South Coast Aboriginal Cultural Centre Ltd v Commonwealth of Australia

CATCHWORDS : CORPORATIONS - winding up - statutory demand - whether genuine dispute as to existence of debt - where debt said to arise by operation of statute - whether conditions prescribed by statute for imposition of payment condition satisfied - plaintiff fails to show plausible contention that conditions not satisfied - extent to which question of statutory construction should be determined upon an application of this kind

Aboriginal and Torres Strait Islander Commission Act 1987 (Cth), ss 20(1), 20(2) LEGISLATION CITED : Aboriginal and Torres Strait Islander Commission Amendment Act 2005 (Cth), Part 3 of Schedule 1, Items 1991, 199(2), 213 Corporations Act 2001 (Cth), ss 459G, 459H(1)(a) Real Property Act 1900, ss 74F, 74J, 74K

Circuit Finance Pty Ltd v Crown & Gleeson Securities Pty Ltd [2005] NSWSC 997; (2005) NSW ConvR 56-143 Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd [2003] HCA 41 Duthie v Smith (1992) 83 NTR 21 CASES CITED : Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 Hanson Construction Materials Pty Ltd v Vimwise Civil Engineering Pty Ltd [2005] NSWSC 880; (2005) NSW ConvR 56-137 Maynard v O'Brien (1991) 78 NTR 16 Wellnora Pty Ltd v Fiorentino [2008] NSWSC 483; (2008) 66 ACSR 229

PARTIES : South Coast Aboriginal Cultural Centre Limited - Plaintiff Commonwealth of Australia - Defendant

COUNSEL : Mr T J Rickard - Plaintiff Ms M N Allars - Defendant

SOLICITORS : Marriott Oliver - Plaintiff Minter Ellison - Defendant

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

4350/08 SOUTH COAST ABORIGINAL CULTURAL CENTRE LIMITED v COMMONWEALTH OF AUSTRALIA JUDGMENT 1 The plaintiff is a public company registered under the Corporations Act 2001 (Cth) and limited by guarantee. As its name implies, the plaintiff was formed for community purposes associated with the welfare of Aboriginal people on the South Coast. It established a cultural centre in Junction Street, Nowra some thirty years ago. A government grant was used to acquire land and erect a building. 2 The plaintiff makes application under s 459G of the Corporations Act for an order setting aside a statutory demand dated 1 August 2008 which was served on it by the defendant, Commonwealth of Australia. The debt or alleged debt the subject of the statutory demand is described in its schedule as follows: " Description of the debt Amount of the debt South Coast Aboriginal Cultural Centre Ltd failed to fulfil a grant condition, namely South Coast Aboriginal Cultural Centre Ltd sol the property located at 160 Junction Road, Nowra NSW (Lot 12 on Deposited Plan 584374) without the Commonwealth's consent. The Commonwealth issued a notice under Item 199 of the Aboriginal and Torres Strait Islander Commission Amendment Act 2008 requiring repayment of the grant dated 6 May 2008" $485,000.00

3 The plaintiff's attack on the statutory demand is based wholly on s 459H(1)(a) and the proposition that there is a genuine dispute as to the existence of the debt of $485,000. The grounds on which the plaintiff relies will be better understood in the light of a review of the facts. 4 On 16 December 1997, the Aboriginal and Torres Strait Islander Commission ("ATSIC") wrote to the plaintiff offering financial assistance, in the form of a grant, for the purpose of extending the cultural centre at Nowra. The amount offered was $720,217. The letter of offer said that acceptance of the offer would constitute agreement by the plaintiff to certain matters, including compliance with "the Standard Terms and Conditions Relating to Grants as set out in Attachment B", compliance with "the Supplementary Terms and Conditions as set out in Attachment C" and compliance with "the Special Conditions as set out in Attachment D". According to the evidence, there was an Attachment B setting out so-called "Standard Terms and Conditions Relating to Grants between the Aboriginal and Torres Strait Islander Commission and South Coast Aboriginal Cultural Centre Ltd", but there was no Attachment C and no Attachment D. 5 Among the conditions in Attachment B is condition 4.5 as follows: "The Grantee must obtain written approval from the Commission before disposing of any interest in land which was funded by the Commission or by the former Aboriginal Development Commission or the former Department of Aboriginal Affairs." 6 It is not disputed that the plaintiff sold the cultural centre property to an unrelated party ("Stocklands"), apparently on arm's length terms. The contract for sale was made on 18 December 2006. Completion took place on 12 February 2008. The net proceeds of sale, after payment of debts, are held intact by the plaintiff in the form of term deposits. These amount to some $1.5 million. Having sold the cultural centre, the plaintiff has no ongoing activity. 7 On 6 May 2008, an officer of the Department of Families, Housing, Community Services and Indigenous Affairs wrote to the plaintiff a letter as follows: " Notice under the Aboriginal and Torres Strait Islander Commission Amendment Act 2005, Schedule 1, Item 199: 1. I am the Delegate for the Minister of the Department of Families, Housing, Community Services and Indigenous Affairs for the purpose of sub-section 1 of item 199 of Schedule 1 of the Aboriginal and Torres Strait Islander Commission Amendment Act 2005 (Amendment Act) . 2. South Coast Aboriginal Cultural Centre Limited (SCACC) purchased the property located at 160 Junction Road, Nowra NSW (Lot 12 on Deposited Plan 584374) using a capital grant totalling $38,500 from the former Department of Aboriginal Affairs. 3. The former Aboriginal and Torres Strait Islander Corporation (ATSIC) provided SCACC with a capital grant totalling $485,000 (grant) to extend the cultural centre located on the property under Part 2 of the Aboriginal and Torres Strait Islander Act 1989. It was a condition of the grant that: 'The Grantee must obtain written approval from the Commission before disposing of any interest in land which was funded by the Commission or by the former Aboriginal Development Commission or the former Department of Aboriginal Affairs.' 4. The Commonwealth of Australia (Commonwealth) represented by the Department of Families, Housing, Community Services and Indigenous Affairs has, under the Amendment Act, responsibility for the grant made by ATSIC to the SCACC for the purpose of extending the cultural centre. 5. I am satisfied pursuant to sub-item 1 of item 199 of schedule 1 of the Amendment Act, SCACC has failed to fulfil the condition mentioned in paragraph 3 due to its sale of the property without the Commonwealth's written approval. 6. Pursuant to sub-item 2 of item 199 of schedule 1 of the Amendment Act. SCACC is to forward the sum of $485,000 within 7 days payable either by: · Cheque made payable to: Accounts Receivable Team Department of Families, Housing, Community Services and Indigenous Affairs Box 7576 Canberra Mail Centre ACT 2610 or · Electronic transfer to the Reserve Bank of Australia Branch Number 092-009 Account Number 117205. 7, Contact for the Commonwealth is Kari Ahmer on 02 6121 0227. Yours sincerely (sgd) Kari Ahmer Kari Ahmer Branch Manager CDEP Program Management Branch Department of Families, Housing, Community Services & Indigenous Affairs 6 May 2008." 8 The condition of grant set out in paragraph 3 of this letter and referred to in paragraph 5 is, of course, the condition 4.5 to which I have referred. The legislative provisions referred to in paragraphs 5 and 6 are among consequential and transitional provisions contained in Part 3 of Schedule 1 to the Aboriginal and Torres Strait Islander Commission Amendment Act 2005 (Cth), the central purpose of which was to abolish ATSIC and to cause the Commonwealth to be substituted for ATSIC in the numerous legal relationships to which ATSIC was party. Items 199(1) and 199(2) are as follows: " Repayment of grants and loans (1) If, before ATSIC abolition day, the Commission had made a grant to a person or body under Part 2 of the ATSIC Act (other than a grant that is, on ATSIC abolition day, declared to be a class A exempted asset or a class B exempted asset) on particular terms and conditions: (a) the Commonwealth is treated, on and after that day, as if it had made the grant on the same terms and conditions; and (b) if the Minister is satisfied that the person or body has failed to fulfil such a term or condition - the Minister may, on behalf of the Commonwealth, give notice to the person or body receiving the grant that the Minister is so satisfied; and (c) if the Commission had, before ATSIC abolition day, given a notice under section 20 of the ATSIC Act to the effect that the Commission was satisfied that the person or body receiving the grant had failed to fulfil a term or condition of the grant - that notice has effect, on and after that day, as if it had been given by the Minister under paragraph (b).

(2) A person or body to whom a notice is given, or treated as having been given, by the Commonwealth under subitem (1) is liable to pay to the Commonwealth, immediately, an amount equal to: (a) the amount of the grant; or (b) so much of the amount of the grant as was specified in the notice." 9 The rationale for the inclusion of these provisions in the Act of 2005 may be traced to ss 20(1) and 20(2) of the Aboriginal and Torres Strait Islander Commission Act 1987 (Cth): " Grants and loans to be repayable where conditions breached etc (1) The Commission may give written notice to a person or body to whom a grant has been made under this Part stating that the Commission is satisfied that the person or body has failed to fulfil a term or condition of the grant. (2) A person or body who is given notice under subsection (1) is liable to pay to the Commission an amount equal to: (a) the amount of the grant; or (b) so much of the grant as the commission specifies in the notice." 10 The position the Commonwealth took in issuing the statutory demand is quite straightforward. First, a grant was made by ATSIC to the plaintiff in 1997 or 1998 pursuant to the ATSIC letter of 16 December 1997. Second, that grant was a grant of the kind referred to in item 199(1) of Part 3 of Schedule 1 to the Act of 2005. Third, the grant was made on terms and conditions that included condition 4.5 requiring the plaintiff to obtain the written approval of ATSIC before disposing of any interest in land that was funded by ATSIC. Fourth, the land at Nowra, the buildings on which were extended by application of the grant to the extent of $450,000, was land covered by condition 4.5. Fifth, that land was sold by the plaintiff. Sixth, item 199(1)(a) had the effect that, upon the abolition of ATSIC, the Commonwealth was deemed to have made the 1997 grant on the terms and conditions on which it was in fact made by ATSIC. Seventh, the plaintiff did not obtain any written approval before selling the Nowra land. Eighth, it was therefore open to the Minister to be satisfied that the plaintiff had failed to fulfil a term or condition of the grant. 11 From that chain of circumstances, the Commonwealth says, it follows that notice could be given to the plaintiff under item 199(1)(b) of Part 3 of Schedule 1 and the giving of notice gave rise to a payment obligation of the plaintiff by operation of item 199(2), which payment obligation is properly characterised as a debt. Ms Allars of counsel, who appeared for the Commonwealth, referred, in this last connection, to parts of the majority judgment in the recent case of Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd [2008] HCA 41 (3 September 2008) confirming that a payment obligation created by statute may, as a debt, properly be made the subject of a statutory demand. 12 The grounds on which the plaintiff maintains the existence of a genuine dispute as to the existence of any such debt are set out in the affidavit supporting the s 459G application, being the affidavit sworn by the plaintiff's chairman, Mr McLeod, on 21 August 2008. The relevant paragraphs of the affidavit are paragraphs 24 to 27: "24. The terms of the Grant did not provide for the repayment of the grant amount or any part of it. 25. The Plaintiff denies it has breached any relevant Grant conditions as specified in the Notice referred to in the Statutory Demand. In any event the Plaintiff considers and understood that the Defendant by its conduct and attitude gave any consent or approval required for the sale of the property. 26. Further the Plaintiff says that it was an implied term of the Grant that any consent or approval required would not be unreasonably withheld or subject to unreasonable conditions. 27. The Plaintiff genuinely disputes that the debt claimed is owing on the basis claimed by the Defendant." 13 Four propositions are thus relied on by the plaintiff: first, that the terms on which the grant was made did not provide for repayment; second, that the plaintiff did not breach any relevant grant condition; third (and as an aspect of the second matter), that the Commonwealth gave consent or approval of the sale of the property; and, fourth, that there was an implied term that consent or approval would not be unreasonably withheld or made subject to unreasonable conditions. 14 Implicit in the plaintiff's reliance on these propositions is acceptance of certain other matters of importance, including that item 199 of Part 3 of Schedule 1 is relevant and applicable and that the letter of 6 May 2008 is a notice issued pursuant to that provision. The plaintiff does not complain that the state of satisfaction expressed in the letter is that of Mr Ahmer, Branch Manager, CDEP Program Management Branch, Department of Families, Housing, Community Services and Indigenous Affairs, whereas item 199 refers to the Minister's being satisfied. It may be inferred that the plaintiff accepts the existence and efficacy of delegation of the kind allowed by item 213 of Part 3 of Schedule 1 to the Act of 2005. Nor does the plaintiff question that the sum of $485,000 out of the total of $720,217 referred to in the letter of 16 December 1997 was used to "fund" an interest in land, having regard to its expenditure in extending and improving fixtures. 15 The first proposition relied on by the plaintiff - that the terms of the grant did not provide for repayment - is undoubtedly correct. But that is irrelevant to the question now at hand, namely, whether there is a genuine dispute as to the existence of the debt. The Commonwealth does not seek to base the debt on a term of grant providing for repayment. It relies wholly on the statutory provisions and their operation and effect. The first proposition may therefore be left to one side. 16 The second proposition, as developed in argument by Mr Rickard of counsel for the plaintiff, has three aspects to it. First, it is said that condition 4.5 is not a condition of the kind contemplated by item 199(1). That provision is concerned with a case where ATSIC made a grant "on particular terms and conditions". Mr Rickard submitted that "particular terms and conditions" are to be distinguished from ordinary or standard terms and conditions. He referred to judicial statements differentiating "particular circumstances" from ordinary circumstances: Maynard v O'Brien (1991) 78 NTR 16 at 22; Duthie v Smith (1992) 83 NTR 21 at 30. 17 Ms Allars submitted, on behalf of the defendant that "particular" terms and conditions are merely identified and ascertained terms and conditions. 18 A question which now arises is whether this point of construction can and should be determined upon an application of the kind now before me. I had occasion to consider that question recently in Wellnora Pty Ltd v Fiorentino [2008] NSWSC 483; (2008) 66 ACSR 229. It is sufficient to repeat what was said there at paragraphs 44 to 48, by reference to earlier cases: "[44] It was submitted on behalf of the defendants that the court should, in this proceeding, come to a conclusion on the way in which the provisions in question operate, as distinct from simply accepting that there are alternatives each of which is fairly arguable.

[45] I was referred to several cases on the question whether matters of construction should properly be determined upon a s 459G application. The first is the decision of Austin J in Jem Developments Pty Ltd v Hansen Yuncken Pty Ltd (2006) 205 FLR 432; (2006) NSWSC 1308. But, as was pointed out by counsel for the plaintiff, that was an offsetting claim case, not a genuine dispute case. I accept that the references there to the need for a contractual provision to be construed related to the question of the existence of a claim, not the question of the existence of a dispute. I do not consider the case to be of assistance in the present context.

[46] In Tatlers.com.au Pty Ltd v Davis (2007) 213 FLR 109; 25 ACLC 1150; [2007] NSWSC 835 at [47], White J said that a purely legal question could be decided on a s 459G application even though the question of law was fairly arguable. The question was as to the availability of a right of set-off. It went, therefore, to the existence of an offsetting claim for s 459H purposes.

[47] White J referred with apparent approval to a passage in the judgment of Cohen J in Delnorth Pty Ltd v State Bank of New South Wales (1995) 17 ACSR 379 at 384: 'Section 459H(1) refers to the court finding that there is a genuine dispute. The parties have argued this case on the issue of whether the proper construction of the agreement and the facts results in the plaintiff owing money to the defendant. The facts were not in dispute and there was thus no question of whose evidence would be accepted on a final hearing. Under the previous legislation, when there was a claim that there was a bona fide dispute on substantial grounds as to the debt claimed, the court could decide that dispute if it arose from a question of law or was of short compass. See, for example, Offshore Oil NL v Acron Pacific Ltd (1984) 2 ACLC 8. I consider that under the provisions of the Corporations Law, the same approach can be taken. Although questions of disputed fact will not be decided on an application to set aside a statutory demand, the issue of whether there is a genuine dispute can be resolved on that application where the question arises on a short point of law or the construction of documents or agreed facts.'

[48] These observations apply, in terms, to a case in which genuine dispute, as distinct from offsetting claim, is alleged. They have been approved and followed in later cases: see, for example, Lifestyle Retirement Projects No 2 Pty Ltd v Parisi Homes Pty Ltd [2005] NSWSC 205 at [16]-[17]; BBX Holdings Pty Ltd v American Home Assurance Co [2007] NSWSC 549 also at [16]-[17]. But while a 'short point of law' or a question of construction might be resolved on a s 459G application, I do not understand Cohen J to have said that every point of law or question of construction must be determined." 19 The question of statutory construction here is a short and simple one. It is apt to be determined upon a s 459G application. 20 The question must, in my view, be determined in the way for which Ms Allars contends. There is no logical basis for drawing any distinction between different kinds of terms and conditions for the purposes of item 199(1). No form of differentiation was envisaged by s 20(1) of the 1987 Act. There is no reason to think that some change of policy or intent was implemented when the transitional or consequential regime under item 199(1) was made to replace the pre-existing regime under s 20(1). The subject matter is not, of its nature and in any event, one that is of such a kind as to contemplate, in any material way, conditions which are ordinary or standard or normal as opposed to those which are not. And it makes no difference to my mind, that ATSIC may have habitually applied certain conditions. 21 I turn therefore to the second aspect of the plaintiff's contention that it did not breach any relevant grant condition, namely, its assertion that there was no breach because consent or approval of the sale was in fact given. In taking that stance, the plaintiff relies, in the first instance, on two letters received by it from the relevant Commonwealth department. 22 One such letter is the letter dated 26 April 2007. The relevant part of the letter reads: "The Department will consent to the sale of the Junction Street property, and lift the Commonwealth's caveat over the property at settlement, subject to the following conditions." 23 There followed a number of conditions, including as to application of the sale proceeds and the execution of a so-called "Purposes Agreement". There was then an invitation or request for the plaintiff to indicate its acceptance of the basis stated and to execute the enclosed form of "Purposes Agreement". 24 There can be no real doubt, in my view, that the letter of 26 April 2007 did no more than indicate that the Commonwealth would consent to the sale if and when certain things were done and accepted by the plaintiff. The plaintiff did not do or accept those things, with the result that the foreshadowed consent never became operative. 25 The other letter on which the plaintiff relies is a letter of 7 December 2007 from the Commonwealth's solicitors to the plaintiff's solicitors which reads in part as follows: "We are instructed that the Commonwealth will consent to the sale of the Nowra property to Stocklands upon the following conditions:" 26 Conditions follow together with a concluding paragraph in these terms: "If this proposal is acceptable to your client, our client needs any agreement to be recorded in a deed between our respective clients." 27 Again, it is clear that the letter did not convey an immediate and operative consent. It merely outlined a basis on which consent might in future be forthcoming. And again, there is nothing to suggest that that basis ever came into being. 28 The third contention of the plaintiff is that a relevant consent or approval was given by conduct. The conduct relied on by the plaintiff as a manifestation of the Commonwealth's consent to sale of the property is conduct by inaction. The Commonwealth had lodged a caveat under s 74F of the Real Property Act 1900 in respect of the Nowra land. The sustainability of the caveat must have been, at the least, problematic, given that the estate or interest claimed was described merely as "An equitable interest in land" (see Circuit Finance Pty Ltd v Crown & Gleeson Securities Pty Ltd [2005] NSWSC 997; (2005) NSW ConvR 56-143, Hanson Construction Materials Pty Ltd v Vimwise Civil Engineering Pty Ltd [2005] NSWSC 880; (2005) NSW ConvR 56-137 and subsequent cases denying the adequacy of a description in those terms). But there was no direct challenge by the plaintiff to the validity or effectiveness of the caveat. Rather, the plaintiff chose to take the caveat as it found it and obtained the issue of a lapsing notice under s 74J. Following service of that notice on it, the Commonwealth took no action to make application under s 74K for an order of the court extending the operation of the caveat, with the result that the caveat eventually lapsed. It is the Commonwealth's inaction in this respect that is said to have amounted to consent to the sale of the land. 29 This proposition is simply unsustainable. In any event - and vitally - the consent (or approval) required by condition 4.5 of the conditions of grant was "written approval". There is no basis on which inaction or acquiescence by conduct can amount to "written approval". 30 The plaintiff also relies on the circumstance that the Commonwealth did not make any attempt to obtain an injunction to restrain the sale of the property. Another form of inaction is relied upon. Again, however, that is irrelevant to the question of "written approval". 31 The final matter to be considered is the implied term argument - that there was an implied term of grant that written approval of a sale would not be unreasonably withheld. On this, It is sufficient to say that the plaintiff has pointed to no basis on which such a term could be said to be needed to supply business efficacy or to satisfy the classic "That is so clear it goes without saying" test. In the context of a statutory scheme, a strong basis must be shown for the implication of a term over and above the expressed terms. The plaintiff has not suggested any such basis. 32 In the light of the above, I am not satisfied that the case the plaintiff advances rises to the level of "a plausible contention requiring investigation": Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 at 787 per McLelland CJ in Eq. The provisions of the Act of 2005 are clear and there is, in my view, no cogent basis on which the plaintiff can resist the Commonwealth's payment claim based on them. 33 The application under s 459G will therefore be dismissed with costs. 34 I cannot, however, leave this matter without wondering about the purpose that the Commonwealth's statutory demand is intended to serve. The demand is for $485,000. On the evidence, the plaintiff - which has no other liabilities and no ongoing activities productive of anything but minimal expenses of maintaining the corporate structure - has funds of some $1.5 million in bank deposits available virtually immediately. If and when the Commonwealth seeks to pursue winding up proceedings based on any presumption of insolvency arising from non-compliance with the statutory demand, it seems virtually certain that the plaintiff, as defendant in those proceedings, will discharge with ease the burden of proving that it is solvent, with the result that the winding up application will be dismissed. But as that matter does not require attention in the present context, I say no more about it. **********

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