An important new precedent on the Liquidator’s power of disclaimer: In the matter of Tahmoor Coal Pty Ltd (in liq) [2026] NSWSC 273
In dismissing the Liquidators’ application, the judgment of Black J delivered on 3 July 2026 provides important clarification on the limits of the disclaimer power under s 568 CA.
Natalie Tatasciore, Alex Gorovtsov and Peter Dougherty acted for the successful Defendant and Cross-Claimant, Glencore Coal.
Relevant background
In April 2018, the Glencore group sold the mine to a SIMEC/GFG Alliance entity.
As part of the sale, Tahmoor entered into a Royalty Deed with Glencore Coal as part of the consideration flowing to Glencore. Under the Royalty Deed, Tahmoor was obliged to pay Glencore a royalty on each tonne of saleable coal produced from the Tahmoor South Development.
Relevantly, the Royalty Deed imposed a negative covenant: the Companies were prohibited from assigning, transferring, or otherwise dealing with the mining tenements or Tahmoor land without Glencore’s prior written consent. Glencore was required to provide consent where (i) the proposed transferee agreed to assume obligations under the deed, and (ii) Glencore was satisfied the transferee had adequate financial, technical, and operational capacity.
The mine had been placed under care and maintenance since May 2025.
Tahmoor went into liquidation on 6 March 2026.
The Liquidators sought to disclaim the Royalty Deed under s 568 of the Corporations Act 2001 (Cth) to improve creditor returns on a sale of the mine assets (in that circumstance, Glencore would be left to prove in the winding up as an unsecured creditor for its damages claim).
Importantly, Glencore provided its pre-emptive consent to any successful bidder selected by the Liquidators, on the sole condition that the bidder accede to the Royalty Deed.
The Liquidators entered a sale agreement to transfer Tahmoor’s interest in the mine on 17 June 2026. The sale agreement contained a mechanism for a replacement royalty payable to the Liquidators (on equivalent terms to the Royalty Deed) in the event the Royalty Deed was disclaimed or terminated.
Issues determined
Issue 1: While Black J confirmed that the Royalty Deed constituted “property of the company consisting of a contract” for the purposes of s 568 and therefore capable of disclaimer, his Honour found the Royalty Deed was not an “unprofitable contract” for the following reasons:
- An obligation to make payments under a contract is not sufficient, in itself, to render the contract unprofitable.
- The mere reduction in sale price of the mine attributable to the royalty (a comparative financial disadvantage) did not make it unprofitable.
- Although the consent requirement for transfer in its unqualified form would have rendered the Royalty Deed unprofitable (by limiting the Liquidators’ ability to sell the mine), Glencore’s pre-emptive consent to transfer neutralised that burden.
Issue 2: Black J refused to grant leave to disclaim the Royalty Deed under s 568(1A) on the basis that:
- The disclaimer would defeat rights that Glencore obtained in the original transaction when it sold the mine.
- The purpose of the power is not to transfer wealth from counterparties to increase the pool of assets for creditors.
- Leave could create commercial uncertainty for royalty arrangements and the sector.
Issue 3: Black J declined to give the Liquidators a direction under s 90-15 IPS that they would be justified in selling without complying with the consent requirement for the same reasons. Instead, Black J indicated he would direct the Liquidators that they would be justified in complying with the requirement.
Issue 4: On Glencore’s cross-claim, Black J held that an injunction to restrain breach of the negative covenant should be granted unless the Liquidators advised they will cause the Companies to comply with the Royalty Deed.
While the Liquidators argued that Glencore gave no consideration recognisable in equity for its rights under the Royalty Deed, and therefore equitable relief should be refused, Black J rejected this. Instead, his Honour held that the obligations assumed by Glencore under the Royalty Deed in respect of the consent requirement, confidentiality and other matters, which supported the finding that the Royalty Deed is a contract and property within the scope of s 568, are sufficient consideration in equity for Glencore's rights under the Royalty Deed.
This was notwithstanding his Honour’s finding that Glencore likely does not have a legal or equitable interest in the underlying mining leases or tenements, consistent with the Full Court of the Federal Court in Kirkalocka.
As to discretion, his Honour accepted that a claim for breach of the Royalty Deed would likely be capable of proof in the liquidation, but did not accept that that provided reason for the disclaimer or by extension, reason to withhold an injunction (that would otherwise be available) on discretionary grounds, so as to improve the return to creditors at Glencore's expense.
His Honour concluded that “there also seems to me to be no relevant prejudice to creditors here, where neither the Liquidators nor the Companies will pay any royalty that is payable by a purchaser on recommencing operation of the mine. All that occurs here is that the unsecured creditors do not obtain the windfall gain that would arise if the Companies could depart from the obligations assumed by the Companies as part of the GFG Alliance group's acquisition of an interest in the mine.”
Implications
The judgment makes clear:
- Where a royalty or similar encumbrance reduces the sale price of an asset, this comparative financial disadvantage is not “unprofitability” as contemplated by s 568. The provision concerns contracts that impose net burdens on the estate, not those that limit the upside of disposal or realisation.
- The disclaimer power is not a tool to transfer wealth from counterparties to creditors.
- The profitability assessment is made at the time of the application, in the actual commercial context. Counterparties who cooperate by mitigating or waiving onerous requirements can effectively neutralise the basis for disclaimer.
- The statutory powers under s 477 do not override contractual restrictions on dealing with assets. A liquidator sale conducted in breach of a negative covenant is vulnerable to injunctive restraint, absent compelling reasons to the contrary.
