Darkinjung Pty Ltd v Darkinjung Local Aboriginal Land Council & Ors; Hillig v Darkinjung Pty Ltd & Ors

CATCHWORDS : TRUSTS AND TRUSTEES - constructive and remedial trusts - following and tracing - where court to declare that statutory corporation exceeded statutory capacity and authority in transferring money and that transferee accordingly holds on trust for transferor balance of such money still in hand and property on which money was expended - where part of money applied by transferee by way of loan to other companies and acquisition of shares in one such company - whether transferor may follow or trace money into hands of such other companies - whether the other companies are liable to transferor under knowing receipt limb of Barnes v Addy - whether transferor entitled to equitable compensation from transferee - where transferee gave particular indemnity in breach of trust - whether recipient of indemnity entitled to lien on funds for which transferee accountable to transferor - CORPORATIONS - oppression unfair prejudice etc - where sole member alleges itself to be object of such conduct - conduct sourced in manner in which company structured by sole member upon incorporation - whether court would order winding up where sole member itself able to initiate voluntary winding up

LEGISLATION CITED : Corporations Act 2001 (Cth), Part 5.3A. ss.232, 233, 490(a), 491(1), 494, 497, 499(1)

Barnes v Addy (1874) LR 9 Ch App 244 Blythe v Northwood (2005) 63 NSWLR 531 Carl Zeiss Stiftung v Herbert Smith & Co [1969] 2 Ch 276 Cassis v Kalfus (No 2) [2004] NSWCA 315 Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373 Darkinjung Pty Ltd v Darkinjung Local Aboriginal Land Council & Ors; Hillig v Darkinjung Pty Ltd & Ors; Darkinjung Local Aboriginal Land Council v Warner & Ors [2006] NSWSC 1008 Ernest v Croysdill (1860) 2 DeGF&J 175; 45 ER 589 Foskett v McKeown [2001] 1 AC 102 Goozee v Graphic World Group Holdings Pty Ltd (2002) 42 ACSR 534 Governor and Company of the Bank of Scotland v A Ltd [2001] 1 WLR 751 Gray v Johnston (1868) LR 3 HL 1 Kalls Enterprises Pty Ltd v Baloglow (2006) 58 ACSR 63 Koorootang Nominees Pty Ltd v Australia and New Zealand Banking Group Ltd [1998] 3 VR 16 Labouchere v Tupper (1857) 11 Moo PC 198, 14 ER 670 CASES CITED : Lipkin Gorman (a firm) v Karpnale Ltd [1991] 2 AC 548 Manning River Co-operative Dairy Co Ltd v Shoesmith (1915) CLR 714 O'Neill v Phillips [1999] 1 WLR 1092 Re Legal Costs Negotiators Ltd [1999] 2 BCLC 171 Remrose Pty Ltd v Allsilver Holdings Pty Ltd (2005) 225 ALR 588 Re Polyresins Pty Ltd [1999] 1 QdR 599 Robb Evans of Robb Evans & Associates v European Bank Ltd (2004) 61 NSWLR 75 Say-Dee Pty Ltd v Farah Constructions Pty Ltd [2005] NSWCA 309 Scott v Scott (1963) 109 CLR 649 Smolarek v Liwszyc (2006) 32 WAR 101 Thomas v H.W. Thomas Ltd [1984] 1 NZLR 686 Vacuum Oil Co Ltd v Wiltshire (1945) 72 CLR 319 Watling v Lewis [1911] 1 Ch 414 Wayde v New South Wales Rugby League Ltd (1985) 180 CLR 459 Yeshiva Properties No 1 Pty Ltd v Marshall (2005) 219 ALR 112

(1) Darkinjung Pty Limited - Plaintiff Darkinjung Local Aboriginal Land Council - First Defendant Darkinjung Cattle Company Pty Limited - Second Defendant Darkinjung Housing Pty Limited - Third Defendant Darkinjung Funeral Fund Pty Limited - Fourth Defendant NSW Aboriginal Land Council - Fifth Defendant PARTIES : Darkinjung Projects Pty Limited - Sixth Defendant (2) Peter Hillig in his capacity as Administrator of Darkinjung Local Aboriginal Land Council - Plaintiff Darkinjung Pty Limited - First Defendant Jeffrey John Bradford - Second Defendant David Pross - Third Defendant Greg Flanders - Fourth Defendant George Alexander Watts - Fifth Defendant Michael Stuart Jones - Sixth Defendant

(1) Mr S.D. Epstein SC/Mr D.A.C. Robertson - Plaintiff Mr D.H. Murr SC/Mr D.A. Smallbone - First Defendant Ms T.L. Jowett - Second Defendant COUNSEL : Mr G. Lucarelli - Third, Fourth and Sixth Defendants Mr A. Chalk, Solicitor - Fifth Defendant Mr J.S. Drummond - Outback Beef Australia Pty Ltd by leave (2) Mr D.H. Murr SC/Mr D.A. Smallbone - Plaintiff Mr S.D. Epstein SC/Mr D.A.C. Robertson - First Defendant

(1) Norton White Melbourne - Plaintiff Patrick Woods & Company - First Defendant Blackshield & Co - Second Defendant SOLICITORS : Cutler Hughes & Harris - Third, Fourth and Sixth Defendants Chalk & Fitzgerald - Fifth Defendant (2) Patrick Woods & Company - Plaintiff Norton White Melbourne - Defendants

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST

5634/05 DARKINJUNG PTY LIMITED v DARKINJUNG LOCAL ABORIGINAL LAND COUNCIL & ORS 2842/06 PETER HILLIG IN HIS CAPACITY AS ADMINISTRATOR OF DARKINJUNG LOCAL ABORIGINAL LAND COUNCIL v DARKINJUNG PTY LIMITED & ORS

JUDGMENT Introduction 1 On 3 November 2006, I heard oral submissions on the orders that should be made in consequence of publication of reasons on 3 October 2006 in two related proceedings, being 5634/05 and 2842/06. The oral submissions supplemented written submissions previously made. The reasons of 3 October 2006 carry the medium neutral citation [2006] NSWSC 1008. 2 I need not repeat the findings and conclusions recorded in the October reasons. The abbreviations used there are also used here (save that, in these reasons, the Trust Deed dated 9 March 2004 is referred to as "the Darkinjung Trust Deed" and the trust thereby constituted is referred to as "the Darkinjung Trust"). These present reasons must be read together with the reasons of 3 October 2006. The agreed orders 3 It has become common ground that the following relief in proceedings 5634/05 is warranted by and should be granted to effectuate the reasons of 3 October 2006: " The Court Orders that:

2. The purposes identified in par. 52(1)(g)(ii) of the Aboriginal Land Rights Act and the purpose identified in clause 3.1(h) of the Darkinjung Local Aboriginal Land Council Trust deed dated 9 March, 2004 are not charitable and are not purposes for which the trustee of the Darkinjung Local Aboriginal Land Council Trust is able to receive, hold and apply capital or income of the Darkinjung Local Aboriginal Land Council Trust property.

3. The payments made by Darkinjung Local Aboriginal Land Council to Darkinjung Pty Limited of: (a) on 15 July 2004, the sum of $19,582,713.36;

were beyond the power of Darkinjung Local Aboriginal Land Council and those funds were received by Darkinjung Pty Limited and were and are held by it upon trust for Darkinjung Local Aboriginal Land Council.

4. The whole of the funds and assets of Darkinjung Pty Limited are held by it upon trust for Darkinjung Local Aboriginal Land Council.

5. The following payments made by Darkinjung Pty Limited of: (a) on or about 19 August 2004, the sum of $5,000,000.00 to the first cross defendant (Darkinjung Cattle Company Pty Limited);

(b) on or about 18 May, 2005, the sum of $5,000,000.00 to National Management Consultants in trust for the second cross defendant (Darkinjung Housing Pty Limited);

(c) on or about 18 May, 2005, the sum of $1,500,000.00 to the third cross defendant (Darkinjung Funeral Fund Pty Limited); and

(d) on or about 30 June, 2005, the sum of $2,185,542.90 to the fourth cross defendant (Darkinjung Projects Pty Limited); and

(e) on or about 23 August, 2005, the sum of $500,000.00 to the fourth cross defendant (Darkinjung Projects Pty Limited);

were beyond the power of Darkinjung Pty Limited." 4 It has likewise become common ground that the following relief in proceedings 2842/06 is warranted by and should be granted to effectuate the October reasons: " The Court Declares that:

1. The purposes identified in par. 52(1)(g)(ii) of the Aboriginal Land Rights Act and the purpose identified in clause 3.1(h) of the Darkinjung Local Aboriginal Land Council Trust deed dated 9 March, 2004 are not charitable and are not purposes for which the trustee of the Darkinjung Local Aboriginal Land Council Trust is able to receive, hold and apply capital or income of the Darkinjung Local Aboriginal Land Council Trust property.

2. The payments made by Darkinjung Local Aboriginal Land Council to Darkinjung Pty Limited of: (a) on 15 July 2004, the sum of $19,582,713.36;

were beyond the power of Darkinjung Local Aboriginal Land Council and that those funds were received by Darkinjung Pty Limited and were and are held by it upon trust for Darkinjung Local Aboriginal Land Council.

3. The whole of the funds and assets of Darkinjung Pty Limited are held by it upon trust for Darkinjung Local Aboriginal Land Council." 5 The orders set out at [3] and [4] above are expressly sought by DLALC. In light of the reasons of 3 October 2006, there is no opposition to the making of those orders. It will be convenient to refer to them as "the agreed orders". 6 In each case, the relief thus granted will be declaratory relief only. DPL concedes that it would be consistent with the October reasons for the court also to order that DPL transfer to DLALC all the property identified in the agreed orders as held by DPL upon trust for DLALC. DPL notes, however, that DLALC has not sought any such order. I therefore say nothing further about that aspect. Orders sought as to which there is no agreement 7 Beyond the matters to which I have so far referred, there is no consensus regarding the orders the court should make. It is the contention of DLALC that a number of additional orders should be made. That contention is, as to all or some of the additional orders, disputed by each of DPL, CattleCo and Outback Beef. The last-mentioned company was, without opposition, given leave to make submissions when the matter came back before me on 3 November 2006. I should record that, on that occasion, NSWALC did not seek to make submissions on anything beyond the uncontroversial proposition that the summons in 5634/05 should be dismissed. I should also record that the Enterprise Companies were not represented on 3 November 2006 but that counsel retained in the interests of Mr Warner and Mr Sanderson (whose purported appointment as voluntary administrators of the Enterprise Companies was dealt with in the earlier reasons) made submissions about certain aspects of the additional orders sought by DLALC. 8 Leaving to one side claims based on the Corporations Act 2001 (Cth), the question remaining for consideration is whether the court should make (a) declarations to the effect that moneys received by the Enterprise Companies and CattleCo from DPL by way of the loans made by DPL (recognised in the agreed orders as beyond the power of DPL) are held by the Enterprise Companies and CattleCo upon trust for DLALC; (b) declarations to the effect that the whole of the funds and assets of each Enterprise Company is held by it upon trust for DLALC; (c) declarations to the same effect as in the immediately preceding (b), but with respect to the whole of the property and assets acquired by CattleCo by application or use of moneys received by CattleCo from DPL; (d) an order that CattleCo pay equitable compensation to DLALC; (e) an order that DPL pay equitable compensation to DLALC in respect of such part of the aggregate sums of $25,757,095 paid by DLALC to DPL as has been neither retained by DPL nor paid to DLALC; and (f) a declaration or order that DPL is not entitled to indemnity from the assets of the Darkinjung Trust for the amount of any liability of DPL under a deed of indemnity dated 19 May 2006 between DPL and Mr Warner and Mr Sanderson, the persons supposedly appointed voluntary administrators of each Enterprise Company. 9 As far as the Enterprise Companies are concerned, it is the submission of DPL that there are significant procedural obstacles to the making of any declaration that an Enterprise Company holds upon trust for DLALC money received by the Enterprise Company from DPL or the property and assets generally of the Enterprise Company. These stem, it is said, from the fact that the Enterprise Companies, although parties to the relevant proceeding, took no part in the hearing; and that there was no pleaded case as to the moneys received by the Enterprise Companies. Those companies appeared, at the time, to be in the hands of administrators appointed under Part 5.3A of the Corporations Act - an appearance that paragraph [308] of the October reasons showed to be deceptive. Counsel for DPL referred to the judgment of Bryson JA (with whom Mason P and Beazley JA agreed) in Yeshiva Properties No 1 Pty Ltd v Marshall (2005) 219 ALR 112 (at p.116) regarding the need for fraud and matters akin to fraud to be pleaded with particularity. DLALC's tracing and following claims 10 DLALC emphasises that its claims in respect of the particular moneys and the assets generally of the Enterprise Companies and CattleCo are first and foremost proprietary claims to follow or trace and are advanced independently of Barnes v Addy (1874) LR 9 Ch App 244. DLALC does, however, place separate reliance upon Barnes v Addy in a way to be mentioned in due course. 11 When I refer to claims to follow or trace, I refer to the distinct processes described by Lord Millett in Foskett v McKeown [2001] 1 AC 102 at p.127: "The process of ascertaining what happened to the purchasers' money involves both tracing and following. These are both exercises in locating assets which are or may be taken to represent an asset belonging to the purchasers and to which they assert ownership. The processes of following and tracing are, however, distinct. Following is the process of following the same asset as it moves from hand to hand. Tracing is the process of identifying a new asset as the substitute for the old. Where one asset is exchanged for another, a claimant can elect whether to follow the original asset into the hands of the new owner or to trace its value into the new asset in the hands of the same owner. In practice his choice is often dictated by the circumstances. In the present case the purchasers do not seek to follow the money any further once it reached the bank or insurance company, since its identity was lost in the hands of the recipient (which in any case obtained an unassailable title as a bona fide purchaser for value without notice of the purchasers' beneficial interest). Instead the purchasers have chosen at each stage to trace the money into its proceeds, viz the debt presently due from the bank to the account holder or the debt prospectively and contingently due from the insurance company to the policy holders." 12 There are thus really two distinct questions regarding the money paid by DPL to each of the Enterprise Companies and CattleCo by way of loan: first, whether that money itself may be "followed" into the hands of each such borrower company; and, second, whether it can be "traced" into property of the borrower company. 13 The circumstance that the transfer of moneys by DPL to the Enterprise Companies and CattleCo was in each case by way of loan has a particular bearing on these questions. It makes the circumstances analogous with those in which money is paid by a person into the person's bank account. The depositor thereby ceases to own the money. It becomes owned at law by the bank which becomes a debtor of the depositor and owes him or her a debt of the same amount as the deposited sum. So too here, the Enterprise Companies and CattleCo became debtors of DPL. It is accordingly relevant to refer to two statements in recent English cases about following and tracing of money into bank accounts. The first is a statement in the speech of Lord Millett in Foskett v McKeown (above, at pp.127-128), appearing after his explanation of the distinction between the two concepts or processes: "We speak of money at the bank, and of money passing into and out of a bank account. But of course the account holder has no money at the bank. Money paid into a bank account belongs legally and beneficially to the bank and not to the account holder. The bank gives value for it, and it is accordingly not usually possible to make the money itself the subject of an adverse claim. Instead a claimant normally sues the account holder rather than the bank and lays claim to the proceeds of the money in his hands. These consist of the debt or part of the debt due to him from the bank. We speak of tracing money into and out of the account, but there is no money in the account. There is merely a single debt of an amount equal to the final balance standing to the credit of the account holder. No money passes from paying bank to receiving bank or through the clearing system (where the money flows may be in the opposite direction). There is simply a series of debits and credits which are causally and transactionally linked. We also speak of tracing one asset into another, but this too is inaccurate. The original asset still exists in the hands of the new owner, or it may have become untraceable. The claimant claims the new asset because it was acquired in whole or in part with the original asset. What he traces, therefore, is not the physical asset itself but the value inherent in it." 14 To the same effect are comments by the Court of Appeal (Lord Woolf CJ and Judge and Robert Walker LJJ) in Governor and Company of the Bank of Scotland v A Ltd [2001] 1 WLR 751 which involved proceeds of fraud paid into a bank account. The Court of Appeal observed (at p.763) that, while there is a natural tendency to speak of "money at the bank", the true position is that a bank "has a personal, unsecured obligation to pay its customer, but the benefit of that obligation is rightly regarded as an asset into which trust property may be traced". Their Lordships further observed that "a tracing process would attach, not to any assets of the bank, but to the chose in action representing the bank's obligation to its customer". 15 Principles of tracing support the conclusion, already accommodated by the agreed orders, that the debts owed to DPL by the Enterprise Companies and CattleCo (as well as the shares in CattleCo held by DPL) are held by DPL in trust for DLALC. The aspects of the agreed orders declaring that "the whole of the funds and assets" of DPL is held by it upon trust for DLALC (see order 4 at [3] above and order 3 at [4] above) extend to those debts, as assets of DPL. According to the bank analogy, DLALC cannot trace into any assets of the borrowers from DPL - at least if the identity of the loan proceedings has been lost or the borrower is properly to be seen as a bona fide purchaser for value. 16 But, regardless of any loss of identity and the question whether the borrower is a bona fide purchaser without notice, it is pertinent that the parties have accepted, by way of the terms of the agreed orders, that the debts owed to DPL by the Enterprise Companies and CattleCo (being part of "the whole of the funds and assets of" DPL referred to in the agreed orders) are to be recognised as held by DPL upon trust for DLALC. DLALC may thus be seen to have made an election of the kind referred to by McTiernan, Taylor and Owen JJ in Scott v Scott (1963) 109 CLR 649 (at p.660): "There is, of course, abundant authority for the proposition that if trust moneys have been exclusively used in the purchase of property the beneficiary may elect to take the property itself." 17 The agreed orders recognise the reality that the moneys received from DLALC were the only moneys ever received by DPL in the whole of its existence (apart from the nominal sum of $10 originally settled, which may be ignored, and such income as the moneys received may themselves have generated) and that the whole of the property, funds and assets of DPL as presently existing are, in the relevant sense, property upon the "purchase" of which DLALC's money has been "exclusively used". Outlay by way of loan productive of an obligation to repay is, for these purposes, to be regarded as entailing "purchase" of the resultant debt. 18 Because DLALC may thus be seen to have elected to assume ownership of the debts owed to DPL by the Enterprise Companies and CattleCo, there is no basis for "tracing" on the part of DLALC so as to obtain direct access to the assets of the Enterprise Companies and CattleCo. This conclusion proceeds on a basis explained by Spigelman CJ (with whom Handley and Santow JJA agreed) in Robb Evans of Robb Evans & Associates v European Bank Ltd (2004) 61 NSWLR 75. 19 In the Robb Evans case, proceeds of fraud found their way into an account maintained by Benford with European Bank. At about the same time, European Bank deposited an equivalent amount in its own name with Citibank. Spigelman CJ did not accept the proposition that the fraudulently obtained funds could be "traced" into European Bank's account with Citibank. Having referred to the observations of Lord Millett in Foskett v McKeown, Spigelman CJ said (at p.104): "Furthermore, in property law, the new "asset" constituted by the European Bank deposit with Citibank, was not, to use Lord Millett's terminology, a 'substitute for the old [asset]', constituted by the Benford deposit with European Bank. That 'old asset' has never been transformed or 'substituted' into any thing. The funds had been employed by the bank, but the 'old asset' always existed and still exists. The Benford account was always in credit, whether as a deposit account or as a current account. There was no occasion on which the value inherent in the account, which Benford held as trust property, had become located in the value inherent in the deposit with Citibank. No process of the character referred to by Lord Millett as 'substitution' has occurred." 20 Likewise here the assets acquired by the Enterprise Companies and CattleCo by outlay of the proceeds of loans from DPL were not a "substitute" for the debt owed by the particular borrower company to DPL consequent upon the making of the loan by DPL. 21 Similar reasoning precludes "following" by DLALC of the lent moneys into the hands of the Enterprise Companies and CattleCo. To allow such "following" once DLALC's right to the debts owed by those companies to DPL had been recognised would be to sanction what would be, in a real and substantial sense, double recovery. DLALC would be put into a position where it could both assert ownership of moneys received from DPL by the Enterprise Companies and CattleCo and sue the Enterprise Companies and CattleCo for the debts arising from payment of those moneys by DPL to the Enterprise Companies and CattleCo. Equity will countenance one of these results but not both. And DLALC, having opted for the latter (by seeking the agreed orders), cannot have the former. 22 In the result, therefore, the circumstances are such as to cause DPL to hold upon trust for DLALC the debts owed to DPL by the Enterprise Companies and CattleCo (as recognised by the agreed orders), but not such as to ground a proprietary claim or remedy causing any money or property of the Enterprise Companies and CattleCo to be held upon trust for DLALC. DLALC's knowing receipt claim 23 It is then necessary to deal with DLALC's alternative claim based on Barnes v Addy principles and the contention that those principles operate to make the Enterprise Companies and CattleCo accountable to DLALC. This is, of course, an in personam claim, not a proprietary claim. 24 The money that each of the Enterprise Companies and CattleCo received as proceeds of the loan made to it by DPL was trust property to which DLALC was entitled by way of the trust recognised by the agreed orders. As can now be seen, the transfer of the money by DPL to the particular Enterprise Company (or CattleCo) by way of loan was inconsistent with a fiduciary obligation to account owed by DPL to DLALC. The Enterprise Company (or CattleCo) will be accountable to DLALC because of its receipt of money from DPL if the Enterprise Company (or CattleCo) can be seen to have incurred liability under the so-called first limb of the rule in Barnes v Addy. 25 I should observe that the submissions made on behalf of DLALC with respect to Barnes v Addy made it quite clear that reliance was placed only on the first (or "knowing receipt") limb. I may therefore safely leave to one side the second limb of the rule in Barnes v Addy, involving assistance in a fiduciary's dishonest or improper design. 26 It is necessary, at this point, to emphasise an important matter. The equity DLALC seeks to vindicate by resort to the first limb of Barnes v Addy (being the equity reflected in the agreed orders) is one that arises from the impropriety of the payments by DLALC to DPL. Separate impropriety arose from the circumstance that DPL, as trustee of the Darkinjung Trust, applied trust moneys otherwise than consistently with and as permitted by the Darkinjung Trust Deed. That latter circumstance, as I see it, is not the source of any right or entitlement on the part of DLALC. It was not and is not a beneficiary of the trusts evidenced by the Darkinjung Trust Deed. DLALC has no standing to complain about the application of assets of the Darkinjung Trust in a manner inconsistent with the duties of DPL as trustee under the Darkinjung Trust Deed which, as to at least part of its purposes, constituted a valid charitable trust (see paragraph [188] of the October judgment). DLALC is in no sense the "victim" of any such misapplication. Its standing and entitlement, vis-à-vis claims against the Enterprise Companies and CattleCo based on breach of trust or fiduciary duty, are a product of its status as beneficiary of the trusts in its favour recognised by the agreed orders, not any status related to the Darkinjung Trust. 27 For the first limb in Barnes v Addy to avail DLALC, certain findings would have to be made regarding the state of the knowledge of the Enterprise Companies and CattleCo, as recipients of money from DPL. The relevant notice concepts differ as between the first and second limbs. This is made clear in the judgment of Tobias JA (with whom Mason P and Giles JA agreed) in Say-Dee Pty Ltd v Farah Constructions Pty Ltd [2005] NSWCA 309 at [208]: "It is now well established that whereas the second limb of Barnes v Addy , now known as 'accessory liability', applies where a third party knowingly assists a trustee (or fiduciary) in a breach of the trustee's or fiduciary's duties and thus requires actual knowledge on the part of the third party of the breach, the first limb, which is known as 'recipient liability', on one view does not. Nevertheless, the authorities, to a greater or lesser extent, favour the proposition that liability under the first limb of Barnes v Addy requires some form of knowledge on the part of the recipient of the benefit of the fiduciary's breach of duty. The crucial question that seems to have occupied a deal of judicial time is the nature and extent of that knowledge." 28 Having said that, however, Tobias JA went on to adopt a view of the first limb that appears to pay no immediate attention to the state of notice or knowledge of the recipient. His Honour regarded the matter as not covered by High Court authority and, after reviewing in some detail the decision of Hansen J in Koorootang Nominees Pty Ltd v Australia and New Zealand Banking Group Ltd [1998] 3 VR 16, which drew upon Lipkin Gorman (a firm) v Karpnale Ltd [1991] 2 AC 548, said (at [232]: "I see no reason why the proverbial bullet should not be bitten by this Court in favour of the Birks/Hansen approach. In my opinion there is support for the adoption of the restitutionary approach in Lipkin in the House of Lords and in the exposition on the subject by Hansen J in Koorootang at 99-105." 29 The approach thus favoured by the Court of Appeal was described by Tobias JA at [222] as follows: "According to Hansen J in Koorootang (at 102), the adoption of the restitutionary approach would have the consequence that the plaintiff need only prove: (a) enrichment of the defendant; (b) at the expense of the plaintiff; which is (c) unjust on the ground of some recognised factor." 30 This approach has been regarded in some quarters as out of line with mainstream thinking: see, for example, J D Heydon and M J Leeming, "Jacobs' Law of Trusts in Australia", (7th edition, 2006) at [1337]; J Watson, "Breach of Fiduciary Duty: Whether Volunteer Who Innocently Receives Property Must Restore It", (2006) 80 ALJ 172; B Strahorn "The End of Knowing Receipt? A Riposte to Unjust Enrichment", (2006) 80 ALJ 765. And as Hamilton J has pointed out in Kalls Enterprises Pty Ltd v Baloglow (2006) 58 ACSR 63 (at p.78), a trial judge of this court now "faces the difficult situation of obiter dicta in the High Court some 30 years ago conflicting with recent dicta of the Court of Appeal, which have met with substantial criticism". The obiter dicta in the High Court referred to by his Honour are those of Stephen J (with whom Barwick CJ agreed) in Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373 (at p.410). Stephen J quoted with approval the following passage in the judgment of Jacobs P in the Court of Appeal: "The point of the difference between the person receiving trust property and the person who is made liable even though he is not actually a recipient of trust property is that in the first place knowledge actual or constructive of the trust is sufficient but in the second place something more is required and that something more appears to me to be the actual knowledge of the fraudulent or dishonest design so that the person concerned can truly be described as a participant in that fraudulent dishonest activity." 31 These observations as to the need for "knowledge actual or constructive of the trust" in a first limb case were obiter because the decision in Consul Development was about the second limb of Barnes v Addy, not the first. 32 It seems to me that, in approaching Tobias JA's factor (c) as set out in the extract at [29] above, one must have regard to the state of the recipient's knowledge since that of itself will be a major ingredient of the kind of "injustice" the Court of Appeal had in contemplation. In a "knowing receipt" case of the kind contemplated by the first limb of Barnes v Addy, the question is whether the recipient is "in privity with the breach of trust", to quote the words of Lord Cairns in Gray v Johnston (1868) LR 3 HL 1 at p.11. Equity is, as always, concerned with the state of a person's conscience. The court must consider whether "the conscience of the borrower [is] affected by the trust". These are the words of Turner LJ in Ernest v Croysdill (1860) 2 DeGF&J 175 at p.198; 45 ER 589 at p.598, itself a "knowing receipt" case. 33 It is therefore relevant to consider the state of the knowledge of, respectively, each Enterprise Company and CattleCo regarding the wrongful quality of the payments by DLALC to DPL, such wrongful quality deriving from the circumstance that DLALC exceeded its corporate capacity and authority in making the payments so that DPL, as payee, became accountable to DLALC accordingly. Because we are dealing with companies, the state of the corporate knowledge can only be determined by reference to the knowledge of natural persons such as directors and officers. 34 Even assuming that each of the Enterprise Companies and CattleCo had knowledge of every conceivably relevant fact, I am not satisfied that the state of its knowledge would have been sufficient to warrant a finding of personal liability under the first limb of Barnes v Addy. Again, I emphasise that DLALC is entitled to relief by reference to the trusts to be declared by the agreed orders in consequence of the findings that the payments by DLALC to DPL were in excess of the capacity and authority of DLALC; and that breach of the trusts created by the Darkinjung Trust Deed under which DPL was constituted trustee cannot be the source of any equity on the part of DLALC. 35 The dates on which the Enterprise Companies and CattleCo received funds from DPL are identified at paragraph [18] of the reasons of 3 October 2006. In the case of CattleCo, there was one receipt of funds only. It occurred on 19 August 2004. Receipts by FuneralCo and HousingCo occurred in May 2005. There were receipts by ProjectCo in June and August 2005. The relevant knowledge attributable to the respective companies is that existing at the respective dates. At each such date, there existed, at most, an allegation that the making of payments by DLALC to DPL to constitute a fund to be held by DPL subject to the Darkinjung Trust Deed was beyond the statutory capacity and authority of DLALC. By October 2005, when a summons was filed by NSWALC to commence proceedings 5634/05, the allegation had matured into a formal legal claim. By that time, all the receipts of money by Enterprise Companies and CattleCo from DPL were complete and in the past. Opinions of counsel had been obtained at various earlier times. The first was an opinion of Mr A. Robertson SC dated 13 August 2003, that is, some six months before the creation of the Darkinjung Trust and the execution of the Darkinjung Trust Deed and a year before the making of the first loan (being the loan of 19 August 2004 under which CattleCo received $5 million from DPL). That opinion, although dealing in advance with somewhat hypothetical possibilities, would have provided, for a layman, a basis for a conscientiously held view that the plan, as eventually implemented (including by means of the payments by DLALC to DPL), was lawful and legitimate. A reader of the opinion would not have been left with the impression that any misapplication of DLALC funds was involved. 36 Opinions of other counsel - Mr T.F. Robertson SC (26 November 2004) and Mr J. Basten QC (23 December 2004) - were later obtained. Each of these expressed reservations or negative views on the matters that were ultimately determined adversely to DLALC by the judgment of 3 October 2006. But then, on 19 March 2005, Mr A. Robertson SC delivered a further opinion saying that he had reviewed Mr Basten's opinion and nevertheless adhered to the views he had expressed in his advice of 13 August 2003. 37 The four opinions to which I have referred are, on the evidence, the only opinions that were forthcoming before the making of the last payment by DPL in August 2005. (There was a subsequent opinion of Mr B. Walker SC and Mr J. Kirk of counsel, but it need not be considered.) Mr A. Robertson's first opinion was the only opinion extant at the time of the loan by DPL to CattleCo. By the time of the loans to FuneralCo and ProjectCo, there were also in existence not only the negative opinions of Mr T.F. Robertson and Mr Basten, but also the opinion of 19 March 2005 by which Mr A. Robertson confirmed his original advice. 38 Different parties obtained the four opinions for their own purposes. It is not clear exactly who saw the opinions or had an opportunity to do so. Let it be assumed, however, that every person involved in decision-making within the Enterprise Companies and CattleCo had read all these opinions. The message that such a person would have taken from them was that some lawyers thought that DLALC was not authorised to make the payments that it in fact made to DPL but that the lawyer who had first reviewed the matter considered that there was no such problem and remained of that opinion at a later stage after having reviewed the contrary opinion of one of the other lawyers. 39 The matter was, of course, one that involved legal questions - indeed, legal questions of some difficulty and complexity. The Darkinjung Trust, by its terms, was (and is) a trust to benefit the Aboriginal community whose interests are the concern of DLALC. A layman, asked for a layman's assessment of the proposed transfer of DLALC funds to DPL to be held subject to the Darkinjung Trust Deed, would not have concluded that any dishonesty or other moral wrong was involved. The situation would have been seen by such a person as one in which Aboriginal community funds were being deployed for Aboriginal community purposes, albeit in circumstances where there were claims (espoused mainly by NSWALC) that the deployment was beyond the legal capacity and authority of DLALC under the ALR Act. 40 The position of each Enterprise Company and CattleCo, on the assumptions I have made as to the knowledge of the decision-makers, may thus be seen to be similar to the position occupied by the firm of solicitors in Carl Zeiss Stiftung v Herbert Smith & Co [1969] 2 Ch 276. The plaintiffs in that case contended that a West German foundation held all its assets upon trust for the plaintiffs. The foundation had paid moneys to its solicitors out of those assets. The plaintiffs brought proceedings for an account against the solicitors alleging receipt of the moneys by them. It was also alleged that the solicitors, by reason of their knowledge of all the facts and matters averred and proved or to be proved in the main proceedings, had notice that the foundation's money belonged to the plaintiff. The claim against the solicitors failed. Central to the decision was a finding that the solicitors did not have notice of any trust affecting their client's assets. They had notice of claims only. Danckwerts LJ put the matter thus (at p.293): "Mr Harman's contention was that the defendant solicitors knew where the moneys that they received came from and knew that the source was trust funds. In my view this contention fails at the outset. What the defendant solicitors knew was that the moneys came from the West German foundation and they knew of the allegations contained in the proceedings brought against that foundation by the plaintiffs in which they were instructed to act as solicitors for the West German foundation. They knew that claims were being made against the West German foundation that all their property and assets belonged to the plaintiffs or were held on trust for them. But claims are not the same thing as facts. Mr Harman contended that for the purposes of the present issue all the allegations contained in the statement of claim in both the actions must be taken as true. That will not do. What we have to deal with is the state of the defendant solicitors' knowledge (actual or imputed) at the date when they received payments of their costs and disbursements. At that date they cannot have had more than knowledge of the claims above mentioned. It was not possible for them to know whether they were well-founded or not. The claims depended upon most complicated facts still to be proved or disproved, and very difficult questions of German and English law. It is not a case where the West German foundation were holding property upon any express trust. They were denying the existence of any trust or any right of property in the assets claimed by the plaintiffs. Why should the solicitors of the West German foundation assume anything against their clients?" 41 Sachs LJ said (at p.296): "The rule, as I understand it, is that no stranger can become a constructive trustee merely because he is made aware of a disputed claim the validity of which he cannot properly assess. Here it has been rightly conceded that no one can foretell the result of the litigation even if the plaintiffs were to prove all the facts they allege." 42 Edmund Davies LJ agreed that knowledge of a mere claim that a trust exists is insufficient to give rise to a constructive trust. 43 As I have said, equity is concerned in a "knowing receipt" case with the state of the recipient's conscience, a matter that is to be judged very much by reference to the recipient's knowledge of the rights of the owner. The state of the recipient's knowledge will be a strong indicator of whether his or her receipt was "unjust" in the sense referred to in the Say-Dee case. In the present case, I am not satisfied that, even on the assumption as to knowledge on the part of relevant decision-makers most favourable to DLALC's contentions in this part of the case, there should be attributed to any Enterprise Company or CattleCo knowledge of impropriety relating to the payments by DLALC to DPL of such a kind as to warrant a conclusion that the conscience of any such company was affected by the trust in favour of DLALC now to be recognised by the agreed orders. The knowledge extended to claims only, plus (in the cases other than CattleCo) the fact that differing legal opinions had been expressed. The assumed knowledge of CattleCo (on the basis on which I am approaching the matter) was that there was no legal problem. Exercise of reasonable moral acuity would not have produced in the mind of any of the decision-makers within any company a conclusion that wrongdoing or unconscientious conduct was involved. To the extent that there was "enrichment" of the borrower companies (itself a questionable concept when they came under an obligation to repay), the "enrichment" was, in the circumstances of the knowledge I have assumed, not "unjust" so as to require restitution according to the Court of Appeal's formulation in Say-Dee. 44 I would add that even if it were correct to regard DLALC as entitled and able to rely on the wrong done by DPL in applying funds inconsistently with the purposes of the Darkinjung Trust and the terms of the Darkinjung Trust Deed, the result with respect to "knowing receipt" would be the same. This is because the relevant body of knowledge I have assumed, based on the several opinions of counsel, and the assessment made by a conscientious layman would still have been the same. The propriety and validity of the Darkinjung Trust were dealt with in the opinions, along with the propriety of the particular application of DLALC funds. Summary of conclusions on claims against Enterprise Companies and CattleCo 45 The conclusions I have reached with respect to "following", "tracing" and "knowing receipt" mean that orders as outlined at items (a), (b) and (c) at [8] above will not be made. This is apart altogether from the objections raised by DPL as outlined at [9] above. Those conclusions are also sufficient to dispose of the claim for an order that CattleCo pay equitable compensation (item (d) at [8] above). DLALC's claim for equitable compensation against DPL 46 I consider next the contention of DLALC that DPL should be ordered to pay equitable compensation to DLALC in respect of such part of the aggregate sums of $25,757,095 paid by DLALC to DPL as has been neither retained by DPL nor paid to DLALC, that is, the contention referred to at item (e) at [8] above. The assumption here is that restitution to DLALC entails more than restoration to it of the unexpended balance of the moneys received by DPL from DLAC and the whole of the balance of the funds and assets of DPL, including the debts owed by the Enterprise Companies and CattleCo. 47 The agreed orders proceed on the clear basis that DPL became liable to account to DLALC for the moneys transferred by DLALC as from the time of the transfer. The transfers were beyond the capacity and authority of DLALC when made and remained so. DPL was accordingly at all times a fiduciary in respect of the moneys, so that application of them otherwise than by restoration to DLALC entailed breach of fiduciary duty. The inability of DLALC to recover the balance of the moneys (that is, so much as has been paid away and is not represented by assets beneficial ownership of which by DLALC will be recognised and secured by the agreed orders), together with the interest that DLALC may be presumed to have earned if the moneys had remained with it, is something that should be recognised in the form of an order that DPL pay equitable compensation according to principles most recently discussed by the Court of Appeal in Cassis v Kalfus (No 2) [2004] NSWCA 315 and Blythe v Northwood (2005) 63 NSWLR 531. 48 There will accordingly be an order to the effect referred to in item (e) at [8] above, together with an order creating appropriate machinery for the calculation of the amount of the equitable compensation. Whether DPL may resort to trust assets to satisfy indemnity deed 49 I consider next the contention of DLALC that there should be an order to the effect that DPL is not entitled to resort to assets of the Darkinjung Trust to satisfy an indemnity given by it by deed made on 19 May 2006 in favour of Mr Warner and Mr Sanderson (see item (f) at [8] above). The deed has not so far been mentioned in any detail. It was made six days after Mr Warner and Mr Sanderson were purportedly appointed administrators of each of the Enterprise Companies under Part 5.3A of the Corporations Act. 50 The deed begins by reciting appointments of Mr Warner and Mr Sanderson. It then recites that DPL (called, in the deed, "Darkinjung") has "agreed in its own right and as trustee of the Darkinjung Local Aboriginal Land Council Trust and any other trust of which it is the trustee, to provide the Administrators with an indemnity as set out in this Deed". There is a further recital to the effect that the administrators have agreed to continue "to trade the business" of FuneralCo and to allow ProjectCo "to occupy certain property on the condition that Darkinjung execute this Deed". Then follow operative provisions the first two of which are as follows: "1. Darkinjung hereby covenants with the Administrators that Darkinjung will indemnify and keep indemnified without limitation as to time the Administrators and their legal personal representatives, and their partners, employees, and others for whose actions the Administrators may be responsible (indemnified entities) against all claims, demands, actions, damages, costs, charges and expenses or other liabilities whatsoever that may be brought against, suffered, sustained, or incurred by any indemnified entities and all liabilities of any indemnified entities whether arising pursuant to the provisions of the Corporations Act, any other statute or however otherwise for debts property incurred by them in the course of the appointment of the Administrators, for services rendered and all other liabilities of the indemnified entities (if any) including all amounts paid by the Administrators in compromise of claims made against the Administrators that arise out of or in connection with: (i) the Administrators in their sole discretion allowing Funeral Fund to continue to perform any agreements entered prior to their appointment (ii) the Administrators in their sole discretion allowing Funeral Fund to enter new agreements during the administration period for the provision of funeral services (iii) the Administrators and/or Projects occupation and control over any property including the land used by Projects to agist cattle being land [as described]. 2. Darkinjung further covenants in that in the event of any of the indemnified entities becoming liable to any person as referred to above, then Darkinjung will pay such person directly an amount in full discharge any such liability." 51 It is clear from this that Mr Warner and Mr Sanderson were aware that DPL was the trustee of the "Darkinjung Local Aboriginal Land Council Trust". 52 It is not suggested that the deed of 19 May 2006 is void or that the recipients of the indemnity purportedly given by it may not maintain an action at law against DPL upon the covenants of the deed. But it is suggested that the making of the deed by DPL and the giving of the covenants it embodies were not things that it was open to DPL, as trustee of the Darkinjung Trust, to do. That must be correct. The Darkinjung Trust is a purpose trust. The trust fund is, by the Darkinjung Trust Deed, applicable only for the purposes therein stated. It was quite foreign to those purposes for any part of the Darkinjung Trust fund to be applied in making good to Mr Warner and Mr Sanderson the costs, charges, expenses and liabilities incurred or suffered by them in connection with the matters relevant to their activities as voluntary administrators of FuneralCo and ProjectCo which are referred to in the provisions of the deed extracted above. That could not conceivably have been done or promised in furtherance of any charitable purpose. 53 It becomes relevant here to consider certain basic principles which are usefully summarised by R P Meagher in "Insolvency of Trustees" (1979) 53 ALJ 648. A trustee is personally liable to its creditors for all the debts it incurs. This is so whether the trustee contracts in its own name or as trustee (see, for example, Watling v Lewis [1911] 1 Ch 414). In the present case, DPL expressly contracted "in its own right and as trustee of" the Darkinjung Trust "and any other trust of which it is the trustee". In equity, a trustee has a general right to indemnify itself out of the trust assets for all liabilities properly incurred by the trustee: see Vacuum Oil Co Ltd v Wiltshire (1945) 72 CLR 319. But that right to indemnity extends only to acts which the trustee was authorised to do and, if the trustee acts beyond power, the right does not arise: see, for example, Labouchere v Tupper (1857) 11 Moo PC 198, 14 ER 670. The creditors of a trustee are subrogated to the trustee's rights of indemnity, whatever they may happen to be; and, if the trustee has no right of indemnity, the creditors cannot have any higher right. 54 The last three propositions are of special relevance here. I am satisfied, as already stated, that the incurring by DPL of liability upon the covenants of the deed of 19 May 2006 was something that was not done in exercise of the powers given to DPL as trustee of the Darkinjung Trust or in due execution of the Darkinjung Trust. That being so, no right of indemnity out of trust assets accrued to DPL in respect of that liability and there is accordingly no means by which the persons to whom the covenants were given can claim any interest in or right to resort to those assets. And this is so regardless altogether of the notice of knowledge of those persons concerning the terms of the trust. 55 I have said in earlier parts of these reasons that DLALC does not have any equity referable to breaches of trust by DPL in respect of the trust constituted by the Darkinjung Trust Deed. To say that DPL does not have a right to be indemnified out of the assets of the Darkinjung Trust in respect of its liabilities under the deed of 19 May 2006 is not to recognise any such equity on the part of DLALC. Rather, it recognises that the property held upon trust for DLALC by DPL in the way recognised by the agreed orders is not subject to any lien in support of a right of indemnity or reimbursement out of the assets enjoyed by DPL (or any derivative right of the recipients of the covenants of the deed), with the result that no competing interest in the property held for DLALC arises. 56 An order to the effect of item (f) at [8] above will accordingly be made. DLALC's claims under ss.232 and 233 of the Corporations Act 57 Finally and as a discrete matter, I consider DLALC's claims in respect of DPL based on ss.232 and 233 of the Corporations Act. DLALC made it clear in submissions that the relief principally sought by it under that head is an order modifying the constitution of DPL by omitting provisions requiring, in relation to certain matters, a confirming resolution passed by a special majority of DLALC's own members. There is a secondary and alternative claim for an order for the winding up of DPL and an order for the appointment of a liquidator. 58 The statutory jurisdiction created by ss.232 and 233 (based on concepts of oppression, unfair prejudice, unfair discrimination and inconsistency with the interests of the members as a whole) provides a means by which the court can look beyond legal rights and do what is just and equitable in the particular circumstances. In Wayde v New South Wales Rugby League Ltd (1985) 180 CLR 459 (at p.471), Brennan J said that this provision "broadens the grounds of intervention", adding that "the legislature intends to provide a greater measure of curial protection to members of a company, especially if they be in a minority, than the protection afforded under earlier Companies Acts". In Thomas v H.W. Thomas Ltd [1984] 1 NZLR 686 (at p.693) Richardson J said that the several distinct concepts referred to in the analogous New Zealand section are not to be considered "separately in watertight compartments" but "overlap", so that "each helps to explain the other". Read together, Richardson J said, the several concepts: "… reflect the underlying concern of the subsection that the conduct of the company which is unjustly detrimental to any member of the company whatever form it takes and whether it adversely affects all members alike or discriminates against some only is a legitimate foundation for a complaint under s 209. The statutory concern is directed to instances or courses of conduct amounting to an unjust detriment to the interests of a member or members of the company. It follows that it is not necessary for a complainant to point to any actual irregularity or to an invasion of his legal rights or to a lack of probity or want of good faith towards him on the part of those in control of the company." 59 One aspect of the statutory jurisdiction is the effectuation of parties' underlying intentions when these are not consistent with strict legal rights. I quote from H A J Ford, R P Austin and I Ramsay, "Principles of Corporations Law" at para 11.450: "We have seen that equitable considerations underpin the oppression remedy. A party may have a legal right which the Court refuses to allow the party to exercise on the basis that this would be unfair. It may be unfair because exercise of the legal right may breach an understanding between the parties. An example is a company formed by a majority and minority shareholder on the basis that both shareholders will participate in management of the company and each be directors. The majority shareholder has a legal right to remove the minority shareholder as a director. However, where this breaches the understanding of the shareholders that both will be involved in the management and be directors, the Court can restrain the exercise of the legal right by the majority shareholder on the basis that its exercise would be oppressive." 60 That passage was the subject of the following comment by Hasluck J in Remrose Pty Ltd v Allsilver Holdings Pty Ltd (2005) 225 ALR 588 at p.600: "The learned author notes that the term 'legitimate expectation' has been used to describe an understanding or expectation of the kind just mentioned although Lord Hoffman in O'Neil v Phillips , above, indicated that use of the term may not be appropriate. More recently, in Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [2001] NSWCA 97, Priestley JA described it as a convenient shorthand term, so long as Lord Hoffman's caveat about its proper significance is kept in mind, namely that it is a consequence not a cause of equitable restraint upon legal rights. His Honour indicated that it is a useful label for describing the result of the way in which equitable considerations operate." 61 In similar vein, the Court of Appeal of Western Australia (Steytler P, McLure and Buss JJA), in Smolarek v Liwszyc (2006) 32 WAR 101, noted, at p.122, that, notwithstanding the criticism of the expression by Lord Hoffman in O'Neill v Phillips [1999] 1 WLR 1092, "legitimate expectation" has been used in this context to describe "an understanding or expectation of a member which, because of equitable considerations, can make it unfair for a party to exercise legal rights". 62 The basis on which DLALC pursued its claim under ss.232 and 233 of the Corporations Act was briefly described at paragraph [222] of the reasons of 3 October 2006. DLALC, in the person of Mr Hillig as its administrator, complained of its inability to recover and possess the funds transferred to DPL and about the effect and operation of the provisions of DPL's constitution set out at paragraph [59] of the earlier reasons. In broad terms, those provisions of the constitution make ineffective, in the absence of satisfaction of a particular condition, any transfer of shares in DPL by DLAC, any resolution of the members of DPL increasing or reducing the number of directors or appointing or removing any director and any resolution to alter the constitution of DPL. The particular condition applies while DLALC holds any share in DPL. Satisfaction of the condition involves the passing of an authorising or confirming resolution at a meeting of DLALC itself, with at least 66% of the members of DLALC who are present and vote at the meeting casting votes in favour of that resolution. 63 The first basis of complaint by DLALC will be resolved by the agreed orders. Those orders will recognise that DLALC is entitled to all the funds, property and assets of DPL. The question of relief under ss.232 and 233 therefore falls to be considered solely by reference to the second matter of which DLALC complains, namely, the effect and operation of those provisions of DPL's constitution which, in the present context where DLALC is the sole member of DPL, make ineffective particular steps in relation to the company that a sole member could ordinarily take at will - unless the members of DLALC have, in the prescribed way, expressed concurrence in those steps. 64 There has been some debate on the question whether a sole shareholder can be the "victim" of conduct within the purview of ss.232 and 233. In Goozee v Graphic World Group Holdings Pty Ltd (2002) 42 ACSR 534, I expressed the view that a sole shareholder could obtain relief under those sections, since they operate by reference to norms of conduct having wholly objective content and existing independently of the identity and will of the totality of the members. A contrary opinion was stated by Mr Justice Chesterman in his article "Oppression by the Majority - or of it" (2004) 25 ABR 103. He referred to a number of cases, starting with his decision in Re Polyresins Pty Ltd [1999] 1 QdR 599 and including the decision of the English Court of Appeal in Re Legal Costs Negotiators Ltd [1999] 2 BCLC 171 which endorsed the view below that the equivalent English provisions are concerned with protection of minority shareholders. 65 The view that a sole member may not invoke ss.232 and 233 proceeds on the implicit footing that such a member has the capacity to exercise full control over the company and thereby to cause it to act in any way the sole member wishes - subject, no doubt, to due regard for interests to which a company's decision-makers must generally respect. That basis for the view is made clear by the observation of Peter Gibson LJ in Re Legal Costs Negotiators (at p.197) that: "prejudice will not be unfair to the petitioner's interests where the petitioner had available to him a method of bringing that prejudicial state of affairs to an end." 66 His Lordship also said (at p.198) that the provisions are a means of redressing "abuse of power to the prejudice of shareholders who lacked the power to stop that abuse". A majority member (and a fortiori a sole member) is assumed to possess that power; and, in the vast majority of cases, that assumption is no doubt valid. M Rice, in "The Availability of the Oppression Remedy to Majority Shareholders in Ontario" (1989) 16 Can Bus LJ 58, saw the general cogency of the assumption as the reason why instances of resort to the remedy by majority shareholders had been rare. The author did, however, refer to a number of such instances in Canada pre-dating the publication of his article almost two decades ago. 67 I do not need to revisit the theoretical question whether a sole member may obtain relief under ss.232 and 233. This is because I am not persuaded that the sole member in this case has suffered in a way relevant to the operation and invocation of those sections. As principles already mentioned confirm, the sections are, in broad terms, designed to allow mitigation of strict legal obligations and qualification of strict legal rights in a way that ensures a just and equitable outcome consistent with legitimate expectations within the company. 68 In this case, the company was founded and established on the principle that the form of control that would ordinarily accrue to a sole member was to be qualified. I say this because the provisions of the constitution of DPL requiring a confirmatory resolution agreed to by 66% majority at a meeting of the sole member's own members have always formed part of DPL's constitution and were deliberately included at the time of the company's registration. The legitimate expectation of the member or members - derived from what Isaacs J, in Manning River Co-operative Dairy Co Ltd v Shoesmith (1915) CLR 714 at pp.721-2, described as the basis agreed to "by the social compact of the Company" - has, in this case, always been subject to the overriding conditions regarding concurrence by the membership of DLALC by the specified 66% majority. 69 General assumptions about the position occupied by a sole member and the nature and extent of a sole member's powers are no more than a reflection of the operation of statutory provisions and the corporate constitution in the generality of cases. In the present case, the sole corporator itself saw fit not only to impose but also to accept a system under which the statutory provisions were, by special provisions of the constitution consciously and deliberately adopted, made to operate in a special way differing from the norm. The sole corporator thereby introduced into the governance of the wholly owned subsidiary it created certain principles of democratic decision-making that prevailed within the sole corporator itself. It was open to the sole corporator to proceed in that way. And, having itself created that modified system, that corporator should not now be heard to say the system thwarts or denies some legitimate expectation to which it is entitled. 70 It is true that decision-making within the sole corporator is, for the moment, in the hands of an administrator appointed under the ALR Act. But that does not somehow now make oppressive or unfair the expectations flowing from the special system that the corporator itself deliberately chose to adopt. The overriding supervision of the sole member's own members does not cease to be legitimate because of that temporary change. 71 In summary, this is not a case where adherence to the strict letter can be said to require modification so that a just and equitable result replaces one that is unfair. The operation, according to their terms and the intentions underlying them, of the qualifying provisions adopted by the sole member is not unfair to that sole member. There will accordingly be no grant of either of the forms relief sought by DLALC as referred to at [55] above. 72 I would add that, even if the continued presence of the qualifying provisions in DPL's constitution had been seen as a source of oppression, unfair prejudice or some other aspect of the composite concept embodied in ss.232 and 233, I would not have been disposed to exercise the court's discretion to make a winding up order. DLALC, through Mr Hillig (exercising the powers given to him by the ALR Act), has ample ability to procure the passing of a special resolution of DPL under s.491(1) - or, at least, will have if the present application for a winding up order is no longer extant: see s.490(a). The requirement related to a 66% majority at a meeting of DLALC's members will not apply in relation to any such special resolution. Once the special resolution had been passed, voluntary winding up of DPL would follow, although whether it was a members' voluntary winding up or a creditors' voluntary winding up would depend on whether DPL's directors had made a declaration of solvency under s.494. If they had not, it would be open to the meeting of creditors convened under s.497 to install a liquidator other than the one selected by DLALC: see s.499(1). Because only duly qualified persons are eligible for appointment as liquidators, this aspect would not entail any conceivable prejudice to DLALC. In short, the winding up remedy, if sought by DLALC in relation to DPL, lies entirely in DLALC's own hands. Another matter 73 I have not to this point mentioned another order DLALC seeks in proceedings 2842/06, being an order that the second, third, fourth, fifth and sixth defendants (that is, the directors of DPL) "do deliver up to the plaintiff [DLALC] all records of the first defendant [DPL] and provide such information as the plaintiff may reasonably require". 74 The basis upon which the directors of a company should be compelled by the court to give the company's sole shareholder all the company's records and provide whatever information the shareholder reasonably requires is not elucidated by DLALC. Given the statutory provisions casting upon a company itself the obligation to keep books and records of various kinds and the regime under s.247A allowing the court to make an order for the inspection of a company's books by a member, an order for wholesale delivery up to a member would be at odds with the legislative intention. 75 No such order will be made.

Conclusions 76 The outcome of the proceedings to this point is as follows: 1. In 5634/05, there will be orders as set out at [3] above. 2. In 2842/06, there will be orders as set out at [4] above, together with a declaration or order in terms of item (f) at [8] above, orders for the payment and calculation of equitable compensation as outlined at [48] above and an order dismissing the claims based on ss.232 and 233 of the Corporations Act . 77 I direct that agreed short minutes of the orders I have outlined be filed by delivery to my Associate within seven days. 78 I direct that written submissions on costs of both proceedings (5634/05 and 2842/06) be exchanged among the parties and filed by delivery to my Associate within 21 days. I shall hear the parties to 2842/06 at a time to be fixed regarding directions for the progress of the aspects of those proceedings involving claims against company directors. **********

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