Henry v Sandlewood Aboriginal Projects Limited

Federal Court of Australia|2021-11-22|Before: Mr P, Rares J

The applicants and first respondent have leave to enter into the proposed deed of settlement.
The applicants have leave to settle their claim against the first respondent on the terms set out in the settlement deed, being confidential exhibit 1 in the oral application heard on 22 November 2021 (the settlement deed).
The settlement sum (as defined in the settlement deed) be paid into Court. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

RARES J: 1 On 7 October 2021, the applicants, and particularly the seventh applicant, Western Downs Group Limited, and the first respondent Sandlewood Aboriginal Projects Limited, informed my associate that, under s 240 of the Corporations Act 2001 (Cth), they had agreed to settle the proceedings as between them. I made programming orders on 9 November 2021 on the assumption that an interlocutory application seeking that leave would be filed, but counsel informed me today that no such interlocutory application had been filed. I granted leave for the applicants to apply orally for leave to settle the proceedings with respect to Sandlewood.

7 In addition, the statement of claim alleged that: on 17 February 2014, Western Downs paid $120,000 to Sandlewood by a cheque authorised by Mr Doctor, Ms Lacey and Ms Maytom; that payment was not supported by any invoice from Sandlewood to Western Downs; each of Mr Doctor, Mr Jarro and Ms Lacey used his or her position as a director or officer of Western Downs, and or as a signatory to its bank account, to effect or authorise payment of moneys held by it on trust, for purposes other than those for which Western Downs held the money, in breach of their fiduciary obligations owed to Western Downs and the 11 claim groups; those payments conferred benefits on, among others, a company associated with Mr Doctor (Bigambul Limited), Mr Doctor himself, Mr Jarro, Sandlewood, Ms Lacey and the fifth respondent, Lucy Davis, each of which constituted a breach of the duties which those individuals owed Western Downs; Sandlewood was aware of the nature of the trust on which Western Downs had received moneys from Arrow pursuant to the ILUA; Western Downs held those moneys on trust for distribution equally to the 11 claim groups; the payments totalling $1,613,023 were: • not bona fide expenses incurred by Western Downs; • were for the benefit of Sandlewood itself, Mr Doctor and Mr Jarro and not for Western Downs or the claim groups; and • were in an amount or amounts obviously detrimental to the cestui que trusts, namely, the claim groups.

The proposed settlement 8 The applicants and Sandlewood attended a mediation on 16 September 2021 conducted by the Honourable John Byrne AO QC RFD. The applicants were represented by Peter Somers of counsel and their solicitor, Trevor Hauff; Sandlewood by Damien Atkinson QC and Kristie Swainston of DLA Piper lawyers; and the Attorney-General by Holly Blattman, instructed by Nathalie Frost of Crown Law. As a result of the mediation, the applicants and Sandlewood entered into an undated deed of settlement, a redacted version of which Mr Hauff annexed to his affidavit of 12 November 2021. 9 The full terms of the deed are in a confidential exhibit before me, together with Mr Somers' confidential memorandum of advice dated 18 November 2021. 10 Relevantly, the settlement provides for the payment of a sum by Sandlewood to Western Downs in settlement of all the claims or possible claims against it or claims that might be made against Sandlewood's directors and officers. The deed also provides for payment of a sum in respect of the applicants' costs of prosecuting their claim against Sandlewood. 11 Mr Somers' advice, relevantly, discussed the matters that he considered apposite to warrant his conclusion that the settlement sum represented a good resolution of the claim, given difficulties which he identified and outlined in respect of Western Downs being able to establish certain matters in its pleaded case. He also noted that the settlement provided for the recovery of a proportion of the costs incurred in prosecuting the case against Sandlewood. 12 In forming his opinion, Mr Somers had regard to the fact that, were the matter to go to trial, first, further substantial legal costs would be incurred, not all of which would be recoverable on a taxation, even if Sandlewood were unsuccessful, secondly, there was a commercial risk that, even if successful, the full value of a judgment may not be ultimately recoverable,; and thirdly, there remained a risk that the claim would fail. In those circumstances, Mr Somers recommended the settlement. 13 The Attorney-General has seen Mr Somers' opinion and, although she has not independently reviewed the parties' discovery or disclosures in the proceeding or conferred with potential witnesses, she was represented at the mediation and is aware of the terms of the proposed settlement. The Attorney considers that the proposed settlement between the applicants and Sandlewood is a reasonable one. The Attorney seeks that, as with the other orders for summary judgment made against Mr Doctor, Mr Jarro and Ms Lacey, the settlement sum, as opposed to the costs component of the settlement, be paid into Court and that, before payment out, the Court settle a scheme as to how all the funds paid into Court be used to advance the charitable purpose of the trust.

Consideration 14 The scheme of the Corporations Act allowing members and others to bring a proceeding on behalf of a company under Pt 2F.1A contemplates a degree of supervision of such a proceeding by the Court. First, s 237 requires a person to apply for leave to bring a proceeding in the name of a company and sets out relevant considerations that are discussed in Huang v Wang (2016) 114 ACSR 586 at 597-598 [56]-[60] per Bathurst CJ, with whom McColl and Barrett JJA agreed. Secondly, s 240 requires that leave of the Court must be obtained before a proceeding brought, or intervened in, with leave under s 237, can be discontinued, compromised or settled. Thirdly, the Court may make orders under s 241 and give any directions it considers appropriate in relation to proceedings brought under Pt 2F.1A. 15 Nothing in Pt 2F.1A expressly sets out the considerations relevant to the grant of leave to settle a proceeding under s 240. In my opinion, the discretion to grant leave under s 240 falls to be exercised on the principle that it is unconfined, except in so far as the subject matter, scope and purpose of the Act may enable the Court to discern any reason that is definitively extraneous to any objects that the Parliament could have had in view: see Water Conservation and Irrigation New South Wales v Browning (1947) 74 CLR 492 at 505 per Dixon J; The Queen v Australian Broadcasting Tribunal; Ex parte 2HD Pty Limited (1979) 144 CLR 45 at 49-50 per Stephen, Mason, Murphy, Aickin and Wilson JJ. The considerations governing the grant of leave to bring the proceeding under s 237 must also be relevant to the discretion to grant leave to enter into any particular settlement, as Stewart J held in Nation Energy (Australia) Pty Limited v Paltar Petroleum Limited (Administrators Appointed) [2019] FCA 1473 at [15], where he said: Given that the power under s 241 is supervisory of proceedings commenced with leave under s 237, and the interests of the company are central to the granting of such leave, the interests of the company must be central to the exercise of the power under s 241. In considering what is in the best interests of the company, it is necessary to consider the prospects of success of the action, the likely costs and likely recovery if the action is successful and likely consequences if it is not: Robash Pty Ltd v Gladstone Pacific Nickel Pty Ltd [2011] NSWSC 1235; 86 ACSR 432 at [57] per Ball J. 16 In granting leave to bring a proceeding in the name of the company under s 237, Bathurst CJ said in Huang 114 ACSR at 597 [60] that an applicant must establish, on the balance of probabilities, that to do so is in the best interests of the company, which can only be demonstrated by taking into account all relevant circumstances, and where the company is solvent, those interests will predominantly reflect the interests of shareholders of the company in that capacity. He approved an observation by Ball J in Robash Pty Limited v Gladstone Pacific Nickel Pty Limited (2011) 86 ACSR 432 at 445-446 [58] that the grant of leave did not necessarily involve a consideration of the underlying merits of the proposed litigation except to the extent necessary to determine if there were a serious question to be tried. 17 I am of opinion that, where a court is asked to approve a settlement, ordinarily it will have regard to any advice of counsel for the plaintiff or applicant as to the considerations taken into account in arriving at and recommending the settlement. That is because the Court must be satisfied, ultimately, that it is in the best interests of the company in whose name the action has been allowed to proceed for it to be compromised on the terms on which the Court is asked to act. 18 I have reviewed the allegations in the statement of claim and Sandlewood's defence, where it denied a number of matters that it would be essential for Western Downs to establish. These include denials of the allegations that Sandlewood had knowledge sufficient to make it liable under the principles in Barnes LR 9 Ch App at 251-252. 19 Sandlewood asserted that it only received a benefit of a commission of 10 per cent of the moneys that Western Downs passed through it and asserted its belief that the moneys which it received and paid on were for Western Downs' benefit in accordance with its experience in dealing with numerous other similar arrangements that it had made to assist native title claim groups distribute benefits to their members. Those pleaded denials might make it difficult for Western Downs to prove certain matters, particularly having regard to the list of payees in par 68 of the statement of claim. It is apparent that there were numerous persons to whom payments were made of varying sizes, some of which were less problematic than others, such as those to Mr Doctor and Mr Jarro, who had 105 meetings within a relatively short period of time under which each man received over $330,000: see [6] above. 20 While one might think, as I have found in entering judgment against each of Mr Doctor and Mr Jarro, that those fees taken as a whole would be difficult to justify, proof of liability in respect of many of Sandlewood's other payments would have required considerable evidence and attention individually. I am satisfied that there were complex and difficult issues of fact and law raised on the pleadings on which there was room for the parties to arrive at a bona fide compromise having regard to the uncertainties of litigation.

Conclusion 21 Accordingly, I am satisfied that, having regard to the submissions of the parties and on the evidence before me, the nature of the claims, and the submissions of the Attorney-General as an intervenor, with responsibility for considering the best interests of the charitable trust the subject of Western Downs' constitution and the ILUA, that I should grant Western Downs leave to enter into the proposed settlement in the settlement deed. I certify that the preceding twenty-one (21) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Rares.

SCHEDULE OF PARTIES QUD 280 of 2017 Applicants Fourth Applicant: PATRICIA CONLON Fifth Applicant: PATRICK BUNDAI Sixth Applicant: GEORGE HOPKINS Seventh Applicant: WESTERN DOWNS GROUP LIMITED (AN 166 757 384) Respondents Fourth Respondent: KERRY-ANNE LACEY Fifth Respondent: LUCY DAVIS Sixth Respondent: BIGAMBUL LIMITED

Corporations Act 2001(Cth)s 240, ss 237, 240, Pt

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