Hillig v Darkinjung Pty Ltd & Ors [2008] NSWCA 75 | Case summary

Hillig v Darkinjung Pty Ltd & Ors [2008] NSWCA 75 | Case summary | Zoe

(e) DLALC could have passed the resolution, and the appellant could do so. 5 The question then is the effect of the words in the Provisos "by a majority of 66% of the members present and voting at such a meeting" ("the majority words"). On one view, the resolution in the minute signed by the appellant satisfied the majority words, in that the appellant's resolution represented a 100 per cent vote in passing the resolution in relation to the share. On the contrary view, the majority words required that the resolution be one passed at an actual meeting and by the actual members with the requisite majority, and the Provisos could not be satisfied by a resolution passed by an administrator exercising the functions of DLALC. 6 The answer lies in the construction of cll 6.1 and 14.4 of DPL's constitution. 7 The Provisos began the condition with the words "on the Council passing a resolution". The subsequent majority words described the nature of the resolution, one which commanded more than the customary simple majority. But they did not stipulate a strict requirement. A majority of 80 per cent of members present and voting at a meeting, rather than 66 per cent, would suffice as an expression of DLALC's will, as would a resolution passed by a sole member in the unlikely event that there was only one member of DLALC. So also, in my view, would the absolute expression of DLALC's will through an administrator's resolution, which necessarily represented more than the customary simple majority and more than a 66 per cent majority. The clauses confined the circumstances in which the constitution could be amended or the directorships altered by stipulating for DLALC's concurrence; if that concurrence came about by an absolute expression of DLALC's will, through a sole member or an administrator exercising a function of DLALC, there was no question of a 66 per cent majority and the resolution representing a 100 per cent vote provided DLALC's concurrence. 8 So to construe cll 6.1 and 14.4 gives effect to their evident purpose of ensuring that DLALC had control over the constitution of DPL and the membership of its board of directors, DLALC for this purpose meaning DLALC when subject to the appointment of an administrator as well as in ordinary circumstances. There is no justification for terminating the control upon the appointment of an administrator, at a time when it may be that the control is particularly needed. On the contrary view abovementioned, control would be in the hands of the members of DLALC as a voting body distinct from DLALC, excluding an administrator exercising DLALC's functions. That could not stand with the words "on the Council passing a resolution", and would also mean that important control over DLALC property would lie not in DLALC but in an outside voting body unrecognised in the ALR Act; quite contrary to the strict scheme of the Act protective of the property of Local Aboriginal Land Councils. Such a construction would not readily be adopted, and in my view it should not be adopted. 9 It is unnecessary to decide whether DPL's constitution could validly stipulate for the concurrence of an outside body, DLALC, or to enter upon whether the validity of the Provisos or cll 6.1 and 14.4 as a whole can be impugned for repugnancy to the ALR Act. It is enough that, assuming the validity of the clauses including the Provisos, as a matter of construction they accommodated DLALC passing a resolution in the exercise by an administrator of DLALC's functions. 10 I agree with the orders proposed by McColl JA. 11 McCOLL JA: Darkinjung Local Aboriginal Land Council ("DLALC") owned waterfront land at North Entrance on the Central Coast. On 24 September 2002 it contracted to sell that land to Mirvac Projects Pty Ltd for the overall consideration of $42 million which was to be paid in stages. 12 DLALC decided to set up a trust into which to place the proceeds of the sale. By trust deed dated 9 March 2004 Darkinjung Pty Ltd ("DPL") was appointed to act as trustee for the Darkinjung Local Aboriginal Land Council Trust (the "Trust"), an entity "purportedly a charitable trust established on very broadly expressed terms essentially mirroring the structure and powers of the Land Council": Hillig v Darkinjung Pty Ltd [2006] NSWSC 594; (2006) 201 FLR 148 (at [47]). DLALC was the sole shareholder in DPL.

Procedural aspects of the appeal 25 The appellant filed a Notice of Appeal with appointment on 23 June 2006. On 17 July 2006 the respondents filed a Notice of Motion seeking orders that the appeal be struck out as incompetent and costs. On 9 August 2006 the appellant filed a Summons seeking a declaration that his appeal lay as of right, alternatively an order granting leave to appeal from the primary judgment and an extension of time to seek that leave. 26 Following the appointment of the liquidator to DPL a notice of change of solicitor and a submitting appearance were filed on its behalf. On 13 March 2007 the second to seventh opponents filed an appearance submitting to such order as the Court may make save as to costs. 27 When the matter was called on for hearing, Mr D Murr of Senior Counsel appeared with Mr D Smallbone for the appellant. Mr S Epstein of Senior Counsel appeared for the second to seventh respondents. 28 Despite his clients' submitting appearance, Mr Epstein informed the Court that the second to seventh respondents would contend "to the extent necessary" that the appeal should be held to be not competent and that leave should not be granted. He said, however, that he did not propose to move on the competency motion, nor make submissions in support of the orders sought therein. 29 The Court raised with Mr Murr what the point of the proceedings was having regard to the orders made by Barrett J on 12 December 2006. He informed the Court that the principal practical consequence of the success of the appeal was costs. He contended that because Austin J had determined as a separate question what I will describe, briefly, as the Provisos issues, Barrett J had been bound by that decision. Accordingly, as I understood his argument, the utility of the appeal for the purposes of proceedings No 2842 of 2006, was that it may affect the final costs orders of the Commercial List proceedings. That would be a valid basis upon which an appeal court could consider hearing an appeal where its subject matter had otherwise been rendered moot: Bonan v Hadgkiss [2007] FCAFC 113; (2007) 160 FCR 29; Harrington v Rich [2008] FCAFC 61.

30 It appears that by the time the appeal was heard DPL had transferred substantially all its assets to DLALC except for an amount of $430,000 set aside in Barrett J's December 2006 orders. The outstanding costs issue which Barrett J has yet to resolve turned, Mr Murr informed the Court, on the validity of the appellant's steps of 22 May 2006. Notwithstanding this statement, at the end of the oral argument, Mr Murr submitted that if the Court upheld the appeal it should order the respondents to pay the appellant's costs both of the proceedings before Austin J and of the appeal. 31 The Court determined that if leave to appeal were required, it would grant that leave. It also determined that it should deliver reasons on the issues raised by the appeal, save those as to costs. The issue of costs is to be determined once the substantive appeal is resolved. 32 Mr Murr submitted, in support of the utility of the appeal, that if successful the appellant would argue as relevant to the question of costs (whether in this Court or before Barrett J was not made clear) that the proceedings before Barrett J were conducted by people who had been removed from office and who had no proper authority to conduct them. 33 This submission appeared to me to be based on a misconception. Acts done according to the exigency of a judicial order afterwards reversed are protected as being "acts done in the execution of justice, which are compulsive": Commissioner for Railways (NSW) v Cavanough [1935] HCA 45; (1935) 53 CLR 220 (at 225) per Rich, Dixon, Evatt and McTiernan JJ. This principle is a corollary of the proposition that an order made by a court of competent jurisdiction must be obeyed unless and until that order is discharged: Hadkinson v Hadkinson [1952] P 285 (at 288) per Romer LJ, cited with approval by Lord Diplock in delivering the judgment of the Privy Council in Isaacs v Robertson [1985] AC 97 (at 101-102). 34 There is nothing in Barrett J's judgment which indicates that the outcome of the Provisos hearing affected the points his Honour had to determine. While the outcome of the Provisos hearing stood, and the parties acted as bound by it, I should have thought the principles I have cited meant his Honour had to determine any costs application as if the second to seventh respondents were authorised to act. However these matters were not explored in argument and it is not necessary to express a final opinion on them.

39 Section 52 sets out the functions of a Local Aboriginal Land Council. As at 22 May 2006 it provided: " 52 Functions of Local Aboriginal Land Councils (cf former section 12) (1) The functions of a Local Aboriginal Land Council are as follows: (a) in accordance with any regulations, to acquire land and to use, manage, control, hold or dispose of, or otherwise deal with, land vested in or acquired by the Council, (b) to negotiate the acquisition by the Council or by the Council and one or more other Local Aboriginal Land Council s of lands of cultural significance to Aboriginal persons that are listed in Schedule 14 to the NPW Act and the lease of those lands to the Minister administering that Act, (c) to submit proposals to the Director-General of National Parks and Wildlife for the listing in that Schedule of other lands of cultural significance to Aboriginal persons that are reserved or dedicated under the NPW Act, (d) to negotiate the lease by the Council or by the Council and one or more other Local Aboriginal Land Council s of lands to which section 36A applies to the Minister administering the NPW Act, (e) to make applications in writing to the New South Wales Aboriginal Land Council for the acquisition by the New South Wales Aboriginal Land Council of land on behalf of, or to be vested in, the Local Aboriginal Land Council, (f) to make applications in writing to the New South Wales Aboriginal Land Council or other persons or bodies for the granting of funds for the payment of the costs and expenses of the Local Aboriginal Land Council, (g) to implement the wishes of its members (as decided at a meeting of the Council) with respect to: (i) the acquisition, management, use, control and disposal of land, and (ii) the acquisition, establishment and operation of enterprises (including enterprises that promote employment and employment training as a means of obtaining self-sufficiency for Aboriginal persons), (h) to consider applications to prospect or mine for minerals on its land and to make recommendations to the New South Wales Aboriginal Land Council in respect of such applications, (i) to make claims to Crown lands, (j) to acquire, construct, upgrade or extend residential accommodation for Aboriginal persons in its area, (k) to protect the interests of Aboriginal persons in its area in relation to the acquisition, management, use, control and disposal of its land, (l) to negotiate with persons desiring to use, occupy or gain access to any part of its land, (m) to promote the protection of Aboriginal culture and the heritage of Aboriginal persons in its area, (n) to ensure 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 (nothing in this paragraph prevents the payment in good faith of remuneration to any officer or member of staff of the Council), (o) such other functions as are conferred or imposed on it by or under this or any other Act. Note. Section 50 of the Interpretation Act 1987 provides for the powers of a statutory corporation." 40 The members of the 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: s 53. An Aboriginal person can 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: s 55(1) and (2).

6.1 Appointment and removal of directors (a) Subject to rule 6.1, there must be five directors. (b) The directors in office on the date that this constitution was adopted by the company continue in office but on the terms and conditions set out in this constitution. (c) At all times: (i) there must be more Internal Directors than External Directors; and (ii) no more than one director may be an officer (as that term is defined in the Aboriginal Land Rights Act) of the Council. (d) The company may by resolution increase or reduce the number of directors, provided that if at the time of such resolution the Council holds any shares, the resolution of the company is conditional on the Council passing a resolution (prior to the resolution by the company or within one month after the passing of a resolution by the company) in materially the same terms as the resolution passed by the company by a majority of 66% of the members present and voting at such meeting. (e) Subject to rule 6.1(f), the company may appoint or remove a director provided that if at the time of such appointment or removal the Council holds any shares, the resolution of the company is conditional on the Council passing a resolution (prior to the resolution by the company or within one month after the passing of a resolution of the company) in materially similar terms as the resolution passed by the company by a majority of 66% of the members present and voting at such meeting. The resolution of the Council must also authorise the person being appointed as a director to act in the best interest of the company. (f) Subject to rules 6.1(a) and 6.1(c), the directors may appoint any natural person to be a director, either to fill a casual vacancy or as an additional to the existing directors, but the total number of directors must not at any time exceed the maximum number allowed under this constitution. (g) Subject to rule 6.2 and to the terms of any agreement entered into between the company and the relevant director, a director holds office until the director dies or is removed from office pursuant to rule 6.1(e)." (emphasis added) 47 Clause 14.4 provided: " 14.4 Amendment of this constitution The company may by resolution amend this constitution. If at the time of such resolution the Council holds any shares, the resolution of the company is conditional on the Council passing a resolution (prior to the resolution of the company or within one month[s] after the passing of a resolution by the company) in materially similar terms as the resolution passed by the company by a majority of 66% of the members present and voting at such meeting. " (emphasis added) 48 The Council referred to in the clauses I have extracted was DLALC. The sections I have emphasised were referred to by the primary judge, and are referred to in these reasons, as "the Provisos". 49 Clause 6.14 provided that a sole director could pass resolutions or make declarations by signing a minute. 50 The Dictionary to the Constitution relevantly required that it be interpreted subject to the Corporations Act: cl 2(a). DPL could exercise any power permitted by the Corporations Act which a company limited by shares might exercise if authorised by its constitution: cl 3(a). 51 Where the constitution conferred a power to do a particular power or thing it was taken, absent contrary intention, to include a power exercisable in a like manner and subject to like conditions, to repeal, rescind, revoke, amend or vary that power or thing: cl 3(c). 52 Clause 4 of the Dictionary excluded the replaceable rules applicable to a proprietary company in the Corporations Act. 53 Clause 5 provided, in effect, that where a company only had one member, references to "members" were references to that member.

The primary judgment 55 The appellant did not seek approval for his actions from the DLALC as was required by the Provisos. He advanced four arguments before the primary judge to contend that, despite the Provisos, his actions of 22 May 2006 were valid. As described by the primary judge, these arguments were: "11… First, he contended that the exercise of powers by Mr Hillig as Administrator is valid by reason of s 125 of the Corporations Act 2001 (Cth), and consequently the directors, in so far as they have any power to challenge Mr Hillig's decisions, have a remedy in damages and nothing more. 12 Secondly, he contended, as a matter of construction, that the Provisos are satisfied by resolutions of the Land Council by its Administrator, because where an Administrator has been appointed the Provisos do not require a resolution of a meeting of members of the Land Council. 13 Thirdly, he submitted that if (contrary to his second submission) the Provisos are not satisfied by decisions of the Administrator on behalf of the Land Council, then they are repugnant to the Aboriginal Land Rights Act 1983 (NSW) ('ALR Act') and are void. 14 Fourthly, he said that the establishment of the trust and the incorporation of Darkinjung as trustee with the Constitution that it has, are parts of a scheme to achieve an improper purpose. He did not seek to suggest any moral turpitude, or dishonesty, but simply that the adoption of the scheme was improper in the sense that it was designed to achieve something contrary to the scheme of administration of aboriginal land and aboriginal funds that had been established by the legislature." All four arguments failed. 56 The first argument turned on the proposition that the Provisos were express restrictions on DPL's exercise of its powers to remove its directors and to amend its constitution so that, by force of s 125(1) of the Corporations Act, the exercise by the appellant of those powers was not invalid merely because (there being no resolution passed by a majority of 66% of the members present and voting at a meeting of members) it was contrary to the restrictions in the Provisos: primary judgment at [18]. The primary judge rejected that argument because he held (at [26] ff) that a resolution of the company's sole member to remove a director or to amend the company's constitution was not an exercise of a power by the company within s 125(1) of the Corporations Act. In short, his Honour (at [27]) regarded the subject matter of the clauses in which the Provisos appeared as, "inherently, to do with the internal management of the company, by allocation of a decision-making function to a company organ". 57 Mr Murr does not pursue the s 125 point on appeal. However as the primary judge's characterisation of the Provisos is germane to other issues, I set out that part of his Honour's reasons on the s 125 issue dealing with their characterisation: "26 The Provisos are conditions attached to decision-making by company organs. Clause 6.1(d) deals with the power of the members of the company (or the sole member) to increase or reduce the number of directors. Clause 6.1(e) deals with the power of the members (or the sole member) to appoint or remove a director. Clause 14.4 deals with the power of the members (or the sole member) to amend the company's constitution. They are, relevantly, analogous to provisions allocating decision-making power on matters of management to the board of directors constituted in a specified manner, and allocating decision-making power over the use of the common seal to the board … the Provisos restrict and inhibit the members (or the sole member) in exercising those powers, but they do not have any bearing on the extent of the powers of the company. Instead, they are qualifications to the internal requirements for the allocation, amongst the organs and agents of the company, of authority to exercise the company's powers. In my opinion, to apply the second sentence of s 125(1) to the Provisos would be inconsistent with the Brick and Pipe decision**, and it would misconceive the purpose and operation of the section." (emphasis added)

** Brick and Pipe Industries Ltd v Occidental Life Nominees Pty Ltd [1992] 2 VR 279. 58 In dealing with the second argument, the primary judge accepted (at [32]) that, by virtue of his appointment as Administrator, the appellant acquired, under s 222(4) and s 4(2)(a) of the ALR Act, the powers in relation to a Land Council's property conferred by s 41. However, in his Honour's view (at [33]) the powers enjoyed by the Administrator under s 41 were no more than powers to do or suffer, in relation to the Land Council's property, any act or thing that the Land Council could lawfully do or suffer if it were a natural person. As a natural person holding shares in a company formed under the Corporations Act had, in relation to those shares, the rights conferred by the company's constitution, then if the constitution contained a restriction on one of the rights attaching to those shares that restriction would be effective as a part of the bundle of shareholders' rights, unless contrary to law. 59 Insofar as the Proviso to cl 14.4 was concerned his Honour was of the view (at [34]) that it was a permissible "further requirement" for the purposes of s 136(3) of the Corporations Act and was not incompatible with s 41 of the ALR Act. This was because the Proviso was a part of the bundle of rights which constituted the property that is the share, and therefore it affected what a natural person, and consequently a Land Council under s 41, might lawfully do as a shareholder. It was "not a restriction superimposed on a species of property defined aliunde". 60 The same reasoning applied, subject to one qualification, in relation to the Provisos in cll 6.1(d) and (e). The qualification was that because the Corporations Act did not purport to prescribe any procedure for increasing or reducing the number of directors or appointing or removing a director of a proprietary company such as DPL, the Provisos in cll 6.1(d) and (e) were part of the definition of the voting rights attaching to the shares. Accordingly under s 41 of the ALR Act the voting rights of a Land Council (and its Administrator) holding such share(s) was affected by the relevant Proviso: primary judgment at [35]. 61 Further, in his Honour's view (at [36]) the appointment of an Administrator was not an obstacle to the Provisos operating according to their terms, and therefore permitting decisions by the shareholders (or the sole shareholder) of DPL on the stated subjects only with the approval of a resolution of members of the Land Council. The fact that the Administrator acquired all the functions and powers of the Land Council upon appointment did not mean that he or she acquired a power conferred on the members of the Land Council. Rather, in his Honour's view, although the Provisos spoke of "the Council passing a resolution", those words did not, in context, identify the exercise of a function or power of the Council, acquired by the Administrator. The phrase was, like "the company by resolution" or "the company in general meeting", "a form of words used by convention to identify one of the organs of the relevant body, namely the members in general meeting". The fact that "the Provisos juxtaposed the concepts of the Council passing a resolution and the company passing a resolution, strongly suggest[ed] uniformity of meaning". Accordingly his Honour concluded: "37 In my view, the Provisos upon their proper construction require that a decision by the shareholders (or sole shareholder) of Darkinjung on any of the subjects identified in clauses 6.1(d), 6.1(e) and 14.4 be conditional on the passing, by a majority of 66% of the members present and voting at a meeting of members of the Land Council, of a resolution in materially similar terms, either prior to the resolution of the shareholders (or sole shareholder) or within one month after the passing of that resolution. The Provisos, so construed, are not inconsistent with the ALR Act because they form part of the definition of the voting rights of the shareholders of Darkinjung." 62 The result was that (at [38]), subject to the arguments about impropriety and repugnancy, the appellants' 22 May decisions were subject to the Provisos, and, therefore, were conditional on the passing of resolutions in materially similar terms by the requisite majority of members of the Land Council within the timeframe specified in the Provisos and were inoperative and ineffective unless that condition was satisfied. 63 His Honour rejected (at [39]) an argument that on this construction the Proviso amounted to an invalid alienation of the voting rights attached to shares in DPL. 64 The appellant's third argument was that the Provisos were repugnant to s 77 of the ALR Act which provides: "Subject to this Act, a decision supported by a majority of votes cast at a meeting of the Council at which a quorum is present is the decision of the Council." 65 The primary judge accepted (at [42]) that the Provisos were invalid to the extent that they were inconsistent with s 77. However he concluded (at [43] - [44]) that: "…s 77 does not wholly extinguish the Provisos, as a matter of construction. To the extent that they impose the additional requirement of a resolution by the members of the Land Council, as a condition for an effective decision of the Darkinjung shareholders/shareholder, the Provisos are not inconsistent with s 77. The inconsistency arises only with respect to the requisite majority for the resolution to be carried. 44… It is sufficient for present purposes to hold (and I do hold) that s 77 does not extinguish the Provisos, so as to permit Mr Hillig to exercise the Land Council's powers as Darkinjung's shareholder in disregard of them." 66 The primary judge noted (at [45]) for the purpose of dealing with the appellant's improper purpose argument, that it was common ground that DLALC became entitled to receive approximately $42 million, payable in instalments, upon the sale of the land at North Entrance to a company in the Mirvac group and that, to date, approximately $25 million had been received in three instalments. The appellant contended (see [47]): "…that the vast bulk, if not all, of the money to be received from the sale of the land was to be transferred to the Trust. He complains that the effect of these arrangements is to take the Land Council's money outside the statutory controls applicable to Aboriginal Land Councils under the ALR Act, controls that include requirements for the banking of funds in specific bank accounts, auditing and reporting requirements, and other supervisory requirements."

67 Although the appellant did not accuse those who established and implemented the scheme of dishonesty or moral turpitude, he did contend that the scheme was established for an improper purpose, because it was designed to defeat or hinder the administration of aboriginal property under the ALR Act and the activities of an Administrator appointed under that Act in recovering funds: primary judgment (at [48]). 68 His Honour referred (at [50] - [56]) to various senior counsels' opinions which he concluded (at [51]) "provide[d] grounds for concern as to whether the Trust was validly constituted, and … substantial concern as to whether the Land Council's funds were validly transferred to it and are being validly disbursed, bearing in mind the requirements of the ALR Act." However he concluded (at [57]) that it was not necessary to decide whether the Trust was unlawful or whether the scheme was designed and implemented for an improper purpose or unlawfully. He accepted (at [58]) the respondents' submission that the appellant had not established that any improper purposes underlying the development and implementation of the scheme affected the validity or enforceability of the Provisos. He was also of the view (at [60]) that it was not appropriate to make factual findings about the allegation of improper purpose in what were essentially interlocutory proceedings, but that resolution of such issues should be determined in the Commercial List proceedings which had been commenced, to which I refer in greater detail below. 69 In the result, the primary judge concluded (at [66]) that the respondents had made out their case. On 19 June 2006 he made declarations to the effect that the appellant's actions of 22 May 2006 were inoperative and ineffective, that DPL's constitution had not been amended or repealed, that the second to sixth respondents continued to be DPL's directors and that the seventh respondent continued to be DPL's solicitor. He ordered that the appellant be restrained from holding himself out or purporting to act as a director of DPL in reliance upon any of the 22 May resolutions. He ordered the appellant to pay the costs of the "Interlocutory Processes" he had determined.

(a) that as the appellant and NSWALC contended, the transfers of funds from DLALC to DPL "were actuated by the improper purpose of removing the moneys in question from the ambit of decision-making within the statutory confines of DLALC and to place them instead within the decision-making structure based on DPL and the Trust, being a decision-making structure not presided over by members of DLALC": (at [153]); (b) that, even though the transfers of funds were duly sanctioned by resolutions passed at meetings of DLALC, it was beyond the statutory authority and capacity of DLALC for it to make the four transfers to DPL and that the decisions to transfer were made for an improper and extraneous purpose: (at [220]); (c) that the Trust was a charitable trust (in the sense that at least part of the "Sole Purpose" is charitable) but that, to the extent that trust moneys were lent by DPL, as trustee, to CattleCo and the Enterprise Companies (and, in the case of CattleCo, outlaid as subscription moneys for shares), the expenditure was neither made in furtherance of any aspect of the charitable purpose nor made in a form that the Trust Deed permitted the trustee to make: ibid. 72 It is pertinent to note parts of Barrett J's reasoning to these conclusions. 73 First, in considering the nature of DLALC his Honour (at [35]) considered the important aspect of the statutory scheme created by the ALR Act was that: "…Unless a particular matter is either placed by the Act within the province of one of the three officers or delegated in accordance with s 82, that matter may only be dealt with by the council itself at a meeting. The central role played by such meetings in the affairs of a Local Aboriginal Land Council is emphasised by s 73 which requires that an ordinary meeting of the council be held at least once in every three months and that annual meetings also be held." 74 Secondly, his Honour emphasised (at [97]) that although s 41 of the ALR Act said "a council may do or suffer in relation to its 'property' (which, by force of s 21 of the Interpretation Act 1987, includes money) 'any act or thing that it could lawfully do or suffer if it were a natural person'", that provision was qualified by the words "Subject to this Act …" and thus "[i]ts role as facilitating what the Act otherwise allows is thus made clear".

75 Thirdly (at [102] - [103]) Barrett J emphasised that as a statutory corporation, while DLALC might exercise the powers conferred by the ALR Act, including the s 41 power, as well as the power derived from s 50 of the Interpretation Act, "any such power may not be exercised otherwise than as a means of pursuing the s.51 objects and performing the s.52 functions". 76 Fourthly, his Honour accepted (at [142]) a submission that Local Aboriginal Land Councils were "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." 77 His Honour's analysis of the ALR Act and the Aboriginal Land Rights Regulation is also germane. After setting out and/or referring to a number of provisions in the ALR Act dealing with the DLALC's functions and powers, and noting that DLALC was a "statutory corporation" within the meaning of the s 50(1) of the Interpretation Act (judgment at [36] - [44]), his Honour said: "45 The statutory structure is thus such that the objects of a Local Aboriginal Land Council are those described in s.51 of the ALR Act; that the functions described in s.52 are to be performed by the Local Aboriginal Land Council; and that powers gathered from a number of provisions of the Act (and from the Interpretation Act) are made available to the council. The ALR Act also imposes duties and responsibilities upon a Local Aboriginal Land Council. Provisions not so far mentioned create a system of public oversight, supervision and accountability within which a council must operate." 78 His Honour examined the provisions relating to the oversight, supervision and accountability of a Land Council (at [46] - [51]), the terms of the Trust (at [52] - [57]) then briefly considered DPL's constitution. He referred (at [59]) to the clauses containing the Provisos as "unusual provisions calculated to make certain actions and decisions within or in relation to DPL ineffective unless approved or confirm [sic, confirmed] in a certain way by members of DLALC." Apart from commenting that the clauses were "of particular relevance to the claim for a winding up order in respect of DPL made by Mr Hillig for DLALC" and referring to Austin J's decision, he did not further consider them. 79 In considering an argument the appellant advanced "that the four transfers of funds by DLALC to DPL were inconsistent with what are sometimes termed principles of 'narrow ultra vires' [and were] … beyond the statutorily authorised scope of activities of DLALC" (see [68]), his Honour considered (at [68] ff) the nature of statutory corporations. Critically his Honour noted (at [70]) that the principle that "corporations created by or pursuant to statute possess only the powers expressed or implied in the constating instruments" was well recognised and (at [71]) had been recognised as applying to a Local Aboriginal Land Council such as DLALC by Campbell J in Sanpine Pty Ltd v Koompahtoo Local Aboriginal Land Council [2005] NSWSC 365. He concluded: "72 In all cases where a corporation owes its existence to a statute, it is open to the corporation to do only those things that the statute contemplates are to be done by it . It is commonplace for a founding and enabling statute to contain express statements with respect to the purposes, objects, functions, powers and duties of the corporation. Those express statements, together with the necessary implications to which they give rise, are the source of the corporation's authority and capacity and the limits upon them. Where the corporation purports to act beyond the field of its authority and capacity thus defined, its acts are void." (emphasis added) 80 Next, after considering (at [73] - [94]) an argument advanced by DPL that in considering the ultra vires argument great weight had to be placed on the statement of objects in s 51 of the ALR Act, his Honour said: "95 When this approach is taken in the present case, the statement of the objects of a Local Aboriginal Land Council in s.51 of the ALR Act is seen to be one of several factors relevant to any decision about the capacity of such a council and the permitted scope of its activities. Another highly relevant factor is the statement of functions in s.52. Also pertinent are provisions about powers and the expenditure of money. It is the statute as a whole that marks out the boundaries. 96 I have no doubt that its objects limit the functions of a Local Aboriginal Land Council. Such a council may not lawfully perform a s.52 function in furtherance of some object beyond those specified in s.51. But I am also of the opinion that the functions of a Local Aboriginal Land Council do not include functions not specified in s.52 that may nevertheless be considered conducive to the attainment of the s.51 objects. On the view I take of the statute as a whole, a Local Aboriginal Land Council is authorised to perform the s.52 functions, provided that in so doing it acts within the s.51 objects; and it likewise has authority to pursue the attainment of the s.51 objects, provided that in doing so it does not perform functions beyond the s.52 functions. 97 Provisions conferring powers on a Local Aboriginal Land Council do not allow it to operate beyond the scope of its objects and functions. It was faintly suggested on behalf of DPL (although not pleaded) that s.41 of the ALR Act alone justified the transfers of funds by DLALC to DPL. That section says that a council may do or suffer in relation to its 'property' (which, by force of s.21 of the Interpretation Act, includes money) 'any act or thing that it could lawfully do or suffer if it were a natural person'. A natural person can lawfully squander his or her money at will. But that does not mean that, by virtue of s.41, a Local Aboriginal Land Council may deal with its money or other property in ways that are not conducive to the attainment of its objects and the performance of its functions. Section 41, after all, begins with the words, 'Subject to this Act …'. Its role as facilitating what the Act otherwise allows is thus made clear.

… 102 Again, therefore, the need to construe the statute as a whole is emphasised. As Barwick CJ pointed out in the Kathleen Investments case (at p.128), there is a difference between a statutory corporation's functions and authority and its powers or capacity. While the powers or capacity may be broad, they can be exercised only within the confines of the functions and authority conferred by the statute. The general concept - and the one reflected in the ALR Act - is that statutory corporations are created for purposes and are given powers calculated to enable them to perform their statutory functions in pursuit of those purposes. 103 In the present case, the authority of a Local Aboriginal Land Council is the authority to perform the s.52 functions in pursuit of the s.51 objects or, to put it the other way, to pursue the s.51 objects by performing the s.52 functions. Sections 51 and 52 must be read together to discover the scope of corporate authority. In exercise of that authority - that is, in performing the s.52 functions in pursuit of the s.51 objects or pursuing the s.51 objects by performing the s.52 functions - a Local Aboriginal Land Council may exercise the powers conferred by the ALR Act, including the s.41 power, as well at the power derived from s.50 of the Interpretation Act. But any such power may not be exercised otherwise than as a means of pursuing the s.51 objects and performing the s.52 functions in the ways I have described. 104 What I have just said may be re-cast in the form of three negative propositions: first, a Local Aboriginal Land Council must not do anything that lies beyond the scope of the s.51 objects; second, a Local Aboriginal Land Council must not do anything that does not involve the performance of a s.52 function; and, third, a Local Aboriginal Land Council must not exercise any of the powers conferred by the ALR Act (and s.50 of the Interpretation Act) except in doing things that are within the scope of both the s.51 objects and the s.52 functions. The 'must' in each of these propositions is intended to indicate a limit upon authority and capacity." (emphasis added) 81 He concluded (at [106]) that: "… DLALC, by making the four payments to DPL, put it out of its power to control and direct the future disposition of the moneys transferred into the ownership of DPL. It is not suggested that DPL contracted with DLALC at the time of receipt that DPL would apply the moneys received in particular ways or would deal with them only as DLALC requested or directed. Any such contract may, in any event, have involved an impermissible fettering of the discretions of DPL as trustee. Nor did the terms of the Trust require DPL, as trustee, to obey any instructions of DLALC, a non-beneficiary whose members were also non-beneficiaries. Once received by DPL, the moneys came under the sole control of DPL and it was DPL alone who could determine what was to be done with them, subject always to the constraints and duties to which it was subject as a trustee (and, as to income, to having regard to any recommendation of DLALC)." 82 He identified (at [107]) the question to be determined by reference to the s 51 objects and the s 52 functions as being "whether DLALC acted within the scope of its statutory authority in transferring money to the trustee of a purpose trust having purposes corresponding, either wholly or in certain respects, with the statutory functions of DLALC". 83 DLALC contended the transfers were an exercise of one or more of its s 52(1)(g)(ii), s 52(1)(k) and/or s 52(1)(m) functions. His Honour rejected that submission as to s 52(1)(k) and s 52(1)(m), holding (at [110] - [111]) that there was no clear and direct connection between any of the payments made by DLALC to DPL and the subjects of those functions. 84 He also rejected the argument that the transfer invoked the s 52(1)(g)(ii) function, concluding (at [117]): "… that DLALC, in transferring funds to DPL, did not apply any part of those funds in or towards the performance of any of its own functions. It made those funds available to DPL so that DPL might, according to DPL's own decisions, deploy the funds in the furtherance of the purposes for which DPL was permitted to act. Decisions that caused funds to be applied by DPL towards those objects were decisions of DPL alone. And, given its duties as a trustee, it was in no position to accept fetters upon its discretion to make decisions as to the application of trust funds." 85 Accordingly his Honour held (at [118]) that because in parting with its money, DLALC relinquished both ownership of the money and the power to control its application by so doing, it could not be said to be exercising any of the functions upon which it purported to rely. 86 Barrett J then considered (at [120] ff) the argument that the transfer of funds to DPL was inconsistent with the scheme of the ALR Act and accordingly unauthorised, an argument which focussed on DLALC's duties and responsibilities and the public policy to which the ALR Act gives effect. He examined authorities dealing with the purported relinquishment of statutory functions by statutory corporations which he concluded proceeded on the basis of three main principles: "129… First, it is recognised that a grant of incorporation by Parliament carries with it not only rights and privileges but also duties and responsibilities. Second, the duties and responsibilities, as well as existing for the benefit of the section of the population directly affected, are of a public or quasi-public nature. Third, the corporation may not act to abdicate or evade its statutory duties and responsibilities, even if the means by which it purports to do so otherwise appear to lie within the scope of its objects, functions and powers." 87 In his Honour's view (at [131]), the principles reflected in the statutory relinquishment line of cases applied to DLALC because of its public character as "a body committed to promote the welfare and interests of a section of the public or, as s 51 puts it, to 'improve, protect and foster the best interests of' that section of the public". Accordingly (at [132]) only DLALC could discharge its duties and responsibilities, subject only to the limited power to delegate created by s 82. The consequence was that: "132 … Any arrangement which causes land council property to be vested in another person for application in accordance with future decisions of that person - albeit in ways that may in whole or in part correspond with the land council's s 52 functions and be consistent with its s 51 objects - entails an impermissible abdication of statutory responsibility, an impermissible shifting of statutory decision-making, an impermissible side-stepping of statutory controls and therefore a subversion of the statutory intention." 88 His Honour accepted (at [135]), accordingly, that "the effect of the trust structure and the transfers of funds by DLALC to DPL for deployment within the trust structure were an impermissible abandonment by DLALC of its statutory duties and responsibilities with respect to a large part of its property". In his view, "DLALC did not purport to delegate any of its own functions… [r]ather, its objective was to put the property in question entirely out of its ownership and beyond its reach and to subject the property to a regime which, while in some respects contemplating applications of funds in ways corresponding with those open to DLALC under the ALR Act, involved decision-making and control otherwise than by DLALC". The transfers were "against the policy of the ALR Act because of DLALC's abdicat[ion] of control and supervision of matters which that Act require[d] to be controlled and supervised by it". His Honour noted (at [137]) that the question whether DPL was "controlled" by DLALC was debated before him, but considered it was not relevant to the matters before him. He did observe, however, that even if DPL was so "controlled", the effect of the transfers of DLALC's funds was that "[t]he funds [were] no longer subject to the wider supervisory regime created by the ALR Act." 89 Accordingly his Honour concluded (at [138]) that attempted evasion of the statutory scheme was an additional ground for holding that the four transfers of funds by DLALC to DPL were not authorised by law. 90 Barrett J next considered (at [139] ff) the argument based on "broad ultra vires" because of an abuse of power, an argument which depended on "the proposition that powers lawfully available were used for purposes other than those for which they were conferred, and that the purposes actually pursued were therefore impermissible purposes". He held (at [153]) that, "the transfers of funds were actuated by the improper purpose of removing the moneys in question from the ambit of decision-making within the statutory confines of DLALC and to place them instead within the decision-making structure based on DPL and the Trust, being a decision-making structure not presided over by members of DLALC." 91 Finally, for present purposes, Barrett J rejected (at [165]) an argument that because the transfer of funds to the Trust involved subversion of the statutory scheme, the Trust must be regarded as illegal. In his view DLALC's action in setting up the Trust did not involve subversion of the statutory scheme. Rather, the action that attracted criticism was the transfer of substantial funds in relation to which DLALC was thereby disabled from performing its statutory duties and responsibilities. Accordingly the question whether the Trust was valid was to be judged against the ordinary criteria applicable to charitable trusts, regardless of the provisions of the ALR Act. He concluded (see [194] - [217], [220]) that "the Trust [was] a charitable trust (in the sense that at least part of the 'Sole Purpose' [was] charitable) but that, to the extent that trust moneys were lent by DPL, as trustee, to CattleCo and the Enterprise Companies (and, in the case of CattleCo, outlaid as subscription moneys for shares), the expenditure was neither made in furtherance of any aspect of the charitable purpose nor made in a form that the Trust Deed permitted the trustee to make".

92 In his 3 October reasons, Barrett J invited the parties to make further submissions as to the relief which was warranted in relation to the claims in the light of his reasons. The matter came back before him on 3 November: see Darkinjung Pty Ltd v Darkinjung Local Aboriginal Land Council; Hillig v Darkinjung Pty Ltd [2006] NSWSC 1217. 93 On 12 December 2006 DLALC renewed its application that DPL be wound up relying on a special resolution that it be wound up by the Court: s 461(1)(a), Corporations Act. It appears tolerably clear from his Honour's judgment that that special resolution was "passed" by the appellant, exercising his DLALC functions and, in turn, DLALC's power as sole member of DPL: Hillig v Darkinjung Pty Ltd [2006] NSWSC 1371 (at [24] - [25], [36]) (the "winding-up judgment"). His Honour concluded (at [36]) that a ground for winding up had been established and, in any event, that "with the whole of DPL's funds and assets held by it upon trust for DLALC, there has been, in a real sense, a removal of DPL's substratum of such a kind that, having regard to that wider context, winding up should be considered just and equitable". 94 On that day he also made orders disposing of all the matters dealt with in his 3 October 2006 reasons, 16 November 2006 reasons and his reasons of that day, relevantly as follows: "1. Declare that the purposes identified in s 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. Declare that the following payments made by Darkinjung Local Aboriginal Land Council to Darkinjung Pty Limited: (a) on 15 July 2004, the sum of $19,582,713.36; (b) on 27 October 2004, the sum of $69,100.00; (c) on 7 July 2005, the sum of $5,453,374.25; and (d) on 7 July 2005, the sum of $651,907.40, 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 .

Submissions 97 Mr Murr submitted that: (a) during the period of his appointment, the administrator had all of the functions, powers, authorities and duties of DLALC under the Act, to the exclusion of DLALC; (b) meetings of DLALC could not exercise any of those functions, powers or authorities or perform any of those duties during the period of the appointment of an administrator; (c) DLALC's powers under s 41 of the ALR Act include all the powers that a natural person would have in relation to DLALC's share in DPL; (d) accordingly, during the period of his appointment, the appellant had all DLALC's powers in relation to its share in DPL and meetings of the members of DLALC did not have any of those powers; and (e) the corollary was that during the period of the administrator's appointment meetings of the Land Council did not have the power to pass resolutions purporting to exercise DLALC's powers in relation to its share in DPL, or any part of those powers. 98 Secondly, Mr Murr contended that unless DPL's constitution was construed so that either: (a) The provisos did not apply where an administrator had been appointed; or (b) The provisos were taken to be complied with by a properly-made decision of the administrator for the Council, then: (c) The Provisos would prevent DPL from exercising the powers concerned, including the powers to amend its constitution, although there was both statutory and common law authority that it must be able to do so; (d) The Provisos would prevent the appellant from exercising DLALC's power in respect of its property, as set out in s 41 of the ALR Act; and (e) The provisos would confer or purport to confer on DLALC powers in respect of its property that according to s 222(4) of the ALR were vested in the appellant during the term of his appointment, to the exclusion of DLALC. 99 Thirdly, Mr Murr argued that the primary judge erred first in concluding that it was not incompatible with s 41 to allow the "further requirement" (the 66% resolutions) required by the Provisos to operate, because they were part of the bundle of rights that constituted the property that was DLALC's share in DPL and, secondly in concluding that the Provisos did not confer the power to pass the "resolution in materially similar terms" on DLALC, but on the members in general meeting as the designated organ of DLALC. 100 As to the first point Mr Murr submitted that the "further requirement" to which the primary judge referred was not one that required concurrence of a third party or the occurrence of an external event, but, rather, one that required additional action by DLALC, and hence one that DLALC, by its own actions, was capable of fulfilling. Accordingly he argued the ability to satisfy the requirement, and by doing so to make its vote on the relevant matters effective, was a power that DPL's constitution gave to DLALC while it held shares in the company and was also part of the "bundle of rights that constitute the property that is the share". He also contended that unless the construction for which the appellant contended was accepted, the Provisos had the effect that DLALC was prevented from exercising the powers that the Provisos gave it. 101 As to the second point Mr Murr argued that Local Aboriginal Land Councils are single organ bodies incorporated under s 50 of the ALR Act and that the organ was the Part 5, Division 4 meeting, which operated by majority vote, as a direct democracy: see s 77. Next he pointed out that in each Proviso the power was expressed as something that DPL might do, conditional upon the "the Council" passing a similar resolution and that "The Council" was defined in cl 1.1 of the Dictionary as "Darkinjung Local Aboriginal Land Council". Accordingly, even accepting the primary judge's construction of the expression, "the Council passing a resolution" as meaning "the members in general meeting, as the designated organ of the Council, passing a resolution", he argued that the relevant action was still the action of DLALC and was the exercise of a power in relation to DLALC's share in DPL. 102 Next he contended that as, during the period of an administrator's appointment, a meeting of members could not exercise DLALC's powers in relation to its share in DPL and could not pass a resolution of DLALC purporting to do so, any decision of such a meeting purporting to exercise powers under the Provisos would not be a resolution of DLALC, and would have no more legal force than a statement of the personal opinion of the majority of those persons present. Finally he submitted that a decision of an administrator appointed to exercise all of the functions of a Land Council to the exclusion of the Council was a decision of the Council. He contended that even though an administrator could not be a member of the Land Council (s 225(c)) so that a decision an administrator made was not a resolution of or by the members of the Land Council, it was nevertheless an exercise of DLALC's powers by virtue of his appointment so to act. 103 Mr Murr also submitted that the provisos were void, invalid or ineffective because they attempted to impose on a Land Council decision making which was different from that provided in the ALR Act, would prevent an Administrator from exercising the powers of a Land Council in respect of the Land Council's property and purported to confer on the Council by the organ of a members' meeting a power that the Council as a statutory corporation was incapable of receiving. 104 The respondents made no submissions on the substantive issues in the appeal, each having filed a submitting appearance.

Sanpine was appealed to this Court and to the High Court on an issue concerning repudiation: Sanpine Pty Ltd v Koompahtoo Local Aboriginal Land Council [2006] NSWCA 291; Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61; (2007) 82 ALJR 345. Neither judgment affects the passages I have cited from Campbell J's reasons. 108 It is consistent with these propositions that one of the functions assigned to the appellant by virtue of his appointment was the decision-making function hitherto exercised by the DLALC. The primary judge accepted that, but held that that the members of DLALC had a residual function, not one of the bundle of functions conferred on the appellant by his instrument of appointment, to vote as "one of the organs of the relevant body, namely the members in general meeting". 109 In my view, with respect, his Honour erred in so finding. Although it might be accepted that a corporation has legal personality apart from its members because it may own property and have legal rights and duties (New South Wales Aboriginal Land Council v Jones (1998) 43 NSWLR 300 (at 305) per Handley JA), that is not the model of the Local Aboriginal Land Council created by the ALR Act. As Barrett J and White J have demonstrated, a Local Aboriginal Land Council is a single-organ corporation. 110 One of the functions of a Local Aboriginal Land Council is to acquire land and to use, manage, control, hold or dispose of, or otherwise deal with, land vested in or acquired by the Land Council: s 52(1). 111 A Local Aboriginal Land Council acquires and disposes of property in accordance with Part 2 of the ALR Act. Significantly, s 40D, which is found in Part 2, provides that a Local Aboriginal Land Council may only sell, exchange, mortgage or otherwise dispose of land vested in it if, relevantly, at a meeting of the Council specifically called for the purpose (being a meeting at which a quorum was present) not less than 80 per cent of the members of the Council present and voting have determined that the land is not of cultural significance to Aborigines of the area and should be disposed of. 112 As I have earlier pointed out, pursuant to s 77, a decision supported by a majority of votes cast at a meeting of the Local Aboriginal Land Council at which a quorum is present is the decision of the Local Aboriginal Land Council. In other words, there is no decision-making organ other than the members of the Local Aboriginal Land Council. At the time the Resolutions were passed, the officers of the Local Aboriginal Land Council did not exercise a function independently of the Local Aboriginal Land Council. Rather, their function was to direct and control its affairs in accordance with the ALR Act and the resolutions and decisions of the members of the Council as expressed through Council meetings: s 65. 113 I note, parenthetically, that the structure of Local Aboriginal Land Councils was substantially altered by the 2006 Amendment Act which omitted Divisions 3 and 4 of Part 5, and substituted a structure which provides for Local Aboriginal Land Councils to have a Board (s 61), with responsibility, inter alia, to direct and control the affairs of the Council, in accordance with the ALR Act and the regulations and consistently with the community, land and business plan of the Council: s 62(a). Significant functions, including approval of dealings with land, are still, however, to be made by the voting members (s 52G(e)) and s 40D still governs disposal of land. It is unnecessary to decide the extent to which, if at all, the new structure might affect the characterisation of a Local Aboriginal Land Council as a "single-organ corporation". 114 The members of a Local Aboriginal Land Council were not entirely divested of their functions on the appointment of an administrator. Despite the mandatory terms of s 222(4) conferring on the administrator the functions of the Land Council "to the exclusion of the Council", s 230 precludes an administrator from disposing or otherwise dealing with land vested in or acquired by the Local Aboriginal Land Council "without the consent of the Council, as decided at a meeting)". It is not necessary to explore the apparent tension between the two provisions. It is sufficient to note, in my view, that the limited carve-out of functions retained by a Local Aboriginal Land Council after an administrator's appointment, reinforces the proposition that the appellant otherwise exercised any function of the Local Aboriginal Land Council. 115 The consequence of DLALC having only one decision-making body (the members in a duly constituted meeting) is that investing the appellant as administrator with DLALC's functions conferred on him the function of making all decisions in lieu of the members, subject to s 230. However the function the appellant sought to exercise by passing the resolutions was not caught by s 230. 116 Accordingly, assuming for present purposes that the Provisos were valid, a decision by the appellant to take one of the steps contemplated by cll 6.1(d) and (e) and 14.4 carried with it the necessary approval by the Land Council as required by the Provisos. The appellant took those steps by passing the Resolutions. 117 This conclusion is sufficient to dispose of the appeal. It is not necessary to determine whether the Provisos were valid.

Hillig v Darkinjung Pty Ltd & Ors

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Judgment (75 paragraphs)

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Legislation Cited (2)

Cases Cited (19)

Cited By (12)