Hillig v Darkinjung Pty Ltd & Ors

Supreme Court of NSW|2007-06-29|Before: White J, Barrett J

CITATION : Hillig v Darkinjung Pty Ltd & Ors [2007] NSWSC 683

JURISDICTION : Equity Division Corporations List

DECISION : 1. Order that the second to sixth defendants' Notice of Motion filed on 17 April 2007 be dismissed with costs; 2. direct the parties to bring in short minutes of order for the further conduct of the proceedings.

LEGISLATION CITED : Corporations Act 2001 (Cth) Aboriginal Land Rights Act 1983 (NSW)

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 Darkinjung Pty Ltd v Darkinjung Local Aboriginal Land Council & Ors; Hillig v Darkinjung Pty Ltd & Ors [2006] NSWSC 1217 Hillig v Darkinjung Local Aboriginal Land Council [2006] NSWSC 1371 CASES CITED : Barnes v Addy (1874) LR 9 Ch App 244 Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41 Fouche v The Superannuation Fund Board (1952) 88 CLR 609 Commonwealth v Verwayen (1990) 170 CLR 394

Peter Hillig in his capacity as administrator of Darkinjung Local Aboriginal Land Council PARTIES : v Darkinjung Pty Ltd & Ors

COUNSEL : Plaintiff: D A Smallbone Defendants: S Epstein SC, D A Robertson

SOLICITORS : Plaintiff: Patrick Woods & Co Defendants: Norton White

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

2842/06 Peter Hillig in his capacity as administrator of Darkinjung Local Aboriginal Land Council v Darkinjung Pty Ltd & Ors JUDGMENT 1 HIS HONOUR: This is an application by the second to sixth defendants that the proceedings against them be summarily dismissed. Alternatively, they seek orders that the amended points of claim be struck out, or, in the further alternative, that the proceedings be stayed until other persons are added as defendants. Background 2 The plaintiff was appointed as administrator of Darkinjung Local Aboriginal Land Council ("DLALC") on 2 May 2006. He brings these proceedings in that capacity. No issue was raised as to whether the DLALC itself ought to be a plaintiff. 3 The first defendant to the proceedings is Darkingjung Pty Ltd ("DPL"). On 12 December 2006, Barrett J ordered that DPL be wound up by the Court on the grounds specified in s 461(1)(a) of the Corporations Act 2001 (Cth). Mr Richard James Porter, an official liquidator, was appointed as liquidator of DPL. It was wound up on the application of the plaintiff. It and the plaintiff now have the same interest in the proceedings. 4 The second, third and fourth defendants were voting members of the DLALC. It is alleged that the second to fourth defendants were directors of DPL from 2 March 2004, and that the fifth and sixth defendants were directors of DPL from 14 April 2005. 5 The present claim arises from the circumstances disclosed in the judgments of Barrett J in 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; and Darkinjung Pty Ltd v Darkinjung Local Aboriginal Land Council & Ors; Hillig v Darkinjung Pty Ltd & Ors [2006] NSWSC 1217 and Hillig v Darkinjung Local Aboriginal Land Council [2006] NSWSC 1371. In short, in 2002, the DLALC sold land at North Entrance to Mirvac Projects Pty Ltd for just over $42,000,000. Prior to the appointment of Mr Hillig as administrator of the DLALC, more than $25,000,000 was paid by Mirvac to the DLALC. On 15 July 2004, the DLALC paid $19,582,713.36 to DPL. On 27 October 2004, it paid $69,100 to DPL. On 7 July 2005, it paid $5,453,375.25 and a further $651,907 to DPL (Darkinjung Pty Ltd v Darkinjung Local Aboriginal Land Council [2006] NSWSC 1008 at [18]). 6 DPL was the trustee of a trust (called the "DLALC Trust") established for the purpose of improving, protecting and fostering the best interests of Aboriginal persons within the "Relevant Area" and other persons who are members of the Land Council by doing any act that the Land Council had the power to do (Darkinjung Pty Ltd v Darkinjung Local Aboriginal Land Council [2006] NSWSC 1008 at [53]). 7 DPL disbursed a substantial part of the moneys paid to it. In Darkinjung Pty Ltd v Darkinjung Local Aboriginal Land Council [2006] NSWSC 1008, Barrett J referred to seven payments made by DPL between 8 August 2004 and 23 August 2005 totalling $17,804,493.71. Five million was paid by DPL to Darkinjung Cattle Company Pty Ltd ("the Cattle Company"). Five million dollars was paid by DPL to Darkinjung Housing Pty Ltd. $1,500,000 was paid by DPL to Darkinjung Funeral Fund Pty Ltd. Darkinjung Housing Pty Ltd and Darkinjung Funeral Fund Pty Ltd are together call "the Enterprise Companies". 8 In Darkinjung Pty Ltd v Darkinjung Local Aboriginal Land Council [2006] NSWSC 1008, Barrett J held (at [153]) that the transfers of funds from the DLALC and their subsequent disbursement by DPL were, "actuated by the improper purpose of removing the moneys in question from the ambit of decision making within the statutory confines of Darkinjung Local Aboriginal Land Council and to place them instead within the decision making structure based on Darkinjung Pty Ltd and the Trust, being a decision making structure not presided over by members of Darkinjung Local Aboriginal Land Council." His Honour held that it was beyond the power of the DLALC to make the four payments totalling $25,757,095.01. The parties agreed that as a result of that finding, DPL held the moneys which it received on trust for the DLALC. 9 The present proceedings, 2842/06, were before Barrett J at the hearing which resulted in his Honour's judgment of 3 October 2006. The hearing of those proceedings commenced in July 2006. On 3 July 2006, the plaintiff filed an amended originating process and points of claim which added claims against the second to sixth defendants for equitable compensation, for recovery of amounts of directors' fees received by them from the first defendant, and for indemnity in respect of any amount which might become due from DPL to administrators appointed to DPL. On 10 July 2006, orders were made for the separate trial of those claims. This ultimately led to the filing of the amended points of claim which the second to sixth defendants seek to have summarily dismissed. The second to sixth defendants were parties to the proceedings in which Barrett J made declarations that the payments made by the DLALC to DPL were beyond its powers, and that the moneys received by DPL were held by it on trust for the DLALC. A declaration was made that the whole of the funds and assets of DPL were held by it on trust for the DLALC. 10 On 16 November 2006, Barrett J rejected claims of the administrator of the DLALC that moneys lent by DPL to the Enterprise Companies and the Cattle Company from DPL were held by the Enterprise Companies and the Cattle Company on trust for the DLALC. His Honour rejected the DLALC's application for declarations that the whole of the funds and assets of each Enterprise company were held by it on trust for the DLALC. His Honour also rejected a claim that the assets of the Cattle Company acquired from the moneys received by it from DPL were held on trust for the DLALC. His Honour also rejected a claim against the Enterprise Companies and the Cattle Company that they were liable to account under the first limb of the principles in Barnes v Addy (1874) LR 9 Ch App 244 for the moneys paid to them by DPL in breach of the trust on which DPL held the moneys for the Land Council (Darkinjung Pty Ltd v Darkinjung Local Aboriginal Land Council & Ors; Hillig v Darkinjung Pty Ltd & Ors [2006] NSWSC 1217 at [23]-[45]). The present second to sixth defendants do not contend that those findings give rise to any res judicata or issue estoppel. They were not parties to the proceedings in which the liability of the Enterprise Companies and the Cattle Company to the DLALC to account for moneys received from DPL was determined. However, the defendants rely upon Barrett J's findings in favour of the Enterprise Companies and the Cattle Company in their application for summary dismissal of the claim, or parts of the claim, made against them in these proceedings.

Outline of Relevant Pleadings 11 In his amended points of claim, Mr Hillig, as administrator of the DLALC, pleads that at all material times, the second to fourth defendants were voting members of the DLALC. He pleads that the second defendant was, at all material times, until 2 May 2006, an officer of the DLALC and its chairperson. The plaintiff alleges that voting members of the DLALC are Aboriginal persons who reside in, or have an association with, its designated area who have applied for and been enrolled as members after being accepted by a meeting of the DLALC and who are not otherwise disqualified from voting at its meetings. It is alleged in paragraph 47 that: "47 Because each of the Second to Fourth Defendants was a voting member of Darkinjung LALC, each of those Defendants was at all material times a fiduciary to Darkinjung LALC and owed it the following duties: (1) To adhere to the terms of its statutory object, functions and powers; (2) To preserve and apply its property and money for its statutory object and functions; (3) To refrain from profiting at the expense of Darkinjung LALC; (4) To refrain from taking or applying directly or indirectly to his private use or benefit any part of the property or funds of Darkinjung LALC, except, subject to Pt. 5, Div. 5 and Pt 10, Div. 4 of the Aboriginal Land Rights Act and in the event of holding appointment as an officer or member of staff of Darkinjung LALC, the payment in good faith of such remuneration for his services as an officer or member of staff or Darkinjung LALC as may be determined by Darkinjung LALC; (5) To prefer the interest of Darkinjung LALC to his personal interest; (6) To refrain from placing himself in any position of conflict between his duty to Darkinjung LALC and: (a) His duty to any other person; or (b) His personal interest; (7) In discharging the business of Darkinjung LALC and in the exercise of its functions and powers, to use that reasonable care that an ordinary prudent business person would take if it were his or her own business. "

12 In paragraph 48, it is alleged that, because the second defendant was the chairperson of DLALC, he was at all material times a fiduciary to the DLALC and owed it the duties alleged in paragraph 47 and certain additional duties. The additional duties which it is alleged the second defendant owed included: "(1) To direct and control the affairs of Darkinjng LALC on behalf of Darkinjung LALC only in accordance with:

(b) Resolutions and decisions of Darkinjung LALC; (2) To participate in the allocation of the Council's resources for the benefit of the Council's members only in accordance with:

(b) Resolutions and decisions of Darkinjung LALC; ... (6) To uphold the rules of Darkinjung LALC, including: (a) Model Rule 15(1)(a), requiring the Treasurer promptly to deposit all money received into Darkinjung LALC's account with an authorised deposit-taking institution; (b) Model Rule 15(4) and (5), requiring: (i) The Treasurer or in the absence of the Treasurer the Chairperson to present to Darkinjung LALC: (a) All bills and accounts that have not been paid to be approved by Darkinjung LALC for payment; and (b) Details of all bills and accounts that have been paid and not previously approved by Darkinjung LALC for ratification by Darkinjung LALC; and (ii) Full details of all approvals and ratifications to be entered in the minutes of the meeting of Darkinjung LALC at which they are made; (c) Model Rule 16(4) requiring: (i) That the property, including money, of Darkinjung LALC which is in the possession of or under the control of an officer whose term of office has expired by reason of removal from office must be handed over to the officer's successor as Darkinjung LALC directs; and (ii) That an officer whose term of office has expired by reason of removal from office take no step after his removal from office to deal with or dispose of any property of Darkinjung LALC so as to hinder or prevent his successor from having or obtaining in due course possession or control of the same; and (d) Model Rule 21(a), (b) and (c), requiring that the Treasurer must: (i) Maintain proper accounts and records of all transactions in relation to the operations of Darkinjung LALC in a manner approved by the New South Wales Aboriginal Land Council; and (ii) Ensure that all money received is deposited as soon as possible in Darkinjung LALC's account with an authorised deposit-taking institution; and (iii) Ensure that financial statements, together with an auditor's certificate in relation to the statements, are submitted to each annual meeting of Darkinjung LALC and to the New South Wales Aboriginal Land Council in accordance with Division 2 of Part 8 of the Aboriginal Land Rights Act. " 13 In paragraphs 49, 50, 51, 52, 53, 54, 55 and 56, the plaintiff alleges that the second to fourth defendants breached duties which it is alleged they owed as fiduciaries of the plaintiff. Many breaches are assigned. They include:

(a) participation in the establishment of the DLALC Trust, participation in the meeting of 10 February 2004 at which the DLALC confirmed that the second defendant was to be a director of the trustee company and the second to fourth defendants were to be directors (paragraph 49);

(b) acting as directors and managing the affairs of DPL (paragraph 49);

(c) participating in the decisions of the DLALC to make the payments totalling $25,757,095.01 between 15 July 2004 and 7 July 2005 to DPL (paragraphs 49 and 50), which payments were not authorised by the Aboriginal Land Rights Act 1983 (NSW); were not for any particular purpose of executing any of the functions of the DLALC; were unauthorised; were made for improper purposes; exposed the second to fourth defendants to a conflict between their duties to the first defendant to adhere to the terms of the Trust and their duties to serve the interest of the DLALC; and were imprudent as they deprived the DLALC of substantially the whole of its then presently disposable funds, its ability to fund its ordinary and budgeted operating expenses, and to execute its statutory functions (paragraphs 49 and 50);

(d) received remuneration as directors of the first defendant which was paid from the moneys of the DLALC (paragraph 51);

(e) caused DPL to pay $990 to the second defendant to indemnify him for the expense of obtaining personal legal advice in relation to a complaint that he had been defamed (paragraph 52);

(f) caused DPL to make numerous payments which did not relate to any function of the DLALC and were made for improper purposes (paragraphs 53 and 54);

(g) in relation to payments to National Management Consultants, that the expenses paid were disproportionate to the income of the DLALC and of DPL, that the defendants did not give reasonable consideration to whether the services were necessary and did not seek or consider alternative tenders for the services, and that the services were related to or were caused by the unauthorised establishment and operation of the DLALC Trust and the unauthorised payments of funds of the DLALC to and from DPL, and in circumstances where National Management Consultants had not complied with their obligations of disclosure under s 187 of the Aboriginal Land Rights Act (paragraphs 53 and 54);

(h) caused or permitted DPL to make various other payments to consultants, advisors and lawyers which were unauthorised applications of the moneys of the Land Council and made for improper purposes, were incidental to the unauthorised application of the plaintiff's funds and were not payments which a reasonable prudent person of business would make (paragraph 55); and

(i) caused investments to be made by DPL of the DLALC's funds which were not authorised by the Aboriginal Land Rights Act (paragraph 56). 14 Further allegations are made against the second defendant. It is alleged that at the time of his removal from office upon the appointment of Mr Hillig as administrator, he controlled all of the property of DPL and of Darkinjung Projects Pty Ltd which was the property of the Land Council. 15 By paragraph 59, it is alleged that the second to fourth defendants in breach of their duties alleged in paragraph 47, and, in the case of the second defendant, in paragraph 48, failed to ensure that the funds of the DLALC were paid into the statutory account of the DLALC, caused the property of the DLALC to be applied without authority including in the defence of the proceedings, caused, or were knowingly concerned in, the actions of the directors of the Enterprise Companies to appoint voluntary administrators to those companies without the authority of the plaintiff and in order to hinder the plaintiff from exercising control and supervision over the operations and assets of those companies, and caused DPL to purport to give an indemnity to the administrators. The Fiduciary Relationship Claim 16 In seeking the summary dismissal of these claims, counsel for the second to fourth defendants submitted that it was not seriously arguable that those defendants were fiduciaries of the DLALC and owed the duties alleged in paragraph 47, and in the case of the second defendant, paragraph 48. 17 In paragraph 47, it is alleged that the basis upon which each of the defendants was a fiduciary to the Land Council and owed the alleged duties was that each of them was a voting member of the Land Council. It was submitted for the defendants that it is not seriously arguable that a voting member of a Local Aboriginal Land Council is a fiduciary of the Land Council by reason of being a voting member, and it is not seriously arguable that a voting member who exercises his or her voting rights is subject to the alleged duties. 18 A "voting member" of a Local Aboriginal Land Council is a member of that Council who has voting rights in relation to that Council (Aboriginal Land Rights Act, s 4(1)). The members of a Local Aboriginal Land Council for a Local Aboriginal Land Council area are the adult Aboriginal persons who are listed on the Local Aboriginal Land Council membership roll for that area (Aboriginal Land Rights Act, s 53). Section 54 provides for the keeping of membership rolls. Subsection 54(2) provides: "54 Local Aboriginal Land Council membership rolls ... (2) The Secretary of a Local Aboriginal Land Council must list on the membership roll for the Local Aboriginal Land Council area the names and addresses of those adult Aboriginal persons: (a) who: (i) reside within that area, or (ii) have an association with that area, and (b) who have been accepted by a meeting of that Council as members. " 19 Section 55 provides that an Aboriginal person may be a member of more than one Local Aboriginal Land Council, but is entitled to voting rights in relation to one Local Aboriginal Land Council only at any one time. A person who is a member of more than one Local Aboriginal Land Council may nominate the Council in relation to which the person has voting rights. That nomination may be changed from time to time. Otherwise, the Chief Executive Officer of the New South Wales Aboriginal Land Council may determine the Local Aboriginal Land Council in relation to which the person is to have voting rights (ss 55 and 56). 20 In Darkinjung Pty Ltd v Darkinjung Local Aboriginal Land Council [2006] NSWSC 1008, Barrett J said (at [142]): "142 Local Aboriginal land councils were described in submissions as 'single-organ corporations'. This is because such a council has only one deliberating and decision-making body, being the members assembled at a meeting convened and conducted in accordance with the ALR Act . Delegates and agents may act for the corporation, but every delegate or agent will derive his or her authority to do so from a decision made by members in the way I have described." 21 This follows from Divisions 4, 5 and 6 of Pt 5 of the Aboriginal Land Rights Act. Section 73 provides that a Local Aboriginal Land Council is to hold meetings at such times as the Council determines. Ordinary meetings are to be held at least once in every three months. Section 74 provides that the Chairperson of a Local Aboriginal Land Council is to preside at meetings of the Council, and in the absence of the Chairperson, the members of the Council are to elect a member to preside at the meeting. Section 76 specifies the quorum for a meeting of a Local Aboriginal Land Council. Section 77 provides: " 77 Voting

(cf former section 10) Subject to this Act, a decision supported by a majority of the votes cast at a meeting of the Council at which a quorum is present is the decision of the Council. " 22 Local Aboriginal Land Councils do not exist only for the benefit of its members. Section 51 provides that: " 51 Objects of Local Aboriginal Land Councils

(cf clause 5 of Schedule 1 to 1996 Regulation) The objects of each Local Aboriginal Land Council are to improve, protect and foster the best interests of all Aboriginal persons within the Council's area and other persons who are members of the Council. "

23 The functions of a Local Aboriginal Land Council are specified in s 52. They include acquiring residential accommodation for Aboriginal persons in the Land Council's area, protecting the interests of Aboriginal persons in its area in relation to the acquisition, management, use, control and disposal of its land, and promoting the protection of Aboriginal culture and the heritage of Aboriginal persons in its area (s 52(1)(j), (k) and (m)). Section 52(1)(n) provides that the functions of a Local Aboriginal Land Council include ensuring that no part of the income or property of the Council is transferred directly or indirectly by way of dividend or bonus or otherwise by way of profit to members of the Council. This does not prevent payment in good faith of remuneration to any officer or member of staff of the Council. 24 Any analogy between voting members of a Local Aboriginal Land Council and shareholders in a company is inaccurate and misleading. Voting members who exercise their voting rights at meetings of a Local Aboriginal Land Council make the decisions of the Council. The Council must act in accordance with its objects and functions which include having regard to the welfare of all Aboriginal persons within the Council's area as well as of the interests of those persons who are its members. Its members cannot obtain any profit from the income or property of the Council either directly or indirectly. 25 In my view, it is seriously arguable that within such a statutory framework, those voting members of a Council who exercise their voting rights stand in a fiduciary relationship with the Council. It may be accepted that the relationship between a Local Aboriginal Land Council and its members is not one of the accepted fiduciary relationships such as trustee and beneficiary, agent and principal, or director and company (although the relationship is similar to the relationship between a director and the company of which he or she is a director). It may also be accepted that the imposition of a statutory duty to perform certain functions does not as a general rule impose fiduciary obligations (Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41 at 71, 96). However, it does not follow that, because Local Aboriginal Land Councils are creatures of statute and the functions of its members derive from statute, a fiduciary relationship between the Land Council and its members is excluded (Hospital Products Ltd v United States Surgical at 96). 26 Section 176 of the Aboriginal Land Rights Act provides: "176 Conduct of councillors, officers and staff of Aboriginal Land Councils (cf section 439 of Local Government Act 1993 ) (1) Every officer and member of staff of an Aboriginal Land Council, and every councillor, must act honestly and exercise a reasonable degree of care and diligence in carrying out his or her functions under this or any other Act. (2) Although this section places certain duties on officers and members of staff of a Council, and on councillors, nothing in this section gives rise to, or can be taken into account in, any civil cause of action. " 27 The section applies only to "officers", members of staff of an Aboriginal Land Council and "councillors". An "officer" in relation to an Aboriginal Land Council is the chairperson, secretary or treasurer of the Council (s 4). It follows that the plaintiff contends that the second defendant is an officer within the meaning of s 176. A "councillor" means a member of the New South Wales Aboriginal Land Council. The voting members of a Local Aboriginal Land Council are not "councillors" within the meaning of the section. Section 176 is silent as to whether a fiduciary relationship exists between voting members of a Local Aboriginal Land Council and the Land Council. It does not exclude the possibility of such a relationship existing. 28 In the case of the second defendant, who is an "officer", s 176 does not exclude the possibility of a civil cause of action against him. Subsection 176(2) merely excludes the duties imposed by subs 176(1) as elements of any cause of action which might otherwise exist. 29 Section 242(1) provides as follows: "242 Exclusion of personal liability

(cf former section 54) (1) An act or omission of an Aboriginal Land Council, or any of the following persons: (a) a councillor, (b) a member of any Local or Regional Aboriginal Land Council, (c) the Chief Executive Officer of the New South Wales Aboriginal Land Council, (d) any person acting under the direction of an Aboriginal Land Council, does not subject a councillor, member, Chief Executive Officer or person so acting personally to any action, liability, claim or demand if the act or omission was done, or omitted to be done, in good faith for the purpose of executing this or any other Act. ... " 30 Subsection 242(1) does not exclude the possibility of there being a fiduciary relationship between a voting member of a Local Aboriginal Land Council and the Land Council. It implies that a Local Aboriginal Land Council might have a civil cause of action against a member, but excludes personal liability if the member acts in good faith for the purpose of executing the Aboriginal Land Rights Act or any other Act. 31 In Hospital Products v United States Surgical Corporation, Mason J said (at 96-97): " ... The critical feature of these [accepted fiduciary] relationships is that the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense. The relationship between the parties is therefore one which gives the fiduciary a special opportunity to exercise the power or discretion to the detriment of that other person who is accordingly vulnerable to abuse by the fiduciary of his position. The expressions 'for', 'on behalf of' and 'in the interests of' signify that the fiduciary acts in a 'representative' character in the exercise of his responsibility, ... " 32 It was submitted for the second to fourth defendants that voting members of a Local Aboriginal Land Council do not act in a "representative character" in the way described above. However, the contrary is seriously arguable. What the members of a Local Aboriginal Land Council decide will determine what the Local Aboriginal Land Council does. They are charged with determining how a Local Aboriginal Land Council's assets are to be deployed, not for their own profit, but in the interests of all members and of all Aboriginal persons in the Land Council's area. The Land Council and those in whose interests the Land Council is required to act are vulnerable to an abuse by the voting members of their position. 33 The second to fourth defendants also submitted that the duties pleaded in paragraphs 47 and 48 were not confined to fiduciary duties or fiduciary obligations as properly understood; that is, as requiring the avoidance of conflicts between interest and duty, or between duty and duty, and requiring the fiduciary to refrain from profiting from the fiduciary office without the fully informed consent of the principal. In particular, it was submitted that the duty alleged in paragraph 47(7), that the second to fourth defendants were required to exercise their functions and powers with the reasonable care that an ordinary prudent person of business would take in the conduct of his or her own business, was not a fiduciary duty. However, it is immaterial that such a duty is properly characterised as an equitable rather than a fiduciary duty. The question is whether it is seriously arguable that the second to fourth defendants have such a duty. As the voting members of the Local Aboriginal Land Council in general meetings determine how the Land Council's funds will be deployed, it is plainly arguable that such a duty is owed and is enforceable in equity (Fouche v The Superannuation Fund Board (1952) 88 CLR 609 at 640-641). 34 The second to fourth defendants also submitted that the pleading was defective because the plaintiff did not identify with particularity which of the alleged duties was breached by which particular impugned transaction and what loss was alleged to have been incurred as a result of each such alleged breach. 35 Of course, these submissions could not lead to the summary dismissal of the proceedings. Nor do they justify an order striking out the amended points of claim. It is easy to quibble about a pleading. The question is whether the pleading pleads material facts, discloses an arguable cause of action, and makes clear to the defendant the case the defendant has to meet. The pleading is perfectly clear, even if there is room for debate, as to whether each alleged breach could constitute a breach of each alleged duty. The time for making any such complaint about lack of particularity would be once defences have been filed and affidavits have been served, and only then, if it could seriously be contended that the defendants did not understand the case they have to meet. 36 Arguments about pleadings which have a tendency to delay the preparation of the case for hearing, and which are not really necessary for the defendant to understand the case against him, should be firmly discouraged. 37 I do not accept that the plaintiff has not specified sufficiently the loss which it is said has been incurred as a result of the alleged breaches of duty. The plaintiff has specified how much money was paid out by the DLALC. It has pleaded the further disbursement of the DLALC's money by DPL. What the loss ultimately may be is likely to depend on the extent to which the DLALC is successful in recovering moneys from third parties, particularly, from the Cattle Company and from the Enterprise Companies. It has pleaded that the Cattle Company has not repaid any part of the $5,000,000 paid to it by DPL, and it has pleaded that the Cattle Company disputes the right of either the DLALC or DPL to recover any part of those moneys. There are other proceedings on foot in which the DLALC or DPL seek to recover those sums. Similarly, the plaintiff pleads that the DLALC has recovered effective control of Darkinjung Funeral Fund Pty Ltd and the remaining funds controlled by that company, but that some moneys have been put aside to meet a contested claim, and that costs and expenses have been incurred in recovering the funds. The amended points of claim do not include particulars of the dollar sums recovered or the amount of expenses incurred. However, that is a matter for further particulars. The allegations of loss are clear. 38 Complaint is also made by the defendants that rather than seeking equitable compensation, the plaintiff seeks an order that there be an inquiry to determine the amount of equitable compensation claimed from the second to sixth defendant. The defendants submit that it is not open to the plaintiff to secure a separate hearing on the quantum of its claim for equitable compensation in the absence of an order for the separate determination of issues. That is not a matter which warrants the striking out of the claim. It can be a matter for directions in due course. However, I should not be taken as accepting that in an equity suit, it would necessarily be expected that in the absence of an order for the trial of separate issues the quantum of such a claim would be determined by the judge hearing the claim. The equity procedure was typically for such matters to be referred to an Associate Judge for certification once it appeared that such an inquiry was called for. But this is by the way. The important point is that there be clarity as to what matters are to be determined at the hearing. It is not an objection to the pleading that the plaintiff seeks an inquiry. The Barnes v Addy Claims 39 In paragraph 61 of the amended points of claim the plaintiff pleads that the second to fourth defendants were appointed as directors of DPL on or about 2 March 2004 and that the fifth and sixth defendants were appointed as directors of DPL on or about 14 April 2005. It is alleged that those defendants have remained as directors since their appointment. 40 It has already been declared that the funds received by DPL were held by it on trust for the DLALC. The parties to the proceedings before Barrett J were agreed that that declaration was the appropriate consequence of his Honour's findings on 3 October 2006 that the payments made by the DLALC to DPL were beyond power. DPL was a volunteer. The trust would be properly characterised as a resulting trust. 41 In paragraphs 62-65, the plaintiff alleges that the second to sixth defendants are liable to account as constructive trustees under both limbs of Barnes v Addy for the moneys paid by DPL to them (the claim under the first limb), and for losses suffered by the DLALC by the defendants assisting in the breach of trust by DPL in paying out those moneys to third parties (the claim under the second limb). 42 In paragraph 62, the plaintiff pleads receipt by the second to sixth defendants of remuneration, superannuation contributions, and, in the case of the second defendant, a sum of $990 as reimbursement for personal legal fees. It is alleged that each of the second to sixth defendants knew, or ought to have known, or that an honest and reasonable person, in the circumstances known to each of the defendants, would understand, that the funds they received from DPL were funds held on trust for the DLALC. The plaintiff pleads the matters which it is alleged the second to sixth defendants knew or ought to have known which are relevant to these allegations. Those matters are also relied upon in support of a claim that the second to fourth defendants, and after 14 May 2005, the fifth and sixth defendants, knowingly assisted in the commission of breaches of fiduciary duty by each other by, inter alia, causing DPL to make the impugned payments, and otherwise to make investments and incur consultancy fees and carry on the affairs of DPL in disregard of various legal opinions, and without obtaining advice or direction from the Court, and notwithstanding the pendency of proceedings challenging the validity of the payments made by the DLALC to DPL. 43 It was submitted for the second to sixth defendants that these claims should be summarily rejected because of findings made by Barrett J on 16 November 2006 (Darkinjung Pty Ltd v Darkinjung Local Aboriginal Land Council [2006] NSWSC 1217) that the Enterprise Companies and the Cattle Company were not liable to account for payments received by them from DPL pursuant to the first limb of Barnes v Addy. The payment of moneys by DPL to the Enterprise Companies and the Cattle Company was a breach by DPL of the trust upon which it held the funds for the DLALC. Barrett J held (at [35]-[44]): "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 .

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. " 44 The second to sixth defendants submitted that nothing was pleaded against them which could place them in an arguably different position from that of the Enterprise Companies and the Cattle Company in proceedings determined by Barrett J. The second defendant was a director of both the Cattle Company and the Enterprise Companies. Apparently, the other directors were not. 45 It was conceded that no estoppel arose. Rather, it was submitted that for the same reasons as given by Barrett J it was clear beyond serious argument that the claims based on Barnes v Addy against the director defendants was doomed to fail. 46 I do not accept this submission. The question of what knowledge the individual defendants had, if any, of the trust on which DPL held the DLALC's assets will depend upon the evidence adduced in the case. No findings were made by Barrett J as to the knowledge of any of the individual defendants. His Honour proceeded on the basis of assumptions which, on the evidence led before his Honour, were most favourable to the DLALC's contentions, namely, that they knew only of claims, plus, in the case of the Enterprise Companies, that differing legal opinions had been expressed in relation to those claims. It is impossible to say whether the evidence which may be adduced in the present proceedings would justify the same approach. For example, if it were found in the case of one director defendant that he wilfully shut his eyes to the question of whether the making of the payments by DPL was a breach of trust on which DPL held its funds for the DLALC, for fear of learning what he would rather not know, he would be treated as having knowledge that the payments were made in breach of trust. In my view, it would be no answer for a defendant in such a position to say that, had he considered the question, he could properly have formed the view on materials that could have been available to him that the payments involved no breach of trust. 47 Likewise, if it were found that one defendant had seen or been told only of a legal opinion to the effect that the payments by the Land Council to DPL were unauthorised, or if he believed from what he had seen and read that payments by the Land Council were beyond its power, it is by no means clear that such a person would escape liability under either limb of Barnes v Addy because another person with fuller knowledge, or who formed a different belief on the basis of what he had read and been told, might properly escape liability. 48 The question on an application for summary dismissal is not whether the defendants are likely to succeed for the same reasons as the Enterprise Companies and the Cattle Company succeeded. The question is whether it is seriously arguable that they may be liable on the basis of the matters alleged. That inquiry is not answered by predicting that the evidence to be adduced in the current proceedings will be the same as the evidence adduced at the hearing before Barrett J and that like conclusions will be reached as to the liability of the director defendants as were reached in the case of the Cattle Company and the Enterprise Companies. As Dawson J said in Commonwealth v Verwayen (1990) 170 CLR 394 (at 456): " Of course, an amendment which is futile because it is obviously bad in law will not be allowed. But it is no ground for refusing an amendment that it raises a claim or defence which ought not to succeed. That will be an issue upon trial. " 49 For these reasons, I reject the claims that the proceedings be summarily dismissed or that the amended points of claim be struck out. Joinder of Parties 50 Counsel for the second to sixth defendants submitted that the plaintiff had failed to join all proper parties to the proceedings and that the proceedings should be stayed until the proper parties were joined. They submitted that all persons liable to a single demand in equity are required to be joined as parties. They referred to the principle that prima facie all trustees are necessary parties to a suit complaining of a breach of trust. Thus, they said that if they are liable for having breached their duties as fiduciaries by voting at meetings of the DLALC in favour of resolutions for the establishment of the DLALC Trust of which DPL was the trustee, and the making of payments by the DLALC to DPL as trustee of the DLALC Trust, all other persons who voted in favour of those resolutions are also liable to the same demand, and should be joined as defendants. Likewise, they submitted that all of the directors of DPL who participated in the decisions to deal with the moneys of DPL in the ways complained of by the plaintiff are liable, or none is liable, and all should be joined. 51 I do not accept these submissions. Voting members of the DLALC cannot be liable for acts done or omitted in good faith for the purpose of executing the Aboriginal Land Rights Act (s 242). Whether the absence of good faith is an element in the plaintiff's cause of action, or whether it would be a defence that the actions about which the plaintiff complains were done in good faith for the purpose of carrying out the functions of the DLALC under the Act, whether a voting member is liable depends not only upon what he or she did, but the purpose and intention with which he or she did it. It would not be responsible for the plaintiff to institute proceedings against members of the DLALC unless the plaintiff were of the view that there are reasonable grounds for believing on the basis of provable facts, and a reasonably arguable view of the law, that the claim had reasonable prospects of success. Unless the plaintiff had reason to believe that other members of the DLALC who voted in favour of the resolutions were not acting in good faith, it would not be appropriate or proper for the plaintiff to join such persons as defendants. In my view, this case is clearly distinguishable from the equity practice for which counsel for the second to sixth defendants referred. 52 Likewise, the liability of directors of DPL under either limb of Barnes v Addy for receiving moneys which constituted property held on trust for the DLALC, or for assisting in DPL's breach of trust, depends upon each individual director's notice or knowledge of the breach of trust. The claims are several. It cannot be inferred from the allegation that the director defendants had sufficient notice and knowledge to be liable under either limb of Barnes v Addy, that if the allegation is established, all directors are so liable. 53 The defendants have not shown that the proceedings are defective for want of parties. If the defendants consider that other persons are also liable to the plaintiff's demand, then it is open for them to join such persons as cross-defendants to a claim for contribution. Orders 54 For these reasons, I order that the second to sixth defendants' Notice of Motion filed on 17 April 2007 be dismissed with costs. I direct the parties to bring in short minutes of order for the further conduct of the proceedings. If the parties do not agree on what orders should be made, I will hear the parties on that question. ******

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