Clive Palmer may be forced to end his lawsuit against CITIC

Clive Palmer may be forced to scrap Qld Nickel’s $137.5m suit against his estranged Chinese business partner.

Clive Palmer in question time yesterday. Picture: Gary Ramage

Clive Palmer may be forced to scrap Queensland Nickel’s $137.5 mil­lion civil lawsuit against his estranged Chinese business partner, as administrators review his stricken company’s legal bills.

Voluntary administrators from FTI Consulting are also investigating whether Queensland Nickel should plead guilty to ­wilfully breaking environmental laws, risking a maximum fine of $736,250, after a dam full of contaminated water overflowed at the Townsville refinery in 2014.

The company was committed to stand trial for the offences late last year.

The Australian understands lawyers for the independent administrators — installed by Mr Palmer on January 18 after 237 refinery workers were sacked — are reconsidering litigation ­spending by the refinery’s operating company, which will run out of money by April 30 without a bailout.

Mr Palmer’s primary case against his estranged Chinese government-owned business partner CITIC — spearheaded by his flagship private company Mineralogy in the West Australian Supreme Court — is also under threat because Mineralogy is short on cash.

The federal MP and his companies have been fighting CITIC and its subsidiaries in several ­jurisdictions for years, alleging CITIC has failed to pay Mineralogy the correct royalties from its $12 billion Sino Iron project in WA’s Pilbara. Mr Palmer argues that the shortfall is up to $400m each year, which he says he would use to prop up his cash-poor business empire. CITIC denies the claims, and argues that the royalty is unable to be calculated and should be struck from the ­arrangement with Mr Palmer.

The fight is costly: Mineralogy spent $4.7m on legal bills in the last financial year alone. Though most of Mr Palmer’s legal attack is run through Mineralogy, in ­August last year Queensland Nickel sued CITIC and its ­subsidiaries in the Queensland Supreme Court for $137.5m in damages for “unconscionable ­conduct”.

Queensland Nickel argues that without the full Chinese royalties being paid to Mineralogy, Mineralogy could not afford to fund a conversion of the nickel refinery’s roasters from oil to gas, which would have saved the Townsville plant money.

CITIC hit back, asking Queensland Supreme Court judge David Jackson to strike out Queensland Nickel’s lawsuit.

In December, lawyers for CITIC argued that the refinery was a “third party outside the universe of … the CITIC companies and Mineralogy”.

“Queensland Nickel here is … a long way away, and its circumstances have no connection with that universe of relationships ­between the CITIC parties and Mineralogy in relation to mineral leases in the north of Western Australia paying royalties,” said the Chinese company’s barrister, Alan Archibald QC.

Justice Jackson has not decided whether to strike out Queensland Nickel’s claim.

Lawyers for the administrators are weighing up Queensland Nickel’s likelihood of success in the lawsuit versus the hefty legal bills that will be incurred if the matter continues.

The other major court drama for Queensland Nickel is its defence of a Queensland Environment Department prosecution. The department alleges the refinery wilfully and recklessly breached its environmental authority when it allowed a dam full of contaminated water to overflow during a cyclone in 2014.

In a committal hearing in Townsville Magistrates Court late last year, prosecutor Jeff Hunter QC alleged the company poorly managed a tailings dam containing wastewater for months, taking risks ahead of the bumper 2013-14 wet season. No environmental damage is alleged. Queensland Nickel was committed to stand trial on two offences, the most serious of which carries a maximum fine of $736,250. The refinery company, represented at the committal hearing by two silks, including top Brisbane barrister Peter Davis QC, had indicated it would fight the matter at trial.

Administrators are also considering Queensland Nickel’s chances of success and potential legal bills and court costs, versus the likely penalty should the company plead guilty to avoid a trial.