Introduction
In Kalium Lakes Potash Pty Ltd (in liq) v Minister for Mines and Petroleum [2026] FCA 355, Justice Banks-Smith ordered for tenements disclaimed as onerous property by a liquidator to be revested in the company so as to not prejudice creditors.
Background
Kalium Lakes Potash Pty Ltd and Kalium Lakes Infrastructure Pty Ltd, (together, plaintiffs) undertook a potash mining operation.
On 3 August 2023, Administrators were appointed to the plaintiffs. Immediately after, Receivers were also appointed.
On 18 March 2024, the plaintiffs entered into liquidation and Mr Jones and Mr Woods were appointed as joint and several liquidators (liquidators).
In October 2024, the plaintiffs’ receivers retired, leaving the tenements under the liquidators’ control.
On 4 November 2024, the liquidators disclaimed the tenements as onerous property lodging an ASIC Form 525S, on the grounds that:
the tenements were not readily saleable;
it was reasonable to expect the costs in realising them would exceed any profits; and
that they may give rise to a liability to pay money or some other onerous obligation.
However, just nine days later, a prospective purchaser expressed interest in acquiring some of the tenements.
Negotiations ensued and a conditional sale and purchase agreement (Sale Agreement) was executed on 15 March 2025.
To facilitate the sale, the liquidators commenced proceedings to revest the tenements the purchaser sought to buy.
A number of parties held encumbrances over the tenements, including Westpac (mortgagee), Greenstone Resources II (Australia) Holdings L.P. (caveator), Kalium Corporate Pty Ltd (caveator), and Marputu Aboriginal Corporation RNTBC (caveator).
The liquidators commenced proceedings in the Federal Court to revest the tenements and complete the Sale Agreement.
Issues
Pursuant to section 568F of the Corporations Act 2001 (Cth) (Act), the Court can revest property where the applicant is
entitled to the property or has an appropriate interest;
the applicant has an interest in the property or is under liability in respect of the property, and
the Court hears “such persons as it thinks appropriate” in respect of the revesting application.
The Court was required to determine these questions.
Court Findings
Justice Banks-Smith revested all tenements into the names of the plaintiffs, so they could be sold to the purchaser under the Sale Agreement. All encumbrances on the tenements were reinstated.
Justice Banks-Smith clarified that upon a disclaimer of onerous property taking effect, it terminates a company’s rights, interests, liabilities and property in or in respect of the disclaimer property.
However, pursuant to section 568D(1) of the Act, disclaimer does not affect any other person’s rights or liabilities except where it is necessary in order to release the company and its property from liability.
Accordingly, Justice Banks determined the “unusual circumstances” of seeking to revest previously disclaimed property did not bar an application for revesting.
Issue 1: Entitled to the property or has an appropriate interest?
Her Honour determined the liquidators/companies were the appropriate entities to whom the tenements should be vested to, pursuant to section568F(1)(b).
A variety of factors were considered, including that:
the liquidators consistently acted in accordance with their duties and functions; and
the liquidators had gone to considerable lengths to negotiate and execute the Sale Agreement.
However, Justice Banks-Smith gave particular weight to the potential prejudice of the plaintiff’s creditors and to those with pre-disclaimer interests in the tenements if the tenements were not to be revested.
Her Honour indicated the liquidators would not have disclaimed the tenements if they knew a purchaser would come forward. Her Honour opined this was a “clear case” where revesting to facilitate the proposed sale was appropriate.
Issue 2: Did the liquidators/ companies have an interest in the disclaimed property, or were they under a liability in respect of that property?
Justice Banks Smith determined the liquidators / companies had an interest in any sales proceeds if the Sale Agreement was successful as well as having a liability as they remained liable to pay arrears relating to the tenements.
Accordingly, the liquidators / companies had a bona fide claim to an interest in the tenements and had sufficient liability for the purpose of bringing an application under s 568F(2) of the Act.
Her Honour found that if the revesting were to proceed, and the Sale Agreement was successful, any sale proceeds paid would be under the liquidators’ control. Further, if there were any outstanding fees due to the liquidators, they would typically hold an equitable lien over assets under their administration.
Thus, the liquidators had a bona fide claim allowing them standing to bring an application under section 568F(2)(a).
Key Takeaways
Where a disclaimer of onerous property occurs that does not mean this cannot be reversed but there are requirements that must be met to do so.
Liquidators will likely have an interest in disclaimed assets of insolvent companies capable of sale as any sale proceeds of these tenements would be under a liquidator’s control.
When revesting the property of insolvent companies, the Courts will give particularly consider the potential prejudice experienced by creditors if the property is not revested.
Parties will likely meet the ‘opportunity to be heard’ requirement under section 568F where they are served the appropriate applications but choose not to make submissions or appear.
If you have any queries please contact:
Alicia Hill
Principal
T: +61 3 9611 0180 | M: +61 484 313 865
E:ahill@sladen.com.au
This article was originally published on the Sladen Legal website: Revesting disclaimed property – the case of Kalium Lakes Potash Pty Ltd (in liq) v Minister for Mines and Petroleum where a liquidator’s disclaimer was overturned
