The Court held that a royalty deed imposing payment obligations and consent requirements on a company in liquidation was not an 'unprofitable contract' under s 568(1A) of the Corporations Act, where the counterparty (Glencore) had given pre-emptive consent to any purchaser selected by the liquidators, thereby substantially removing the practical burden of the consent requirement; the Court assessed unprofitability by reference to the actual operation of the contract rather than its terms alone. Leave to disclaim under s 568(1A) was also refused, as disclaimer would defeat rights obtained in a proper commercial transaction, potentially undermine commercial certainty in royalty arrangements, and amount to a wealth transfer from Glencore to unsecured creditors — the purpose of disclaimer being to facilitate expedient winding up, not to expand the pool of assets available to creditors. The Court would have granted Glencore's injunction to enforce the negative covenant in cl 5.1 of the Royalty Deed, holding that the obligations assumed by Glencore under the deed constituted sufficient consideration in equity, and that neither the statutory power under s 477 nor the pari passu principle provided discretionary grounds to withhold injunctive relief.
The full text is available to signed-in members.