Subject to acceptance of the equity of the Branch in the net proceeds of the sale, it was RESOLVED that the appointed members of the Management Committee should sign the Auction Sale documents on behalf of the Board of Directors.
119 This was discussed at the meeting of the Executive Committee of the Hornsby Branch on 11 October 1988 - Minutes Item 6 - in terms which show that there was dissatisfaction with this decision. After further communications Hornsby Branch Executive resolved on 21 February 1989 to recommend that the property not be sold for the time being and "[i]n addition, Hornsby Branch maintains its claim to the capital resources invested by the Foundation in the property for the operation of the Branch …". Then on 21 March 1989 Ex 2, Tab 97, the Chief Executive Officer of Challenge Foundation informed the Hornsby Branch of decisions which in effect adhered to the position that the Mt Own property was to be disposed of and one sixth of the proceeds were to go to Mt Own, but left open the prospect of further consideration. Hornsby Branch then turned its attention to selling the land.
120 In August 1989 the Branch decided to defer further discussion regarding sales of the Sydney Road site and to move its administration to the Sydney Road site. From October 1989 until 1993 and continuing until 1994 when the property was sold the Mt Own site was used for the administration of Hornsby Branch operations, including use for administrative office functions, meetings and interviews, staff equipment and staff meetings and organisation meetings and as a base for a contract cleaning business. In the evidence attention was given, disproportionate to the importance of the subject, to the exact nature of these activities and to the parts of the buildings which were used in them; plainly enough not all parts of the structures were used at all times, but activities were continuous. In 1992 the Executive Committee of the Hornsby Branch again took up consideration of the sale of the Mt Own property and initiated investigation of relocating the Branch services. However no relevant or significant change in the use of the Mt Own site had occurred by 30 June 1993. The resolutions of 16 November 1988 and 4 March 1989 were no longer being acted on in 1992 and 1993.
121 No doubt different interpretations could be made and reasonable people could reach different conclusions on whether the Mt Own site was in use by the Hornsby Branch in the first part of 1993. Activities of which evidence speaks relate almost entirely to use of the buildings. Only with heroic perversity would anyone conclude that the question whether the buildings were in use by the Branch should be determined by proceeding from room to room, appraising the intensity of use of each room and excluding rooms in the buildings or passages in which no particular activity could be shown to be located. A relatively small part of the plateau land surrounding the buildings was used for vehicle access, parking or kept as mown lawn, and much of the area of Portion 439, particularly approaching the cliffs, can hardly ever have known the physical presence of a person. For the land below the plateau no activity involving the physical presence of a person at any relevant time has been positively proved, although it can reasonably be supposed that it may have been inspected by persons such as surveyors, engineers or estate agents in association with long-continued consideration of its possible sale. Such limited information as there is suggests that it was very difficult to reach by any means of access. In the history of the Mt Own land there is no theme of treatment of the lower land or of any part of the land as associated with Challenge Foundation in any way distinctly from association with the Hornsby Branch, whether as an investment to be realised in the future or in any other way.
122 The delegation to the Management Committee of 13 February 1993 empowered the Committee to enter into agreements "… as it deems necessary and appropriate to give effect to cll 1 and 2 of the resolution …" of 12 December 1992. "There is no evidence and it was not maintained by the plaintiff's counsel in final submissions that the Management Committee had acted for some improper purpose or bye-motive, and the question whether the Management Committee's decision about the Mt Own land were within this delegation resolves itself to the question whether reasonable persons acting as the Management Committee on proper considerations could, acting reasonably, take the view that the disposition which they decided to make was necessary and appropriate to give effect to cll 1 and 2. This would lead to further questions. In relation to cll 1 and 2, could persons in that situation take the view that it was necessary and appropriate to make the transfers and enter into the Deed to assist the establishment by Hornsby Branch of Hornsby Foundation for the purpose of assuming responsibility for the services operated by Hornsby Branch? Could persons in that situation decide that the whole of the land in both parish portions was an asset in use by the Branch? Could such persons decide that it was necessary and appropriate to donate and transfer the land to Hornsby Foundation subject to existing liabilities and on conditions as determined?
123 It was in my view reasonably open to the Management Committee to treat both parish portions as together constituting one asset. It was I suppose at least equally open to treat them as two different assets, and if they were so treated, deciding whether Portion 939 was in use by the Branch would present quite different considerations to deciding whether Portion 439 was in use by the Branch. Classification of the two together as one asset was in my view well within the range of reasonable outcomes; the two had been bought together at the same time, had always been held together in the one ownership since 1964, Portion 939 had not been used in any way competing with or inconsistent with use of Portion 439, but had simply been held in a state of inertia while activities had been pursued on the usable part of the holding formed by them both. When consideration came to be directed to subdividing them and to selling them, consideration was directed to subdividing them together, as well as (at least at one time) to selling Portion 939 separately. While a decision to treat them as two different assets would be well within the range of reasonable outcomes, classification as one asset under cl.2 is also well within the range of reasonable outcomes and probably would be the decision of most persons approaching the problem in good faith. If they are classified as one asset, the question whether that asset was in use by the Branch can admit of only one reasonable outcome; if they are classified as two assets, a decision to treat Portion 939 as in use by the Branch in the first half of 1993 would have little to commend it, although it would not be entirely beyond the range of reasonable outcomes for a portion of land which had been held for a long time in conjunction with another piece of land which had been more actively used.
124 The sum of $170,000 is not described as a loan in the Deed, although it had been spoken of as a loan in discussion leading up to the Deed. It had none of the character of a loan; it was the decision of the Management Committee that an obligation to make that payment out of any sale was an appropriate condition. The range of conditions which could reasonably have been regarded as appropriate, within the Management Committee's delegation, was extremely wide. There could well have been some condition which brought to Challenge Foundation a share of the value of the land and of capital appreciation. It was open to the Management Committee to give far greater weight than they in fact gave to earlier considerations, dealings and decisions, such as the decision of 1989 under which Challenge Foundation would have recovered five-sixths of the price on any sale; and this is so notwithstanding that the decision of 1989 was not being carried out in 1993. It is not open to the court to make their decisions for them, or to make their decisions again.
125 The terms of the delegation to the Management Committee did not leave it open to the Management Committee to exercise all the powers of the Board but confined the Management Committee to carrying out cll 1 and 2 of the decision of 12 December 1992. The extent to which the Management Committee was confined was, having regard to the terms of the resolution of 13 February 1993, by no means narrow. In my view the Management Committee's decision was within the bounds of its delegation. When tested in relation to whether, on an objective view, the decision could reasonably be reached within the terms of the delegation there could in my view be no doubt that making the delegation was within the powers of the directors. Accordingly there being no subjectively improper motive or bye-motive to consider, it could not and should not be concluded that Hornsby Foundation knew or ought to be taken to have known of any breach of duty or excess of powers by the Management Committee. Accordingly notwithstanding the absence of express ratification by the directors of the decision of the Management Committee of Challenge Foundation I am of the view that Hornsby Foundation is entitled to succeed. Again an array of matters of defence were put forward which cannot be addressed except in the context of some breach of duty or excess of power.
126 In litigation arising out of the death on 7 December 1992 of one Barry Bobeth, an intellectually disabled person who was employed by Challenge Foundation in that he was employed by the Hornsby branch, and for whom the Hornsby branch provided accommodation and support services as a client, Challenge Foundation allowed Hornsby Foundation to conduct the proceedings by instructing solicitors to act on behalf of Challenge Foundation, and generally by managing the litigation in the name of Challenge Foundation and later by conducting indemnity proceedings against the workers compensation insurer. Hornsby Foundation paid sums for damages and costs in respect of liabilities of Hornsby Challenge, and in this Challenge Foundation relied upon the indemnity to which it was entitled under the Deed. Challenge Foundation acted in this respect and in all respects with full knowledge at all times of the transactions into which its Management Committee had taken it and which Challenge Foundation had executed under its common seal. While I do not accept that the adoption resolution is itself an act of ratification it forms a prominent part of the full array of proofs that Challenge Foundation knew of and acted for years on the footing that the transactions were its own effective transactions.
127 In the circumstances I am of the view that Hornsby Foundation is entitled to succeed in the proceedings.
128 The claim made by Challenge Foundation against Windgap Foundation stands on a quite different basis to its other claims. Challenge claims that $100,000 paid to Windgap Foundation by Challenge Foundation Support Services Inc. in November 1993 was a distribution of money of Challenge Foundation to a member of Challenge Foundation in breach of the plaintiff's Memorandum of Association and is recoverable for that reason.
129 Windgap Foundation was incorporated on 14 September 1990 and carried on the affairs and provided the services earlier provided by the Eastern Suburbs Branch of Challenge Foundation as an unincorporated body. Although this instance may not have been unique it was not typical that, before the initiative associated with the resolution of 12 December 1992, a branch was incorporated, became itself a member of Challenge Foundation and continued in association with Challenge Foundation. This process is referred to in the Minutes of the Management Committee of Challenge Foundation of 16 October 1992 (EX A1 p64) at Item 4.3 which recorded consideration of a form of settlement deed and continued
"A clause to the effect that Windgap Foundation Ltd. will join the Foundation as a corporate member will be added to the Deed. The books for the Eastern Suburbs/South Sydney Branch will be closed off as at 30/10/92.
It was RESOLVED that after the Board agrees to gift the nett assets of Eastern Suburbs/South Sydney Branch to Windgap Foundation Ltd, the Deed will be signed."
130 Minutes of the directors' meeting of Challenge Foundation of 6 November 1992 deal with Windgap Foundation at Item 3.2 (Ex A1, p92). The minute records discussion in which it was said that an application for membership had been received from Windgap Foundation which was welcomed as members and Mr Corbridge said that the net assets disclosed by accounts to be prepared by Eastern Suburbs/South Sydney branch as at 30 October 1992 would be transferred. The following resolution was passed:
RESOLVED that this Board of Directors approves the transfer of responsibility to Windgap Foundation Limited as auspicing body for the services formerly operated by Eastern Suburbs/South Sydney Branch of the Foundation; and pursuant to its powers so to do by virtue of Article 30 of the Articles of Association and by virtue of placita 3 (g), (p) and (q) of the Objects of the Foundation as stated in its Memorandum of Association, hereby RESOLVES to donate to Windgap Foundation Limited the net assets of the Eastern Suburbs/South Sydney Branch of the Foundation as disclosed by the audited balance sheet of the Branch as at 31st October 1992; and so as to give effect to the foregoing determination, authorises the execution under Common Seal of the deed of transfer as approved by the Management Committee of Directors. (6 abstained - Mr. Mansell abstained not in principle, but because he could not understand the mathematics.)
131 A Deed of Transfer to Windgap was noted as executed under Challenge Foundation's Common Seal in the Minutes of the Management Committee of Challenge Foundation of 27 November 1992 (Ex A2, p356). At the same meeting the Management Committee resolved - Minute Item 5.3 - to approve the membership application of Windgap Foundation as a member with one vote and acceptance was confirmed by letter dated 2 December 1992.
132 Clause 4 of Challenge Foundation's Memorandum of Association, set out above, provides the effect that no portion of the income and property shall be paid or transferred directly or indirectly by way of profit to the members of the foundation. Clause 9 was also relied on in the pleading and alleged to have been breached but it has no application on the present facts. Clause 9 serves to illustrate the workings of the Memorandum of Association overall, in which members cannot be entitled to share in the assets of Challenge Foundation in any event.
133 Challenge Foundation Support Services Inc. (CFSS) was incorporated on 21 April 1993 under the Associations Incorporation Act 1984 upon an application made by Mr G.V. Patterson which nominated Mr Corbridge as President, Mr Patterson as a Committee Member, and seven other persons who were members of the Management Committee of Challenge Foundation as office holders. The application for incorporation (Ex A1, p142) stated: "The principal activities of the association are likely to be Provision of advice, co-ordination and bureau support services for incorporated branches of the former Challenge Foundation in the provision of services for persons with an intellectual disability, and liason with Governmental funding authorities and their departmental offices." The objects set out in the application are as follows: