Legal errors in the report?
93 The applicants submit that in making recommendations to the Minister, Mr Beauman misconstrued the Act in critical respects. It is submitted that "[t]he errors are such that the Report is invalid, and could not be said to disclose grounds reasonably open to the Minister that could justify the appointment of an administrator." The submission relates in the main to Chapter 5 of the Report which I have annexed to these reasons and turns upon the discussion of the concept of "separation of powers."
94 The submission is complex and was developed in the following terms:
"The principal basis for Mr Beauman recommending that an administrator of NSWALC be appointed, and the only basis on which he recommended an 'all-functions' administrator, was a finding that the elected Council of NSWALC had failed to observe, and were likely to continue to fail to observe, the doctrine of 'separation of powers' in relation to the corporate governance of NSWALC. Although the starting point of Mr Beauman's insistence upon the observance of this doctrine appears to have been a concern for 'the liberty of the individual' it is evident that he understood the doctrine to apply to NSWALC in the sense that it is necessary for the proper governance of NSWALC that there be a well defined and observed separation between the powers and functions of the elected Council on the one hand and the powers and functions of the Chief Executive Officer (the 'CEO') and staff of the NSWALC, which he referred to collectively as the 'Corporate Body', on the other.
Mr Beauman's finding was based on a number of instances which were said to evidence the failing by the Council to ensure an effective separation of powers. These instances are all described or referred to in Chapter 5 of the Report. All of these instances, bar two, took place prior to the commencement of significant amendments to the Act on 25 October 2002, which amendments were introduced by the Aboriginal Land Rights Amendment Act 2001, No 118. The majority of these instances relate to the conduct of the Treasurer (the Third Applicant) towards the former CEO.
Prior to the commencement of those amendments, all of the functions of NSWALC were, by law, vested in the elected Council. Consistent with this, the position of councillor was (and still is) a full-time salaried position. The Act, prior to the amendments introduced by the 2001 amending Act, did not provide for the delegation of any of these functions to others including any employed CEO. There was no scope for the type of separation of powers and functions that Mr Beauman regarded as essential. Further, special functions were reserved for the Treasurer.
NSWALC is constituted by the Act (and regulations and rules made under the Act). As the Act existed prior to commencement of the amendments (the 'Reprint 6 Act'), provisions in relation to the constitution of NSWALC were contained largely in Part 4. Part 4 of the Reprint 6 Act is, notably, brief. Section 22 constituted the Council as consisting of elected 'full-time Aboriginal councillors equal in number to the number of Regional Aboriginal Land Council areas'. Provisions relating to the remuneration of councillors were found in Schedule 5 of the Act. Schedule 6 set out provisions in relation to 'procedure' and included a provision requiring the councillors to elect a Chairperson, a Secretary and Treasurer at its first meeting after each election (cl 2). The functions of the Council were set out in s 23. Section 24 provided for the Council to establish Rules for itself if the Registrar required it, and further provided that until such Rules are established, the Rules of the Council were to be the so-called 'Model Rules' prescribed in the Regulations. The Registrar never did require the Council to submit Rules and so the rules of NSWALC were the Model Rules prescribed by the regulations.
Section 27B (inserted into the Act in 1990) empowered the Council to employ staff 'to enable the Council to exercise its functions' (s 27B(a)). The power to delegate functions of the Council to staff was, however, confined by s 55(3) which provided that the 'New South Wales Aboriginal Land Council may delegate to a person prescribed by the regulations any of the functions of the Council prescribed by the regulations …'. No such persons or functions were ever prescribed. The performance of all functions of NSWALC were, under the Reprint 6 Act, therefore, vested by law in the elected Council alone.
Specific provisions in relation to the functions of the Treasurer were contained in the Model Rules. Immediately prior to the amendment of the Act in October 2002, the relevant regulations were those in the Aboriginal Land Rights Regulation 1996 (the '1996 Regulation'). The Model Rules were in Schedule 3 to the 1996 Regulation. The functions of the Treasurer were contained in cl 15 and 21. These provisions gave the Treasurer effective responsibility for and control over NSWALC's finances. Specific provisions in relation to the functions of the Chairperson and Secretary were contained in cl 19 and 20 of the Model Rules.
This distribution of powers and functions within NSWALC is in contrast to that established by the Act as it is now. The constitution of NSWALC is now dealt with in Part 7 of the Act. The Council is still constituted by full-time elected councillors (s 107(1)) and the executive positions of Chairperson, Secretary and Treasurer are retained (Division 6 of Part 7). The Act now provides, however, for the office of CEO (Division 9 of Part 7). It makes the CEO 'generally responsible for the efficient and effective operation … ' of NSWALC (s 139(1)) and gives the CEO specific enumerated functions which include 'the day-to-day management of the Council's affairs' and 'the exercise of such functions of the Council as are delegated by the Council …' to the CEO (s 139(2)).
The power of the Council to delegate to the CEO is no longer restrained by the extent to which this is prescribed by regulation. Section 146 empowers the Council to delegate all functions other than certain specified functions to the CEO.
There is therefore a marked difference in the legal constitution of NSWALC pre and post 25 October 2002. After 25 October 2002, NSWALC there might be said to be some separation of powers and functions within NSWALC between the elected Council and the CEO. It is significant, however, that even under the post 25 October 2002 regime, the division of powers and responsibilities established under the Act does not entirely fit within the paradigm urged by Mr Beauman in which 'Council' and 'Corporate Body' are entirely distinct. Section 146 reserved significant functions to the elected Council, including the function of making grants for the payment of the costs and expenses of Local and Regional Aboriginal Land Councils. Mr Beauman expressed unease in his report about the full-time nature of the role of councillor and, indeed, went as far as to say that this compromised the separation of powers doctrine.
In supporting his argument that the appointment of an all functions administrator was necessitated by the failure of the elected Council to observe the doctrine of separation of powers, with instances of individual councillors, and notably the Treasurer, 'interfering' in the role of the CEO, Mr Beauman demonstrates that he did not appreciate the significance of the way in which NSWALC was legally constituted. In fact, Mr Beauman makes it clear that to his mind, considerations of law were irrelevant in relation to this issue. On page 37 of his report, for example, he states in relation to an assertion of lawful authority made by the Treasurer:
'Whether this is a correct interpretation of the functions of the Treasurer as set out in the Act or not, it is my view that the Treasurer should have appreciated the need to uphold the division of responsibilities between the Council and the Corporate Body.'
Mr Beauman's error was to take an abstract notion of the 'separation of powers', apparently imported from a consideration of corporate governance issues in another context as his standard for the Council's conduct, rather than the law as it stood at relevant times. This is illustrated by his criticism of the current s 146 of the Act as inconsistent with some (abstract) separation of powers doctrine."
95 It is also submitted that Mr Beauman misdirected himself in law as to the proper construction and operation of s 157 of the Act in that he proceeded on the incorrect premise that the Council had been in breach of s 157. This is said to have influenced Mr Beauman's adverse conclusions in relation to financial management by the Council, with the consequence that those conclusions and the report are invalid.
96 Viewed from the perspective of a constitutional lawyer, the discussion in Chapter 5 of the Report of the concept of "separation of powers" is at times confused. However, the fundamental concern of Mr Beauman was that the policy and supervisory role of the Council should be separated from the day-to-day management of the organisation. Mr Beauman expressed concern that this had not occurred. He emphasised that the failure to appoint a Chief Executive Officer or allow that person to manage the organisation had compromised the integrity and effectiveness of the Council.
97 In his report, Mr Beauman found that the Council "does not maintain a register of general disclosures of interests, a gifts register, or a register of Councillor's external representations. The failure to maintain appropriate registers is a significant failing on the corporate governance of NSWALC."
98 In the Parliament, the Minister noted in his statement that the investigator's findings included "a failure to maintain registers of pecuniary and external interests." The Minister described the finding as "extremely serious."
99 The substance of the complaint made by the applicants is that Mr Beauman, although discussing the relevant legislation, has failed to appreciate that the amendments made to the Act in October 2002, which repealed s 56B and in particular subsection (4), had the effect that there was no longer a requirement to keep a register of pecuniary interests. The only statutory obligation was to disclose relevant matters at council meetings and for those matters to be recorded in the minutes. It is suggested that Mr Beauman has misdirected himself as to the statutory requirements or "simply chose to ignore them in reaching his findings and recommendation on the issue by referring instead to abstract concepts of "best practice."
100 Notwithstanding the fact that the description of the relevant principles as "separation of powers" may have been inappropriate, the fundamental point being made by Mr Beauman related to the management structure of the Council. This was a matter he was required to investigate and in relation to which he was required to form a judgment and make his report.
101 I accept that following the Aboriginal Land Rights Amendment Act 2001 (NSW) the relationship between the elected councillors and the management of the Council was clarified. It may be that the administrative arrangements which Mr Beauman believed to be ideal could not have been entirely achieved before those amendments were made. However, one of Mr Beauman's fundamental concerns appears to have been the failure to engage a Chief Executive. He also catalogued a sequence of events which, even if the legislative amendment altered the structure of the organisation, on any view, reflects an ineffective relationship between the Treasurer and the Chief Executive. Mr Beauman records that problems with the actions of the Treasurer continued up to and including the period of the investigation.
102 Mr Beauman's conclusions in Chapter 5 are not dependent on findings in relation only to events before the legislative amendments came into operation. The conclusions relate to contemporary matters which reflect an organisation in serious difficulty with respect to its effective management. Even if some of Mr Beauman's observations are at odds with the original legal structure of the organisation, this would not in my view have the consequence of rendering his report a nullity.
103 In relation to the matter of pecuniary interests, in my opinion the applicants' criticism of Mr Beauman cannot be sustained. The report discusses the relevant legislation at page 46 and, in my opinion, sets it out correctly. In particular, Mr Beauman records the fact that "the requirement to maintain a pecuniary interest register has been replaced by a requirement for the nature of the interest to be recorded in the minutes of the meeting."
104 However, notwithstanding the statutory obligation, Mr Beauman draws attention at p 53 of the Report to the approach which he believes should be taken to be best practice corporate governance. He says in this respect:
"Best practice would suggest that a general disclosure of all relevant interests should be made by Councillors upon their election and regularly reviewed during their term of appointment. This register should be available for review by Councillors, NSWALC and the membership. This register should be updated regularly.
The failure to maintain an appropriate register of interests is a significant failing on the corporate governance of NSWALC."
105 As I understand the Report, this conclusion is not based upon any statutory obligation. Mr Beauman was discussing matters of best practice. In my opinion, he was not only entitled to discuss those matters, but it was appropriate for him to express conclusions based upon his approach to best practice of an organisation such as the Council.
106 In any event, even if Mr Beauman had misunderstood the law this would not, in my opinion, have the consequence that the Report was not a report "of an investigator appointed in accordance with Division 1" within the meaning of s 222(3). Perhaps if the report was founded upon an understanding of the law which was not reasonably open, with the consequence that the ultimate conclusions were not open, it could be set aside. However, a submission to that effect could not be made in the present case.
107 With respect to the submission in relation to s 157, I am satisfied that it is unnecessary to resolve that matter. Whether or not Mr Beauman's interpretation of the statutory obligation is correct could not, in my opinion, affect the legitimacy of his report for its statutory purpose. As the full discussion at p 85 of the report makes plain, Mr Beauman's concerns extend beyond any alleged failure to comply with the section and were concerned with ensuring that effective budgeting and long-term financial planning processes were put in place.
108 To the extent that budget problems were identified, they extended far beyond any concerns in relation to s 157 and there could be no doubt they were matters which Mr Beauman could and should have raised when reporting to the Minister. Even if the conclusion in relation to s 157 was in error, it could not be said that Mr Beauman's findings on these matters were not open.