Coolah is a small town in the central western part of New South Wales. It contains a caravan park situated on Cunningham Street called the Coolah Caravan Park (the "Park").
The Park contains a number of cabins and powered camp sites available for rental, together with a camping area and shared bathroom, kitchen and laundry facilities.
In April 2012 the land upon which the Park was situated was purchased by the present respondent ("CHB"). The directors of CHB were, and remain, Graeme Booker and Janet Kelly.
Shortly after the purchase, CHB placed advertisements in various publications advertising for sale 62 (A class) shares in CHB. It was expressly represented by CHB that the purchase of an A class share would entitle the owner of that share to exclusive use and enjoyment of an identified site within the Park (each share was allocated to a particular site), plus ownership of a proportion of the "common property". The advertising referred to the arrangement as "company title". On some sites, dwellings (small cabins) were already constructed. On others it was contemplated that dwellings could be constructed if the owner of the relevant share so desired.
CHB had also issued two ordinary class shares. Graeme Booker and Janet Kelly each owned one of those shares.
Halsbury's Laws of Australia, online edition, at [355-9010], describes company title as follows (footnotes omitted):
"The most popular form of home unit ownership before the introduction of strata title schemes was company title. Under this arrangement, the land is owned by a company specifically incorporated for the purpose of owning land (whether as registered proprietor or legal owner of general law land). Individual units are allocated to shareholders of the company according to the value of shares held, and the 'purchase' of a unit is by way of purchase of shares in the company. The articles of association of the company confer exclusive rights to occupy a certain part of the building and determine the rights and obligations of the shareholders regarding maintenance and use of the building. A right of exclusive use of a unit conferred on a shareholder by the company articles does not give the shareholder a proprietary right but only a personal right against the company."
That description is apt for what was proposed by CHB.
The advertising was principally directed to people colloquially referred to as "grey nomads", being retired people who spend their time travelling, typically in a caravan or motorhome.
The advertising included express written representations that this was "RV style community living for grey nomads" and there were advertisements for the sale "by Management" of various "sites" (being sites 4, 15, 22 and 43 for prices ranging between $95,0000 and $155,000).
A document was published titled "The 'CHB Dream' Explained" (the "Explanation"). This Explanation included express representations that "the dream" for potential purchasers was to be "part of a like-minded community" where purchasers could be debt free in their own home with security of tenure. It said that purchasers could enjoy the relaxed lifestyle of travelling around Australia whilst having a "home base" to return to. It said that even seasoned grey nomads still wanted a base they could call home, somewhere they could keep the family photographs and something they could cash in if they needed to or could pass on to their children. The Explanation said that "like-minded" meant that all purchasers would be "retired or semi-retired".
The Explanation contained express representations that purchasers would each own one share in CHB, all 62 shares would be owned by people who owned sites or allotments, each shareholder would be entitled to "exclusive use and enjoyment" of their site, shares could be sold (subject to certain conditions) and the Park could only:
"… be sold if agreed to by way of a Special Resolution at a General Meeting of the Company (CHB) with an 80% majority."
The Explanation said that that the tourism side of the Park (being the letting of sites to tourists for short-term periods) and the management of the Park would be subcontracted to a separate company which had a "Management Rights" agreement with CHB.
This management company was called Home Base Solutions Pty Ltd ("HBS"). The directors and shareholders of that company were and remain Graeme Booker and Janet Kelly. We do not know whether the sites advertised for "sale" by "Management" referred to at [9] above were for shares to be issued by CHB or for shares in CHB then owned by HBS (which owned, at one point in time, 26 A class shares in CHB).
The Explanation expressly discouraged owner/investors who had no intention of personally using their site but said that it was accepted that owners could make their site available "as rental stock" whilst they were away travelling.
The Explanation said that "one-time costs" included the purchase price of a share, the purchase price of any improvements already existing on a site, the construction cost of any new dwelling and associated structures which may be constructed on a site, connection costs for electricity, water gas etc, the cost of driveways, earthworks, landscaping and some other matters.
It said that shareholders would incur "repetitive costs" being site fees covering rates, garbage disposal, sewerage, water, administration and park maintenance.
The Explanation said that CHB had development consent from the local council to operate a caravan park on the land, and so any dwellings constructed on any site had to comply with that development consent.
Pets were expressly allowed, there would be a Resident's Committee, being an elected "Shareholders Advisory Group" which would be an "interface" between shareholders and the directors.
The Explanation again emphasised that it was "very unlikely" that the Park would ever be sold because an 80% majority vote was required at a General Meeting of the Company (CHB), and, given that all shareholders would be site owners, then any intending purchaser:
"… would need to be making an extremely lucrative offer for such a proposal to get up." 13 votes out of 62 will stop such a move."
These representations may have been misleading because the Explanation was silent about the possibility of the land being sold because CHB may be placed into liquidation, or because CHB might be placed into voluntary administration, or for other reasons with the result being that there would be no vote at a General Meeting to approve or reject a sale. Whether the person or persons who made the representation mentioned at [19] above or CHB had reasonable grounds for making that representation (which related to future matters) is unknown.
By an Agreement dated 26 March 2013 Barry Tait (now deceased) and the first appellant, Lee Tait, purchased a share in CHB (which was attached to site 33) for $23,120, and agreed for HBS to construct a cabin on that site which was not to exceed the price of $76,880 without the purchasers' consent.
The Site Plan for the Park, being Schedule 4 to the CHB Constitution, shows that the Park had 62 sites containing cabins or being powered sites, and had an open area for camping. The reasonable inference to draw is that it was hoped that all of the cabin and powered sites would be "sold" (that is, the 62 shares attaching to the 62 cabin and powered sites would be sold, thus leaving the camping area as common property) to "grey nomads" (being expressly referred to as retired or semi-retired people).
We shall return to this later in these reasons, but these brief facts, including the specific references in the Explanation to "grey nomads" who were "retired or semi-retired", there being 62 shares for sale and the Park consisting (at that time) of 62 cabin and powered sites (in total), seems to be the basis for the appellants' contention that the Park is a "retirement village" as defined in s 5 of the Retirement Villages Act 1999 (NSW) (the "RV Act") because it was:
"… intended to be predominantly or exclusively occupied, by retired persons …"
[Emphasis ours]
As at 14 December 2019, 29 of the A class shares were owned by various individuals, and 32 shares were owned by a company Residential Cluster Pty Ltd. The directors and shareholders of that company were and remain Graeme Booker and Janet Kelly.
A company search of CHB reveals that the two ordinary shares issued by CHB to Mr Booker and Ms Kelly had a par value of $2, and the 60 A class shares had a par value of $742,227.46.
After a time, but before October 2018, disputes arose between various shareholders and Mr Booker and Ms Kelly.
Proceedings were commenced in the Supreme Court of NSW by two shareholders on 15 October 2018 seeking orders for the inspection of the books of CHB. CHB opposed the application on the basis that the plaintiffs were allegedly not acting in good faith and that the order for inspection was allegedly not sought for a proper purpose.
During the course of a hearing before Black J in those proceedings his Honour raised the question of CHB's solvency. The proceedings were adjourned part-heard on 14 August 2019.
On 21 August 2019 Mr Booker and Ms Kelly placed CHB into voluntary administration.
On 27 November 2019 CHB entered into a Deed of Company Arrangement ("DOCA"). Under the terms of the DOCA the land was to be sold to a company of which Mr Booker and Ms Kelly were the sole directors and shareholders, being Coolah Tourist Park Pty Ltd ("CTP") for the sum of $473,000 inclusive of GST.
It appears the major creditors of CHB, and who voted in favour of the DOCA, were Mr Booker and Ms Kelly. This notwithstanding the representations made to Mr and Mrs Tait about security of tenure and that, in effect, the only circumstances in which the Park would be sold would be if there were an 80% majority vote of shareholders at a General Meeting of CHB.
By letter dated 2 December 2019 Mr Booker and Ms Kelly advised CHB's shareholders that the Administrators had agreed to sell the land and improvements at the Park (which included the sites attached to each share and any improvements constructed on them) to CTP.
Mr Booker and Ms Kelly went on to say that after that contract for sale completed (on 18 December 2019), each shareholder would be offered a Residential Site Agreement ("RSA") [pursuant to the provisions of the Residential (Land Lease) Communities Act 2013 (NSW) (the "RLLC Act")]. Shareholders were informed that the Park would come under the RLLC Act on 18 December 2019 (when the contract for sale settled) and shareholders could either:
1. sign the RSA relevant to their site and pay site fees at market value thereafter; or
2. if they did not sign an RSA, they would "have to leave the Park".
The letter went on to say that:
"(f)ailure to sign the RSA means you have no right to occupy, enter or remain on the land, after 18th December 2019. This regrettable situation has arisen as a direct result of court action taken by (some shareholders) against your company, Coolah Home Base Pty Ltd."
The sale was settled. The land is now owned by CTP, and HBS's management agreement with CHB has ended.
On Christmas Eve 2019 CTP (under the hand of Mr Booker and Ms Kelly) wrote to the "Coolah Caravan Park Residents" and said that the sale of the Park to CTP was "the result of court action taken by" certain shareholders. The letter went on to say that even though the CHB Constitution provided that the Park could only be sold with the consent of 80% of shareholders, it was the:
"… voluntary administrators of CHB who sold the land in exercise of their power to do so conferred by the Corporations Act 2001."
The letter did not mention that the voluntary administrators sold the land because the majority of creditors, in number and value (being Mr Booker and Ms Kelly) had voted in favour of the resolution put to creditors by the administrators to sell the land to CTP.
On 22 January 2020 Ms Tait commenced proceedings in the Tribunal against CHB.
In that application Ms Tait sought various orders she said could be made under the RV Act. She sought the following:
1. a declaration that the Park is a retirement village within the meaning of s 5 of the RV Act;
2. a declaration that the residential site agreement between CHB and Mr and Mrs Tate dated 26 March 2013 has not been terminated;
3. an order pursuant to s 84 of the RV Act that an administrator be appointed to operate the village until the well-being and financial security of the residents can be assured;
4. an order pursuant to s 128(1)(c)(ii) of the RV Act that CHB must continue to perform the residential site agreement;
5. an order pursuant to s 139 of the RV Act that the operator retracts statements that residents must sign a new residential site agreement or leave the park;
6. an order pursuant to s 139(3) of the RV Act that Mr Booker and Ms Kelly pay compensation to the residents;
7. an order pursuant to s 128(2) that Mr Booker and Ms Kelly apologise to residents for threatening eviction;
8. an order pursuant to s 24A of the RV Act that Mr Booker and Ms Kelly pay 100 penalty points; and
9. the Commissioner to regulate the Park to ensure compliance with the RV Act.
These proceedings, as presently constituted, have a number of significant problems.
First, the proceedings were commenced against CHB (and this appeal was lodged) despite CHB still being under external administration, the voluntary administration not being terminated or, as far as we are aware, the creditors not resolving that the statutory stay provided for by s 440D of the Corporations Act 2001 (Cth) would end upon execution of the DOCA or at some other time before these proceedings were commenced. As far as we are aware the administrators did not consent to the commencement of the proceedings, nor has a Court (as defined in the Corporations Act and which does not include the Tribunal) granted leave to commence the proceedings - see s 440D(1) and (2) of the Corporations Act.
Section 440D(1) says:
Stay of proceedings
(1) During the administration of a company, a proceeding in a court against the company or in relation to any of its property cannot be begun or proceeded with, except:
(a) with the administrator's written consent; or
(b) with the leave of the Court and in accordance with such terms (if any) as the Court imposes.
"Court" is defined to be the Supreme or Federal Court, the Family Court or a court to which s 41 of the Family Law Act 1975 (Cth) applies - s 58AA of the Corporations Act. Thus, contrary to the appellant's submission, the Tribunal cannot grant the leave referred to in s 440D(1)(b).
The word "court" may apply to a tribunals or commissions as well as courts, and we think the better view is that the Tribunal is a "court" for the purposes of s 440D (contrary to the respondent's submission), although we do not strictly have to decide that point because of the other problems with this case to which we will shortly come. However, we mention this point because, as we have decided this matter should return to the Tribunal, it is a matter which will need to be addressed.
In Brian Rochford Ltd (Admin Apptd) v Textile Clothing & Footwear Union of NSW (1998) 47 NSWLR 47 Austin J held that the word "court" applied to the Industrial Relations Commission of NSW even though the Commission was not a "court". His Honour held that the relevant provisions of the Corporations Law allowed for that construction. His Honour said:
"In my opinion, even a literal reading of s 440D and s 58AA requires the Court to have regard to the intention underlying s 440D. This is because (for the reasons explained above) s 58AA, being a definition provision, does not apply if the contrary intention appears. When one reflects on the legislative intention underlying s 440D, it is evident that the purpose of the section would be frustrated if the definition of "court" in s 58AA were applied, because the general moratorium on legal proceedings which is necessary to enable the administrator to discharge the statutory function imposed by Pt 5.3A would then largely evaporate. Having regard to the structure of Pt 5.3A and the evident purpose within that structure of s 440D, it is proper for the Court to conclude, and I do conclude, that s 440D in its context exhibits a legislative intention to exclude the application of the definition of "court" in s 58AA. I reach this conclusion on the wording of the Corporations Law, taking into account s 435A and the structure of Pt 5.3A, and the place of s 440D in that structure."
There have been some changes to the corporations legislation since his Honour's decision (there have been some amendments to s 58AA as it now appears in the Corporations Act for example) but the evil identified by his Honour remains. If the Tribunal is not a "court" for the purposes of s 440D then the purpose of the statutory stay would be frustrated and the general moratorium on legal proceedings which is necessary to enable administrators to discharge their statutory functions would largely evaporate.
In Moorabool Shire Council v J & B Taitapanui & Anor [2002] VSC 418 Nettle J held that the word "court" in s 471B of the Corporations Act ("a proceeding in a court against the company or in relation to property of the company") included the Victorian Civil and Administrative Tribunal.
Therefore, we are inclined to the view that the Tribunal is a "court" for the purposes of s 440D of the Corporations Act.
Proceedings commenced without leave or consent under s 440D are not a nullity. In Murgolo v AAI Ltd t/as AAMI [2019] NSWCA 295 Leeming JA, referring to a similar prohibition in s 471B of the Corporations Act, pointed out:
"As Basten JA has explained, on 19 February 2013, Mr Murgolo commenced proceedings against CW, then in liquidation, and without seeking or obtaining leave, contrary to s 471B of the Corporations Act. It is well settled that the contravention did not render the proceedings a nullity: Re Testro Bros Consolidated Ltd [1965] VR 18; Re Sydney Formworks Pty Ltd [1965] NSWR 646; Bell Group Ltd v Westpac Banking Corp (2000) 104 FCR 305; [2000] FCA 439.
In Taouk v Assure (NSW) Pty Ltd [2019] NSWCA 224 Macfarlan and Payne JJA, and Emmett AJA, held that applications and appeals to the Court of Appeal were "proceedings" and were to be treated as proceedings separate from those at first instance. Thus, the leave of a Court or the administrator's consent would be required for this appeal separately to any consent or leave obtained for the proceedings at first instance.
But it is our view, as will become clear, that the proceedings must return to the Tribunal if the real issues in dispute between the (proper) parties are to be resolved.
The second possible problem with these proceedings is that if the company is still under administration (which we were told it is) then the question arises as to what authority the directors have to give instructions on behalf of CHB.
Section 198G of the Corporations Act says that a director must not perform or exercise a function or power of that office unless, for example, the director has the permission of the administrator. No such specific permission, we were told, has been given.
Section 198G(4) says that s 198G(1) does not apply if a DOCA has been executed and the deed has not yet terminated (which seems to be the case here). But the authors of Ford, Austin & Ramsay's Principles of Corporations Law, online edition, say at [26.050]:
"An administrator under a DOCA is an officer under the definition in s 9, but the prohibition in s 198G(1) does not apply if the company has executed a DOCA which has not terminated (s 198G(4)), because in that case s 444G takes over and says that the DOCA binds, among others, the officers of the company and the deed administrator, and so any provisions in the DOCA which allow the deed administrator or the directors to continue to run the company's business are operative according to their terms."
[Our emphasis]
The DOCA in this case, filed with ASIC, says on p.2:
"Upon execution of the deed of company arrangement, did control of the company revert to the company's directors?
No."
Therefore, there is a question whether Mr Booker and Ms Kelly are able to provide instructions on behalf of the CHB in relation to these proceedings including retaining solicitors for that purpose. That is an issue which may be easily resolved in the future with the assistance of the administrators.
Third, the proceedings were commenced against a company, CHB, which no longer owns the land. Therefore, any orders made against that company will be of no utility since CHB has no power to do anything in relation to the land.
Fourth, the party who now owns the land and whose rights would be affected by some of the orders sought if they were made, namely CTP, is not a party to the proceedings. Contrary to the appellant's submissions, CTP is a necessary party to the proceedings and it needs to be a party if the real issues in dispute are to be resolved. It cannot seriously be doubted that any finding that the Park is a retirement village would seriously affect CTP's rights as owner of the land.
That CTP is a necessary party to the proceedings is made clear by the holdings in John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd [2010] 241 CLR 1; [2010] HCA 19. In that case the High Court unanimously said the following:
"[131] Walker Corporation submitted that where a court is invited to make, or proposes to make, orders directly affecting the rights or liabilities of a non-party, the non-party is a necessary party and ought to be joined. That submission is correct. The Court of Appeal's orders directly affected Walker Corporation. The majority of the Court of Appeal (Macfarlan JA, Giles JA concurring) erred when it held to the contrary.
[132] In News Ltd v Australian Rugby Football League Ltd the Full Federal Court (Lockhart, von Doussa and Sackville JJ) said 82 :
'Where the orders sought establish or recognise a proprietary or security interest in land, chattels or a monetary fund, all persons who have or claim an interest in the subject matter are necessary parties. This is because an order in favour of the claimant will, to a corresponding extent, be detrimental to all others who have or claim an interest.'
[133] …
[134] The Court of Appeal majority also erred in saying: 'Walker Corporation's claim that it has an equitable interest in the land ranking in priority to that of the [Club] may be pursued by it in separate proceedings against the [Club].' …
[135] … The question is not whether any problem arising in the original proceedings could be resolved in separate proceedings, but, as explained above, whether that problem should have been resolved in the original proceedings without the need for separate proceedings.
[136] … The wisdom of the rule, which is about to be dealt with, that a person directly affected by an order in proceedings to which that person was not party is entitled as of right to have it set aside is thus demonstrated: it is a more efficient course than having to institute separate proceedings calling for an interlocutory injunction and an undertaking as to damages."
The appellants submitted that CTP did not need to be a party but that it would be bound by any finding that the Park was a retirement village (if that is the finding made). That submission is plainly wrong.
The respondent's solicitor submitted that, as he understood the position of his (other) client, being CTP, it would agree to abide the result of any proceeding against CHB. That prediction might be correct but it would be insufficient to bind CTP to the outcome of the proceedings against CHB, and it does not overcome the problem that CTP would have a right to set aside any order of the Tribunal made in its absence but which affected it (per John Alexander at [136]).
Fifth, orders are sought against Mr Booker and Ms Kelly and yet they are not named as parties to the proceedings. The appellants' solicitor seemed to think that they could later be joined if and when necessary. With respect, that was not an appropriate course. Their rights may be affected by any findings of the Tribunal against CHB and they should be joined for the same reason that CTP should be joined. Further, and this also applies to the joinder of CTP, their absence from the proceedings as presently constituted does not, in our view, accord with s 36 of the Civil and Administrative Tribunal Act 2013 (NSW) and the obligation of the parties to co-operate in the processes of the Tribunal to facilitate the just, quick and cheap resolution of the real issues in the proceedings [s 36(1)] and to facilitate the resolution of the issues between the parties in such a way that the cost to the parties and the Tribunal is proportionate to the importance and complexity of the subject-matter of the proceedings [s 36(4)].
Sixth, the appellants' solicitor said that the Tribunal below decided, in substance, a separate question, namely, whether the Park was a retirement village within the meaning of that term in the RV Act. He says there was a direction that the parties file and serve submissions on that point but was unable to point to any order that a separate question be decided in advance and separate to all other issues in the case.
The respondent's solicitor said that what happened at the hearing was, in effect, the hearing of this separate question, but similarly could not point to any order to that effect.
The result is that many relevant issues were not determined by the Tribunal. The appellant's solicitor seemed to think that if this separate question was decided in the appellants' favour then the matter could return to the Tribunal for one or more of the outstanding matters to be decided. Implicit in this submission was the idea that the parties could, if they so chose, run a series of hearings cherry picking issues to be decided, and what parties were to be joined, when and if it suited them (subject to the Tribunal's leave). In our view that suggestion, at least in this case, runs counter to the obligations set out under s 36. In any event, there has been no order made by the Tribunal for the hearing of any separate question.
The end result of all of that is that Ms Tait had part only of her case heard. Had she succeeded in that case then any orders made against CHB would have been of no utility. Three necessary parties were not parties to the proceedings. At least one, and probably all three of those necessary parties, could have subsequently had any orders made by the Tribunal which affected their interests set aside. There is a question whether the proceedings were validly commenced against CHB because of s 440D of the Corporations Act, and a question whether Mr Booker and Ms Kelly were authorised to give instructions on behalf of CHB.
In all of those circumstances it seems to us that the proceedings below fundamentally miscarried such that the decision below should be set aside, and the matter returned to the Tribunal. We have wide power to remit matters. In Moloney v Taylor [2016] NSWCA 199 the Court of Appeal said at [18]:
"The Appeal Panel clearly had power pursuant to s 81(1) to make an order requiring the first instance Tribunal to reconsider a matter having regard to the correct provisions of the Act; and the conclusion that it did not was a conclusion of law."
And at [30]-[32]:
"[30] … Rather, it is required to conduct itself with minimum formality and to reach decisions according to the substantive merits of the case, and not by reference to legal form or technicalities. Further, it is to exercise its powers speedily and economically.
[31] On appeal, the question for the Appeal Panel was whether in substance the Tribunal had made an appealable error and, if so, what orders should be made which would best achieve justice between the parties having regard to that error and the provisions of the Act. That question was not addressed, or not properly addressed, simply by asking the question whether the Tribunal had power to make the orders sought under the provision relied on by the Tribunal.
[32] Whether the appellant had identified the correct section or not, it was plain that he sought to recover from the respondent compensation for the costs of removing the structure left behind by the respondent on site 63 in the caravan park. The CAT Act required both the Tribunal at first instance and the Appeal Panel to address the question whether the appellant was entitled to recover the amount claimed as a matter of substance, not in terms of legal form and technicalities, redolent of pre-Judicature Act formalism."
As the above is dispositive of the appeal we need not decide the remaining issues on the appeal. However, we do note that the reasons of the Tribunal appear to disclose that it erred in law in that it failed to address a substantial argument raised by the appellant. The question the Tribunal determined was whether the Park was a retirement village within the meaning of that term in s 5 of the RV Act because it was "predominantly or exclusively occupied … by retired persons". That was not the totality of the appellant's case.
Part of the appellant's case, as expressed in writing in paragraph 5 of the Annexure to Retirement Villages Application which was annexed to the application filed in the Tribunal on 22 January 2020, was that the Park was a retirement village because it was "intended to be predominantly or exclusively occupied" by retired persons.
Given the Park consisted of 62 cabin and powered sites, and 62 shares were advertised by CHB for sale to "grey nomads" who were defined as being "retired or semi-retired" people in the Explanation, there was some evidence to support that contention. It is clear that the Tribunal did not address itself to that part of the appellant's case.
[2]
Conclusion
We make the following orders:
1. Appeal upheld.
2. The decision of the Tribunal is set aside.
3. The proceedings are returned to be heard by the Tribunal differently constituted.
4. At the first directions hearing, and in addition to other matters relevant to the future conduct of the proceedings, the parties are directed to address the Tribunal on the following issues:
1. the necessary parties to the proceedings;
2. whether the proceedings could be commenced or continued against the respondent;
3. whether the directors of the respondent are authorised to provide instructions in relation to these proceedings.
[3]
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: 21 July 2020