‘Clive Palmer told QNI to underpay creditors’ as cash ran out

Clive Palmer ordered Queensland Nickel creditors be underpaid last year, the Federal Court was told.

Daren Wolfe, former Queensland Nickel chief financial officer, appearing at the Federal Court, Brisbane, yesterday to be questioned about the company’s finances and Clive Palmer’s role in its operations.

Clive Palmer ordered Queensland Nickel creditors be underpaid last year because his company did not have the cash to pay its bills, but it continued to operate under the ­tycoon’s “tight control”, the Federal Court was told.

Queensland Nickel’s former chief financial officer Daren Wolfe yesterday confirmed Mr Palmer had “tight control” over the company managing his Townsville nickel refinery in the year before its collapse, despite the then MP publicly insisting he had retired from business.

In evidence to a Federal Court public examination, Mr Wolfe said Mr Palmer demanded that he personally approve all expenditure above $500, insisted on ­weekly cashflow statements — in hard copy, for fear of “espionage” — and had used an email in the name of Terry Smith from 2009.

The court heard Mr Palmer had Queensland Nickel sign a deal to buy $250 million worth of shares in another Palmer company, China First, just five days ­before QN collapsed.

Mr Wolfe, who frequently claimed privilege against self-­incrimination during his testimony, said he knew nothing of the January 13 China First deal until he was asked to witness the signatures. By that stage, he said, it was ­“inevitable” administrators would be appointed. “In a world when an entrepreneur is involved, they tend to act quite quickly on things,” Mr Wolfe said, explaining he didn’t consider it unusual that as CFO he had been in the dark about a major liability.

Administrators FTI Consulting were appointed on January 18, just after 237 workers were sacked. Nearly 800 staff in total lost their jobs by the time QN fell into liquidation, under nearly $300m in debts. Special purpose liquidators PPB Advisory are leading the public examination into the collapse and are also seeking to establish whether the company traded while insolvent.

Insolvent trading occurs when a company is unable to pay its debts when they fall due, but continues to trade regardless. Directors and shadow directors of a company found to have traded while insolvent can be pursued for civil penalties and compensation and may also face criminal charges, according to the Australian Securities & Investments Commission.

Mr Palmer denies allegations he acted as a shadow director.

Mr Wolfe told barrister Tom Sullivan QC, for PPB Advisory, he took orders from Mr Palmer and QN’s sole director Clive Mensink, Mr Palmer’s nephew, but Mr Palmer had the “final sign-off” on expenditure. Mr Palmer’s “active interest” in the day-to-day running of the refinery continued in 2015, even when he was not registered as a director with ASIC.

Mr Sullivan: “Would Mr Mensink defer to the decisions of Mr Palmer?” Mr Wolfe: “Generally, yes.”

He said he could not recall an occasion when Mr Mensink had overruled Mr Palmer in the running of QN.

As the nickel price dived in 2015, Mr Wolfe said QN ran into financial difficulty.

By mid-June last year, Mr Wolfe said, Mr Mensink and Mr Palmer had come to a decision to underpay creditors, including rail giant Aurizon and the Australian Taxation Office.

Mr Sullivan: “Was that decision made by Mr Palmer?” Mr Wolfe: “Yes, it was.” He added that Mr Mensink contributed to the ­decision.

In September, QN was refused a $25m credit facility by all four big banks, including National Australia Bank where Mr Palmer had banked for three decades. A memo from QN to NAB described the decision as “unconscionable”.

By October, Mr Palmer, Mr Mensink, Mr Wolfe and Mr ­Palmer’s son Michael Palmer went to FTI Consulting in an ­attempt to source the $25m credit facility. Mr Sullivan QC asked if QN had sufficient funds to pay its debts when that meeting ­occurred.

Mr Wolfe: “Not without some negotiations with Aurizon or another facility being made available.”

Aurizon sent default notices to QN in November. Mr Wolfe had served as chief financial officer at QN for three years before he was made redundant by the company’s administrators in March.

He told the court he was now a consultant for Mr Palmer’s new refinery management company, Queensland Nickel Sales.

The Yabulu refinery near Townsville has not operated since March, when Mr Palmer dismissed QN as manager of the ­operation.

The hearing continues today. Mr Palmer is expected to be called to give evidence later this week.