HER HONOUR: Before me for hearing are competing notices of motion which, in essence, seek the same relief, namely that a receiver and manager be appointed to the fifth defendant in these proceedings, the Christian Democratic Party (Fred Nile Group) Incorporated (CDP).
One motion is dated 22 April 2021 and was filed by Mr Schon Gregory Condon in his capacity as the administrator of the CDP. By his motion, Mr Condon seeks an order validating his appointment as administrator under s 1322(4) of the Corporations Act 2001 (Cth). Further, or in the alternative, Mr Condon seeks an order appointing him as receiver and manager of the CDP for the purposes of convening an Annual General Meeting of the CDP with the intent of electing a new Management Committee and providing a report to the Court as to the affairs and governance of the CDP, or an order appointing him as liquidator of the CDP.
The other motion, which I gave leave to file in Court at the hearing, is an amended notice of motion filed by the plaintiff, Mr Charles Knox, who is a member of the CDP. By his motion, Mr Knox seeks an order that Mr Trent McMillan be appointed as receiver of the CDP.
The first, second and third defendants, who also appeared at the hearing, support the appointment of a receiver and manager to the CDP.
Mr Condon and Mr Knox rely on a number of affidavits contained in the Court Book and read at the hearing. They also rely on written submissions dealing with the issues raised by the motions and the history of these proceedings.
By way of background to the motions, Mr Knox commenced these proceedings on 17 September 2020 as he took issue with the outcome of an Annual General Meeting of the CDP held in December 2019. In these proceedings, Mr Knox seeks various relief relating to the governance of the CDP or, in the alternative, the appointment of a receiver for the purposes of winding-up the CDP. A cross-summons has been filed by the defendants seeking to validate what occurred at the December 2019 meeting.
After a mediation on 6 November 2020, an agreement was purportedly reached between the parties to these proceedings and other members of the CDP. The agreement provided for the appointment of a caretaker Board of the CDP and the calling of an Annual General Meeting on 28 November 2020.
It appears it was the intention of the parties that, following the Annual General Meeting, a new Management Committee (also referred to as the Board of the CDP) would have been elected and any outstanding disputes concerning the governance of the CDP would be resolved. As events transpired, this did not happen.
Mr Knox now alleges that the Board elected at the Annual General Meeting on 28 November 2020 was not validly elected and appointed according to the CDP's constitution. Various other issues are raised by Mr Knox concerning the calling of the meeting and steps taken by the parties since the proceedings were commenced, including the appointment by the new Board of Mr Condon as administrator.
According to the Report to Creditors (Ex A), the new Board received advice that the costs associated with these proceedings would be significant and have the effect of placing the CDP into insolvency. The advice stated that the most appropriate solution was the appointment of a voluntary administrator pursuant to s 54 of the Associations Incorporation Act 2009 (NSW).
On 9 April 2021, the new Board passed a resolution and appointed Mr Condon as administrator.
At the start of the hearing, it was common ground that there were two issues for the Court's determination.
The first was whether the Court should make an order pursuant to s 1322(4) of the Corporations Act validating Mr Condon's appointment as administrator of the CDP nunc pro tunc and an associated order ending the administration (on the expectation that a receiver and manager will be appointed), with the question of the administrator's costs being reserved.
The second was who should be appointed as receiver and manager of the CDP going forward.
As to the first issue, Mr Knox initially contended that the Court should not make an order validating Mr Condon's appointment as administrator. He argued that the administration was unnecessary and the Board should not have appointed Mr Condon in circumstances where there were existing disputes as to the Board's validity and powers, the CDP was not insolvent and Mr Knox had, in his amended statement of claim, already proposed the appointment of a receiver.
During the lunch adjournment, I was informed that Mr Knox withdrew his opposition and would consent to orders proposed by Mr Condon relating to the validation of his appointment as administrator. Considering the evidence and submissions of the parties, I am also satisfied that the Court has jurisdiction to make the orders sought and that is it appropriate for them to be made in this case.
Section 1322(4) of the Corporations Act is a remedial section with wide operation. Subsection (a) enables the Court to declare that any act, matter or thing purporting to have been done or any proceeding purporting to have been instituted or taken under the Corporations Act or in relation to a corporation is not invalid by reason of any contravention of a provision of the Corporations Act or a provision of the corporation's constitution.
The expression in s 1322(4)(a) of "any act, matter or thing purporting to have been done, or any proceeding purporting to have been instituted or undertaken, under [the Corporations Act] or in relation to a corporation" is of the widest kind and embraces the purported appointment of Mr Condon as administrator of the CDP. The expression "by reason of contravention of a provision of the constitution of a corporation" has also been liberally construed, with the word "contravention" not being confined to its orthodox meaning of infringement: Sheahan v Londish [2010] NSWCA 270 at [233]-[234].
Based on the evidence on this application, in my view, there is a question as to whether the new Board had the power to appoint Mr Condon as administrator of the CDP on 9 April 2021. This issue arises because it is not clear that the parties to the mediation agreement were authorised to appoint the caretaker Board, who then convened the Annual General Meeting in November last year. There is also the question raised by these proceedings, which is not necessary for me to determine on this application, as to whether the elections undertaken at that meeting were conducted according to the CDP's constitution which requires all office bearers to be endorsed by at least 75% of the members of the Annual State Council, rather than a simple majority.
The issues raised about the validity of Mr Condon's appointment would involve contraventions of the provisions of the constitution of the CDP, having regard to those relating to the appointment of Office Bearers and the State Board, particularly clause 4.
I am also of the view that it is just and equitable that an order under s 1322(4)(a) be made and am satisfied that no substantial injustice has been or is likely to be caused to Mr Knox or other members of the CDP by making such an order: Corporations Act, ss 1322(6)(a)(iii), 1322(6)(c).
It is apparent from the evidence and, indeed, accepted by the parties to these proceedings that there was an intractable impasse between the various party factions and there was a need for an independent third party to step in and take control of the CDP. There is no evidence on this application, or any basis for considering, that there will be any prejudice to members or creditors of the CDP as a result of Mr Condon's appointment, particularly in circumstances where the question of his costs, fees and disbursements are reserved and will be determined on another day.
No issue was taken with Mr Condon's conduct of the administration. I am also of the view that his appointment, as an independent third party, is likely to have been of value to the CDP and its members given the history of disputes within the party evidenced by these proceedings, including claims relating to access to bank accounts and payments made by those purporting to act on behalf of the CDP Board.
There is now no contest as to an order under s 1322(4) being made and, in my view, it is in the interests of the CDP for any uncertainty about Mr Condon's appointment to be removed. It follows that I am also satisfied that the orders proposed should be made by consent.
The next issue relates to the appointment of the receiver and manager to the CDP.
The appointment of a receiver and manager in this case is for the primary purpose of resolving a dispute about the continuing governance of the CDP, an association governed by the Associations Incorporation Act, whilst, at the same time, preserving the CDP's property. Specifically, the appointment seeks to empower the receiver to administer and supervise an election process which, as is evident from the history of these proceedings, is expected to be contentious. Courts have recognised the jurisdiction to appoint a receiver for these purposes: Sengthong v Lao Buddhist Society of NSW Incorporated [2016] NSWSC 1408 at [170]ff; Chen v Shaanxi Chamber of Commerce [2021] NSWSC 337 at [11]-[12]. Given the history of disputes and current impasse, I am satisfied that the circumstances warrant the appointment of a receiver and manager to the CDP in this case.
The contest between the parties is who should be appointed as receiver and manager. Mr Knox contends for his nominee, Mr McMillan. Mr Condon, supported by the first, second and third defendants, proposes himself. Both parties advanced cost savings as a reason for their proposed appointee.
Mr Knox also submits that the Court should appoint Mr McMillan because the conduct of the Board in appointing Mr Condon as administrator and pressing for his appointment as receiver sought to trump or circumvent his intention of seeking to appoint Mr McMillan as receiver, which was originally referred to in his amended statement of claim filed on 25 February 2021. Mr Knox argues that the first, second and third defendants were aware of the issues he had raised as to the Board's authority, which raises a cloud over Mr Condon's appointment as administrator. He also submits that to appoint Mr Condon as receiver would deprive Mr Knox of the relief that he should properly be granted in these proceedings, namely the appointment of Mr McMillan as receiver.
I accept that it could be said that there were some irregularities in how the Board, which included some of the defendants, came to appoint Mr Condon on 9 April 2021. In circumstances where it must have been known to the Board that there was an existing dispute about the validity of the Board and its powers and Mr Knox was seeking to appoint a receiver in this case, it is not clear why the Board chose to appoint an administrator voluntarily and did not seek approval from the Court .
In that context, I accept that Mr Knox may feel somewhat aggrieved that the Court is now being asked to urgently appoint a receiver and has pressed for Mr McMillan to be appointed.
That said, as noted above, the Board appears to have received advice that the costs of these proceedings may have placed the CDP into insolvency and that an administrator was appropriate. I should also record that I do not consider there to have been anything irregular about Mr Condon's acceptance of his appointment. His evidence is that he understood there was a dispute about the validity of the resolutions passed at the Annual General Meeting on 28 November 2020, which may have raised a question about the validity of his appointment, following the investigations undertaken after he was appointed. Soon after, he filed his motion that is now before the Court.
Having considered the evidence and the submissions, and while finely balanced, I have come to the view that it is in the best interests of the CDP for Mr Condon to be appointed as receiver and manager.
It is inevitable that Mr Condon will have acquired knowledge in his role as administrator that will be of value to a receiver and manager going forward. That information includes details of the CDP's constitution, its membership, the history of the disputes between the parties, and the current assets and financial position of the CDP.
Mr Condon's understanding of these matters, particularly the dynamics of the parties and the history of the disputes, can be expected to enable him to undertake the steps required of a receiver and manager more quickly than someone newly appointed to the role. This should also mean that, compared to Mr McMillan, Mr Condon's appointment may produce costs savings for the CDP. In that regard, I note that the hourly rate schedule provided by Mr McMillan for him and his team are not significantly different to the hourly rates in evidence in relation to Mr Condon and his team.
I have no doubt that Mr McMillan is fully qualified to take on the role and would perform the function of receiver and manager satisfactorily. But it seems to me that it would be in the best interests of the CDP and its members to realise the potential time and cost advantages from Mr Condon being appointed to that role. I also see no grave risk of injury to Mr Knox or the CDP more generally from appointing Mr Condon in circumstances where the complaints made by Mr Knox have been directed to the conduct of the Board and not about Mr Condon's conduct, no issue was taken about Mr Condon's performance as administrator, and Mr Condon is represented by independent legal counsel.
Accordingly, the Court will appoint Mr Condon as receiver and manager of the CDP.
The parties are agreed on most of the orders proposed to be made in relation to the powers of the receiver. After delivering these reasons, the parties addressed me on three outstanding issues, the outcomes of which are recorded on the transcript.
For these reasons, I make orders in accordance with the short minutes which I have initialled and dated and placed with the papers, which notes the amendments I have made as a consequence of the submissions of and discussions with the parties.
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Decision last updated: 14 May 2021