Will each Housing Association be Acting Contrary to the Interests of the Members as a Whole by Entering into and Perfecting the Proposed Subleases?
317 The submissions did not distinguish between the position of the Housing Associations incorporated under the Associations Act (NT) or under the CATSI Act, even though their respective Constitutions and Rule Books are a little different.
318 Their Constitutions and Rule Books, including their purposes and their membership are addressed at some length above.
319 In my view, there are two steps required to address the primary proposition:
(1) determining what is authorised by the Constitutions or Rule Books of the Housing Associations; and
(2) determining whether the proposed conduct of perfecting the grant of the proposed subleases is, in the circumstances, within the scope of that which is authorised or required.
Another way of describing those steps might be to ask whether the grant of the proposed subleases is beyond the express or implied power of the Housing Associations under their Constitutions and Rule Books, whatever organ of the Housing Associations might have made the decision to do so, and secondly whether their grant, although within the express or implied power of the Housing Association under their Constitutions and Rule Books, was not within the powers of the Management Committees or the directors to undertake. In Rolled Steel Products (Holdings) Ltd v British Steel Corporation [1986] 1 Ch 246, Browne-Wilkinson CJ at 302-5 described the distinction as between ultra vires in the "narrow sense" and ultra vires in the "wider sense". His Lordship at 303 noted that Cotman v Brougham [1918] AC 514 recognised that "the objects of a company and the powers conferred on a company to carry out those objects are two different things" (at 303) and remarked at 304:
The critical distinction is, therefore, between acts done in excess of the capacity of the company on the one hand and acts done in excess or abuse of the powers of the company on the other.
Mason CJ in Northside Developments Pty Ltd v Registrar-General (1990) 170 CLR 146 at 162-3 referred with apparent approval to that distinction.
320 In the present circumstances, the answer to the first question may answer the second. That is because the Residents' position was pitched at two levels. The first was that the Housing Associations could not agree to enter into the proposed subleases simply because they effectively alienated them from any right to control what happens on the town camps for at least 40 years, irrespective of the benefits that might ensue to their members. The second was that, even if they could do so, by the particular terms of the proposed subleases, the assured benefits to their members by each proposed sublease were not such that the proposed subleases could reasonably be said to be in the interests of the members of each Housing Association as a whole.
321 It is important to note that this is not a case where the good faith of those persons who attended the meetings of the Housing Associations in late July 2007, and who resolved that the particular Housing Association should sign the proposed subleases, or of those who signed the proposed subleases, is in issue. Clearly, it is not. There was no suggestion by the Residents to the contrary. It is appropriate to accept, as I do, that those who supported those resolutions and those who then executed the proposed subleases did so in good faith.
322 In my view, it is also not a case where the commercial judgment of those persons, on a pragmatic basis, can be subject to question. It is self-evident that, once it is assumed that the only two realistic outcomes are that the proposed subleases be signed alienating control of the town camp areas for 40 years (but subject to the consultative roles of the Housing Associations and possibly more significant roles for them, as discussed above) or alternatively that the town camp areas be compulsorily acquired by the Minister, it was an appropriate commercial judgment on a pragmatic basis to choose the option of the lesser evil of granting the proposed subleases and ultimately retaining the interest in the town camps through the Special Purposes Leases or Crown Leases, unencumbered by the proposed subleases. Although, as the Residents submitted, there may in fact have been other possible outcomes if the Housing Associations did not agree to grant the proposed subleases, in the light of the communications from the Minister in July 2009, I consider that those who supported the grant of the proposed subleases, and those who signed them for the Housing Associations, cannot be reasonably criticised for assessing the available options as they did. The Council itself reached the same view about the options.
323 In my view, the first critical question is, therefore, whether it was within the power of each of the Housing Associations to agree to grant the proposed subleases, having regard to the extent to which an interest in the land comprising the town camps was retained. That does not involve any assessment of the value of the monetary consideration for the grant of the proposed subleases, because the proposition is that, whatever that consideration, the decision to grant the proposed subleases is beyond the power of the Housing Associations.
324 To answer that question, it is, I think, a distraction to look to the alternative of compulsory acquisition. The fact of that being, or being seen to be, the only alternative should not inform what each Housing Association is empowered to do. It is relevant to the quality of the commercial judgment of each of the Housing Associations by those acting on its behalf, assuming they could enter into the proposed subleases. I note on that issue (to be addressed below) that as a matter of law, there was no obligation legally enforceable by a particular Housing Association that a particular (or any) part of the $100 million referred to in clause 6(a) of the proposed subleases should be spent on the town camp of the particular Housing Association. However, as a matter of reasonable and realistic commercial judgment, a significant part of that sum would be spent on each of the town camps of the Housing Associations. I discuss that issue later in these reasons.
325 However, if the Constitutions and Rule Books of the Housing Associations do not permit them to grant the proposed subleases to the Executive Director for 40 years, on their terms, then the commercial benefits of doing so will not create the power to do so. And if they do permit the Housing Associations to grant the proposed subleases, then the assessment of the quality of the commercial benefits for doing so (whether legally enforceable or merely or soundly based expectation) will not limit or confine that power. In that case, it will be necessary to separately consider whether the proposed conduct of perfecting the grant of the proposed subleases is, in fact, within the scope of that which is authorised; the focus turns more to the second of the two questions I have identified in [319] above.
326 The Residents say that each Housing Association was established for the purpose of becoming the lessee of its particular Special Purposes Lease or Crown Lease for the purpose of Aboriginal communal living.
327 That is really an oversimplification of their purposes.
328 In the case of the Housing Associations incorporated under the Associations Act (NT), their objects set out in clause 2.2 of the Constitutions and Item 1.3 of the Schedule to the Constitutions are firstly "to relieve the poverty, sickness, destitution, distress, suffering, misfortune or helplessness of Aboriginal people in Central Australia" and secondly, having regard to the circumstances of those people, to advance those objects by means which include the six enumerated means in Item 1.3(b) of the Schedule. They are set out in [198] above. Clause 3.1 authorises the doing of "all such lawful things as seem to the Association to be necessary or desirable to advance the objects and purposes of the Association" in order to achieve its objectives. That power is limited as specified in Item 1.5 of the Schedule. No submission was made by any party that Item 1.5 had any significance to the present issue.
329 The definitions in clause 1.1 include "Town Camp" to mean any land leased by the Association, including the land described in Item 1.2 of the Schedule: that is the land comprising their respective town camps [my emphasis].
330 Membership under clause 4 is confined to eligible persons admitted to membership. Item 1.7 says that the membership comprises adult Aboriginal persons who apply for, and are admitted to, membership and who are residents of the particular specified town camps.
331 The objects of those Housing Associations do not expressly state, or confine, their purposes to acquiring the Special Purposes Lease or the Crown Lease of the particular town camp and managing that town camp. However, that state of affairs underlies the existence of each of those Housing Associations. That is apparent from the definition of "Town Camp" and the fact of the relevant Special Purposes Lease or Crown Lease. It is apparent that the Constitutions of the Housing Associations incorporated under the Associations Act (NT) are recent. Item 1.6 in each instance gives a commencement date of 2006 or thereabouts. Clause 3.6 says that the Constitutions replace all previous constitutions from that date. The various Special Purposes Leases and Crown Leases were granted between 1976 and 1981 and in 1983. Consequently, I am satisfied that, under their Constitutions, the holding of the head lease and the provision of housing and other services to the members at the town camp covered by the particular head lease is an important role of the Housing Associations.
332 On that basis, however, it does not follow that the Housing Associations must personally procure and provide the housing and services. Their Constitutions do not prevent them from subcontracting the provision of services to their members to fulfil its objects. The expressed means of fulfilling their objects are not exclusive. Clause 2.2 and Item 1.3(b) says the means of doing so include the specified means. The sub-item most applicable does not confine the means by which obtaining land housing and community facilities are to be achieved for their members. In particular, it does not require the housing and community facilities be provided directly by the Housing Associations. And clause 3.1 is also not restrictive in any relevant way. In fact, the Council has apparently been given the role of managing the various tenancy agreements by the Housing Associations. It is obvious that the building of new dwellings and the maintenance and repair of existing dwellings may be contracted out. Many other examples may be given. It is clear enough that (for example), a Housing Association, in managing the housing stock or maintaining it, could contract with others to provide the services necessary to do so. Once that step is taken, there is no apparent reason why that contract to do so should be confined to an ad hoc arrangement, and should not include a contract with a third party to do so for a fixed period of time. That is, it is open to a Housing Association, to decide how it fulfils its objects. It is the objective of fulfilling those purposes and aims which is the limiting factor in what it may do, or arrange for others to do.
333 The effect of the proposed subleases is summarised above. They will remove from the Housing Associations the right to control the nature of any housing improvements or new housing on the town camps for its term. They give that right to the Executive Director and to the Housing Authority. The same is true of any infrastructure improvement or new infrastructure. They remove the right of the Housing Associations to deal with existing tenants or to decide upon and deal with any new tenants for the same lengthy period, although the pool of eligible persons must be its members. They do provide the opportunity for consultation, and in some respects the opportunity for a more active role for the Housing Associations in respect of vacant land and community land and, after three years, as a Housing Authority, but there is no assurance that that more active role will be granted by the Executive Director. In substance, in my view, they operate to cede from the Housing Associations to the Executive Director or the Housing Authority the power to address those things in relation to the particular town camp.
334 Clearly, the proposed subleases are seen by the Housing Associations as an opportunity to meet their primary objectives. They will result in great improvements in the housing and other community facilities available to their members, and so will relieve the distress, suffering and misfortune of their members. The "price" is the grant under the proposed subleases.
335 An analysis of the terms of the proposed subleases however, in my view, reveals that the proposed subleases, if granted, may effectively exclude the Housing Associations from other than the consultative roles referred to above. For the period of 40 years, they will not have a direct role or responsibility of providing Aboriginal community living or ancillary activities. The area of the leased land under the head leases is co-terminous with the grant under the proposed subleases. During the period of the proposed subleases, the Housing Associations will not be entitled to take steps to provide housing or infrastructure in the town camps. That role and responsibility is ceded by the proposed subleases. The covenant of quiet enjoyment in clause 22.1 precludes the Housing Associations from doing anything in the areas of the town camps which may disturb or interrupt the Executive Director or any entity performing functions under the proposed subleases from performing those functions. Their opportunities to perform those functions are dependent upon the preparedness of the Executive Director to accommodate them; they have no legal right to do so. They may do so only through the direct and indirect (Forum) consultations provided for under the proposed subleases or with the consent of the Executive Director, so as not to contravene the covenant of quiet enjoyment.
336 Consequently, if the sole or principal objective of the Housing Associations was to hold the head lease and to provide and manage the housing and tenancies for their members, and supporting facilities on their particular town camps, I would be inclined to conclude that the grant of the proposed subleases was so inconsistent with that objective as to be beyond power.
337 It is necessary to consider whether that is the sole or principal objective of those Housing Associations or whether their objectives are different or more extensive in a relevant way.
338 I have indicated that I accept that the "context" of the Housing Associations is that each was formed to hold the relevant Special Purposes Lease or Crown Lease from the Northern Territory. Although not grants of freehold title, their terms show that they are the next best thing: permanent and, in a practical sense, unconstrained title to the town camps land. Their terms also show that the obligations which the Housing Associations thereby assumed are consistent with the objects of those Associations. The leased land was to be used for Aboriginal community living and ancillary activities.
339 The Residents contend that the proposed subleases, for such a lengthy period, removes the sub-stratum for the creation and continuing operation of the Housing Associations as their objects contemplate. However, it is necessary to pay proper regard to the current Constitutions and Rule Books of those Housing Associations.
340 In HA Stephenson & Son Ltd (In Liquidation) v Gillanders Arbuthnot & Co (1931) 45 CLR 476 Dixon J at 487 said that the question of corporate capacity
must be ascertained according to the true meaning of the memorandum interpreted by a fair reading of the whole instrument.
341 In my judgment, a fair reading of the current Constitutions of those Housing Associations does not reveal such a focused and restricted objective or principal objective as the Residents contend for.
342 Although the name is "town camp specific", the objectives now contemplate each of those Housing Associations serving their objectives beyond that town camp. The definition of "Town Camp" extends to any land owned or leased by an association, and includes the particular town camp. Item 1.3(b) includes serving the objectives in Item 1.3(a) and generally by "obtaining land" for its members. There is no provision now which specifies the only, or primary, objective to operate the particular town camp. Item 1.2, under the heading "Town Camp governed by the Association (clause 1.1)" has the name of the Housing Association itself - I take it to be designating the town camp itself - but clause 1.1 is a reference to the definitions in the Constitution, and the only relevant definition is that of "Town Camp". Separately, clause 2.2 has the heading "Objects and Purposes" and refers to Item 1.3. The heading to Item 1.2 in that light cannot be the defining purpose or object of those Housing Associations. There is now no expression of the object or the principal object of the Housing Associations being to control the provision and maintenance of housing and other facilities on the land held under their head leases. The objects are more expansive.
343 Item 1.3(a) of the Objects and Purposes is general in its expression. It is not confined to particular Aboriginal people in Central Australia. Item 1.3(b), as pointed out above, does not confine the means by which those objects may be fulfilled. It says that those objects shall be advanced by means which include the specified means. Thus, for example, providing housing for its members is a means, but not the only means, by which its objects may be advanced. It may be consistent with its objects if housing were to be provided to other Aboriginal persons who are not, or are not eligible to be, members. That housing, it contemplates, may be provided on land obtained by a Housing Association which is not the land the subject of its particular head lease. Similarly, the provision of programs which advance the well being of its members is clearly within the means of advancing its objects, but the provision of programs which advance the well being of other Aboriginal persons may also be advanced consistent with its objects. Ultimately, the control of what they do is within the control of the members, who must reside on its particular town camp to be eligible to be members, or the Management Committee elected from the members. But that does not itself limit the objects of the Housing Associations themselves or how they may be advanced. The powers in clause 3.1 are not restricted in any relevant way. The limitations on those powers in clause 3.2 and Item 1.5 also do not indicate that, in any way relevant to the present issue, the objects of those Housing Associations are confined: they may not engage in trade or commerce; and they may not grant security over assets so as to expose those assets to being lost by default under the terms of the security instrument.
344 In addition, even if those Housing Associations were to cede control of their particular town camps (as I have found they do under the proposed subleases) the advancement of their objects by the means specified in Item 1.3(b)(i) and (ii) even in respect of their members will not be entirely redundant: other community facilities for members need not be on the particular town camp; or the programs which advance (for example) the health or education of members need not be provided on the particular town camp. And the means specified in Item 1.3(b)(iii), (iv), (v) and (vi) would also be able to be carried out.
345 In my judgment, for those reasons, on the proper construction of the Constitutions of those Housing Associations, I consider that the entry into the proposed subleases is within the objects and purposes of those Associations, even though it effectively cedes control of the particular town camps for 40 years. It is a way of obtaining significant housing and facilities and benefits to its members in a manner which, upon the proper reading of their objects, is not alien to them.
346 It is not necessary to determine the alternative argument put on behalf of the Minister that, assuming the objects of those Associations are confined to obtaining housing and other facilities on the particular town camp of each Housing Association, the grant of the proposed subleases is not inconsistent with those objects because their Constitutions do not direct that the control of the provision of housing and other facilities must lie with the Housing Associations, so the provision of housing and other facilities - to a much greater degree than would otherwise have been the case - through the grant of the proposed subleases in any event is within their power.
347 The objects of the Housing Associations constituted under the CATSI Act are a little different. They are relevantly set out in [214] to [215] above. They also encompass the provision of housing and facilities for Aboriginal people who are not members: see clause (b) of the "Objectives" clause. The Karnte Aboriginal Corporation's "Objectives" are a little more confined in one sense but they are otherwise quite general.
348 Accepting that it is an underlying, but not express, foundation for those Housing Associations that each has an interest in its particular town camp, I reach the same conclusion as in the case of the Housing Associations incorporated under the Associations Act (NT), that it was within their objects to agree to enter into the proposed subleases. The significance of the terms of the Constitutions or Rule Books is, perhaps, evident from their earlier Rule Books as set out at [203] above in which there is more of a focus on direct control of the town camp and direct management of its houses by the use of the active verbs: to manage the housing stock and tenancy; to look after our Town Camp now and for future generations; to keep our housing in good repair; to develop and improve our housing.
349 In my judgment, in the case of those Housing Associations also under their current Rule Books, there was power to agree to the proposed subleases. In my judgment, on a fair reading of the present Constitutions and Rule Books of the Housing Associations, it is not so integral to their purposes that they directly control the provision of housing and other facilities on their respective town camps that their agreement to enter into the proposed subleases is simply beyond their power as incorporated associations.
350 Simply to show that it has not been overlooked, there is one ancillary matter I should mention. The common law "narrow" ultra vires rule which restricts an incorporated entity to doing only what its constitution authorises and to exercising only those powers which are expressly or implicitly conferred upon it has long been qualified in the case of corporations: see now s 125, Corporations Act 2001 (Cth) and see the discussion in Gower, Modern Company Law,(4th ed 1979, Stevens) at 161-74. Gower says at 171 that the rule was designed to protect the incorporated entity "against itself (or rather against its organs) so as to safeguard its members and creditors".
351 That rule continued to apply to other incorporated associations. At least in respect of partially executed contracts, the absence of power may not have precluded their enforcement: In Re K.L. Tractors Ltd (1961) 106 CLR 318. That is not this case. There may also be circumstances where, notwithstanding that the corporation has acted ultra vires, relief may be available: see Ford's Principles of Corporations Law (Butterworths Looseleaf Service) at [12,060]. However, the rule was in any event ameliorated by provisions similar to that in the Corporations Act 2001 (Cth) in most, if not all, of the States' Associations Incorporation Acts: see s 17 Associations Incorporation Act 1981 (Vic); s 26 Associations Incorporation Act 1981 (Qld); s 27 Associations Incorporation Act 1985 (SA). There was no such provision in the Associations Incorporation Ordinance 1963 (NT) or in the Associations Incorporation Act 1978 (NT). Those enactments were repealed and replaced by the Associations Act (NT), enacted in 2003. There is also no such provision in the Associations Act (NT). Part 6 of the Associations Act (NT) deals with the transfer of property of an incorporated non-trading association. Each of the Housing Associations is not permitted to trade: Item 1.5 of the Schedule to their Constitutions. Section 54 Associations Act (NT) permits the transfer of real property by one association only to another body formed for promoting objects similar to its own or charitable objects, or to a council for the area in which the property is situated. That section also imposes procedural requirements. It is not necessary to refer to them. It is not suggested the grant of the proposed subleases is authorised by s 54 independently of the Constitutions of the Housing Associations. Nor, on the other hand, is it suggested that the grant of the proposed subleases is unlawful so as to prevent the Housing Associations from agreeing to enter into them. Section 54 is expressly subject to s 110. Section 110(2) restricts a Housing Association from disposing of, or charging, prescribed property, which appears to include a lease under the SPL Act or the CL Act (see the definition of prescribed property in s 4), except with the consent of the Minister administering that Act (and, by the NTNER Act, that would include the Minister) without the Minister's consent. It is also not necessary to further discuss those provisions as they were not relied upon, or referred to, either by the Residents or by any of the respondents, as informing the proper construction of the Constitutions of the Housing Associations either to grant or not to grant the proposed subleases. There is no doubt good reason for that.
352 The CATSI Act does have a provision similar to that in s 125 of the Corporations Act 2001 (Cth). Section 96.1 relevantly provides:
(1) An Aboriginal and Torres Strait Islander corporation has the legal capacity and powers of an individual within and outside Australia.
(2) An Aboriginal and Torres Strait Islander corporation also has all the powers of a body corporate, including the power to, if the corporation's constitution permits, distribute any of the corporation's property among the members, in kind or otherwise.
(3) An Aboriginal and Torres Strait Islander corporation's legal capacity to do something is not affected by the fact that the corporation's interests are not, or would not be, served by doing it.
353 The Minister did not rely upon s 96.1 of the CATSI Act as providing the foundation for the Housing Associations incorporated under it to be enabled to enter into the proposed subleases. That may be simply because there are only three of them, and the condition precedent to the activation of each proposed sublease in clause 2.1(a)(i) referred to above would not be satisfied. It may also be because, notwithstanding its apparent effect, there is some authority to suggest its role is confined to validating corporate dealings with outsiders despite deficiencies in corporate capacity, but not to abrogating restrictions on the exercise of shareholders' or directors' powers: see eg per McPherson J (with whom Lee and McKenzie JJ agreed) in ANZ Executors & Trustee Co Ltd v Qintex Australia Ltd (receiver and managers appointed) (1990) 8 ACLC 980 at 988. There may be other reasons. It may be that such a provision does not inhibit a member of such an association from asserting that the common understanding of the members and their general intention was for the association to control the use and development of those town camps, and seeking to enforce that position. That sort of contention has been used to support the winding up of a corporation or the just and equitable ground: see Ford's Principles of Corporations Law (13th ed, 2007, Butterworths) at [12.130] p 744 and the cases there cited. As the issue was not raised, it is not necessary to go beyond those comments.
354 Consequently, it is necessary to consider the second of the questions I have identified above. That is, it is necessary to determine whether the particular terms of the proposed subleases mean that the agreement to enter into them is contrary to the interests of the members as a whole.
355 The Residents as members put their contention quite brutally: for $1, the Housing Associations have given up all rights, functions and representative activities in relation to their town camps so they cannot discharge their responsibilities to their members under Item 1.3 of their Constitutions and under their Rule Books. There is "an equation of $1 for no rights for at least 40 years".
356 In support of the submission, they draw an analogy with the accountability of a corporation to the "interests of its members as a whole".
357 Reference was made to Gambotto v WCP Limited (1995) 182 CLR 432 (Gambotto) as supporting the proposition that a company can act bona fide and fairly, and for the benefit of the company as a whole, but cannot do so if that overrides the rights of existing shareholders. I do not think that decision takes the Residents' position that far. In that case, a small minority shareholder challenged the validity of a proposed meeting to consider amending the company's constitution to enable a member entitled to 90% of the issued shares to compulsorily acquire the balance. The Court therefore had to address the limits of the power to alter the constitution of the company to enable the appropriation of the shares of a minority. Clearly, it is a very different type of case. The proposed resolution was not shown to be for a proper purpose, nor was it shown to be one which did not operate oppressively in relation to minority shareholders: see per Mason CJ, Brennan, Deane and Dawson JJ at 445 and 448. Their Honours pointed out also at 445 that the position may have been different if the right to expropriation had already existed in the company's constitution.
358 Senior counsel for the Residents made the submission that the "interests of the members as a whole" was somehow different from the interests of the Housing Associations themselves. In cross-examination of a solicitor from Gilbert + Tobin (the solicitors for the Council) he elicited that their advice to the Council, and to a working group including certain Housing Association representatives, did not separately address the interests of the members of the Housing Associations as distinct from those of the Housing Associations themselves.
359 The significance of the distinction, if legally there is one, was not made clear. It is argued that the Housing Associations could not alienate their interests in the town camps under the respective Special Purposes Leases or Crown Leases either absolutely or for 40 years. That was said to flow from the proper construction and understanding of the objects and purposes of the Housing Associations. I have already addressed that contention. No reason was put why those objects and purposes should impose restrictions on the powers of the Housing Associations which preclude their capacity to agree to the proposed subleases as Housing Associations, and different restrictions on their powers because of the interests of their members as a whole. The plurality judgment in Gambotto 182 CLR pointed out at 444 that the observations of Lindley MR in Allen v Gold Reefs of West Africa Ltd [1900] 1 Ch 656 at 671 that the power of the majority to alter the articles of association of a company must be exercised in a lawful manner and "bona fide for the benefit of the company as a whole" was inappropriate where the proposed resolution involved a conflict of interests and advantages. The plurality judgment said at 444:
It seems to us that, in such a case not involving an actual or effective expropriation of shares or of valuable proprietary rights attaching to shares, an alteration of the articles by special resolution regularly passed will be valid unless it is ultra vires, beyond any purpose contemplated by the articles or oppressive as that expression is understood in the law relating to corporations.
360 Their Honours then said that, where the articles are proposed to be altered to allow expropriation by the majority of shares of the minority, a more stringent test of validity should be imposed: see at 445-6. There is no submission in this matter that the Housing Associations' entry into the proposed subleases would in any way affect the rights of their members inter se. Clearly it would not do so.
361 If their rights as existing tenants were relevant, the proposed subleases would again not affect those rights as tenants differentially. The interest of the Residents as tenants of the Housing Associations is, as I have found, preserved by the proposed subleases. The benefit of the rent payments, and the repair and maintenance obligations of the landlord, pass to the Executive Director, but the right of occupancy granted under the tenancy agreements is maintained.
362 If their rights as members to be eligible in the future for a tenancy of available accommodation in a town camp were separately considered, again those rights as members would not be altered inter se, although the proposed subleases (clause 10) would impose a different decision-making structure for granting new tenancy agreements. The membership eligibility rules will be unchanged, and the Housing Associations will continue to determine in accordance with their Constitutions or Rule Books who becomes members of them. The proposed subleases do not extend the eligibility of persons to be granted a new tenancy agreement in respect of a dwelling in a particular town camp beyond those presently eligible for such an agreement.
363 Consistent with the expression in Gambotto, in Peters' American Delicacy Co Ltd v Heath (1939) 61 CLR 457, Dixon J when upholding the validity of an alteration of the articles which discriminated against holders of partly-paid shares in favour of the majority shareholders said at 513 that the resolution
involved no oppression, no appropriation of an unjust or reprehensible nature and did not imply any purpose outside the scope of the power.
364 To the contrary, in New South Wales Rugby League v Wayde (1985) 1 NSWLR 86 it was expressly decided at 96 by the Court (Street CJ, Kirby P and Hope JA) that the phrase "the interests of the members as a whole" in s 320 of the Companies (New South Wales) Code is synonymous with "the benefit of the company as a whole" because the only legitimate interests of the members would be their interests as corporators. An appeal to the High Court was dismissed: Wayde v New South Wales Rugby League Inc (1985) 180 CLR 459. No comment was made upon the view of the Court of Appeal on that topic, although Brennan J in agreeing with the result of the plurality judgment at 471 made some additional comments upon it. Besanko J in Millar v Houghton Table Tennis & Sports Club Inc [2003] SASC 1 at [135] appears to have adopted the same view.
365 Szencorp Pty Ltd v Clean Energy Council Limited (2009) 69 ACSR 365, was also an "oppression" case brought in reliance upon the current statutory equivalent, s 232 of the Corporations Act 2001 (Cth), in relation to the conduct of the affairs of an unlisted not-for-profit public company limited by guarantee. It was an entity formed to effect a merger of two existing sustainable energy industry associations. Goldberg J at [59] remarked in the course of his reasons:
The "contrary to the interests" provision now contained in subpar (d) of s 232 has a separate and distinct area of operation from the "oppression" provisions in subpar (e) of s 232. The manner in which a company is being administered and in which its affairs are conducted may fall within the category of conduct contrary to the interests of the company's members as a whole although it may not be described as oppressive, unfairly prejudicial to, or unfairly discriminatory against members of the company: Turnbull v National Roads & Motorists' Association Limited (2004) 50 ACSR 44 at 52, 57; Campbell v BackOffice Investments Pty Ltd (2008) 66 ACSR 359 at 400. (See also Re Spargos Mining NL (1990) 3 ACSR 1 at 42; Shelton v NRMA Limited (2005) 51 ACSR 278.) An example of such conduct may be found where a company is formed for the purpose of undertaking particular activities but the directors and management disregard those activities and direct the company into different commercial areas.
366 The Residents correctly point out that, as his Honour said, the assessment of what is in the interests of the members as a whole of the Housing Associations must be assessed by reference to their objects and purposes. That is uncontentious, so long as their interests as a whole are in broad terms synonymous with the interests of the Housing Associations. Goldberg J did not suggest to the contrary. My analysis of their Constitutions and Rule Books is intended to reflect that approach.
367 Senior counsel for the Residents also referred to Pettit v South Australian Harness Racing Club Inc (2006) 95 SASR 543, a case concerning applications for membership of the association. Reliance was place on certain remarks of White J in [26] as follows:
1. The constitution of an association binds the association and all of its members. This means that the Committee was bound to apply the relevant provisions of the Club's constitution in its consideration of the membership applications.
2. The requirement that an exercise of an association's powers be for the benefit of the members as a whole is to exclude their exercise for "ulterior special and particular advantages", that is, it negatives "purposes foreign to the association's operations, affairs and organizations".
…
4. Conduct by a committee of an association will be contrary to the interests of the members as a whole if no committee, acting reasonably, could have engaged in that conduct. [The supporting references were Wayde 180 CLR and Peters' 61 CLR].
5. Conduct may be contrary to the interests of the members as a whole even though a committee does not act in bad faith. In Wayde, Brennan J said:
[I]f the directors exercise a power - albeit in good faith and for a purpose within the power - so as to impose a disadvantage, disability or burden on a member that, according to ordinary standards of reasonableness and fair dealing is unfair, the court may intervene …
…
7. However, proof of invalidity or non-compliance with an association's rules may indicate that a decision is contrary to the interests of the members as a whole. This is because of the importance which the law attaches to adherence to the provisions of an association's constitution. … [citations omitted].
368 Again, there is no suggestion in that case that the interests of the members as a whole is significantly different from the interests of the Association itself.
369 The Residents' submissions then assert that:
The Corporations Law cases set out above involve "for profit" companies and conduct which is usually oppressive or unfair to some of the members. The principle is necessarily a stronger one where it is applied to a not-for-profit association established for the purpose of providing benefits and services to its members as its raison d'etre.
And they immediately continue:
In any event, both the Corporations cases and the Associations cases demonstrate that conduct which expropriates the rights of existing members and which departs from the objects of the relevant constitution and rules is not in the interests of members as a whole, albeit that it is bona fide.
370 Those propositions require some comment. There is, in my view, some mixing of concepts in them. In the first place, as the High Court pointed out in Gambotto 182 CLR, these particular considerations arise where the proposed conduct of the entity expropriates or is intended to facilitate the expropriation of the interests of particular members at the expense of others. That is not this case. The rights of the members of the Housing Associations inter se are unchanged. Secondly, the measure in fact of what is in the interests of the entity itself and its members as a whole will necessarily depend upon the constitution of the entity: a company formed "for profit" is likely to have a constitution which permits conduct which may not be permitted in the case of a not-for-profit association; in fact, each of the Constitutions and Rule Books of the Housing Associations prohibits them from trading for profit. But it does not follow that, somehow, the measure of what is "oppressive or unfair … is necessarily" applied more rigorously in the case of not-for-profit associations. The measure will still be the objects and purposes of the association. Thirdly, the second proposition set out in the preceding paragraph is really axiomatic. If a particular course of action is not authorised by the constitution, it may not be undertaken.
371 On the second issue, it is necessary therefore that the Residents show that the agreement to enter into the proposed subleases is contrary to the interests of the members as a whole, or effectively to the interests of the Housing Associations. Inevitably, on such issues, there are matters of judgment. Different members will make different commercial judgments about what is, or is not, in the interests of the Housing Associations.
372 The Residents' submission is that their rights as members of the Housing Associations to have the Housing Associations "separately conduct its activities at the town camps for the benefit of its existing members" have been sold for 40 years for $1, without any other return provided as of right for the benefit of the members. I do not accept that contention. It mis-describes their entitlements under the proposed subleases. The general effect of the proposed subleases is set out above. If there is power under the Constitutions or Rule Books of the Housing Associations to enter into arrangements such as the proposed subleases, the aspirational objectives of the Housing Associations may be fulfilled or served by the Housing Associations arranging for another entity, such as the Executive Director, to engage in or conduct activities at the town camps to fulfil or serve those objectives for the benefit of the members.
373 Having taken that step, that the proper approach is to determine whether those persons acting on behalf of the Housing Associations are acting for proper purposes and could reasonably have engaged in that conduct. Barwick CJ, McTiernan and Kitto JJ said in Harlowe's Nominees Pty Ltd v Woodside (Lakes Entrance) Oil Co N.L. (1968) 121 CLR 483 at 493:
Directors in whom are vested the right and the duty of deciding where the company's interests lie and how they are to be served may be concerned with a wide range of practical considerations, and their judgment, if exercised in good faith and not for irrelevant purposes, is not open to review in the courts.
374 Whether the obligation of the Housing Associations and of those persons on their behalf is founded in the contractual relationship between the Housing Association and its members; or in the fiduciary obligation of the Management Committee of the Housing Associations to the members, or upon the Constitutions and Rule Books of the Housing Associations, in my view the appropriate question is for present purposes the same.
375 I have referred above to the finding that each Housing Association, although having no legally enforceable right to any particular part of the $100 million, could reasonably expect and assume that a significant proportion of that sum would be spent on housing and facilities at its town camp. They were aware of the fundamental importance of the town camps land to their respective members. They had negotiated with the Minister for over 12 months. They could reasonably conclude that no "better deal" could be reached. They could reasonably conclude that, if they did not agree to the proposed subleases, the town camps would be compulsorily acquired. They understood the very strong desire of their members to avoid alienation of their land (the land held under the Special Purposes Leases or Crown Leases), and so were making the decision which would ultimately preserve their lands rather than have them compulsorily acquired. They had secured some consultation rights, both directly and through the Forum. They were aware that the $100 million was a package for all the Housing Associations, and its allocation would follow consultation through the Forum. They were aware that the $100 million was required to be expended over a period of five years, and so would provide promptly benefits to existing members, as well as to future generations. They had consulted widely with their members. They had the support of the Council in their decision. They were aware that, under the terms of the proposed subleases, they could be given a significant and direct ongoing role (as recognised in Recitals I and J of the proposed subleases, and in respect of community land, vacant land and after three years potentially as a Housing Authority). As senior counsel for the Housing Associations argued, the Housing Associations were aware that there was no other realistic opportunity available to secure the potential benefits to the town camps which the expenditure of $100 million would bring; they knew of the past "years of inadequate funding leading to substantial housing and conditions for the members and tenants"; and they believed that that funding to the Housing Associations through clause 6(a) of the proposed subleases would directly serve their primary function of relieving the poverty, sickness and suffering and helplessness of Aboriginal people in Central Australia, including their members. Finally, they were aware that the proposed subleases would not preclude them from continuing to engage in activities directed to the six "means" set out in Item 1.3(b) of the respective Constitutions and Rule Books, save to the extent that certain of those activities would be subject to the role and obligations and activities of the Executive Director under the proposed subleases, and they were also aware of the ongoing important role of the Council.
376 All of those considerations lead me to the view that, if it is assumed that for appropriate consideration the Housing Associations had power to grant a 40 year sublease to the Executive Director ceding the degree of control of the lands of the town camps which it did, the decisions of the Housing Associations to grant the proposed subleases were for proper purposes and were reasonably in the interests of their respective Housing Associations and their members as a whole.
377 The submissions for the Residents did not suggest that, in practical terms, the content of the duties of the Management Committees or directors of the Housing Associations, whether founded in contract or equity or otherwise, were different. Consequently, on that assumption, I would have refused relief in the Sublease proceeding. On the conclusion I have reached on the first question set out above, there was no contractual provision which has been breached by agreeing to enter into the proposed subleases. That is, in essence, a consequence of how the members of the Housing Associations have chosen to express the objects and purposes of those Associations in their Constitutions and Rule Books.