[2001] NSWCA 305
Massoud v Nationwide News Pty Ltd
Massoud v Fox Sports Australia Pty Ltd (2022) 109 NSWLR 468
[2018] HCA 6
Re Nash (No 2) (2017) 263 CLR 443
[1992] HCA 60
Williams v Commonwealth of Australia (2012) 248 CLR 156
Source
Original judgment source is linked above.
Catchwords
[2001] NSWCA 305
Massoud v Nationwide News Pty LtdMassoud v Fox Sports Australia Pty Ltd (2022) 109 NSWLR 468[2018] HCA 6
Re Nash (No 2) (2017) 263 CLR 443[1992] HCA 60
Williams v Commonwealth of Australia (2012) 248 CLR 156
Judgment (23 paragraphs)
[1]
Background
An Australian Securities and Investment Commission (ASIC) Current and Historical Company Extract as at 9 February 2023 records that SMTC was incorporated on 25 February 2013 under the Corporations Act 2001 (Cth). SMTC is an Australian Public Company (limited by guarantee). Council participated in the formation of SMTC, and in those circumstances, pursuant to s 358(1), it was required to seek the prior consent of the relevant Minister. The Hon Don Page MP, the then Minister for Local Government and Minister for the North Coast, consented to the formation of the corporation on 11 December 2012.
According to cl 1.2 of the SMTC Constitution, the company has the general objective of fostering "a progressive and prosperous future for St Marys Town Centre".
A Service Level Agreement is in place between Council and SMTC and has, as its stated purpose, the advancement and revitalisation of the St Marys Town Centre. That agreement sets outs service, performance and reporting requirements of SMTC in exchange for Council funding.
The first respondent was elected to Council for the first time in September 2012. She was appointed as a director of SMTC on 18 October 2016 as the Council "representative" on the Board (ASIC Extract; SMTC minutes dated 18 January 2022; per cl 9.2.3 of the SMTC Constitution). She was elected to the office of mayor of Council on 10 January 2022 and shortly thereafter announced her resignation from SMTC's Board of Directors.
There is some disagreement between the parties as to the effective date of her resignation as director of SMTC. Her counsel says that it was on 1 June 2022 and that is reflected in an ASIC Extract for SMTC which records that the second respondent's "cease date" was 1 June 2022. However, the applicants say that the resignation occurred in January 2022, pointing to minutes of a meeting of SMTC on 18 January 2022 which record that Councillor Bernard Bratusa replaced the first respondent as Council representative on the SMTC Board. The SMTC Constitution provides that a director ceases to be a director if the director resigns (cl 9.15.2); a director resigns on giving the Secretary notice in writing. Any notice given by the first respondent is not in evidence.
For the purposes of these proceedings, whether the effective resignation date was on or about 18 January 2022 or 1 June 2022 is not significant, as both dates were after the first respondent's election as councillor in December 2021 and prior to the commencement of these proceedings.
The second respondent became a director of SMTC at the date of the company's incorporation in February 2013; she was appointed to the Board as the Community Organisation representative (Council minutes dated 27 August 2012; per cl 9.2.2 of the SMTC Constitution) and appears to have remained on the Board as the "Community Organisation representative". She was first elected to Council in December 2021. At the time of the hearing of this dismissal application, the second respondent was a director of SMTC and we will assume, for present purposes, that she remains so.
[2]
Evidence of parties
No oral evidence was led by the applicants in the proceedings. Documentary evidence relied on by the applicants includes the Service Level Agreement between SMTC and the Council dated June 2020 (which took effect on 1 July 2020); the SMTC Constitution; an ASIC Company Extract as at 9 May 2022; a report of Morrison Low dated November 2019 concerning the operations of SMTC (and another corporation); documents dated 2012 and 2013 relevant to the establishment of SMTC including Council minutes and the application to the Minister for consent under s 358 of the LGA; SMTC Board minutes; SMTC financial records; SMTC annual reports and other reporting or planning documents; correspondence between the applicants and various officers of Council; election campaign material; and Facebook posts of the first and second respondents. The applicants also rely on a signed statement of Mrs Michelle Burgess dated 24 October 2022 regarding the removal of a stationary bus on land in St Marys. As explained later in these reasons, this statement does not go to any issue arising for determination in these proceedings.
In addition, the applicants rely on two documents described as "expert reports": a signed and undated statement of Dr James Saleam, who is the second applicant in these proceedings (Saleam Statement) and a signed statement of Mr Paul Funnell dated 9 January 2023 (Funnell Statement). The first and second respondents objected to the admission of the statements on the basis that the second applicant and Mr Funnell are not relevant experts. The third respondent also challenged the statements on this basis, and put into question the second applicant's ability to assist the Tribunal as an "expert" in circumstances where he is a party to the proceedings. The objection as to admissibility was not pressed, and we admitted the statements into evidence subject to weight. We will comment further below on these statements in our consideration of issues (3) and (4).
The applicants tendered financial statements of SMTC (produced under summons) at the hearing (with leave). The applicants point to a payment by SMTC to the second respondent, as well as payments to the St Marys Band Club. The third respondent did not object to the financial statements being admitted into evidence. Counsel for the first and second respondents indicated that there was no objection to the admission of the financial statements if the applicants accepted that the payment made to the second respondent in the amount of $190.91 on 20 January 2021 was properly to be characterised as a reimbursement for gifts purchased by the second respondent on behalf of SMTC for its employees. The applicants agreed to this characterisation. We granted leave to the tender of this late evidence on the basis described.
The first and second respondents did not lead any evidence. The third respondent tendered an ASIC Current & Historical Organisation Extract for SMTC as at 9 February 2023 and an Australian Election Company document dated 23 December 2021 declaring the results of the Penrith City Council 2021 election. There were no objections to the admission of these documents.
[3]
SMTC Constitution and Service Level Agreement
All of the parties in these proceedings rely on the SMTC Constitution and the Service Level Agreement between SMTC and Council, as relevant to the company's governance and operations, and the formal relationship between SMTC and Council. There is no dispute that these documents (described by the applicants as "charter documents") are relevant to issues arising for determination in these proceedings.
[4]
SMTC Constitution
The ASIC Extract records that the SMTC Constitution was registered and effective at the date of incorporation, being 25 February 2013. A version of the SMTC Constitution bearing the date 24 December 2012 was tendered by the applicants and relied on by all of the parties. However, we note that the ASIC Extract also records a Notification of Resolution Altering the Constitution effective 20 September 2022 and the registration of a Constitution effective 9 December 2022. Neither the resolution nor the altered Constitution are in evidence. None of the parties adverted to any change to the SMTC Constitution. Where we refer to the SMTC Constitution in these reasons for decision, this is a reference to the version of the Constitution in evidence (bearing the date 24 December 2012). We will assume for present purposes that any changes to the Constitution effective 9 December 2022 are not material to the issues to be determined in these proceedings.
As a company limited by guarantee, SMTC has no shareholders; the members of the company are the persons currently holding office as directors (cll 5, 9.1, definition of "member" in cl 2, SMTC Constitution).
Clause 1.2 of the Constitution states that the objectives for which SMTC is incorporated "are to foster a progressive and prosperous future for St Mary's Town Centre" and include the following:
1.2.1 Promote and implement the Council's adopted strategy for the Town Centre;
1.2.2 Facilitate and participate in partnerships between business, governments and non-government organisations to solve issues;
1.2.3 Work with the Penrith Business Alliance to encourage economic development, investment and job creation in the St Marys Town Centre;
1.2.4 Collaborate with the Penrith City Centre Management Corporation as appropriate;
1.2.5 Facilitate the development of a viable and vibrant St Marys Town Centre;
1.2.6 Facilitate the creation of a safe, accessible and attractive St Marys Town Centre;
12.7 Facilitate cultural and entertainment opportunities to activate the St Marys Town Centre;
1.2.8 Allocate appropriate resources to projects to address specific issues;
1.2.9 Obtain additional financial support from business and government to fund new and expanded projects and services to benefit the development of the St Marys Town Centre;
1.2.10 Engage businesses and property owners in the operation and decision making processes;
1.2.11 Promote the Corporation's activities and achievements to property and business owners and Council; and
1.2.12 Market and promote the St Marys Town Centre to business, investors and visitors.
As to SMTC's Board of Directors, cl. 9.1 states that the Board may consist of up to 9 directors. The composition of the Board is addressed in cl 9.2, which relevantly provides:
9.2.1 Five (5) Directors being business or property owners whose businesses or properties are located within the St Marys Town Centre other than a Councillor of the Council;
9.2.2. One (1) representative appointed from a St Marys based Community Organisation other than a Councillor of the Council;
9.2.3. One (1) representative who is a Penrith City Council Councillor;
9.2.4. One (1) representative who is an industry Expert other than a Councillor of the Council;
9.2.5. One (1) representative who has the capacity to represent persons under 25 years of age other than a Councillor of the Council.
Clauses 9.5 to 9.7 set out the process for retirement and appointment of directors from the inception of STMC:
9.5 In respect of the first board appointed after the adoption of this Constitution and to provide for continuity on the Board, the Directors on the Board, except the Council directors, shall retire on a rotating basis. At first Annual General Meeting three (3) shall retire. At the second Annual General Meeting three (3) shall retire. At the third Annual General Meeting three (3) shall retire. Thereafter the Directors of the Board shall retire after serving three (3) years on the Board after appointment to the Board.
9.6 The vacancies on the Board created by the retirement of Directors pursuant to clauses 9.5 will be filled by persons elected in accordance with this Constitution.
9.7 All retiring Directors shall be eligible for re-appointment.
Clauses 9.10 to 9.13 set out the process for filling a vacancy for positions on the Board as follows:
9.10 Vacancy positions on the Board, whether they be by way of the resignation, or retirement of a director in line with the provisions of this Constitution, shall be advertised so as to attract the best possible candidates.
9.11 Applications together with any consent to appointment as a director will only be accepted for the director positions previously represented by the resigning or retiring directors.
9.12 The receipt of applications for vacant positions on the Board shall close seven (7) Business Days prior to the election. Details of all applications fora board position shall be distributed to all directors eligible to vote five (5) Business Days prior to the election.
9.13 Directors either resigning or retiring prior to an election shall not be eligible to vote at, nor entitled to attend, that part of the meeting where the election of new directors is to take place.
There are no provisions in the Constitution relating to the appointment of the director "who is a Penrith City Council Councillor" contemplated by cl 9.2.3.
Clause 9.15 of the Constitution sets out the circumstances when a director ceases to be a director. These include where a director "ceases to hold the office by virtue of which they are appointed to the Board of Directors" (cl 9.15.5), and where a director "becomes an employee of the Company" (cl 9.15.7).
There is no provision in the SMTC Constitution which permits the payment of directors' fees or allowances (however described). Certain types of "reasonable remuneration" and "expenses" may be paid to directors (or to "members" of the company). The Constitution stipulates that no company distributions may be made to any directors. Clause 1.3 states:
1.3 The Company must not make any distributions to any director; whether by way of dividend, surplus on winding up or otherwise. This Clause does not prevent the payment in good faith by the Company of reasonable remuneration of any Director for goods, or services supplied by that Director to the Company in the ordinary course of business, the payment of reasonable rent for premises leased by the Company by any Director, or the payment of any other reasonable amount of a similar character to those described in this Clause.
Clause 4.1 states that "[t]he income and property of the Company, from wherever it is derived, must be applied solely towards the promotion of the objects of the Company set out in clause 1.2". Further, cl 6 headed "No distribution to members" provides:
6.1 No portion of the income or property of the Company may be paid directly to indirectly, by way of dividend, bonus or otherwise to the member of the Company.
6.2 Clause 6.1 does not prevent:
6.2.1 the payment in good faith of remuneration to any officer; servant or member of the Company in return for any services actually rendered to the Company or for goods supplied in the ordinary and usual way of business;
6.2.2 the payment of reasonable and proper rent by the Company to a member of the Company for premises leased by the member to the Company; or
6.2.3 the reimbursement of expenses incurred by any member on behalf of Company.
Clause 9.16 states that "the company must pay all "out of pocket" expenses to directors as determined by the Board. Directors will not be entitled to other remuneration, except as otherwise provided by this Constitution."
[5]
Service Level Agreement
The formal relationship between SMTC and Council is delineated in the Service Level Agreement effective 1 July 2020. The Agreement specifies the services, service levels, performance requirements and reporting obligations to be performed by SMTC, in return for funding by Council (which derives from Council rates levied on business areas). In the event of poor performance, Council is able to withhold funds or terminate the purchase of services. The current Service Level Agreement replaces an earlier deed of agreement dated 20 December 2013.
The applicants place reliance on a report dated November 2019 by Morrison Low, which contains various recommendations resulting from its review of the operation and performance of SMTC (and another corporation established by Council in 2013, the Penrith CBD Corporation). The report stated (at p 17), under the heading 'Service Level Agreement':
After reviewing the current governance and guidance documents, and the limited influence they have on the performance focus of the corporations, or the accountabilities applied by Council, we are of the view that the Deed of Agreement should be replaced. We noted earlier that the corporate governance structure removes Council from 'ownership' responsibilities of a shareholder owned company, hence are of the view that a Service Level Agreement is more appropriate.
The Service Level Agreement should specify the services, service levels and performance Council is purchasing with the rate of contribution levied on the business areas. The Council is then able to attach specific funding to the services it is purchasing and in the event of poor performance is able to withhold funds or terminate the purchase of service. Accordingly, the Corporations will be able to decline to provide service (and accept funding) where they cannot adequately provide the service or seek funding for the additional services through grants, subscriptions or other fee for service arrangements.
The report subsequently recommended that the then current deed of agreement be replaced with a service level agreement that adopts "a purchaser, provider approach" and:
a. Clarifies the respective role of Council and Corporations, and the relationship between the parties
b. Defines and documents the relationship objectives, service requirements and performance requirements in exchange for funding
c. Determines the proportional or amount of investment (Council priorities) towards satisfying each objective
d. Requires regular reporting (at least six monthly) and an agreement of future priorities, objectives and performance prior to the commencement of the new funding year
e. Requires the collection of data that quantifies the outputs and outcomes of the Corporation activities.
While the applicants submit that the Morrison Low report was critical of Council (and SMTC) in various respects, any comments or criticisms of past governance, operational or other issues contained in that report are not relevant to the issues for determination in these proceedings.
[6]
Issue (1): Can the first respondent be dismissed from the role of councillor on the basis she is disqualified from holding civic office under s 329(b), LGA?
In their initial application to NCAT, the applicants sought orders for the dismissal of both councillors pursuant to s 329(2)(b) of the LGA. Counsel for the first and second respondents made oral submissions at the hearing to the effect that that no order can be made pursuant to s 329(2)(b) in relation to the first respondent because she is no longer a director of SMTC, having resigned as director after her re-election as councillor in December 2021 and her election as mayor in January 2022.
Section 329(2) of the LGA stipulates two circumstances in which NCAT has power to order dismissal of a person from civic office. Paragraph (a) confers power on NCAT to order dismissal for "any irregularity" in the way the person was elected or appointed to office. Paragraph (b) confers power on NCAT to order dismissal if the person "is disqualified from holding civic office".
Section 329(2)(a) is directed to the time a person was elected or appointed to the office. The purpose of s 329(2)(a) is to provide a procedure, whereby persons in civic office may be dismissed from that office because of an irregularity in their election - see, e.g. Molluso v Le [2018] NSWCATOD 158 at [47]. Where a person who is disqualified from holding civic office runs for and is elected to civic office whilst disqualified, that person cannot lawfully be elected by operation of s 276(1) of the LGA. The election of a disqualified person will be "irregular" for the purposes of s 329(2)(a) of the LGA, because the person in question (being in a state of disqualification) may "not be elected to a civic office" by virtue of s 276(1).
In contrast, s 329(2)(b) is directed to the present state of affairs. That is because the word "is" is used in the context of "if the person is disqualified from holding civic office".
We agree with the submissions of the first and second respondents that the two circumstances addressed in s 329 are directed at two different times. A contention that a person was, at the time of being elected, disqualified from holding civic office and not eligible to be elected falls within s 329(2)(a). Section 329(2)(b) does not relate to the status of a person at the time of the election. Rather, read with s 276(1), it provides for the dismissal of a person who is presently disqualified from holding civic office.
At the hearing and in response to counsel's oral submissions, the applicants indicated that they seek the dismissal of both councillors based on an irregularity in the manner that they were elected under s 329(2)(a), and separately, that they are disqualified from being councillors under s 329(2)(b) because they are or were directors of SMTC. The applicants pressed their argument that the first respondent can be dismissed from civic office under s 329(2)(b) despite her no longer being a director of SMTC, although the basis on which NCAT would have power to do so was not addressed.
The present application was lodged with NCAT after the first respondent's resignation as SMTC director. We accept the submissions of her counsel that there is no apparent basis on which she could be dismissed as a councillor under s 329(2)(b) of the LGA; it is instead a question of whether she could be dismissed under s 329(2)(a) on the basis of "irregularity" at the time she was elected to civic office in December 2021.
Accordingly, we have proceeded to consider the present application on the following bases:
1. as to the first and second respondents, whether there was an "irregularity" in the manner they were elected councillors under s 329(2)(a) of the LGA such that they should be dismissed from civic office;
2. whether the second respondent "is disqualified from holding civic office" under s 329(2)(b) of the LGA on the basis of her continued directorship of SMTC, such that she should be dismissed from civic office.
[7]
Issue (2): Is a time extension needed for the making of the application and, if so, is s 41 of the NCAT Act available and, if so, should time be extended?
The issue of whether the dismissal application was made within time limits specified in legislation arises, and if the application was made out of time, whether NCAT can (and should) extend time pursuant to s 41 of the NCAT Act. Section 41 allows NCAT to extend the period for the making of any application, "under any legislation in respect of which the Tribunal has jurisdiction despite anything to the contrary under that legislation".
The applicants submit that their dismissal application has been made within time, and this is the case regardless of whether their application relies on the ground of "irregularity" in s 329(2)(a) or the ground of disqualification under s 329(2)(b). In the alternative, and if we find that the application was made out of time, they seek leave for an extension of time pursuant to s 41 of the NCAT Act.
Rule 8 of the Civil and Administrative Tribunal Rules 2014 (NSW) (NCAT Rules) provides that "[a]n application for an extension of time made under section 41 of the Act must be made in writing unless the Tribunal dispenses with that requirement." We hereby dispense with the requirement for the applicants' application for an extension of time to be made in writing.
[8]
Proceedings based on ground of "irregularity" under s 329(2)(a) - First and second respondents
For proceedings commenced in NCAT based on an irregularity in the manner in which a person has been elected, s 329(3) of the LGA provides that an application may not be commenced more than 3 months after the date of the person's election to that office. The dismissal application was lodged with NCAT on 22 June 2022.
Insofar as the application in respect of one or both councillors relies on the ground of s 329(2)(a) "irregularity", the application has been made approximately 3 months out of time. The 3-month period contemplated by s 329(3) runs from the date the first and second respondents were declared to have been elected councillors on 20 December 2021. Under s 233 of the LGA, that is the date at which the office of a councillor commences (the Dictionary to the Act relevantly defines "civic office" as "the office of councillor"). This was the point at which, if they were disqualified from holding office because they were "employees" of Council or holding an office or place of profit under Council within the meaning of s 275 of the LGA, the applicants would have become entitled to make their application based on irregularity under s 329(2)(a) (see also Molluso v Le [2018] NSWCATOD 158 at [45]).
Prior to the hearing, counsel for the first and second respondents initially submitted that any extension of time under s 41 of the NCAT Act was not available. However, at the hearing before us, counsel accepted that NCAT's power to extend time under s 41 of the NCAT Act was available. The availability of s 41 of the NCAT Act was not challenged by the third respondent.
We consider that s 41 of the NCAT Act is available. The principles to be considered for an extension of time to make an application under s 41 were set out by an Appeal Panel of NCAT in Jackson v NSW Land & Housing Corporation [2014] NSWCATAP 22 at [21]-[22]. The Appeal Panel made clear that "[t]he discretion to grant an extension of time is unfettered under [s 41] but it must be exercised judicially": at [18]. Matters to consider include the length of the delay, the reason for the delay, the prospects of success of the application and the extent of any prejudice suffered by the respondents.
We accept that the matters raised in Jackson are not exhaustive. We agree with the respondents' submissions that, in the context of s 329(3) of the LGA, the purpose of the provision should be added as a factor. That purpose is to ensure the orderly and efficient function of local councils by requiring any challenge to the election of a councillor to be dealt with efficiently and quickly. There is a public interest in a timely challenge to the election of public officials.
The applicants state that the reason for the delay was that they had to spend some time investigating and gathering evidence to make their application. That included making an application for information (particularly documents about SMTC) under the Government Information (Public Access) Act 2009 (NSW) in early January 2022. Some of the documents sought were subject to exemption claims, and there was an internal review of Council's initial decision on the GIPA request. The documents sought were released to the first applicant on 28 February 2022, bar a rental agreement, which had been objected to and was subject to a review period (Exh A3).
On the other hand, the first and second respondents submit that NCAT should refrain from exercising its discretion given the length of the delay - including on the basis that the applicants had received all but one of the GIPA documents on 28 February 2022 - that no evidence or sensible reason explained the delay, and that the applicants' case is misconceived and not legally arguable. Similar submissions are made by the third respondent.
Weighing up the relevant factors, we have decided to grant an extension of time for the making of the dismissal application based on s 329(2)(a) of the LGA. We accept that the applicants were delayed in making the application because they were "investigating" the matter and had made a GIPA application and required time to review the material. We also accept that the issues raised by the proceedings are of significant public importance because they involve the election of councillors to civic office and/or their continuing in office as councillors. The purposes of the LGA as set out in s 7 of the Act include "to provide for governing bodies of councils that are democratically elected" (s 7(c)) and "to provide for a system of local government that is accountable to the community and that is sustainable, flexible and effective" (s 7(e)).
[9]
Proceedings based on "disqualification" under s 329(2)(b) - Second respondent only
We earlier stated our view that s 329(2)(b) has potential application only to the second respondent, and not to the first respondent. We also said that the two circumstances addressed in s 329 are directed to two different times - s 329(2)(a) relates to disqualification at the time of being elected, whereas s 329(2)(b) does not relate to the status of the person at the time of the election. Rather, read with s 276(1), it provides for the dismissal of a person who is presently disqualified from holding civic office.
Insofar as the dismissal proceedings concerning the second respondent rely on s 329(2)(b), there is no time limit contained in the LGA for the making of an application. This can be contrasted to proceedings which rely on s 329(2)(a) where the LGA specifically provides a 3-month time period for commencement from the time of election to civic office. It would thus appear that the LGA does not contemplate a time limit for commencement of proceedings based on s 329(2)(b).
The question is whether NCAT Rules, r 23(3)(b) is engaged, and if so, how it applies in the present circumstances. Rule 23(3) states:
(3) Unless the Tribunal grants an extension under section 41 of the Act, an application must be made -
(a) in the case where enabling legislation specifies the period within which the application is to be made - within the period specified, or
(b) in any other case - within 28 days from the day on which the applicant became entitled under the enabling legislation to make the application.
The applicants contend that the 28-day time limit in r 23(3)(b) does not apply; in the alternative, they seek an extension of time under s 41 of the NCAT Act. The applicants point to a number of sub-paragraphs in s 275(1) and (1A) of the LGA as demonstrative of why the 28-day rule could not apply to s 329(2)(b). In particular, the applicants say that s 275(1)(c)-(h) and (1A) of the LGA are all examples of disqualification that could arise more than 28 days after an election. It is submitted that s 275 should be read as a "complete unity", and in circumstances where s 275(1) and (1A) may be enlivened more than 28 days after an election, the absence of a time limit in s 275(2) must be a deliberate intention of Parliament. Further, it could not have been the intention of Parliament that if no application is made within 28 days of an election, a disqualified person should be permitted to remain in office - there could be no statutory intention for a disqualified person to serve.
The respondents took the position that the better argument is that a 28-day time limit under NCAT Rules r 23(3)(b) applies to an application under s 329(2)(b) of the LGA, and, in the circumstances of this matter, the time period commenced from the date on which the councillors were declared elected to Council, that is, 20 December 2021.
Rule 23(3)(b) is a rule of general application - a "cover-all" provision. If this sub-rule applies, and in the circumstances of this matter, there is the question of when the applicants "became entitled" under the LGA to make their application based on s 329(2)(b) in relation to the second respondent.
Was it at the time of declaration of her election as councillor on 20 December 2021, as contended by the respondents? If so, the 28 days commenced from the date the councillor was declared to have been elected to civic office on 20 December 2021, and in that regard, the application is nearly 5 months out of time. Alternatively, did the applicants "become entitled" to make the dismissal application based on s 329(2)(b) when the applicants first became aware of the facts that ground the dismissal application under s 329(2)(b) (the potentially disqualifying state of affairs)?
An Appeal Panel of NCAT in Kemsley v NSW Land and Housing Corporation [2020] NSWCATAP 188 considered the meaning of "entitled" in r 23(3)(b) in the context of an application under the Residential Tenancies Act 2010 (NSW). Referring to r 23(3)(b), the Appeal Panel stated (emphasis added):
91. In our view, it is somewhat artificial to describe the landlord as having an "entitlement" to bring its application under s 91 of the RTA when it had neither discovered the facts giving rise to such an application nor could it be said that such facts were discoverable with reasonable diligence. It is difficult to describe the landlord as having a realistic or practical "entitlement" to bring its application when it had no knowledge of such a right or claim.
92. Further, it is inherently unlikely that a landlord would have knowledge of the tenant using the residential premises for the purpose of supply of any prohibited drug at that time. The construction of Rule 23(1)(b) [sic - r 23(3)(b)] contended for by the tenant would place an unrealistic and even impossible burden on the landlord to ever bring the relevant application within time and would inevitably lead to having to rely upon making an extension of time application pursuant to s 41 of the NCAT Act.
93. It would be a harsh and unreasonable construction of Rule 23(1)(b) [sic - r 23(3)(b)] to contend that time runs from the date of such supply. Such factors incline us to accept that the better construction of Rule 23(1)(b) [sic - r 23(3)(b)] is that the relevant "entitlement" can only arise when the landlord has knowledge of facts that would ground the relevant application under either s 90 or s 91 of the RTA or, at least, when the landlord ought to have discovered such facts with reasonable diligence.
Ultimately, the Appeal Panel there refrained from expressing a concluded view on the operation of r 23(3)(b) in the circumstances before it, in light of its conclusion that it would extend time under s 41 of the NCAT Act: at [94] and [99].
Noting the passage cited above from Kemsley, it may be the case that the relevant "entitlement" for the purposes of r 23(3)(b) arose when the applicants first had knowledge of the facts that ground the dismissal application under s 329(2)(b) (or when the applicants ought to have discovered such facts with reasonable diligence). If this is the correct approach, the facts that ground their application would seem to be those facts which suggest the second respondent may potentially be an employee of or hold an office or place of profit under Council.
From documentary evidence tendered in the applicants' case, the first applicant, with the second applicant's assistance, made an initial GIPA application to Council on 6 January 2022 (Saleam Statement; Exh A3); Council released documents pertaining to SMTC on 28 February 2022 (Exh A3). Given his assistance with the GIPA application, we infer that the second applicant also had knowledge of the "facts" raised by the GIPA documents at the same time as or shortly after the first applicant. Further, in oral submissions regarding delay in bringing the application, the second applicant referred to a conversation with Mr Paul Funnell in March 2022, following which "finally we thought that we had sufficient material to initiate the action" (Tcpt, p 17(40)-(44)). There is correspondence in evidence dated 29 April 2022 in which the first applicant wrote to Council stating her conclusion (and seemingly doing so on behalf of the Australia First Party for which she was the lead candidate in East Ward) that, by incorporating and funding SMTC, and in the context of the "seeming privatisation of some of its functions", Council "may actually have created an office and place of profit under council" (Exh A1, tab 14, letter from the first applicant to Council dated 29 April 2022).
On this timeline, it would seem that the applicants had knowledge of the facts that ground the application under s 329(2)(b) at some stage between 28 February and 29 April 2022, and more likely somewhere mid to late March 2022. If this is correct, and if it is the case that a 28-day time limit applies, the applicants are out of time unless we grant an extension of time under s 41 of the NCAT Act for the making of the application under s 329(2)(b).
Similarly to the Appeal Panel's approach in Kemsley, we do not think it is necessary to express a concluded view on the operation of r 23(3)(b) in the present proceedings. We do not have comprehensive submissions from the parties on the issues adverted to above. We have already decided to extend time under s 41 of the NCAT Act insofar as the dismissal application relies on s 329(2)(a) of the LGA. The issues raised for determination in the dismissal application are of significant public importance; the applicants have provided a reasonable explanation for delay. To the extent that the applicants are out of time insofar as the dismissal application concerning the second respondent relies on s 329(2)(b), we consider that s 41 is available such that we may extend the time under this provision, and time should be extended for the same reasons already provided with respect to the s 329(2)(a) "irregularity" ground.
In sum, we have decided to extend the time for the making of the application and have proceeded to consider the application in respect of the first and second respondents based on s 329(2)(a) of the LGA, and in addition, in respect of the second respondent, based on s 329(2)(b) of the LGA.
[10]
Issue (3): Are the respondent councillors employees of the council for the purposes of ss 275(2) and 276(1), LGA?
The issue to be determined is whether, for the purposes of ss 275(2) and 276(1), the two councillors in question were employees of Council at the time of their election to Council in December 2021, and in respect of the second respondent, whether she is currently an employee of Council, by virtue of their Board membership and in the circumstances of this case.
[11]
Summary of parties' contentions
The applicants' case is that the two councillors are employees of Council because they are (or were) SMTC employees and SMTC is controlled by Council.
Firstly, the applicants say that the SMTC directors are employees of SMTC because they have an entitlement to remuneration for particular work performed for SMTC, and because they are not volunteers (at least partly because of the absence of any kind of volunteer agreement).
Service of a councillor on the SMTC Board is said to be mandatory such that part of the allowance paid by Council to councillors must, in the case of councillors who are also SMTC directors, be "notional pay" for service on the SMTC Board. The applicants further submit that the directors have an entitlement to remuneration from SMTC, and the fact that the two councillors in question have not received remuneration from SMTC for their role as directors can only suggest it was a deliberate decision not to take remuneration.
Secondly, and in support of the proposition that SMTC is an "entity of the council", the applicants say that the establishment of SMTC under s 358 of the LGA was "a delegation of power allowed by the Minister". The charter documents which define SMTC's relationship with Council (including the Service Level Agreement effective 1 July 2020 and earlier deed of agreement dated 20 December 2013) demonstrate that relationship as one of control by Council, particularly over the budget and expenditure of SMTC. The applicants submit that SMTC is Council "by other administrative means"; its mission was imposed by the Council and it must consult and otherwise comply with Council directions and recommendations.
The applicants say that SMTC's first Board was chosen by Council, relying on a Council resolution of 23 April 2012 which placed the then mayor on an independent review panel to vet candidates for initial Board membership. The applicants also point to Council resolutions, including a resolution of 25 June 2012 to place a councillor on the Board, and a resolution of 27 August 2012 by which Council affirmed the recommendations for directors, which included the second respondent, and noted that a councillor would be elected to the Board after 8 September 2012.
The applicants submit that SMTC is a "conduit" between business interests and Council, where SMTC carries out its functions according to Council's will with no final independent will of its own. Further, the applicants rely on provisions in SMTC's Constitution, which prescribe who the directors may be with the intention of reflecting local business interests, as having the practical effect that SMTC "is a mini economic parliament or an adjunct-council" (AS at [19]).
The applicants also submit that SMTC was established for, and operates as a potential functionary for, the Greater Cities Commission and is bound by the Greater Cities Commission Act 2022 (NSW) when directed or delegated by the Council, in addition to the Western City and Aerotropolis Authority Act 2018 (NSW) as a "service provider". We note that the Western City and Aerotropolis Authority Act 2018 (NSW) is now the Western Parkland City Authority Act 2018 (NSW).
The respondents contend that there is no employment relationship between the first and/or second respondents and Council, or between those two respondents and SMTC, and the applicants' case is misconceived. The first and second respondents submit that the applicants' argument as to the absence of a volunteer agreement resulting in the two councillors being employees of SMTC (and of Council) is a non-sequitur, unsubstantiated by any evidence. Instead, the SMTC Constitution and the ASIC search extract in evidence establishes the councillors are directors and not employees of SMTC. Moreover, the Constitution at cl 9.15.7 prevents a person holding roles as both a director and an employee of SMTC.
Further, it should be noted that the Service Level Agreement between Council and SMTC establishes the relationship between the two entities as an ordinary commercial one (a purchaser/provider relationship), albeit directed to a particular purpose. Any notion of a delegation of powers or relationship between Council and the SMTC is incorrect and unsubstantiated by the Service Level Agreement.
The third respondent submits that no part of a councillor's allowance is "notional pay" for service on the SMTC Board. The Council is required by s 248(1) of the LGA to pay each councillor an annual fee; s 248(3) provides that fee must be the same for each councillor. Moreover, with reference to the SMTC Constitution, the directors of SMTC are not paid or entitled to be paid any director's fees. Further, any assertion that the councillors' service on SMTC's Board is mandatory is contradicted by the documents tendered by the applicants that disclose that the councillors in question offered to serve on the Board.
The third respondent rejects the proposition that SMTC was created as a delegated body of Council. The existence of a service level agreement with Council and the receipt of funding from Council do not make SMTC a creature of Council. The third respondent points to a Council report of 14 May 2012 as emphasising SMTC's independence. This document refers to SMTC's ability, once established, to "make decisions independent of Council". Any criticism contained in the Morrison Low Report dated November 2019 of the operations of SMTC cannot change its legal structure or relationship with Council. That report clearly demonstrates that SMTC and Council are separate entities whose objectives do not always align.
[12]
Applicable principles
For a councillor to be an "employee of the council" within the meaning of s 275(2), there must be an employment relationship between the councillor and Council. We do not take this proposition to be in dispute.
[13]
Our findings
The facts relevant to the issues to be determined in these proceedings are largely uncontroversial. We referred earlier in these reasons to background facts, including information pertaining to STMC's governance (as set out in its Constitution), and we make these findings. We will refer to provisions from the STMC Constitution, where relevant, in our consideration further below.
In respect of a payment of $190.91 made by SMTC to the second respondent on 20 January 2021 (earlier referred to), it was agreed between the parties that this payment was properly to be characterised as a reimbursement for gifts purchased by the second respondent on behalf of SMTC for its employees. We find that that this amount was an amount by way of reimbursement of expenses incurred by the second respondent on behalf of SMTC (contemplated by cl. 6.2.3, SMTC Constitution).
[14]
Consideration
The applicants say that the required employment relationship between Council and the first and second respondents exists because the two councillors are (or were) SMTC employees, SMTC is an "entity of the council", and accordingly the directors who are also councillors are employees of Council. We ultimately reject the applicants' submission that there is an employment relationship between the first and/or second respondents and Council.
As to the asserted employment relationship with SMTC, despite the applicants' submission that an employment contract "must arise when the Directors agree to their role to serve the Corporation according to its charter documents" (AS at [24]), there is no evidence of any employment contract between directors (including the first and second respondents) and SMTC.
The applicants' reliance on Bergman v Broken Hill Musicians Club Ltd t/as Broken Hill Musicians Club [2011] FWA 1143 at [19] does not assist their case, as was noted by the third respondent. Commissioner Steel stated:
19. If there is no contract of employment identified between the parties, the applicant cannot be an employee. If there is a contract of employment and the person performs work as an employee, the employer must conform with the following:
• Any relevant award or applicable enterprise agreement that covers the work performed.
• Any industrial legislation, such as the Fair Work Act 2009 its predecessors, or New South Wales state industrial legislation including Workers Compensation legislation.
• Federal superannuation legislation.
The applicants also refer to the decision of the former NSW Administrative Decisions Tribunal (ADT) in Sullivan v Okeno [2013] NSWADT 12, although there is nothing we can see in that decision which assists the applicants' submission that persons who serve as directors of SMTC are employees of the company. The ADT touched on the distinction between employee and office holder at [23]:
23. For an illustration of the distinction between an employee and an office holder who is appointed and remunerated otherwise than under a contract of employment, and the differing consequences that might flow in relation to access to certain entitlements, see Public Service Association and Professional Officers' Association Amalgamated Union of New South Wales on behalf of Hookey v State of New South Wales (Department of Health Mental Health Review Tribunal) [2012] NSWIRComm 13. The distinction between office holders and employees was also canvassed in Sneddon v State of New South Wales [2012] NSWCA 351…
In Public Service Association and Professional Officers' Association Amalgamated Union of New South Wales on behalf of Hookey v State of New South Wales (Department of Health Mental Health Review Tribunal) [2012] NSWIRComm 13, President Boland concluded, in the context of an application under the Industrial Relations Act 1996 (NSW), that a former part-time member of the NSW Mental Health Review Tribunal was an office holder, not an employee. After considering the difference between the two concepts, President Boland stated that the former MHRT member exercised an "independent responsibility cast upon him by law", the discharge of which was not to be regarded as done in the course of an employment relationship (at [119]).
There is no evidence before us of any past or present employment relationship between the two councillors in question and SMTC. There is no evidence that SMTC's directors are paid, or entitled to be paid, any amounts that an employee of SMTC would receive. We agree with the submission of the third respondent that there is no evidence to support the contention that part of a councillor's allowance is "notional pay" for service on the SMTC Board. The LGA, at Pt 2 Div 5, deals with the fees and allowances payable by councils to councillors. By s 248(1) of the LGA, a council is to pay each councillor an annual fee; s 248(3) provides that fee must be the same for each councillor. Council must pay the mayor an annual fee, which is in addition to the fee paid to the mayor as a councillor: s 249(1) and (2). Importantly, s 251(1) provides that "[a] person is not, for the purposes of any Act, taken to be an employee of a council and is not disqualified from holding civic office merely because the person is paid a fee under this Division."
Further, there is no evidence that service of a councillor on the SMTC Board is "mandatory", as asserted by the applicants. While the Constitution contemplates at cl 9.2.3 that a councillor of Council will serve as a Director, this does not mean that any particular councillor is compelled, by Council, to serve on the SMTC Board of Directors.
The applicants' submission that the existence of an entitlement to remuneration for particular work performed for SMTC establishes the directors as employees of SMTC must also fail. The entitlement of directors to "remuneration" is set out in cll 1.3 and 6.2.1 of the SMTC Constitution, the latter of which does not prevent "the payment in good faith of remuneration to any officer, servant or member of the Company in return for any services actually rendered to the Company or for goods supplied in the ordinary and usual way of business". Such remuneration is distinct from a kind of remuneration for employment. None of the other types of "remuneration" which the company may pay to directors, in accordance with the Constitution, are a kind of remuneration for employment.
Having regard to the concession by the applicants as to the characterisation of the payment of $190.91 from SMTC to the second respondent, being a reimbursement for gifts purchased on behalf of SMTC for its employees (as contemplated by cl 6.2.3 of the SMTC Constitution), it cannot be said that this payment was in made in connection to any kind of employment of the second respondent by SMTC.
There is no other evidence before us to demonstrate that either councillor, by serving as a director of SMTC, is (or was) an employee of Council at any relevant time. The first and second respondent are (or were) not employees of SMTC; they hold (or held) office as directors. The lack of a "volunteer agreement" does not advance the applicants' case. Moreover, cl 9.15.7 of the SMTC Constitution precludes a director from being an employee of SMTC.
While directors' fees are distinct from remuneration of an employee, it is also clear from the SMTC Constitution that Board members have no entitlement to be paid any directors' fees.
We agree with the respondents' submissions in respect of issue (3) and we conclude that there is no evidence of an employment relationship between SMTC and its directors, or between SMTC and the two councillors the subject of the present dismissal application.
Further, the assertion that SMTC is an "entity of the Council" does not assist the applicants' case. They cite Sullivan v Okeno [2013] NSWADT 12 at [25] in support of their contention that SMTC is a functionary, or under the control of, Council, which could operate to cause a disqualification. Paragraphs [24]-[25] and [27] would appear to provide greater weight for an argument against SMTC being an "entity of" Council. In Sullivan, the respondent councillor worked part-time as the Town Centre Coordinator for a Town Centre Program funded by the relevant council. There was a deed governing the program between the council and Southlake Business Chamber & Community Alliance (Alliance), to which funds for the program were allocated, including for the role of coordinator. The councillor was a self-employed contractor with her own ABN and was contracted to provide services to Alliance.
The ADT held:
24. It is commonplace in modern public funding arrangements for government to make grants to private organisations for the carrying out of functions seen by government as in the public interest. People who work for the private organisations would not ordinarily be seen as employees of the government, or otherwise the holders of government offices or places of profit under the government.
25. We accept that cases might arise where it can be demonstrated that the funding authority exercises such a degree of control in the appointment of and work of the individual functionary of the private organisation that, properly characterised, the functionary could be said to be a servant of the government. Mr Sullivan's argument, as we apprehended it, was along those lines.
27. In our view, all of the provisions were ones of a usual kind in funding agreements between a government authority and a private organisation.
The present case is not dissimilar. Here, the Service Level Agreement provides an arm's length agreement for a funding arrangement for an incorporated entity, SMTC, established for particular purposes.
We agree with the respondents that the relationship between SMTC and Council can properly be characterised as two separate legal entities engaged in a purchaser/provider relationship. It is a commercial relationship by which Council provides funds to SMTC; SMTC then has a broad discretion in expending the funds in accordance with the Service Level Agreement. The Service Level Agreement sets out standards which need to be met for SMTC to continue to receive Council funding. Having considered the Service Level Agreement, we consider that it does not allow for Council to make decisions on behalf of SMTC in regular business functions.
The applicants have misconceived the legal structure of SMTC in calling it Council "by other administrative means". While Council initially established SMTC (with ministerial approval), Council has no ownership interest in SMTC, and the company is not an "entity of" Council. Equally, it is misconceived to suggest that the requirement that directors represent different interests in the community makes SMTC "an adjunct-council".
In any event, given our rejection of the contention that the first and second respondents are/were employees of SMTC by virtue of their SMTC Board membership, we cannot see how those councillors can be characterised as employees of Council when there is no evidence of any type of employment relationship, either between SMTC and the councillors in question, or between Council and those councillors for their role as SMTC directors.
The applicants' further submission that the creation of SMTC in 2013, with the consent of the Minister pursuant to s 358 of the LGA, somehow represented a delegation of the Minister's power under the LGA, is also misconceived. There is nothing in the material before the Tribunal to indicate that SMTC was established as a "delegated body" of the Minister, or of Council.
The applicants also contend that Council has a power to delegate to SMTC under the Greater Cities Commission Act 2022 (NSW) (GCCA) and what is now the Western Parkland City Authority Act 2018 (NSW) (WPCAA). This is said to be another indicator that SMTC is an entity of Council, or a "delegated body" of Council, or that SMTC is Council by "administrative means". Even if Council had the powers of delegation asserted by the applicants, which it does not, that cannot make the first or second respondent "employees of the council" for the purposes of s 275(2) of the LGA, in the absence of any demonstrated employment relationship between the councillors in question and SMTC, or between the councillors and Council.
For the sake of completeness, we record that we were taken by the applicants to ss 10, 11, 12 and 20 of the GCCA. Under s 10, the Greater Cities Commission has functions, including "to assist local councils in the Six Cities Region … with the implementation of any plan or proposal relating to the preparation and implementation of any plan or proposal relating to development in the Six Cities Region": s 10(1)(g). Section 12 confers power on that Commission to delegate functions to authorised persons or bodies. Delegates may sub-delegate to authorised persons or bodies: s 12(3). "Authorised person or body" relevantly includes a local council for a local government area in the Six Cities Region, and a person or body (or person or body of a class) authorised by regulation. The Greater Cities Commission Regulation 2022 (NSW) does not presently authorise any other person or body (or class of person or body).
None of the provisions relied upon by the applicants authorise or provide for any delegation by Council to SMTC (as asserted), or more broadly, for any delegation by the Greater Cities Commission to Council, and for Council to sub-delegate (with the written authorisation of the Greater Cities Commission, as contemplated by s 12(3)) any function of that Commission to SMTC.
We were not taken to any particular provision in the WPCAA that was said to allow for delegation or sub-delegation (of functions of the Western Parkland City Authority) by that Authority to Council, or by Council to SMTC. Under s 16 of the WPAA, the Authority may delegate its functions to authorised persons. Delegates may sub-delegate to authorised persons: s 16(2). "Authorised person" is defined in s 16(3) to mean a member of staff of the Authority or a person (or a person of a class) approved by the Minister or prescribed by regulation. There is currently no regulation made under the WPCAA. Despite the assertion of the applicants, there is no legislative provision in the WPCAA that authorises or provides for any delegation, or sub-delegation, by Council to SMTC in respect of functions of that Authority.
Turning briefly to the Saleam and Funnell Statements, the applicants rely on these statements to support their contention that the first and second respondents hold (or held) a place of profit under Council. Those witnesses do not purport to give any opinion as to whether the respondent councillors are (or were) employees of Council. The witnesses do make various assertions about the arrangements between SMTC and Council, and the degree to which SMTC acts "as" or "for" Council. For example, Mr Funnell opines that SMTC "is in fact and [sic] operation an [sic] entity of Penrith City Council". However, whether or not SMTC is "remote" from Council, or "controlled" by Council in some way, is not determinative of whether the two councillors can properly be characterised as employees of Council under s 275(2) of the LGA. The opinions expressed in the Saleam and Funnell Statements do not assist the Tribunal in its fact-finding process, nor in reaching its ultimate conclusions, in relation to issue (3). We will further address the Saleam and Funnell Statements in our consideration of issue (4).
In summary on issue (3), the applicants have not established that either the first or second respondent are (or were, at the time they were declared elected to Council on 20 December 2021) employees of Council for the purposes of ss 275(2) and 276(1) of the LGA.
[15]
Issue (4): Do the respondent councillors hold "an office or place of profit under the council" for the purposes of ss 275(2) and 276(1), LGA?
For the first or second respondent to hold an office or place of profit under Council within the meaning of s 275(2), it would need to be demonstrated that: (i) the councillor held (or holds) "an office or place of profit"; and (ii) only if that question is answered in the affirmative, the office or place of profit is (or was) held "under the council".
[16]
Summary of parties' contentions
The applicants submit that "office of profit" or "place of profit" in s 275(2) of the LGA encompasses non-tangible benefits such as political gain, community status, or gain to private businesses; the notion of financial profit or gain is too restrictive. On this wider notion of "profit", through their SMTC directorships the councillors in question are said to: (i) have held (or hold) an office or place of profit; and (ii) held (or hold) that office or place of profit under Council because SMTC is an "entity of" Council or otherwise controlled by Council.
The applicants point to case law from India, the decision of the ADT in Sullivan v Okeno [2013] NSWADT 12, and a research paper by Professor Twomey, titled "Office of profit under the Crown" (14 June 2018) Parliamentary Research Paper Series 2017- 2018, as permitting such a finding.
In light of this wider interpretation of "profit", the applicants say that the two councillors in question counter-preferenced each other at the local government election, which is said to be indicative of an arrangement where SMTC is used by its directors as a "place of profit" to assist each other into being elected to Council. The applicants say that three Board members ran for election and submit that there was an agreement or "de facto political party" within SMTC. The applicants further submit that a shop façade upgrade project said to be sponsored by SMTC, in light of a wider interpretation of "profit", "can lead to other (even unintentional) results: a clientele can be accrued which becomes a support base for other projects, the Corporation may direct this support base in a political way or a planning way for the activity of the Corporation in other development; or just to encourage recipients of the monies to use the business of Board members" (AS at [38]). The applicants did not lead any direct evidence in this regard.
The applicants rely on evidence of Facebook posts by the first and second respondents as demonstrating that work paid for or performed by SMTC resulted in political gain or enhanced community status for the first and second respondents. Specifically, the applicants refer to posts made by the second respondent regarding shade sails at Kokoda Park in St Marys, the removal of a stationary bus from land near a park, and posts made by the first respondent "reposting" or "sharing" posts from a page named "St Marys Town Centre" regarding free children's activities at Halloween and advertising Christmas in the Park.
The applicants also contend that the second respondent has profited through business benefits to St Marys Band Club, asserting that it is a matter of public record that the second respondent is the CEO of the Band Club, and referring to some 26 payments recorded in the SMTC financial statements to the Band Club.
It is also submitted that the first and second respondents profited from the outsourcing of goods and services by SMTC to their families or friends, or businesses of their families or friends. The applicants did not lead any evidence in this regard.
Distinct from their argument about a broader concept of "profit", the applicants argue that the first and second respondents hold an office or place of profit under Council as a result of Council funding to SMTC, in reliance on the ADT decision in Sullivan v Okeno [2013] NSWADT 12.
The first and second respondents submit that s 275(2) of the LGA should be interpreted as being directed to ensuring that a person elected to a council does not hold, at the will of a council, an office in relation to which the person receives a financial gain. Financial gain is required for "profit", and does not encompass non-tangible benefits such as political gain or community status as contended by the applicants. Further, "office of profit" and "place of profit" should be defined negatively: it will not be an office or place of profit if no salary or fee attaches to the office and no holder of the office could claim payment of such. There is no evidence before the Tribunal that the councillors derive (or have derived) financial gain by reason of their holding of SMTC Board membership.
The SMTC Constitution is dispositive of the issues. The Constitution should be the start and end of an enquiry as to "profit", and in fact the Constitution does not entitle the two councillors to a salary for the conduct of their directorships. The reimbursements authorised by the Constitution do not constitute "profit". Regarding alleged SMTC payments to the St Marys Band Club, the allegation by the applicants is "an impermissible attempt to pierce the corporate veil and is a submission made in a vacuum of evidence" in circumstances where the financial statements "on their face show purchases for services rendered by a corporation" (Tcpt, p 73(20)-(25)). Allegations made about shade sails are irrelevant to the issue of whether the councillors in question hold or held an office of profit (as is the bus issue) and it is a significant leap of logic not available on the evidence. No relevant profit attaches to the holding of the director roles.
Further, there is no office or place of profit held "under" Council. As directors of SMTC, a body corporate and separate legal entity from Council, any office or place would be "under" SMTC - to find otherwise would be an impermissible breach of the corporate veil. Reliance is placed on the High Court decision in Re Lambie (2018) 263 CLR 601; [2018] HCA 6 and to various passages in the joint judgment (see [33]-[34]) about the meaning of the phrase "office of profit under the Crown" in s 44(iv) of the Commonwealth Constitution. In determining whether an office or place of profit (if any) could properly be characterised as "under" Council, the respondents say that, by adopting an analysis similar to that of the High Court's analysis in Re Lambie, it is for the applicants to show that Council was responsible for appointing the first and/or second respondents to their SMTC director roles, or for them remaining in those roles or deriving a profit from such roles.
In this regard, the first and second respondents submit that the SMTC Constitution makes clear that directors are appointed by the company, not Council (referring to cll 5.1 and 9.1-9.5). Reference is made to SMTC Board minutes of 15 February 2022 as an example, where a business owner and industry expert were appointed by election, to support their submission that the Board appoints directors, not Council. Further, there is no evidence that Council exercises or can legally exercise any control as to whether the two councillors remain (or remained) as directors.
The third respondent adopts the submissions of the first and second respondents, adding that any assertion that the ADT decision of Sullivan v Okeno allows a conclusion that "place of profit" might arise from a non-tangible benefit is untenable.
[17]
Expert opinion evidence
The applicants rely on the Saleam and Funnell Statements as expert opinion evidence in relation to issue (4). As earlier noted, we admitted the reports into evidence subject to weight, as is common practice in the Tribunal in matters where the rules of evidence do not apply (as here). Nonetheless, the rules of evidence provide significant guidance to how this Tribunal should deal with evidence which is sought to be relied on as expert opinion evidence.
Focussing on the admissibility of expert evidence, Heydon JA in Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705; [2001] NSWCA 305 at [85] held:
In short, if evidence tendered as expert opinion evidence is to be admissible, it must be agreed or demonstrated that there is a field of "specialised knowledge"; there must be an identified aspect of that field in which the witness demonstrates that by reason of specified training, study or experience, the witness has become an expert; the opinion proffered must be "wholly or substantially based on the witness's expert knowledge"; so far as the opinion is based on facts "observed" by the expert, they must be identified and admissibly proved by the expert, and so far as the opinion is based on "assumed" or "accepted" facts, they must be identified and proved in some other way; it must be established that the facts on which the opinion is based form a proper foundation for it; and the opinion of an expert requires demonstration or examination of the scientific or other intellectual basis of the conclusions reached: that is, the expert's evidence must explain how the field of "specialised knowledge" in which the witness is expert by reason of "training, study or experience", and on which the opinion is "wholly or substantially based", applies to the facts assumed or observed so as to produce the opinion propounded. If all these matters are not made explicit, it is not possible to be sure whether the opinion is based wholly or substantially on the expert's specialised knowledge. If the court cannot be sure of that, the evidence is strictly speaking not admissible, and, so far as it is admissible, of diminished weight. And an attempt to make the basis of the opinion explicit may reveal that it is not based on specialised expert knowledge, but, to use Gleeson CJ's characterisation of the evidence in HG v R (1999) 197 CLR 414, on "a combination of speculation, inference, personal and second-hand views as to the credibility of the complainant, and a process of reasoning which went well beyond the field of expertise" (at [41]).
It is clear that in proceeding such as these, where the rules of evidence do not apply, any issues with an expert report go to weight rather than admissibility. In Hancock v East Coast Timber Products Pty Limited (2011) 80 NSWLR 43; [2011] NSWCA 11, Beazley JA (Giles and Tobias JJA agreeing) held:
82. Although not bound by the rules of evidence, there can be no doubt that the Commission is required to be satisfied that expert evidence provides a satisfactory basis upon which the Commission can make its findings. For that reason, an expert's report will need to conform, in a sufficiently satisfactory way, with the usual requirements for expert evidence. …
83. In the case of a non-evidence-based jurisdiction such as here, the question of the acceptability of expert evidence will not be one of admissibility but of weight. …
Here, there is the question of whether the opinions expressed by these two witnesses are: (1) relevant to the issues for determination; (2) if so, whether the witnesses are qualified to give expert opinions on the basis of some specialised knowledge, and their opinions are based wholly or substantially on that specialised expertise; (3) whether the facts on which the opinions are based are proven; and (4) whether any such expert opinions assist the Tribunal in either its fact-finding task or in reaching conclusions on any of the ultimate issues for determination in the proceedings.
The Saleam Statement comprises a 4-page document headed "Report", with one attachment. After listing his qualifications and skills said to be relevant to these proceedings, the second applicant makes various assertions about a voting count "anomaly" in relation to the second respondent's candidature in the 2021 Council election (said to have been later corrected by the Australian Electoral Company which conducted the election), which he says prompted him to conduct research into SMTC. After briefly referring to some research conducted, he expresses the opinion that SMTC "was functioning at the time of the election as a political actor", that SMTC "was a mobilisation of local small capital in pursuit of close relation with corporate capital" and that "the Penrith corporations, especially [SMTC], were special organisations of council administration and of local capital". After referring to "an overview assessment of the "Six Cities Commission" and the nature of development intended via its arrangements" (without further elaboration), he concludes that SMTC "has a part to play here. It must be the case that the Directors of [SMTC] are aware of this. This would make it not only an administrative body of council but a sure place for (future) profit." There is no specific reference to the first or second respondent (other than in relation to the "anomaly" mentioned above).
The Funnell Statement is a 2-page document headed "Expert Evidence" in which the witness, after referring to his experience as a former elected councillor and as Board member, asserts that the councillors in question "given their authority within [SMTC]" have "on the surface… a serious conflict of interest", and says it would appear they have used their role as SMTC directors for "personal gain" by using the shade sails for campaigning purposes for election/re-election, by controlling the delivery date of shade sails and holding back the signing off on the construction certificate. Mr Funnell refers to "other" (unnamed) SMTC directors "utilising this opportunity for personal gain by using their position to garner personal/political advantage to run for public office" with Council . The witness then expresses his opinion that SMTC "becomes a place of profit", and place of "future" profit in light of nationally important infrastructure being developed in the St Marys locality. He further states that SMTC "is in fact and operation an entity of Penrith City Council".
To the extent the witnesses' comments related to the first or second respondent, the opinions proffered seem to be confined to "personal" or "political" benefits which assist the councillors in question in campaigning for election or re-election to Council office. This evidence is potentially relevant only to the extent that that "profit" in s 275(2) of the LGA encompasses the "political gain" asserted by the applicants. However, to the extent that the two witnesses focus on SMTC being a "place of profit" or "place of future profit", whether the company itself operates in a commercial manner in some respects, would not seem to be relevant. In our view, in applying s 275(2) of the LGA to the circumstances of this matter, the correct approach is to ask whether the councillors in question "profit" (or has an entitlement to such) by reason of their SMTC directorships.
In any event, we do not consider that the respective witnesses are qualified to give expert opinion on the basis of some specialised knowledge, nor are the opinions expressed based wholly or substantially on that knowledge.
Turning to the qualifications listed by each of these witnesses, the second applicant lists his qualifications relevant to these proceedings as follows: experience as a registered officer for the Australia First Party (NSW) Incorporated and the Australia First Party (NSW) Incorporated (Councils) (which he indicates are registered for Commonwealth and local government election purposes respectively); experience in several election campaigns as Registered Officer and Deputy Registered Officer for those parties; that he has been a candidate in Federal, State and Local elections 2008-2019; that he holds a Doctor of Philosophy degree from Sydney University; that he has functioned as a "legal investigator" for himself and others and has appeared in various courts and tribunals (including NCAT) in respect of access to government information and privacy legislation; and that he has skills "in assessing trace material and links between disparate facts to arrive at a composite picture". He also refers to his "particular experience" in Penrith City and East Ward, including his candidature in two Federal elections in the Penrith area in 2016 and 2019, his role as campaign organiser for the first applicant's ticket for East Ward in the 2021 Council poll, and that he has "retained an interest in local politics".
In his statement, Mr Funnell refers to his 9 years' experience as an elected councillor of Wagga Wagga Council, his service on "many Boards" and his current director role on a Local Land Service Board, and his 4 years' experience as the Federal President of the Democratic Labour Party.
While not specifically addressed by the applicants in their submissions or by the second applicant or Mr Funnell in their respective statements, we can infer that the relevant specialised knowledge relied on is that of expertise in local government elections or expertise in the qualifications required for persons running for (or holding) local government office.
The qualifications (including experience) listed by the second applicant and Mr Funnell do not make them qualified to give expert opinion on these topics in reliance on the training, study or experience recorded by them in their respective statements. Whilst the experience of both witnesses in (or pertaining to) local government may be relevant to the broader context of these proceedings, we do not consider that this generates an expertise in local government elections, in assessing the "qualification" requirements for local government councillors or how to identify whether those qualifications are met for the purposes of the LGA. Given our view, it is difficult to see how the respective opinions are wholly or substantially based on the expert knowledge of either witness.
In any event, the second applicant is not an independent expert. He is a party to the proceedings and the former campaign organiser for the first applicant (an unsuccessful candidate in the December 2021 Council election). In his statement, the second applicant says that he is an "advocate" in these proceedings and he is aware that any "expert evidence" he offers "must be separated from [his] primary role". He also says that he has closely read, and believes that he understands, NCAT Procedural Direction 3 on Expert Evidence. We presume the second applicant was referring to paras [14]-[16] of the Procedural Direction, which provides for an "overriding duty to assist the Tribunal impartially", a "paramount duty to the Tribunal and not to any party" and explicitly states that an expert witness "is not an advocate for a party". While we acknowledge that the second applicant appears to have turned his mind to the issue, we do not consider that the second applicant can bring an independent or "impartial" mind to bear in providing the expert opinions he purports to give.
The further issue arises as to the facts on which the respective opinions are based. The opinions of these witnesses about "personal" or "political" gain obtained by the first or second respondent, or about SMTC as a "place of profit" or "entity of" Council, are not based on identified facts, or if they are, those facts are not proved. As Heydon JA said in Makita at [41], it must be established that the facts on which an expert opinion is based form a proper foundation.
The second applicant variously refers to "research" about SMTC, communications with the Australian Electoral Company, a GIPA application and the resulting material released to the applicants, "Council document dumps online", correspondence with Council, social media analysis, "basic research on [corporations listed in an email from the Office of Local Government]" and "assessment of the 'Six Cities Commission'", none of which were attached to the statement. The only document attached was an email from the Office of Local Government listing entities established under s 358 of the LGA. It is not clear whether documents to which the second applicant refers in his statement are included in the bundles of documentary material tendered by the applicants; certainly we were not taken to any such documents.
The Saleam Statement fails to identify the factual bases of its concluded opinions. Comments are made which are unexplained, and without reference to identified evidence. For example, the second applicant opines that Council and SMTC are "essentially one structure" without reference to the facts on which this opinion is founded. The facts on which he bases his opinion that SMTC is "a sure place for (future) profit" are not identified.
The Funnell Statement suffers from similar deficiencies. Mr Funnell makes allegations about SMTC directors utilising their position as director to garner personal/political gain to run for Council office, without reference to identified evidence. He also refers to "material pertaining to the St Mary's [sic] Town Centre Corporation and the Penrith City Council" and "the letter presented to me, authored by Penrith City Council Governance Officer Mr Britton" as the basis for his conclusions. That letter is not annexed to the statement, but presumably is the letter in evidence dated 29 April 2022 from Stephen Britten, Chief Governance Officer, to the first applicant. Indeed, Mr Funnell only uses the letter to contradict the notion that SMTC is remote from Council:
…I opine, this cannot be the case based on the material presented to me and that the St Marys Town Centre Corporation is in fact and [sic] operation an [sic] entity of Penrith City Council.
The "material" said to the basis of this opinion is not described or before us.
For the reasons provided, we do not consider that the Saleam or Funnell Statements constitute expert opinion evidence such that we should give those statements the weight that would typically be accorded to expert reports (subject to relevance). While we have had regard to both statements, we can give them only very limited weight.
[18]
Applicable principles
There is little guidance in case law as to the meaning of the phrase "an office or place of profit under the council" in s 275(2) of the LGA. The applicants ask the Tribunal to take a wide view of what constitutes "profit".
We agree with the respondents that Re Lambie (2018) 263 CLR 601; [2018] HCA 6 provides some guidance in the present context, given the similar wording in s 44(iv) of the Constitution and s 275(2) of the LGA. The first clause of s 44(iv) is in similar terms to s 275(2) and relevantly provides that any person who…"holds any office of profit under the Crown, or any pension payable during the pleasure of the Crown out of any of the revenues of the Commonwealth; …shall be incapable of being chosen or of sitting as a senator or a member of the House of Representatives".
Re Lambie provides the test for determining whether persons hold an "office of profit under the Crown" for the purposes of s 44(iv) of the Constitution. The question considered by the High Court was whether Mr Martin was incapable of sitting as an Australian Senator by reason of s 44(iv) and whether the offices he formerly held, that of mayor and councillor of Devonport City Council, were "offices of profit under the Crown" for the purposes of s 44(iv). He was paid an annual allowance by that council (a local government corporation established under the Local Government Act 1993 (Tas)) for performing those roles. It was not in dispute that he held one or more offices of profit - the question was whether those offices of profit were held "under the Crown". It was ultimately held that the offices of mayor and of councillor of a local government corporation were not offices of profit under the Crown within the meaning of s 44(iv).
As noted, it was agreed between the parties in Re Lambie that there was an office or place of profit. The same was the case in Re Nash (No 2) (2017) 263 CLR 443; [2017] HCA 52 and in Sykes v Cleary [No 2] (1992) 176 CLR 77; [1992] HCA 60, which is far removed from the present circumstances where there is no such agreement between the parties. The High Court in those cases did not therefore have to determine the scope of the term "profit" in s 44(iv). Nonetheless, it is apparent from Re Lambie that the notion of "profit" is one confined to present or future financial gain. This is seen in various passages of the majority judgment, which are directed to receipt of a financial gain in the context of s 44(iv) of the Constitution.
For example, Kiefel CJ, Bell, Gageler, Keane, Nettle and Gordon JJ stated at [28]:
… s 44(iv) can be seen to be quite narrowly tailored to eliminate a particular form of conflict of duty and interest. The targeted conflict is between the parliamentary duty of a senator or member and a pecuniary interest of a kind which, if permitted, would give rise to a real capacity for executive influence over the performance of that duty. The particular form of conflict to which the first clause of the provision is addressed is that which would arise from a senator or member being able to hold at the will of an executive government an office in respect of which he or she receives a financial gain. (emphasis added)
Their Honours stated at [30]:
30. Within that relatively narrow yet important compass, s 44(iv) in combination with s 45(i) has a prophylactic quality. Not only does s 44(iv) operate to prevent a person who holds at the will of executive government an office in respect of which he or she receives a financial gain from being chosen as a senator or member, but s 44(iv) and s 45(i) operate together to limit the capacity for a person who has been chosen as a senator or member to be influenced by the prospect of obtaining any present or future financial gain at the will of the executive during the period in which the person serves as a senator or member. … (emphasis added)
At [31], their honours continued (footnotes omitted):
Interpretation of office of profit "under" the Crown
31. The disqualification set out in the first clause of s 44(iv) is given the greatest certainty of operation that is consistent with its language and with its purpose of eliminating or reducing the executive influence over a senator or member which would arise from a relationship of financial dependency by adopting an interpretation of the word "under" which substantially accords with that proposed by the Attorney-General of the Commonwealth. An office of profit is "under" the Crown within the meaning of the provision if the holding or continued holding of that office, or the receipt of profit from it, depends on the will or continuing will of the executive government of the Commonwealth or of a State. (emphasis added)
Those passages demonstrate that the Court was only concerned with "financial gain" and not "political gain". We are not aware of any Australian case law which extends the term "profit" beyond financial gain and certainly we are unaware of any Australian case law which extends the meaning of profit to include the "political gain" or "enhanced community status" asserted by the applicants.
The applicants point to the research paper of Professor Twomey concerning s 44(iv) of the Constitution to support widening the term "profit" to include political gain or enhanced community status. However, there is nothing in that paper that we can find which would provide a basis for us to do so. In summarising the law on s 44(iv) "office of profit under the Crown", Professor Twomey writes:
Second, it must be an 'office of profit'. This means that some form of profit or remuneration must attach to the office, regardless of whether or not that profit is transferred to the office-holder. Reimbursement of actual expenses does not amount to 'profit'. But a public servant who is on leave without pay or an office-holder who declines to accept a salary or allowances still holds an office of profit. The source of the profit does not matter. Even if it comes from fees paid by members of the public or other private sources, as long as the profit is attached to the office, that is sufficient.
Professor Twomey also cites a 1981 Senate Committee:
The meaning of 'profit' is … best explained negatively: It appears that an office is not one of profit if it has never had attached to it anything in the nature of a salary or fee, and no holder of the office could claim payment of such emolument under any circumstances. Payment of reasonable expenses incurred in carrying out an office does not make it one of profit. However, the fact that the holder of an office is not paid any emolument which otherwise attaches to the office does not affect his position as the holder of the office of profit. (Commonwealth, Senate Standing Committee on Constitutional and Legal Affairs, The Constitutional Qualifications of Members of Parliament, 1981, p. 29).
There is nothing to suggest in these extracts reproduced above, or elsewhere in the research paper, that "profit" extends to non-tangible benefits such as political gain or enhanced community status raised by the applicants.
Moreover, it is clear from s 44(iv) jurisprudence that an office of profit is still regarded as one of profit if the holder of the office declines to accept the profit despite being entitled to it, or if the holder of the office is on leave without pay. Sykes v Cleary [No 2] (1992) 176 CLR 77; [1992] HCA 60 concerned a Victorian State school teacher (employed under legislation in a public sector position) who was on leave without pay from that position at the time of his election to the House of Representatives, Mason CJ, Toohey and McHugh JJ stated at [20]:
The taking of leave without pay by a person who holds an office of profit under the Crown does not alter the character of the office which he or she holds. The person remains the holder of an office, notwithstanding that he or she is not in receipt of pay during the period of leave ((17) Erskine May, op cit, pp 214-215; Harvey's Case House of Commons Parliamentary Debates (Hansard), 15 February 1839, cols 446-466; ibid, 21 February 1839, cols 715-720).
We consider that the same principles apply in interpreting the meaning of "profit" in s 275(2) of the LGA.
While the applicants also refer to case law from India in support of their submission that "profit" encompasses non-tangible benefits, the decisions relied on are of no assistance to the applicants' case. The applicants referred us to four decisions of the Supreme Court of India which considered legislative provisions containing the term "office of profit under the Government": Gurugobinda Basu v Sankari Prasad Ghosal & Ors (1964) 4 SCR 311; Madhuker G. E. Pankakar v Jaswant Chobbildas Rajani & Ors (1976) 3 SCR 832; Satrucharla Chandrasekhar Raju v Vyricherla Pradeep Kumar Dev & Ors (1992) Supp 1 SCR 408; and Pradyut Bordoloi v Swapan Roy (2001) 2 SCC 19. The "decisive test" for whether an office of profit is "under the Government" was said to be "the test of appointment": Pradyut Bordoloi at [7]. Indeed, "whether a person holds an office under the Government, the first and foremost question to be asked is: whether the Government has power to appoint and remove the person on and from the office? If the answer is in the negative, no further enquiry is called for, the basic determinative test having failed": Pradyut Bordoloi at [14].
It can be inferred from these decisions that "profit" was determined to be monetary in nature. Satrucharla Chandrasekhar Raju describes at [12] that an office of profit involves two elements: an office; and that the office carries "some remunerations." The Court also cited at [7] Ravanna Subanna v G.S. Kaggeerappa (1954) AIR SC 653 as an authority that an office of profit must have "any pay, salary, emoluments…attached".
Three further Indian cases are relied on by the applicants regarding a "place of profit": Re Hippocampus Learning Centres Private Limited (National Company Law Tribunal, 23 October 2017, Murali and Mishra); A.R. Sudarsanam v Madras Purasawalkam Hindu Janopakara Saswatha Nidhi Ltd. & Ors (Madras High Court, 20 March 1982, Shanmukham J); and Jagran Prakashan Limited & Anr vs Union of India (High Court of Delhi, 17 November 2015, Endlaw J). These cases arise in the context of corporations, and legislative provisions requiring that officers or directors, or relatives of officers or directors, not "hold a place of profit in any other company" or not "hold any office or place of profit". These provisions and their context are too far removed from the current proceedings, to serve as "a guide", as the applicants contend, for any expansion to the meaning of "place of profit" or extension of "advantages" beyond that of monetary remuneration.
We are not persuaded that the notion of "profit" extends to encompass the non-tangible benefits asserted by the applicants. In the present context, we consider that the term "profit" in s 275(2) is restricted to financial gain (or an entitlement to financial gain) for performance of the SMTC director role.
Payments by way of reimbursement will not amount to "profit" for the purposes of s 275(2) of the LGA. While the applicants point to Professor Twomey's paper in support of their submission concerning a wider notion of "profit", Professor Twomey states that reimbursement does not amount to "profit" (referring to this being the practice in Australia in relation to s 44(iv) of the Constitution and in the United Kingdom in relation to equivalent provisions). For example, Professor Twomey opines at p. 19 of her paper that the exception to an office of profit "is where the allowance involves only the reimbursement of costs actually incurred (or a reasonable estimation of those costs) or wages actually lost, but not compensation for loss of remunerative time." A distinct concept from compensation for lost earnings, "loss of remunerative time" may (or will) constitute profit - this is regarded as being more than mere reimbursement for expenses or lost wages, because it would be possible that the remunerative time might not otherwise have been remunerated, resulting in a profit to the holder. (She refers at pp. 20-21 to various UK examples.)
As to the principles that apply in determining when an office or place of profit is held "under the council" for the purposes of s 275(2), we said earlier that the High Court's approach to construing s 44(iv) of the Constitution in Re Lambie may provide guidance in any such analysis. This becomes relevant only where there is an office or place of profit held by the councillor in question.
[19]
Our findings
There is no evidence before us that Council has paid, or pays, the councillors who are also SMTC directors any monetary amounts for performance of their Board member duties. Under the LGA, all councillors receive the same allowance (regardless of whether they also serve as directors of SMTC) and there is no evidence before us that Council has paid the two councillors in question for their work as SMTC directors through any other means. We can make no finding of any financial payment by Council to the two councillors in question for their work performed as SMTC directors, or that the two councillors have (or had) any entitlement to be paid by Council in this respect.
Further, there is no evidence of any payment by SMTC of any fees or allowances paid to directors, or any entitlement on the part of directors to any such payment, for their work as directors. We can make no finding of any payment of directors' fees or similar for work performed as directors.
The applicants point to a monetary payment made by SMTC to the second respondent, in support of their contention that the director role is one "of profit" within the meaning of s 275(2) of the LGA. We earlier made a finding that an amount of $190.91 (appearing on SMTC's financial statements on 20 January 2022) paid to the second respondent was a reimbursement for gifts purchased for SMTC employees on behalf of the company.
The applicants also point to monetary amounts paid to St Marys Band Club. While the "Expression of Interest - City Centre and Town Centre Management Corporations" form completed by the second respondent, date-stamped 2 August 2012, states: "As the CEO of St Marys Band Club …", no evidence as to the current ownership or management of the Band Club is before us. The applicants rely on the payments in their totality as demonstrative of benefit to the second respondent "even though she's the CEO and not the person who pockets the money" (Tcpt, p 72(50)-73(3)), and in particular point to three payments, dated 15 March 2022, 8 April 2022 and 1 May 2022, each of which was in the amount of $190.91 - the same amount for which the second respondent was reimbursed for gifts purchased for employees on behalf of SMTC. The applicants, acknowledging that there was no evidence as to what these payments were for, asked the Tribunal to infer that the Band Club was also potentially purchasing gifts for staff or some other inference as to profit: "we don't know. But it just shows that there is a relationship possibly along the same line" (Tcpt, p 73(6)-(8)).
On the evidence before us, we cannot make any finding that the second respondent derived financial gain from her SMTC Board member role by reason of the payments by SMTC to St Marys Band Club showing in the SMTC financial statements.
With regard to evidence comprising Facebook posts by the second respondent about the installation of shade sails at a local children's playground, which the applicants assert demonstrates that the first and second respondents used their position on the SMTC Board for political gain and exposure, we observe that the Facebook posts in evidence bear dates shortly prior to the first and second respondents being elected as councillors in December 2021. SMTC appears to have had some role in the installation of the shade sails, although what that role was is not clear. Given our view on the meaning of "profit" in s 275(2) of the LGA, whether or not the first or second respondent "used" their positions as director for political gain is not an issue to be determined in these proceedings. Accordingly, we will make no findings in this regard.
The applicants make similar claims about "political gain" by the second respondent, by reference to material in evidence about the removal of a stationary bus from land next to a park. Evidence includes Facebook posts by the second respondent in October and November 2021, and a written statement from Michelle Burgess about the removal of the bus (owned by her partner and parked on her son's property). Again, the events referred to took place prior to the election in December 2021. However, the first applicant at the hearing conceded that SMTC was not involved in the removal of the bus (Tcpt, p 48(1)). It is not clear from the applicants' submissions how the second respondent is said to have utilised her SMTC Board member position for "political gain" in relation to the bus issue. In any event, whether or not the second respondent benefitted politically from her Board member role is not an issue to be determined in these proceedings. Accordingly, we will make no findings in this regard.
Moreover, there is nothing contained in those statements which constitutes evidence (or refers to other evidence) of financial gain derived by the two councillors in question as SMTC directors, or any entitlement to financial reward for performance of their director roles.
[20]
Consideration
In Sullivan v Okeno, the ADT dealt with the distinction between "office" of profit and "place" of profit and stated at [23]:
… Australian case-law does not cast light on the difference between an 'office' of profit and a 'place' of profit. We assume that the term 'place' is simply being used to deal with those situations where the person under notice does not hold a declared office of the relevant tier of government but carries out functions in service of that tier of government.
By their reliance on Sullivan v Okeno, and as we understand their argument, the applicants assert that the two councillors as SMTC directors hold a "place of profit", and that they carry out functions in service of Council ("the relevant tier of government"). For a councillor to hold a "place of profit under the council", there must be evidence that the councillor in question receives (or is entitled to receive) actual (or potential) profit of the type contemplated by s 275(2) of the LGA. We have stated our view that the notion of "profit" in s 275(2) means financial gain, whether actual or potential, attached to the relevant "office" or "place", which in the present context, is the SMTC Board member position.
To the extent that the applicants argue that the fees or allowances payable to councillors under the LGA includes "notional" pay for directors, we reject this submission. There is nothing in the LGA, or in the evidence or submissions before us, to indicate that part of the allowance payable to a councillor includes notional pay for any company director role performed by the councillor.
Given that s 248(3) of the LGA mandates that the annual fee paid to councillors must be the same of each councillor, it is difficult to understand the contention that the annual fee includes some portion of "notional pay" for performance of director duties for a councillor who is also a director of SMTC. In any event, as we have already noted, s 251(1) of the LGA operates to preclude disqualification from holding civic office on the basis of fees paid to councillors under s 248.
The applicants do not point to evidence that SMTC directors, specifically the first or second respondent, received any other type of financial payment from Council for the performance of their director roles.
It is clear from our consideration of the SMTC Constitution that the role of SMTC director is an unpaid role; it does not attract the payment of any fees or other allowance from SMTC for performance of directorial duties. We also reject the proposition that the first and second respondents as SMTC directors have received financial payments from SMTC for the performance of their directorships, nor that they had (or have) an entitlement to such payment.
Directors are entitled to reimbursement of expenses, including "out of pocket" expenses (as determined by the Board) (cl. 9.16) and expenses incurred on behalf of the company (cll 6.2.3 and 1.3). Reimbursement of expenses does not amount to "profit". Insofar as the second respondent received reimbursement from SMTC for gifts purchased for company employees on behalf of the company, which we have found, this does not amount to receipt of "profit" for the purposes of s 275(2) of the LGA.
The company is also permitted, by the terms of the SMTC Constitution, to pay a director for goods or services supplied by that director to the company in the ordinary course of business; reasonable rent for premises leased by a director to the company, or any other reasonable amount of a similar character (see cls 1.3, 3.1, 6.2). In our view, payment for goods or services supplied in the ordinary course of business, for rental of premises owned by a director, or similar types of payment, do not amount to "profit" in the required sense.
Insofar as the applicants point to monetary amounts paid by SMTC to St Marys Band Club, there is no evidence before us that would demonstrate that the second respondent derived a profit in the required sense through or because of her Board membership. Accordingly, we will make no findings in this regard.
Insofar as the applicants submit that the first and second respondents profited from the outsourcing of goods and services by SMTC to their families or friends, or businesses of their families or friends, no evidence was led in this regard. We reject this submission. Again, there is no evidence before us which would demonstrate that either the first or second respondents derived a profit in the required sense through or because of their Board membership, and we will make no findings in this regard.
Turning to the Saleam and Funnell Statements in evidence, those witnesses purport to offer expert opinions on SMTC being a "place of profit under the council" and SMTC being an "entity" of Council and whether SMTC directors, including the first and second respondents, hold an office or place of profit. While we have had regard to the two statements, we are not usefully assisted by these opinions. We do not accept the second applicant or Mr Funnell as experts qualified to provide the opinions they assert. Their statements are not based on proven facts. Those statements do not assist the Tribunal in its fact-finding task in relation to issue (4), nor in determining the issue of whether the two councillors in question hold (or held) "an office or place of profit" for the purposes of ss 275(2) and 276(1).
We will briefly address a further submission made by the applicants. Relying on the ADT decision in Sullivan v Okeno, the applicants contend that the first and second respondents hold an office or place of profit under Council by reason that Council provides funding to STMC. In Sullivan v Okeno (the relevant facts are recounted above at [99]), the councillor was not found to be in an "office of profit under the council" and the application was dismissed. In our view, the decision of the ADT does not assist the applicants' case.
The ADT acknowledged that the council had a role in the hiring process and in the appointment of the coordinator. Nonetheless, the ADT concluded at [28] - [29]:
28. The evidence is clear that Ms Okeno was employed by the SBCCA on an independent contractor basis. The funding arrangement was made at arm's length between the Council and the SBCCA. It was subject to detailed accountability requirements. Ms Okeno was engaged by the SBCCA. The SBCCA bore ultimate responsibility for the adequacy of her performance. In respect of her role as Town Centre Coordinator, there is no evidence that she was subject to day to day direction or control by Council officers. She was required to perform her function in a manner compliant with the funding deed. The evidence is that she reported to executive members of the SBCCA as appropriate. She had a key role in developing the critical accountability document, the town business plan. We accept that she presented the draft, and related reports, to the Executive Committee, and it reported to Council.
29. Her circumstances are very similar to those affecting school chaplains in the Williams case. The only difference as we see it is that she was selected by a process that included a Council officer on the interview panel. We do not regard that as decisive in any way. The officer was only one of three, and we have no evidence as to how the officer performed his role.
The High court case of Williams v Commonwealth of Australia (2012) 248 CLR 156; [2012] HCA 23 dealt with whether school chaplains held an office under the Commonwealth for the purposes of s 116 of the Constitution. Gummow and Bell JJ stated at [109]:
The chaplains engaged by SUQ hold no office under the Commonwealth. The chaplain at the Darling Heights State Primary School is engaged by SUQ to provide services under the control and direction of the school principal. The chaplain does not enter into any contractual or other arrangement with the Commonwealth. That the Commonwealth is a source of funding to SUQ is insufficient to render a chaplain engaged by SUQ the holder of an office under the Commonwealth.
Similarly, in these proceedings, that Council is a source of funding to SMTC is insufficient to render a director of SMTC the holder of an office or place of profit under Council. The Service Level Agreement between SMTC and Council deals with the funding SMTC receives from Council, and includes clauses allowing Council to terminate funding to SMTC and for either party to terminate the agreement. The SMTC Constitution, the Service Level Agreement, or other evidence before us, do not support the proposition that Council directs or controls the company in its Board decision-making or its daily operations.
In conclusion, we do not consider that the first or second respondent held, at the time they were elected to Council in December 2021, an office or place of profit by reason of their SMTC directorships for the purposes of s 275(2) of the LGA. Nor do we consider that the second respondent holds an office or place of profit by reason of her continuing SMTC directorship. In our view, that disposes of the matter.
We note the general rule, set out in Gulic v Boral Transport Ltd [2016] NSWCA 269 at [7] that "a judge should determine all issues before him or her to assist the appeal process and obviate recourse to a new trial" (see also Massoud v Nationwide News Pty Ltd; Massoud v Fox Sports Australia Pty Ltd (2022) 109 NSWLR 468; [2022] NSWCA 150 at [35]; PPK Willoughby Pty Ltd v Baird [2021] NSWCA 312 at [15] and authorities cited there; Chief Commissioner of State Revenue v Adams Bidco Pty Ltd [2019] NSWCA 34 at [3]-[4]). The Court of Appeal in Gulic at [8] acknowledged that there may be good reasons for not dealing with non-decisive issues. As Leeming JA commented (Basten JA and Simpson AJA agreeing) in PPK Willoughby Pty Ltd v Baird [2021] NSWCA 312 at [15]:
… There are exceptions to the practice, and to be clear a litigant is not entitled to insist that a court determine non-dispositive issues and give reasons for such determination. The obligation of a court to give reasons is an obligation to explain the orders made, and that need not include resolving every issue presented by the parties. There may be good reason not to decide a non-dispositive point (for example, the point may not have been fully argued, or it might be thought undesirable to have necessarily obiter reasoning about a novel question of law). However, when a court chooses not to resolve major issues, on which both parties have joined and spent time and money, it is generally desirable to explain why that course is being taken.
We think that similar principles apply in NCAT proceedings and, here, that there are good reasons not to deal with non-dispositive issues. Whilst the meaning of "under the council" in s 275(2) was the subject of submissions by the parties, we consider it would be undesirable in circumstances where the application has been disposed of to provide reasons as to how the phrase should be interpreted and whether the tests as set out for s 44(iv) of the Constitution should be imported into s 275(2) of the LGA. We are particularly reluctant to do so in light of the absence of what we would consider to be necessary evidence as to, for example, the appointment of particularly the first, but also the second, respondent to the Board of SMTC. Without sufficient evidence to properly engage with a provision, the terms of which have been largely unexplored - in the Tribunal and elsewhere - and given our conclusion that no office or place of profit is (or was) held, we will not decide whether the holding of an office or place of profit (if there is one) is "under the council" for the purposes of s 275(2).
[21]
Miscellaneous issues raised by applicants
The applicants argued in their written submissions, without further elaboration in oral submissions, that the first respondent previously held an office of profit under Council as councillor and deputy mayor, and currently continues to hold an office of profit under Council as councillor and mayor, for the purposes of s 275 of the LGA. This argument appears to be distinct from any office of profit said to be held by the first respondent as director of SMTC.
Pursuant to ss 249(1)-(2) and (5) of the LGA, the mayor and deputy mayor of Council have a statutory entitlement to an annual fee, which (absent other statutory provision) would make those positions an "office of profit under the council" in circumstances where the mayor and deputy mayor are appointed by, or elected by, Council. In this regard, we note that in Re Lambie, the High Court accepted at [9] (and it was not in dispute between the parties) "that the offices of mayor and of councillor of a local government corporation established under the Local Government Act [1993 (Tas)] each answer the description of an "office of profit" within the meaning of s 44(iv) [of the Constitution]: each is a position of public character constituted under governmental authority to which duties and emoluments are attached".
Here, the LGA makes specific provision to ensure that mayors deputy mayors and ordinary councillors, who all receive fees under Pt 2, Div 5 of that Act, are not disqualified on this basis. Section 251(1) of the LGA precludes the disqualification of a person from holding civic office merely because of the payment of fees under s 249. As a result, the applicants' argument must fail.
On a separate point, the applicants assert that there was a breach of the SMTC Constitution by the presence of more than one councillor on the Board at the same time. Any non-compliance with the Constitution by the company has no bearing on whether the councillors in question are (or were) employees of Council, or hold (or held) an office or place of profit under Council for the purposes of ss 275(2) and 276(1)of the LGA, and therefore whether the grounds in s 329(2)(a) and/or s 329(2)(b) are made out in the present case.
The applicants raise additional issues in their submissions that are not relevant to the issues for determination in these proceedings, and accordingly we have not addressed those issues, including that:
1. SMTC operates outside of the Minister's approval;
2. The then-Minister may have breached "constitutional and State-law duties" in sanctioning a councillor to join the SMTC Board;
3. Council misled the Minister into providing approval for the formation of SMTC in 2013, which amounts to gaining entry to a public register unlawfully;
4. The political affiliations of the first and second respondents may have represented a conflict of interest;
5. Payments were allegedly made by SMTC to personal businesses of other directors of the SMTC Board;
6. SMTC does not spend its money in the public interest of the local area.
[22]
Conclusion
Having considered the submissions of the parties and the evidence before us, we are not satisfied that, by reason of their Board membership of SMTC and in the circumstances of this matter, the first or second respondent were (or are) employees of Council or held (or hold) an office or place of profit under Council within the meaning of s 275(2) of the LGA. Consequently, the two councillors, at the time of their elections as councillors, were not disqualified from being elected to Council pursuant to s 276(1) of the LGA. The applicants have not proved (to the civil standard of balance of probabilities) that there was an irregularity in the way that the first or second respondent were elected or appointed to civic office pursuant to s 329(2)(a) of the LGA.
Further, the second respondent is not disqualified from holding civic office pursuant to s 329(2)(b) of the LGA. We are not satisfied that the second respondent is an employee of Council or holds an office or place of profit under Council by reason of her continued directorship of SMTC. The applicants have not proved (to the civil standard of balance of probabilities) that she is disqualified from holding civic office pursuant to s 329(2)(b) of the LGA because she is an employee of Council or holds an office or place of profit under Council.
We dismiss the application.
[23]
Orders
Accordingly, we make the following orders:
1. Time for the making of the application is extended until 22 June 2022.
2. The application is dismissed.
I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.
Registrar
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 22 June 2023
Parties
Applicant/Plaintiff:
Orrock
Respondent/Defendant:
Hitchen
Legislation Cited (13)
Civil and Administrative Rules 2014(NSW)
Greater Cities Commission Act 2022(NSW)
Western City and Aerotropolis Authority Act 2018(NSW)
43; [2017] HCA 52
Satrucharla Chandrasekhar Raju v Vyricherla Pradeep Kumar Dev & Ors (1992) Supp 1 SCR 408
Sullivan v Okeno [2013] NSWADT 12
Sykes v Cleary [No 2] (1992) 176 CLR 77; [1992] HCA 60
Williams v Commonwealth of Australia (2012) 248 CLR 156; [2012] HCA 23
Texts Cited: A Twomey, "Office of profit under the Crown" (14 June 2018) Parliamentary Research Paper series, 2017- 2018
Category: Principal judgment
Parties: Lili Orrock (First applicant)
James Saleam (Second applicant)
Tricia Hitchen (First respondent)
Marlene Shipley (Second respondent)
Penrith City Council (Third respondent)
Representation: Counsel:
P Boncardo (First and Second respondents)