Dunghutti Elders Council (Aboriginal Corporation) RNTBC v Registrar of Aboriginal and Torres Strait Islander Corporations [2011] FCAFC 88

FEDERAL COURT OF AUSTRALIA

Citation:	Dunghutti Elders Council (Aboriginal Corporation) RNTBC v Registrar of Aboriginal and Torres Strait Islander Corporations [2011] FCAFC 88

Appeal from:	Dunghutti Elders Council (Aboriginal Corporation) RNTBC v Registrar of Aboriginal and Torres Strait Islander Corporations [2011] FCA 370

Parties:	DUNGHUTTI ELDERS COUNCIL (ABORIGINAL CORPORATION) RNTBC v REGISTRAR OF ABORIGINAL AND TORRES STRAIT ISLANDER CORPORATIONS and PETER ARMSTRONG

File number:	NSD 500 of 2011

Judges:	KEANE CJ, LANDER AND FOSTER JJ

Date of judgment:	21 July 2011

Catchwords:	ADMINISTRATIVE LAW – registered native title body corporate – notice to show cause why corporation should not be put under special administration – alleged defects in notice making it invalid – apprehended bias as to incontrovertible facts – denial of procedural fairness by failure to provide extraneous documents – reasonable time to respond to notice to show cause – the proper construction of s 487-5 of the Corporations (Aboriginal and Torres Strait Islander) Act 2006 – expenditure of native title trust funds on legal fees

Legislation:	Corporations (Aboriginal and Torres Strait Islander) Act 2006 ss 1-25, 487-1, 487-5, 487-10 and Div 453 Judiciary Act 1903 (Cth) s 39B(1)

Cases cited:	Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 cited Attorney-General v Nottingham Corporation [1904] 1 Ch 673 cited Balmain Association Inc v Planning Administrator for the Leichhardt Council (1991) 25 NSWLR 615 cited Baker v Gough [1963] NSWR 1345 cited Craig, Re (1952) 52 SR (NSW) 265 cited Dunghutti Elders Council (Aboriginal Corporation) RNTBC v Registrar of Aboriginal and Torres Strait Islander Corporations [2011] FCA 370 cited Guiseppe v Registrar of Aboriginal Corporations (2007) 160 FCR 465 cited Habib v Director-General of Security (2009) 175 FCR 411 cited Johnson v Johnson (2000) 201 CLR 488 applied Mahon v Air New Zealand Ltd [1984] AC 808 distinguished Minister for Immigration and Multicultural Affairs v Jia Legeng (2001) 205 CLR 507 cited Murdaca v Australian Securities and Investments Commission (2009) 178 FCR 119 applied Plaintiff M61/2010E v Commonwealth (2010) 272 ALR 14 cited R v Australian Stevedoring Industry Board; Ex parte Melbourne Stevedoring Co Pty Ltd (1953) 88 CLR 100 applied Re Simersall; Blackwell v Bray (1992) 35 FCR 584 cited RPS v The Queen (2000) 199 CLR 620 cited VAAD v Minister for Immigration and Multicultural and Indigenous Affairs [2005] FCAFC 117 cited Waterhouse v Waterhouse (1998) 46 NSWLR 449 cited Wroe v Seed (1863) 66 ER 773 cited
Date of hearing:	8 June 2011
Place:	Sydney
Division:	GENERAL DIVISION
Category:	Catchwords
Number of paragraphs:	111
Counsel for the Appellant:	Mr J McCarthy QC and Mr J Kildea
Solicitor for the Appellant:	Eddy Neumann Lawyers
Counsel for the First and Second Respondents:	Mr N Williams SC
Solicitor for the First and Second Respondents:	Australian Government Solicitor (AGS)

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION	NSD 500 of 2011

ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA

BETWEEN:

DUNGHUTTI ELDERS COUNCIL (ABORIGINAL CORPORATION) RNTBC

Appellant

AND:

REGISTRAR OF ABORIGINAL AND TORRES STRAIT ISLANDER CORPORATIONS

First Respondent

PETER ARMSTRONG

Second Respondent

JUDGES:	KEANE CJ, LANDER AND FOSTER JJ
DATE OF ORDER:	21 july 2011
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1. The appeal be dismissed.

2. Order 1 above be stayed for 21 days.

3. Order 2 made by Bennett J in proceeding NSD 181 of 2011 continue for 21 days.

4. Within seven days of the date of publication of these Reasons for Judgment the respondents are to notify the solicitors for the appellant of the precise orders as to costs which the respondents intend to seek and the identity of those persons and/or entities against whom those orders are to be sought.

5. If, pursuant to order 4 above, costs are sought against persons and/or entities who are not presently parties to the appeal, the respondents are to file and serve within fourteen (14) days of the date of publication of these Reasons for Judgment a Notice of Motion by which they seek to join to this appeal such persons and entities against whom they propose to seek an order for costs and in which the precise orders sought, together with all the affidavits in support of the relief sought, are included.

6. In the event that a Notice of Motion contemplated by order 5 above is filed and served within the time limited by that order, the Registrar of the New South Wales District Registry of the Court is to list the said Notice of Motion for directions before a member of the Full Court no later than nineteen (19) days after the publication of these Reasons for Judgment.

7. Each party have liberty to apply in respect of Orders 2-6 above on such notice as a member of the Full Court might direct.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court’s website.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION	NSD 500 of 2011

ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA

BETWEEN:

DUNGHUTTI ELDERS COUNCIL (ABORIGINAL CORPORATION) RNTBC

Appellant

AND:

REGISTRAR OF ABORIGINAL AND TORRES STRAIT ISLANDER CORPORATIONS

First Respondent

PETER ARMSTRONG

Second Respondent

JUDGES:	KEANE CJ, LANDER AND FOSTER JJ
DATE:	21 july 2011
PLACE:	SYDNEY

REASONS FOR JUDGMENT

1 On 7 April 1997 the Dunghutti people were determined by the Federal Court of Australia to be the native title holders of land at Crescent Head on the north coast of New South Wales. Thereafter negotiations ensued with the Government of New South Wales and the NSW Aboriginal Land Council. On 6 January 2010, as a result of those negotiations and in return for the extinguishment of the native title held by the Dunghutti people in an area of land described as Block B, the Dunghutti Elders Council (Aboriginal Corporation) RNTBC (the appellant) received on behalf of the Dunghutti people approximately $6.1 million by way of compensation.

2 The appellant has been engaged for some years in a number of disputes including disputes with persons who are, or claim to be, members of the Dunghutti people. In the course of these disputes the appellant has incurred legal expenses, the payment of which has reduced the funds held by the appellant for the Dunghutti people. This became a matter of concern to the first respondent, the Registrar of Aboriginal and Torres Strait Islander Corporations.

3 In February 2011 the second respondent, as the delegate of the first respondent, issued a notice to the appellant to show cause why the appellant should not be put under special administration under the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (the CATSI Act) which regulates the appellant’s corporate status as a registered native title body corporate. This notice raised issues as to the appellant’s corporate governance including the amount of expenditure on legal fees incurred by reason of disputes in which the appellant has been engaged.

4 Upon receipt of this notice, the appellant instituted proceedings in the Federal Court seeking declarations that the notice was invalid and an order restraining the second respondent from making a determination that the appellant be put under special administration.

5 These proceedings did not raise the question whether the appellant should be put into administration; rather the appellant’s case was that the process commenced by the second respondent’s show cause notice should be halted at the outset because defects attending the commencement of the process are such that any decision by the second respondent at the conclusion of that process will inevitably be invalid.

6 The appellant’s case failed before the learned primary judge. It must fail in this Court as well. It is convenient to set out the legislative and factual background before explaining why that is so.

THE LEGISLATION

7 The objects of the CATSI Act are set forth in s 1-25:

The objects of this Act are to:

(a) provide for the Registrar of Aboriginal and Torres Strait Islander Corporations; and

(b) provide for the Registrar’s functions and powers; and

(c) provide for the incorporation, operation and regulation of those bodies that it is appropriate for this Act to cover; and

(d) without limiting paragraph (c)—provide for the incorporation, operation and regulation of bodies that are incorporated for the purpose of becoming a registered native title body corporate; and

(e) provide for the duties of officers of Aboriginal and Torres Strait Islander corporations and regulate those officers in the performance of those duties.

8 The provisions dealing with the governance of registered native title bodies corporate are set out in Part 3-2 of the CATSI Act. Under these provisions the appellant’s governance is regulated by Rules made by it.

9 The appellant exists to hold property for, and to serve the interests of, the Dunghutti people. In this regard, the appellant’s Rules state that its objectives are:

3 Objectives

The objectives of the corporation are:

(a) to bring together the Dunghutti people for the purpose of making decisions and acting on any matters affecting the Dunghutti people;

(b) to coordinate the native title claims of the Dunghutti people in relation to native title claims;

(d) to become a registered native title body corporate in relation to native title claims made by the members of the Corporation, and as such:

(i) to hold native title on trust for the Dunghutti people;

(ii) to deal with native title in accordance with the wishes of the Dunghutti people;

(iii) to hold compensation paid in relation to native title for the Dunghutti people;

(iv) to act as agent for the Dunghutti native title holders where no trustee is appointed; and

(v) to perform the prescribed functions of a registered native title body corporate under the Native Title Act 1993.

(e) to advance the education, health, welfare and self-determination of the Dunghutti people in any manner agreed by the members.

10 Notwithstanding the difference in language between Rule 3(d)(i) and 3(d)(iii), it is not disputed that the appellant holds the compensation money received by it in relation to the native title of the Dunghutti people on trust for them.

11 Rule 19 of the appellant’s Rules establishes limitations upon the making of decisions affecting native title rights and interests, particularly those relating to the treatment of money held by the appellant for the Dunghutti people:

19.1 Resolutions affecting native title rights and interests

(a) Where the corporation holds:

(i) native title to land as trustee for the native title holders; or

(ii) compensation moneys paid in relation to native title

resolutions which might affect the native title rights and interests or which involve the expenditure of any of the compensation money can only be made by the members in general meeting.

(b) Notice of a general meeting at which such resolutions are to be considered must state that native title rights and interests or the compensation fund, as the case may be, may be affected by the resolution.

19.2 Procedure for consulting native title holders

The corporation must consult with, and obtain the consent of the common law holders before making a native title decision. Apart from these rules there is no special procedure for consulting with or obtaining the consent of any native title holders that is required for the performance by the corporation of its functions as a registered native title body corporate.

12 The first respondent exercises a supervisory function in relation to registered native title bodies corporate under the CATSI Act. Relevantly for present purposes, s 487-1 of the CATSI Act empowers the first respondent to make a determination that a relevant corporation be under special administration:

487-1 Registrar may put Aboriginal and Torres Strait Islander corporation under special administration

(1) The Registrar may determine, in writing, that an Aboriginal and Torres Strait Islander corporation is to be under special administration for the period specified in the determination.

(2) A determination under subsection (1) is not a legislative instrument.

(3) The Registrar:

(a) must not make a determination under subsection (1) if:

(i) the corporation is being wound up; or

(ii) a liquidator of the corporation has been appointed; and

(b) may make a determination under subsection (1) even if the corporation is being administered under Part 5.3A of the Corporations Act (as applied by section 521-1 of this Act).

(4) The Registrar may make a determination under subsection (1) only if the Registrar is satisfied that at least one of the grounds set out in section 487-5 is satisfied.

(5) The Registrar must make a determination under subsection (1) in accordance with section 487-10.

13 The grounds upon which a determination under s 487-1(1) may be made by the first respondent are set out in s 487-5. Section 487-5(1) provides:

487-5 Grounds for special administration

(1) The following are the grounds for determining that an Aboriginal and Torres Strait Islander corporation is to be under special administration:

(a) the corporation has traded at a loss for at least 6 months during the period of 12 months before the determination is made;

(b) the corporation or the officers of the corporation have failed to comply with, or to ensure that the corporation complies with, one or more of the following:

(i) a provision of this Act;

(ii) an internal governance rule of the corporation;

(iii) a notice that the Registrar has given the directors under section 439-20;

and the corporation has, or the officers have, failed to give the Registrar a satisfactory explanation for the failure;

(d) the officers of the corporation have acted in the affairs of the corporation:

(i) in their own interests rather than in the interests of the members of the corporation as a whole; or

(ii) in a way that appears to be unfair or unjust to members of the corporation;

(e) the affairs of the corporation are being conducted in a way that is:

(i) oppressive; or

(ii) unfairly prejudicial to, or unfairly discriminatory against, a member or members of the corporation; or

(iii) contrary to the interests of the members of the corporation as a whole;

(f) disputes between:

(i) the corporation’s members; or

(ii) the corporation’s members and the corporation’s officers;

are interfering with the proper conduct of the corporation’s affairs;

(g) disputes between the corporation’s officers are interfering with the proper conduct of the corporation’s affairs;

(h) a majority of the corporation’s directors have requested the Registrar in writing to appoint a special administrator;

(i) at least the required number of members under subsection (4) request the Registrar, in writing, to appoint a special administrator;

(j) the appointment of the special administrator is otherwise required:

(i) in the interests of the members of the corporation; or

(ii) in the interest of the corporation’s creditors; or

(iii) in the public interest.

Paragraph (j) does not limit any of the other paragraphs in this subsection.

…

14 The procedure for making a determination under s 487-1 is provided by s 487-10:

487-10 Show cause notice procedure

(1) Subject to subsection (2), the Registrar must, before determining that an Aboriginal and Torres Strait Islander corporation is to be under special administration:

(a) give the corporation notice in writing inviting the corporation to show cause, within a reasonable period specified in the notice, why the determination should not be made; and

(b) consider any representations the corporation makes to the Registrar within that period.

(2) Subsection (1) does not apply if the Registrar is satisfied that the determination needs to be made as a matter of urgency to prevent:

(a) a likely loss of property of the corporation; or

(b) a likely loss of public money held or administered by the corporation; or

(i) a provision of this Act or the regulations; or

(ii) a law of the Commonwealth or a State or Territory; or

(d) the corporation ceasing to provide, or suspending the provision of, services that are essential to, or very significant for, a particular community or group.

(3) Public money includes money that:

(a) has been granted to the corporation by:

(i) the Commonwealth, a State or a Territory; or

(ii) a public authority; and

(b) has been granted to the corporation on conditions.

(4) Without limiting paragraph (2)(c), the conduct referred to in that paragraph may be conduct of:

(a) the corporation; or

(b) an officer of the corporation; or

(d) an officer of a body corporate related to the corporation.

(5) If the Registrar:

(a) gives an Aboriginal and Torres Strait Islander corporation notice under subsection (1); and

(b) decides not to proceed to determine that the corporation is to be under special administration;

the Registrar must give the corporation notice in writing, as soon as practicable after the decision is made, that the Registrar does not propose to determine that the corporation is to be under special administration.

15 It may be noted that s 487-10 does not prescribe the contents of a show cause notice beyond the general requirements of s 487-10(1)(a).

FACTUAL BACKGROUND

16 On 31 January 2011 the respondents, purporting to act under s 487-10(1)(a) of the CATSI Act, sent to the appellant a letter stating that it was “considering putting your corporation under special administration”. A notice to show cause was attached to that letter (the January notice).

17 On 8 February 2011 the appellant’s solicitors replied asserting that the January notice was invalid by reason of defects in its form and content. On 11 February 2011 the respondents wrote back withdrawing the January notice and enclosing a second notice to show cause (the February notice) which required a response by 28 February 2011.

18 The February notice asserted a number of grounds for putting the appellant under special administration pursuant to s 487-5(1) of the CATSI Act. These grounds may be summarised as follows:

a failure by the appellant to comply with a provision of the Act or an internal governance rule of the corporation (s 487-5(1)(b)) in connection with excessive expenditure on legal fees;

officers of the appellant have acted in their own interests rather than in the interests of the members of the corporation as a whole, or officers have acted in a way that appeared to be unfair or unjust (s 487-5(1)(d));

the appellant’s affairs were being conducted in a way that was oppressive, unfairly prejudicial, unfairly discriminatory, or contrary to the interests of the members of the corporation as a whole (s 487-5(1)(e));

disputes between the appellant’s members and officers were interfering with the proper conduct of the corporation’s affairs (s 487-5(1)(f));

the appointment of the special administrator is required for the appellant as it is in the interests of the appellant’s members or in the public interest (s 487-5(1)(j)).

19 On 18 February 2011 the appellant’s solicitors wrote to the respondents in relation to the February notice asserting that it too was invalid and requesting that it be withdrawn. The respondents declined to withdraw the February notice. In response, the appellant commenced proceedings in this Court on 24 February 2011.

20 Some reference to the detail of the correspondence and the notices is necessary. The need to set out the detail of the correspondence and notices arises because the complaints made by the appellant include a complaint as to the insufficiency of the identification of the matters said to be of concern to the respondents. Reference to this material shows that it is difficult to give any countenance to this complaint.

21 The January notice contained the following relevant material:

The Directors

Dunghutti Elders Council (Aboriginal Corporation) RNTBC

PO Box 179

KEMPSEY NSW 2440

TAKE NOTICE that under section 487-10(1) of the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (the Act), I, Peter Armstrong, a delegate of the Registrar of Aboriginal and Torres Strait Islander Corporations (the Registrar) invite the Dunghutti Elders Council (Aboriginal Corporation) RNTBC (ICN 2867) (the corporation or DECAC) to show cause, by close of business on Wednesday, 16 February 2011, why I should not determine under section 487-1 of the Act that the corporation is to be under special administration.

The first part of this notice sets out the grounds that I consider may exist to enable the making of such a determination. The second part of this notice sets out my reasons for considering that the grounds may exist and a determination may be warranted.

PART 1 – GROUNDS

1.1 A ground that I consider may exist to enable the making of the determination arises under section 487-5(1)(b) of the Act, namely:

(b) the corporation or the officers of the corporation have failed to comply with, or to ensure that the corporation complies with, one or more of the following:

(i) a provision of the Act

(ii) an internal governance rule of the corporation,

…

and the corporation has, or the officers have, failed to give the Registrar a satisfactory explanation for the failure.

I can determine that the corporation is to be under special administration if the corporation or its officers have failed to comply with a provision of the Act or the corporation’s internal governance rules, without satisfactory explanation.

…

I refer to the suspected breaches of the Act and the rule book set out in section 2.2 below.

1.2 A further ground that I consider may exist to enable the making of the determination arises under section 487-5(1)(d) of the Act, namely:

(d) the officers of the corporation have acted in the affairs of the corporation:

(i) in their own interests rather than the interests of the members of the corporation as a whole, or

(ii) in a way that appears to be unfair or unjust to members of the corporation.

I can determine that the corporation is to be under special administration if I am satisfied that the officers of the corporation have acted in the affairs of the corporation in their own interests rather than in the interests of the members of the corporation as a whole, or in a way that appears to be unfair or unjust to members of the corporation.

I refer to the matters set out in section 2.3 below.

1.3 A further ground that I consider may exist to enable the making of the determination arises under section 487-5(1)(e) of the Act, namely:

(e) the affairs of the corporation are being conducted in a way that is:

(i) oppressive, or

(iii) contrary to the interests of the members of the corporation as a whole.

I can determine that the corporation is to be under special administration if I am satisfied that the affairs of the corporation are being conducted in a way that is oppressive or contrary to the interests of the members of the corporation as a whole.

I refer to the matters set out in section 2.4 below.

1.4 A further ground that I consider may exist to enable the making of the determination arises under section 487-5(1)(f) of the Act, namely:

(f) disputes between:

(ii) the corporation’s members and the corporation’s officers, are interfering with the proper conduct of the corporation’s affairs.

I can determine that the corporation is to be under special administration if I am satisfied that the appointment of the special administrator is required because of disputes between the corporation’s members and officers.

I refer to the matters set out in section 2.5 below.

1.5 A further ground that I consider may exist to enable the making of the determination arises under section 487-5(1)(j) of the Act, namely:

(j) the appointment of the special administrator is otherwise required:

(i) in the interests of the members of the corporation, or…

(iii) in the public interest.

I can determine that the corporation is to be under special administration if I am satisfied that the appointment of the special administrator is otherwise required in the interests of the members of the corporation or in the public interest.

I refer to the matters set out in section 2.6 below.

PART 2 – REASONS FOR CONSIDERING THAT GROUNDS MAY EXIST

Section 2.1 – The corporation’s circumstances

2.1.1 Incorporation and native title responsibilities

The Dunghutti people were formally recognised on 7 April 1997 by the Federal Court of Australia as the native title holders of land at Crescent Head on the New South Wales north coast. The determination was made with the consent of all parties, including the State of New South Wales, 14 Crescent Head residents and the NSW Aboriginal Land Council.

In October 1996 the State of New Wales had agreed to pay compensation to the Dunghutti people to acquire this land The compensation was to be held by a body corporate (to be incorporated) on trust for the Dunghutti people. The Dunghutti Elders Council (Aboriginal Corporation) was incorporated on 11 November 1996 for this and other purposes.

The corporation is a registered native title body corporate (RNTBC), within the meaning of that term in section 253 of the Native Title Act 1993.

As an RNTBC the corporation holds the native title rights and interests in certain land (or compensation received for the extinguishment of native title or acts affecting the native title in that land) on trust for the Dunghutti people, the native title holders of certain lands in the Kempsey region of New South Wales. As an RNTBC the corporation also acts as the agent or representative of all Dunghutti people in respect of matters relating to native title and performs other functions as set out in the Native Title Act and any regulations made under that Act.

The majority of the objectives of the corporation in rule 3 of the corporation’s rule book, relate to the corporation’s role as an RNTBC in representing the interest of all Dunghutti people

In April 1997 an amount of $738,000 was paid into the New South Wales Aboriginal Land Council Trust Account on behalf of the corporation for the first part of the native title compensation claim for the extinguishment of native title over land at Crescent Head near Kempsey, known as Block A.

In February 2010 the New South Wales Government made a payment of $6.1 million to the corporation for the second part of the native title compensation claim for the extinguishment of native title over land at Crescent Head near Kempsey, known as Block B. The government intended to use the land for residential development. The payment to the corporation has escalated disputes between certain members and the directors of the corporation.

2.1.2 Financial position

The financial statements of the corporation indicate that during the years ended 30 June 1999 to 30 June 2002 the corporation reported surpluses and its audit reports were unqualified.

By 2004 the corporation started incurring trading losses and the native title compensation funds, the only significant asset of the corporation, started reducing annually. The corporation traded at a loss from 2004 until 30 June 2009 with a significant loss of $546,192 in the financial year ended 30 June 2009, including significant legal costs of ($188,832 or 31.7% of all corporation expenditure) partly incurred as a result of the disputes between members and the directors of the corporation.

In the year ended 30 June 2010 the corporation reported a significant surplus of $5,090,304 as a result of the one off payment by the New South Wales Government of $6,076,242 in compensation for Block B during the financial year. In the financial year ending 30 June 2010 the corporation incurred legal costs of $692,248 (60.8% of all corporation expenditure) partly as a result of the disputes between members and the directors of the corporation.

In the 2008/09 and 2009/10 financial years the corporation spent a total of $881,080 on legal costs (not all of which was related to the disputes or the Administrative Appeals Tribunal (AAT) proceedings). Expenditure on legal costs amounted to 50.8% of the corporation’s total expenditure. The quantum of expenditure on legal costs and its proportion of total expenditure is exceptionally high for a corporation of the size and nature of DECAC.

Prior to the disputes the corporation’s expenditure on legal costs was minimal. For example, in the 2005/06 financial year the corporation had nil expenditure on legal costs. In the 2006/07 financial year the corporation had expenditure of $1,500 on legal costs which equated to 0.9% of total expenditure. The disputes commenced in the middle of the 2007/08 financial year and in that year the corporation’s legal costs were $55,000 which equated to 26.3% of total expenditure.

…

2.1.4 Members’ concerns regarding the governance of the corporation and AAT proceedings

In 2007 a number of members of the corporation attempted to call a meeting of the members to raise their concerns regarding the governance of the corporation, including the use of its financial resources, and to remove the directors of the corporation. A number of complaints were made to the Registrar by members regarding this meeting and another subsequent meeting of members called by the directors of the corporation.

At or around the time of the members’ meetings in 2007 approximately 117 people applied in writing (in the membership form prescribed in the corporation’s rule book) for membership of the corporation. It is generally accepted that these people are associated with and/or supportive of the members that attempted to call the meeting and subsequently commenced proceedings in the AAT, as described below.

On 18 September 2008 five members of the corporation applied to the AAT for an order setting aside a decision of the Registrar refusing registration of their details as directors of the corporation. This involved ‘a dispute between two groups of people who sought to be registered as the directors of [the corporation] in 2007.

The applicants in the AAT proceedings submitted that:

A determination within the present proceeding would materially assist the Pending Applicants [for membership] in their attempt to either be admitted or recognised as members of the [corporation] or the resolution of wider disputes amongst the Dunghutti people and within the membership and governance of the [corporation] itself.

In 2009 the AAT referred the dispute between the members and the directors of the corporation for mediation or conciliation to ‘allow the applicants and the [corporation’s] directors an opportunity for the first time since the start of the dispute to meet in person and discuss the dispute. The conciliation was unsuccessful in resolving any of the disputes.

On 14 October 2009 Mr RP Handley, Deputy President of the AAT dismissed the application for review of the Registrar’s decision and the disputes between certain members and the directors of the corporation continued. The corporation incurred significant legal costs during the AAT proceedings which are reflected in the 2008/09 and 2009/10 financial reports of the corporation. In those two financial years the corporation spent a total of $881,080 on legal costs (not all of which was related to the disputes or the AAT proceedings).

…

In March 2010 a number of complaints were made to the Registrar by members of the corporation indicating that they were in dispute with the directors of the corporation. The disputes related to the governance of the corporation, specifically in relation to a large number of applications for membership of the corporation that had not been processed by the directors and the use of the financial resources of the corporation.

On 26 May 2010 the Registrar convened a meeting in Kempsey of interested persons under section 439-5 of the Act to ‘discuss disputes that the corporation has been involved with in the last two years’. The Registrar also met separately with the directors of the corporation on 25 May 2010 in Kempsey to discuss the disputes and the financial position of the corporation. The disputes were not resolved at the meetings.

On 2 June 2010 the Registrar met with the majority of the directors of the corporation in Canberra with their legal adviser, Mr Eddy Neumann to discuss the disputes between certain members of the corporation and the directors. How to resolve the outstanding applications for membership was also discussed. The disputes and the processing of the applications were still not resolved.

Following further communication between the Registrar, the directors of the corporation and the members in dispute with the directors, a meeting was convened by the Registrar in Kempsey on 16 July 2010. Those that attended the meeting were the Registrar, all of the directors, five Dunghutti elders selected by the members in dispute with the directors to represent them and two anthropologists with significant experience working with the genealogies of the Dunghutti people: Dr Barry Morris from the University of Newcastle and Simon Correy from the NTSCorp (New South Wales native title services).

The purpose of the meeting was for the Dunghutti members present to review the outstanding applications for membership and with the assistance of the anthropologists, confirm whether the applicants were Dunghutti people and over the age of 18 years of age: two of the criteria for membership of the corporation (rule 5.2.2 of the corporation’s rule book). At the meeting all of the applicants for membership (97 were still outstanding of the original 117 applicants) were, with the exception of two applicants, accepted as being at least 18 years of age, of Dunghutti descent and identified themselves as a Dunghutti person.

It was agreed at the meeting that the directors of the corporation would then meet to decide whether to accept any or all of the applicants for membership as members. It was also agreed that the corporation’s contact person, Ms Mary-Lou Buck would undertake further investigation of the eligibility for membership of the two applicants disputed at the meeting. The Registrar wrote to the directors on 19 July 2010 to confirm the outcomes from the meeting. On 20 August 2010 the Registrar wrote to the directors providing further information requested by the directors at the meeting on 16 July 2010.

The directors wrote to the Registrar on 21 October 2010 indicating that the genealogical information provided at the meeting on 16 July 2010 was not clear and the directors would need to meet again with Mr Simon Correy to consider the eligibility of all the applicants for membership. On 4 November 2010 the Registrar wrote to the directors expressing concern at the delay in considering the applications for membership and referring to their duties as directors. The Registrar indicated that legal advice would be sought if the unresolved membership applications were not considered and determined by 30 November 2010.

On 30 November 2010 the directors wrote to the Registrar and indicated that the directors would not meet again to consider the unresolved membership applications until the second half of January 2011. The Registrar responded to this letter in writing on 1 December 2010, expressing the view that ‘this is another unreasonable delay and the directors should meet to process the outstanding membership applications as soon as possible and before the end of [2010].

The directors subsequently called a directors’ meeting on 22 December 2010 to consider the unresolved membership applications and invited Mr Simon Correy to attend. At the meeting the membership applications were considered but no applications were rejected or accepted.

Section 2.2 – Potential failures to comply with the Act and the internal governance rules

2.2.1 section 265-1(1) of the Act (duty of care and diligence)

Obligation

Under 265-1(1) of the Act a director must exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they were a director of a corporation in the corporation’s circumstances and occupied the office held by, and had the same responsibilities within the corporation as the director.

Potential failures

The corporation’s directors have been involved in ongoing disputes with certain members of the corporation. The disputes relate to the governance of the corporation, including the use of its financial resources and the failure to deal with approximately 100 applications for membership from persons claiming to be Dunghutti people. Refer to 2.1.4 and 2.1.5 above for further information.

The corporation has incurred significant legal costs as a result of the disputes and for the financial year ended 30 June 2009 these costs contributed significantly to a trading loss (deficit) of $546,192. In the 2008/09 and 2009/10 financial years the corporation expended a total of $881,080 on legal costs. While it is not possible for the Registrar to determine how much of the total legal costs were incurred directly or indirectly as a result of the disputes, given the corporation’s historical expenditure on legal costs prior to the disputes and the proportion of total expenditure during the disputes (50.8%) I consider that a substantial proportion of the $881,080 was incurred as a result of the disputes.

The applications for membership that remain unresolved were submitted to the corporation in 2008, ostensibly in accordance with the corporation’s rule book. The majority of the unresolved applications have not been dealt with by the corporation. A small number of the applicants have died since their applications were lodged with the corporation.

On the basis of the material available to me, I consider that the following conclusions are available to me:

• The process for deciding applications for membership of the corporation that is applied by the directors in relation to the unresolved membership applications submitted to the corporation in 2008 is not consistent with the process applied to applications for membership by other Dunghutti people. Namely ‘a direction from them to NTSCorp concerning the release of genealogical materials to the corporation and to its consultant Dr Barry Morris’ is only required from the 2008 unresolved applicants for membership.

• The process has not been applied reasonably, fairly and consistently to all Dunghutti people applying for membership of the corporation. The unresolved applications for membership submitted to the corporation in 2008 have not been considered in a timely manner, and in a reasonable, fair and consistent way, as described above.

• By failing to deal with the unresolved membership applications submitted in 2008 the corporation is not able to fully and properly undertake its role under the Native Title Act 1993 as an RNTBC: to act as the agent and trustee for all Dunghutti people in respect of matters relating to native title rights and interests in certain land (or compensation received for the extinguishment of native title or acts affecting the native title in that land).

• The corporation is also unable to fully and properly meet the majority of the objectives that are set out in rule 3 of the corporation’s rule book, which relate to the corporation’s role as an RNTBC and to represent the interests of all Dunghutti people It is apparent from rules 3 and 5.2.2 that the general intention and common understanding of those forming the corporation and seeking recognition of it as an RNTBC was that the corporation is to represent all Dunghutti people and those that are over the age of 18 years and identify as Dunghutti should be permitted to be members. The conduct of the directors in not dealing with the unresolved membership applications reasonably, fairly and consistently is frustrating the corporation in meeting its objectives and the purpose of the corporation.

• The directors have received extensive assistance, from the AAT, anthropologists and the Registrar’s office, to resolve the disputes and to determine whether the applicants for membership meet the eligibility requirements in rule 5.2.2 of the corporation’s rule book. Refer to 2.1.4 and 2.1.5 above for further information.

• No reasonable director acting with reasonable care and diligence would have failed to deal with the membership applications in the time since they were submitted to the corporation in 2008. The directors have failed to deal with the membership applications in a reasonable time and have not applied the process for deciding membership applications reasonably, fairly and consistently to all Dunghutti people applying for membership.

• The actions of the directors in not resolving the disputes and not dealing with the membership applications are not in good faith or for a proper purpose. The directors have acted to exclude from membership people associated with and/or supportive of the current members that are in dispute with the directors. The actions of the directors are to ensure that they remain as directors of the corporation.

• The directors are acting in their own interests rather than in the best interests of the corporation (refer to 2.2.2 below for further information) and no reasonable director exercising care and diligence would have made such decisions.

• The significant expenditure on legal costs by the corporation ($881,080 in 2008/09 and 2009/10 and 50.8% of total expenditure) at the direction of directors is not in the best interests of the corporation and has not been made for a proper purpose.

• In all the circumstances, the directors of the corporation have failed to comply with section 265-1 of the Act and the Registrar has not received a satisfactory explanation for this failure.

...

22 In response to the January notice, the appellant’s solicitors wrote on 8 February 2011 to the respondents. That letter contained the following relevant material.

We refer to your letter of 31 January 2011 addressed to the directors of DECAC and enclosing a notice also addressed to those directors purporting to have been given under s 487-10 of the Corporations (Aboriginal and Torres Strait Islander Act 2006 (“the Act”). We act for DECAC and its directors who have instructed us to reply to your letter as follows:

Notice is invalid

1. Our client does not accept that the notice accompanying your letter of 31 January 2011 is a valid and effective notice to it under s 487-10 of the Act for reasons which include the following:

1.1 Your notice purports to be given under s 487-10 of the Act. That section requires the Registrar of Indigenous Corporations (“the Registrar”) to:

give the corporation notice in writing inviting the corporation to show cause, within a reasonable period specified in the notice, why the determination should not be made.

The determination therein referred to is a determination under s 487-1 of the Act:

that an Aboriginal and Torres Strait Islander corporation is to be under special administration for the period specified in the determination. [emphasis added]

Your notice does not state the period of the proposed special administration. The specification of the period is an integral part of the determination as is clear from the wording of s 487-1 itself and also ss 487-20(1) and s 487-25, both of which include the words “the period specified in the determination”. Your notice does not include any reference to the period to be specified in the determination and accordingly does not inform our client as to what is the determination proposed to be made. Therefore the notice is defective and null and void as a notice under s 487-10 of the Act inviting our client to show cause why the determination should not be made.

1.2 Section 487-10 of the Act requires the notice to be given to the corporation. Section 120-1 of the Act sets out how notices may be served on an Aboriginal and Torres Strait Islander corporation. In the case of DECAC, which is registered under the Act as a “small corporation”, a notice may be served by:

1.1.1 Serving a copy of the document personally on the contact person or by sending it by post to his or her address (s 120-1(c)); or

1.1.2 Serving a copy of the document personally on a director (s 120(d)).

The notice accompanying your letter of 31 January 2011 is addressed to the directors of DECAC not to DECAC itself. It was not served personally on the contact person or by sending it by post to her address. Nor was it served personally on a director. Accordingly, no notice has yet been given to DECAC as required by s 487-10 of the Act.

1.3 Even if the notice were a valid notice under s 487-10 of the Act and had been given to DECAC in the manner required, the period specified in the notice is not a reasonable period to respond, given the nature and extent of the allegations and the incomplete and tendentious recitation of the facts, which calls for a comprehensive answer. In addition, as you are aware, the directors are presently involved in finalising the membership applications with the assistance of Simon Correy and feel obliged to give priority to that task. Accordingly, you have failed to comply with the reasonable notice requirement in s 487-10(1)(a) of the Act.

Notice is defective in content

2. There are other respects in which the notice is defective in its content. We will deal with just two of those defects by way of illustration.

First ground is defective in form and in substance

3. You state in paragraph 1.1 of the notice that the first ground you consider may exist to enable the making of the determination under s 487-1 is a ground that arises under s 487-5(1)(b) of the Act, namely:

(b) the corporation or the officers of the corporation have failed to comply with, or to ensure that the corporation complies with, one or more of the following:

(i) a provision of the Act;

(ii) an internal governance rule of the corporation;

…

and the corporation has, or the officers have, failed to give the Registrar a satisfactory explanation for the failure.

4. You then refer to “suspected” breaches of the Act and the rule book as set out in section 2.2 of the notice, which is headed “Potential failures to comply with the Act and the internal rules” [emphasis added]. In section 2.2 you identify “potential failures” in respect of the following provisions of the Act:

• s 265-1, which is headed “Care and diligence – civil obligation only”;

• s 265-5, which is headed “Good faith – civil obligations”;

• s 265-10, which is headed “Use of position – civil obligations”; and

You also identify r 10.1 of the DECAC rule book, which is headed “General duties”. However, as we read section 2.2.4 of the notice, the alleged non-compliance with r 10.1 is derivative in that it is consequential on the alleged failures of the statutory provisions.

5. Each of the allegations particularised in section 2.2 is directed at a “suspected” or “potential” failure to comply by the directors. It is not alleged that the corporation itself has failed to comply with a provision of the Act or the rule book. Nor is it alleged that the directors have failed to ensure that the corporation has complied with a provision of the Act or the rule book. Therefore, the ground is not properly stated in paragraph 1.1 of the notice. Is your notice inviting DECAC to show cause by reference to the ground as stated in paragraph 1.1, which alleges, inter alia, that DECAC has failed to comply with a provision of the Act or the rule book, or is DECAC expected to work out for itself from the particulars what is the alleged ground?

6. Further, the ground in s 487-5(1)(b) contains two elements: failure to comply with a provision of the Act or the rule book and failure “to give the Registrar a satisfactory explanation for the failure”.

7. As regards the alleged failure to give the Registrar a satisfactory explanation, we note that nowhere in the notice is it asserted that the Registrar has requested the directors of DECAC to give an explanation of the alleged failures and that those directors have failed to give a satisfactory explanation. Nevertheless, it is clear from the concluding words of each of sections 2.2.1, 2.2.2 and 2.2.3 that you have formed the opinion that no satisfactory explanation has been given. Furthermore, in the final paragraph of section 2.2 you state that you “may well conclude…that no explanation could satisfactorily address” the alleged failures. The ground in s 487-5(1)(b) is established only if there has been a failure to give the Registrar a satisfactory explanation of the failure to comply with a provision of the Act or the rule book. The ground is not established merely because the Registrar himself cannot think of an explanation that might be satisfactory. Nor is the ground established because an explanation which has not been requested has not been given.

8. As regards the first element of the ground in s 487-5(1)(b) of the Act, there must be a failure to comply with a provision of the Act or the rule book – not a “suspected” failure or “potential” failure. It is not sufficient for the purposes of the section that the Registrar has formed an opinion that there has been or might have been such a failure or that the Registrar considers that “the conclusion available to me is that the directors” have so failed (see section 2.2.2).

9. A failure to comply with a provision of the Act or the rule book is a jurisdictional fact, the existence of which is essential to the establishment of the ground. It is not appropriate to use the show cause provisions of s 487-10 of the Act to reverse the onus of proof and to oblige the directors of an Aboriginal and Torres Strait Islander corporation to convince the Registrar that they have not failed to comply with a provision of the Act or the rule book. This is particularly so in the case of obligations of a general nature, such as the ones identified, and where the Act contains in s 386-1 a specific procedure for establishing a contravention of the identified provisions.

10. The directors of DECAC reject the opinions asserted by the Registrar in section 2.2 of the notice as to their failure to comply with the identified provisions of the Act and the rule book. If the Registrar considers there is sufficient evidence to establish non-compliance, let him do so under s 386-1. If non-compliance be thereby established the Registrar might then request an explanation for the failure to comply, and, if the Registrar does not receive a satisfactory explanation, he might then give a notice under s 487-10 as to why he should not determine that DECAC is to be under special administration for the period specified.

11. Rather than adopting that procedure, it is clear from the last two paragraphs of section 2.2 of your notice that, in respect of the ground in s 487-5(1)(b), you are using the show cause process in s 487-10 of the Act for the purpose of requiring the directors of DECAC to prove their innocence of the alleged failures to comply: “Were I to conclude that the directors have failed to comply with [the identified sections]…; “Were I to find these, or any of these, breaches to have been established…”. We submit that this is an improper use of Division 487 of the Act.

12. Having regard to the foregoing we submit that the first ground set out in the notice at section 1.1 is defective in form and in substance having regard both to the express terms of s 487-5(1)(b) of the Act and the purpose and intent thereof in the context of the Act as a whole.

The notice contains a tendentious statement of the facts

13. The statement of facts in sections 2.1 and 2.2 is tendentious in that relevant facts are omitted or misstated. As a consequence, conclusions are drawn in section 2.2 that are not open or supportable.

14. This point is demonstrated by the third paragraph of section 2.2.1, where you admit that it is not possible for the Registrar to determine how much of the total legal costs were incurred directly or indirectly as a result of disputes, but nevertheless “consider” that a substantial proportion was so incurred. Later, in the second last dot point in section 2.2.1, you conclude, “The significant expenditure on legal costs…is not in the best interests of the corporation and has not been made for a proper purpose”.

15. Given the admission earlier in section 2.2.1 and the fact that the identified period (2008/2009 and 2009/2010) included the time when DECAC’s legal advisers were involved in drafting the new constitution and in intense and lengthy negotiations with the State government which resulted in the payment to DECAC of $6.1 million, that conclusion, which is unqualified as to any particular proportion of the legal costs, is an extraordinary statement to make and a completely unsupportable conclusion to reach.

16. Had the Registrar requested DECAC to provide details of the legal costs he would have been made aware of the precise break-up of the legal costs, including how much was attributable to constitutional matters and to gaining for the Dunghutti people the $6.1 million paid by the State. He would have also realised that the costs incurred in the year ending 30 June 2010 included legal work going back for a number of years before that. Had the facts been ascertained, the embarrassing, unqualified conclusion in the second last dot point in section 2.2.1, based as it is on an unfounded assumption, could have been avoided.

17. There are many other instances in your notice where facts have been omitted or misstated. The following are two examples:

Processing of membership applications

17.1 In section 2.1.5 of your notice (in the middle paragraph on page 7) you refer to the meeting in Kempsey on 16 July 2010 and state:

At the meeting all of the applicants for membership…were, with the exception of two applicants, accepted as being at least 18 years of age, of Dunghutti descent and identified themselves as a Dunghutti person.

In the next paragraph you state:

The Registrar wrote to the directors on 19 July 2010 to confirm the outcomes from the meeting.

Thereafter, the next letter to which you refer is the Registrar’s letter of 20 August 2010 which you describe simply as “providing further information requested by the directors at the meeting on 16 July 2010”.

17.2 However, you do not recite in your notice that we, on behalf of the DECAC directors, wrote to the Registrar on 30 July 2010 disputing the Registrar’s understanding of the meeting as set out in his letter of 19 July 2010.

17.3 In that letter we stated, inter alia, that the directors did not concede that all but two of the applicants had satisfied the test of identifying as Dunghutti persons. We also wrote that, although it appeared, on the basis of the material presented at the meeting, all but two were of Dunghutti descent, we noted that the display of the material on a screen was unsatisfactory because the information was difficult to read and no hard copies were provided for our clients to review at their own pace.

17.4 We had assumed, reasonably we contend, that the Registrar accepted the directors’ version of the meeting. Rather than taking issue with what we wrote in our letter of 30 July 2010, he stated in his letter of 20 August 2010 that he noted the comment about the difficulty of reading the material and indicated he would assist in arranging for Mr Correy to present the material again.

17.5 Apart from failing to refer to our letter of 30 July 2010 and failing to refer to the fact that the Registrar’s letter of 20 August 2010 apparently accepted the directors’ version of the 16 July meeting, your notice includes as an unqualified statement of fact the sentence in the middle paragraph on page 7, which is quoted above.

17.6 In the second last paragraph on page 7 of your notice you refer to our letter of 21 October 2010 where we again stated that the presentation on 16 July 2010 was not clear. However, you do so in the context of the next sentence which refers to the Registrar’s concerns as to delay. Rather than acknowledging that the directors had complained some 2½ months before of the lack of clarity of in the material presented at the 16 July meeting, the said paragraph seems to be intended to give the impression that the directors raised the issue of the lack of clarity of the presentation long after the event for the purpose of delaying the processing of the applications.

17.7 On the issue of the processing of the membership applications you have also failed to state that shortly after receipt of the membership applications the DECAC directors made numerous requests to NTSCorp for access to the genealogical material relating to the membership applicants. You have also failed to state that despite NTSCorp agreeing to do so at the Administrative Appeals Tribunal conciliation conference on 5 May 2009, NTSCorp refused to make that material available until the meeting of 16 July 2010 and then providing it only in the form of slideshow presentation by Simon Correy.

17.8 Not once in the extensive correspondence and meeting dealing with the membership applications issue has the Registrar suggested that the DECAC directors were acting unreasonably by seeking that material before making a decision as to the acceptance of the applications. Rather, the Registrar has facilitated its being made available, for which we on behalf of the directors have expressed their gratitude in the correspondence.

17.9 Nevertheless, without even referring to the fact that NTSCorp’s withheld the genealogical material for almost two years, you state in the fifth bullet point on page 9 of your notice that you consider it is available to you to conclude, “No reasonable director acting with reasonable care and diligence would have failed to deal with the membership applications in the time since they were submitted to the corporation in 2008”.

17.19 Nor do you state that the dissident members chose to continue the flawed AAT proceedings, for which they were receiving legal aid, rather than validly call a special general meeting or attend annual general meetings.

18. The above are just two examples of the tendentiousness of the statement of facts in the notice of 31 January 2011 which demonstrate the inadequacy of the notice as satisfying the requirements of s 487-10 of the Act. There are other aspects of the notice which are equally inadequate, but which we have not yet particularised in this letter, but we will do so, if need be, at the appropriate time.

19. In addition to what we have stated above as to the invalidity of the notice, we also contend that were you, as the Registrar’s delegate, to make a determination under s 487-1 on the facts and reasons set out in Part 2 of the notice, such a determination would also, in our submission, be capable of being set aside, inter alia, on the grounds that the determination was made without considering relevant material and after taking into consideration irrelevant material.

Documentation relied on by the Registrar’s delegate

20. Even if the notice of 31 January 2011 were a valid and effective notice under s 487-10 of the Act, which we contend is not the case, the failure of the notice to state fully and accurately the relevant facts illustrates the inadequacy of the notice in providing DECAC with a reasonable opportunity to make submissions in relation to the proposed determination under s 487-1.

21. The allegations made against the DECAC directors are very serious. In order for them and the corporation to be afforded procedural fairness and have the benefit of practical justice they are entitled to know the facts and circumstances of the allegations against them and on which you as the Registrar’s delegate will be relying to make the decision whether or not to make a determination under s 487-1. That information has not as yet been provided to DECAC.

22. In order for DECAC to be given such a reasonable opportunity, DECAC must be provided with all the information, including copies of all documents, upon which you intend to rely in deciding whether or not to make such a determination. Unless that information is provided to DECAC and DECAC is given a reasonable time in which to consider it and to take advice in relation to it, our client will not have been given a reasonable opportunity to show cause pursuant to s 487-10 of the Act.

Timing of the notice

23. We are further instructed that the directors of DECAC are disappointed that you have chosen to issue this notice just a few days before the final steps in the processing of the membership applications is to be completed. As you are aware the meeting with Simon Correy on 22 December 2010 was adjourned to 28 December 2010. However, NTSCorp subsequently informed us that that date was not suitable. Accordingly, arrangements were made with NTSCorp and Mr Correy to complete the task on 8 and 9 February 2011.

24. An objective observer might conclude that the time of the notice was intended to put pressure on the directors to make their decisions in a certain way. We are instructed that the directors do not regard themselves under any such pressure and will treat each application for membership on its merits.

Conclusion

25. We are instructed on behalf of DECAC to request that you acknowledge the invalidity of the notice of 31 January 2011, purportedly given under s 487-10 of the Act, and that you withdraw it.

26. If we do not receive written notification of the withdrawal of that notice by 4 pm on 11 February 2011, DECAC will seek such relief as it is advised is appropriate.

27. If the Registrar withdraws the notice and proposes to serve a valid notice, the Registrar should, when giving that notice:

27.1 Provide DECAC with copies of all the information upon which the Registrar intends to rely in deciding whether to make a determination under s 487-1 of the Act; and

27.2 Allow a more extensive time period in which to respond than that which was given in the notice of 31 January 2011.

23 It may be noted here, in advance of our discussion of the appellant’s challenge to the February notice on the basis that “disputes” of concern to the respondents are not sufficiently identified, that in the appellant’s letter of 8 February 2011 there is no suggestion of a difficulty in identifying the “disputes”.

24 The respondents’ letter of 11 February 2011 to the appellant was in the following terms:

Dear Directors,

I am writing to tell you that I am considering putting your corporation under special administration under Division 487 of the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (the Act).

Before I place the corporation under special administration the Act requires me to give the corporation an opportunity to show me why I should not take this action.

I have attached a notice that has been issued under section 487-10 of the Act. The notice sets out in detail all of the matters that are of concern to me.

The notice also invites the corporation to show cause by close of business on Monday 28 February 2011 why it should not be placed under special administration.

Please note that the notice, issued under section 487-10 of the Act, to the corporation on 31 January 2011 is withdrawn.

If you would like to discuss this matter, you can contact me using the toll-free number 1800 622 431 (not free for mobile phones).

25 The February notice contained the following relevant material:

Dunghutti Elders Council (Aboriginal Corporation) RNTBC

c/- Mary-Lou Buck

Contact person

13 Elrington Avenue

KEMPSEY NSW 2440

Dunghutti Elders Council (Aboriginal Corporation) RNTBC

PO Box 179

KEMPSEY NSW 2440

The Directors

Dunghutti Elders Council (Aboriginal Corporation) RNTBC

PO Box 179

KEMPSEY NSW 2440

TAKE NOTICE that under section 487-10(1) of the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (the Act), I, Peter Armstrong, a delegate of the Registrar of Aboriginal and Torres Strait Islander Corporations (the Registrar) invite the Dunghutti Elders Council (Aboriginal Corporation) RNTBC (ICN 2867) (the corporation or DECAC) to show cause, by close of business on Monday, 28 February 2011, why I should not determine under section 487-1 of the Act that the corporation is to be under special administration for a period of six months from the date of any such determination.

PART 1 – GROUNDS

1.1 A ground that I consider may exist to enable the making of the determination arises under section 487-5(1)(b) of the Act, namely:

(b) the corporation or the officers of the corporation have failed to comply with, or to ensure that the corporation complies with, one or more of the following:

(i) a provision of the Act

(ii) an internal governance rule of the corporation,

…

and the corporation has, or the officers have, failed to give the Registrar a satisfactory explanation for the failure.

The internal governance rules of the corporation can be found in the rule book of the corporation, as approved by a delegate of the Registrar.

I refer to the suspected breaches of the Act and the rule book set out in section 2.2 below.

1.2 A further ground that I consider may exist to enable the making of the determination arises under section 487-5(1)(d) of the Act, namely:

(d) the officers of the corporation have acted in the affairs of the corporation:

(i) in their own interests rather than the interests of the members of the corporation as a whole, or

(ii) in a way that appears to be unfair or unjust to members of the corporation.

I refer to the matters set out in section 2.3 below.

1.3 A further ground that I consider may exist to enable the making of the determination arises under section 487-5(1)(e) of the Act, namely:

(e) the affairs of the corporation are being conducted in a way that is:

(i) oppressive, or

(iii) contrary to the interests of the members of the corporation as a whole.

I refer to the matters set out in section 2.4 below.

1.4 A further ground that I consider may exist to enable the making of the determination arises under section 487-5(1)(f) of the Act, namely:

(f) disputes between:

(ii) the corporation’s members and the corporation’s officers, are interfering with the proper conduct of the corporation’s affairs.

I refer to the matters set out in section 2.5 below.

1.5 A further ground that I consider may exist to enable the making of the determination arises under section 487-5(1)(j) of the Act, namely:

(j) the appointment of the special administrator is otherwise required:

(i) in the interests of the members of the corporation, or…

(iii) in the public interest.

I refer to the matters set out in section 2.6 below.

…

2.1.2 Financial position

The financial statements of the corporation indicate that during the years ended 30 June 1999 to 30 June 2002 the corporation reported surpluses and its audit reports were unqualified.

By 2004 the corporation started incurring trading losses and the native title compensation funds, the only significant asset of the corporation, started reducing annually. The corporation traded at a loss from 2004 until 30 June 2009 with a significant loss of $546,192 in the financial year ended 30 June 2009, including significant legal costs ($188,832 or 31.7% of all corporation expenditure) partly incurred as a result of the disputes between members and the directors of the corporation.

In the year ended 30 June 23010 the corporation reported a significant surplus of $5,090,304 as a result of the one off payment by the New South Wales Government of $6,076,242 in compensation for Block B during the financial year. In the financial year ending 30 June 2010 the corporation incurred legal costs of $692,248 (60.8% of all corporation expenditure) partly as a result of the disputes between members and the directors of the corporation.

…

2.1.4 Members’ concerns regarding the governance of the corporation and AAT proceedings

In March 2008 the corporation’s solicitor wrote to about 71 applicants and required them to complete new revised membership application forms. The new form provided for the provision of detailed ancestral information by an applicant.

In August 2008, with assistance from anthropologists at NTSCorp Limited, 96 membership applications were lodged with the corporation.

The applicants in the AAT proceedings submitted that:

The cost of legal services to the corporation resulting from the disputes was noted by Mr RP Handley, Deputy President in the AAT proceedings at p12:

The time and costs involved in these proceedings continue to mount.

2.1.5 Ongoing disputes

On 29 October 2008 the directors of the corporation resolved to write to each of these applicants ‘seeking a direction from them to NTSCorp concerning the release of genealogical materials to the corporation and to its consultant Dr Barry Morris.’ Only three of the applicants signed the direction and returned it to the corporation. At a meeting of interested persons convened by the Registrar under section 439-5 of the Act on 26 May 2010 in Kempsey, described below, a number of applicants advised the Registrar that they did not want the corporation to be provided with copies of their genealogical records that would be retained by the corporation.

On 19 February the directors of the corporation met and admitted 23 people as members of the corporation. Some of those admitted were unresolved applicants from 2008. On 22 August 2009 the directors of the corporation met and admitted 10 people as members of the corporation. These 10 people were new applicants for membership and were not required to sign a direction to NTSCorp for the release of their genealogical information.

On 15 July 2010 the directors of the corporation met and admitted seven people as members of the corporation: ‘The Secretary advised that membership Applications had been received from the grandchildren of her mother and fellow Director Muriel Vale, (Eileen Donovan, Clarence Donovan, Marjorie Rodgers, Thomas Donovan and Lillian Donovan) and also from two of the daughters of fellow Directors Mavis and Cyril Davis, (namely Tracey Griffen and Leonie McKay)…. That these applications are in a different category to the other pending applications (emphasis added) because the directors know from their own inquiries and knowledge that each of the applicants had grown up and lived in the Kempsey Shire, was of Dunghutti descent and identified as Dunghutti’ … These seven people were new applicants for membership and were not required to sign a direction to NTSCorp for the release of their genealogical information.

The directors subsequently called a directors’ meeting on 22 December 2010 to consider the unresolved membership applications and invited Mr Simon Corey to attend. At the meeting the membership applications were considered but no applications were rejected or accepted.

A further directors’ meeting was arranged, with Mr Correy in attendance, for 8 and 9 February 2011. I understand that at that meeting some outstanding membership applications were accepted and a small number rejected, but the directors deferred consideration of the majority of the membership applications to a later time and that the majority of the membership applications, lodged as long ago as 2007, remain unresolved.

The issues raised in Section 2.1 have been the subject of correspondence between the Registrar and the corporation or its legal adviser, Eddy Neumann.

2.1.6 Examiner’s report regarding processing of membership applications

In September-October 2008 the corporation was examined under section 453-1 of the Act by Mr Lindsay Roberts FCA (the examiner). The examiner reported on membership application issues at pages 7-8, 9, 12 and 20-22 of the examination report to the Registrar. Amongst other things, the examiner stated:

‘During the years from 2004 to mid 2007 the Group A Directors did not approve any new Membership Applications as they claim they required genealogy reports to assess eligibility.

…

On the 30th June, 2007 they approved twenty five (25) new “Group A” Members at a Directors meeting without genealogical reports.

In August, 2007, the Directors were presented with Seventy one (71) “Group B” Membership Applications, but they did not consider these Applications as they claim they required genealogical reports from NTS.

…

On 12 January, 2008 they approved a further twenty two (22) “Group A” Membership Applications without genealogical reports.

In March 2008 Mr Neumann wrote to the seventy one (71) “Group B” Applicants who had applied in August 2007, and stated they were now required to complete new revised Application Forms which provide ancestral information.

…

The Examination concluded that the Group A Directors have deliberately adopted a policy of selective Membership Application approvals denying legitimate Dunghutti people their basic Membership rights.’

The examiner reported on [sic] an exit interview held with nine of the Group A directors on 9 October 2008 as follows:

‘…The discussions included…the concern surrounding the length of delay in considering a list of Membership Applications from Group B despite the fact that four (4) Group A Directors confirmed there was no doubt as to the eligibility of forty-four (44) of the ninety six (96) listed…The Directors present did not believe there was an issue with respect to the delayed Membership Application considerations and said they were going to have a meeting next weekend to ‘process the known Dunghutti people.…’

Section 2.2 – Potential failures to comply with the Act and the internal governance rules

2.2.1 section 265-1(1) of the Act (duty of care and diligence)

Obligation

Potential failures

On the basis of the material available to me, I consider that the following conclusions are available to me:

• The process for deciding applications for membership of the corporation that is applied by the directors in relation to the unresolved membership applications submitted to the corporation in 2008 is not consistent with the process applied to applications for membership by other Dunghutti people Namely ‘a direction from them to NTSCorp concerning the release of genealogical materials to the corporation and to its consultant Dr Barry Morris’ is only required from the 2008 unresolved applicants for membership.

• The corporation is also unable to fully and properly meet the majority of the objectives that are set out in rule 3 of the corporation’s rule book, which relate to the corporation’s role as an RNTBC and to represent the interests of all Dunghutti people. It is apparent from rules 3 and 5.2.2 that the general intention and common understanding of those forming the corporation and seeking recognition of it as an RNTBC was that the corporation is to represent all Dunghutti people and those that are over the age of 18 years and identify as Dunghutti should be permitted to be members. The conduct of the directors in not dealing with the unresolved membership applications reasonably, fairly and consistently is frustrating the corporation in meeting its objectives and the purpose of the corporation.

• In all the circumstances, the directors of the corporation have failed to comply with section 265-1 of the Act and the Registrar has not received a satisfactory explanation for this failure to date.

...

Section 2.4 – Affairs of the corporation are being conducted in a way that is oppressive or contrary to the interests of the members of the corporation

2.4.1 Oppressive conduct

I refer to the information in 2.1 and 2.2.1 above and consider that, on the basis of that information, the conclusion that the affairs of the corporation are being conducted in a way that is oppressive (namely the conduct of the directors in not resolving the disputes with certain members and not dealing with the unresolved membership applications reasonably, fairly and consistently is frustrating the corporation in meeting its objectives and its purpose) is reasonably available.

2.4.2 Contrary to the interests of the members of the corporation as a whole

I refer to the information in 2.1 and 2.2.1 above and 2.5.1 below and note that the corporation has incurred significant legal expenses as a result of the disputes which I consider has impacted on its ability to deliver services to members and on the objectives of the corporation.

Based on this information I consider that the conclusions that the affairs of the corporation are being conducted by the directors contrary to the interests of members of the corporations as a whole due to:

• the long standing disputes between some members of the corporation and the directors, and

• the breaches of the Act and the corporation’s rule book, and

the directors are acting in their own interests rather than the interests of the members of the corporation as a whole and in a way that is unfair and unjust to members of the corporation, are reasonably available.

Section 2.5 – Disputes between the corporation’s members and officers are interfering with the proper conduct of the corporation’s affairs

2.5.1 Disputes

From 2007 to 2011 the Registrar has received a large number of complaints from members of the corporation indicating that they are in dispute with the directors of the corporation. The complaints were made to the Registrar in confidence and under section 604-5 of the Act the information is deemed to be protected information. Pursuant to section 604-10 of the Act and the provisions of the Privacy Act 1988 the name of the complainant and copies of the complaints must be protected by the Registrar.

However, the following is a summary of the substance of the complaints made to the Registrar by members of the corporation:

• The failure to deal with the processing outstanding membership applications made in 2008

• The failure to conduct annual general meetings of the corporation by the time required under the Act and the corporation’s rule book

• The failure to hold general meetings of the corporation at a reasonable time and place

• The conduct of general meetings of the corporation on Saturdays, which are not appropriate for members who are Seventh Day Adventists

• The attendance of ‘the corporation’s lawyer and accountant at general meetings which was an unfair cost on the corporation’

• The failure to table the financial reports and auditor’s reports at annual general meetings of the corporation

• The use of ‘native title claim funds’ for the personal benefit of the directors and legal advisers to the corporation

• Excessive expenditure on legal costs and travel for directors

• Failure to respond to correspondence requesting information on ‘when a general meeting would be convened in order to pass new members that were reviewed at a joint meeting’

• The removal of members from the register of members by the directors of the corporation

• The rejection of applicants for membership by the directors of the corporation as they were not considered to be of Dunghutti descent

• The ‘misappropriation of funds and nepotism’, and

• That ‘there won’t be any money left’.

I do not rely on the substance of the complaints as potential grounds for a determination, unless otherwise specified in this notice, but as an indication of the existence of disputes between members and directors of the corporation.

A number of members have also written to the Registrar in 2008 and also in 2010 and requested the appointment of a special administrator to resolve the disputes with the directors of the corporation and the issues that are the subject of the disputes. This correspondence is also protected information.

I refer to the information in 2.1.4, 2.1.5, 2.1.6 and 2.2.1 above and the disputes between some members of the corporation and the directors, which has in the past resulted in proceedings in the AAT, in which the corporation was the second respondent. Whilst the application was ultimately dismissed, the proceedings did not resolve the underlying dispute which arguably has been caused, at least in party, by the directors’ failure to deal with the unresolved membership applications reasonably, fairly and consistently, or in a timely fashion.

I consider that there is little doubt that there is a dispute between some members of the corporation and the directors of the corporation, and that it would be reasonable to conclude that this dispute is interfering with the proper conduct of the corporation’s affairs. Significant legal costs have been incurred by the corporation that could otherwise have been used to deliver services to members and Dunghutti people and to meet the objectives of the corporation.

I consider that the directors are devoting significant time to the disputes rather than meeting their obligations under the Act and the corporation’s rule book.

Section 2.6 - In the interests of the members of the corporation and in the public interest

2.6.1 Interests of members and in the public interest

I refer to the information above concerning the other potential grounds for a determination that the corporation is to be under special administration and the important role that the corporation plays as an RNTBC: to act as the agent and trustee for all Dunghutti people in respect of matters relating to native title rights and interests in certain land (or compensation received for the extinguishment of native title or acts affecting the native title in that land).

In all of the circumstances set out above, it is my present view that it would be in the interests of the members of the corporation, and in the public interest, that a determination be made.

Section 2.7- Period of Special Administration

I am of the view that, in the event that a determination under s 487-1 of the Act is made, the period of special administration specified in the determination should be 6 months from the date of the determination. It is my present view that this period is likely to be sufficient to address the issues identified in this notice.

26 The respondents also sent a letter dated 11 February 2011 to the appellant’s solicitors. It read:

I refer to your letter of 8 February 2011 regarding a notice under s 487-10 of the Corporations (Aboriginal and Torres Strait Islander) Act 2006, forwarded to the directors of the Dunghutti Elders Council (Aboriginal Corporation) RNTBC (DECAC) under cover of a letter dated 31 January 2011.

I note you advice that you act for DECAC and its directors in relation to that notice.

I also note your assertions that, by virtue of various alleged irregularities, the notice is invalid and/or is otherwise defective, and your invitation for the notice to be withdrawn.

This is to inform you as follows:

1. Whilst I do not accept the correctness of any of the propositions contained in your letter concerning the validity or effectiveness of the notice, I do not consider it desirable to engage in a debate regarding procedural issues, let alone to engage in litigation over such matters, and so to delay consideration of the substantive issues raised in the notice.

2. In the circumstances, I have decided to withdraw the notice dated 31 January 2011, and to issue a fresh notice to your clients. The fresh notice is in substantially the same terms as the original notice, but seeks to address some of the procedural aspects of the concerns expressed in your letter.

3. As your letter does not suggest that you have instructions to accept service of any fresh notice to be issued, the notice is being provided to your clients directly.

4. Whilst I note your assertion that the time for response provided in the original notice was insufficient, I do not accept that view. In any event, the fresh notice requires a response within two weeks of the date of that notice, and as the notice is substantially in the same terms as the notice given on 31 January 2011, I consider this period more than reasonable in all the circumstances.

27 The appellant’s letter of 18 February 2011 to the respondents contained the following relevant material:

We refer to your letter of 11 February 2011 addressed to this firm and to your letter of the same date addressed to the directors of DECAC and enclosing a notice purporting to have been given under s 487-10 of the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (“the Act”).

We are instructed by DECAC and the directors to reply to your letters as follows:

Letter addressed to this firm

1. In paragraph 1 you state that you do not consider it desirable “to engage in a debate regarding procedural issues”. In paragraph 2 you state that the “fresh notice is in substantially the same terms as the original notice” and that it seeks to address “some of the procedural aspects of the concerns expressed in your letter”.

2. Having compared the two notices it is apparent that the fresh notice is not in substantially the same terms as the original notice and contains new material of a substantial nature such as section 2.1.6 (which relates to the examiner’s report regarding processing of membership applications and detail concerning complaints in section 2.5.1 (which relates to disputes). We find it incredible that you would regard those matters as procedural and not substantial. We make further comment about this additional material below.

3. We note that you do not address any of the substantive defects in the notice of 31 January 2011 which we pointed out in our letter of 8 February 2011, nor have you amended the statement of facts to include undisputed facts favourable to DECAC that were drawn to your attention in our letter. This indicates that you have already made up your mind as to what facts you will take into account and that you intend to ignore relevant facts tending against the appointment of a special administrator. Consequently, our client apprehends that you will not fairly listen to relevant evidence or rational arguments it might choose to put before you. We make further comment on this aspect of the matter below.

4. In paragraph 4 you again claim that the fresh notice is “substantially in the same terms as the notice given on 31 January 2011” (emphasis added) and use that as part of your justification for not providing any further time to respond. However, as we pointed out in our letter of 8 February 2011 no notice was given to DECAC on 31 January 2011. So, if you mean to suggest that the period in the two notices accumulate, we reject that suggestion. Furthermore, even if the notice were otherwise valid, which we deny, the period specified in the notice is not a reasonable period to respond, given the nature and extent of the allegations and the incomplete and tendentious recitation of the facts, which calls for a comprehensive answer.

Letter addressed to DECAC directors

Notice is invalid

5. Our client does not accept that the notice accompanying your letter of 11 February 2011 is a valid and effective notice to it under s 487-10 of the Act which include those set out in the following paragraphs.

Bias

6. Our client contends that a determination under s 487-1 of the Act by you as the Registrar’s delegate would be vitiated by the existence of bias. This is so for a number of reasons including the following:

6.1 Even though you have amended the content of the notice following receipt of our letter of 8 February 2011, you have failed to include in the fresh notice undisputed facts favourable to DECAC that were drawn to your attention in our letter. This indicates that you have already made up your mind as to what facts you will take into account and that you intend to ignore relevant facts tending against the appointment of a special administrator.

6.2 In the notice of 31 January 2011 you concluded, “I consider that, in all the circumstances set out above, that it in the interests of the members of the corporation, and in the public interest, that a determination be made”. In the notice of 11 February 2011 you have attempted to retrieve the situation by changing that clear statement of prejudgment to read, “In all the circumstances set out above, it is my present view that that [sic] it would be in the interests of the members of the corporation, and in the public interest, that a determination be made”. However, in all the circumstances of this case including those set out in this paragraph 6, a fair-minded observer cognisant of the facts might reasonably apprehend that the original statement reflects the true position and that you might not bring an impartial and unprejudiced mind to the question of whether a determination should be made.

6.3 In approaching the question of the outstanding membership applications it is clear you have made up you mind:

6.3.1 that the applicants are entitled to membership; and

6.3.2 that they had provided with their applications sufficient material for the directors to be satisfied as to their eligibility.

It is one thing to state that there are disputes as to membership, but it is another to say that it is open to you to conclude that the directors have improperly used their position or have acted in a way that appears to be unfair or unjust by reason of the fact that they have been “excluding Dunghutti people from membership of the corporation”, as you state in sections 2.2.3 and 2.3.2. Furthermore, you constantly refer to the delay in processing the applications by reference to the fact that the applications were submitted in 2008. (See, for example, section 2.2.1, first three bullet points on page 10 and first bullet point on page 11). Yet you do so without acknowledging that it was not until late 2010 that the directors were given the genealogical information which they had been requesting since 2008. That undisputed fact was well known to you even before you issued the notice of 31 January 2011 and was pointed out to you in our letter of 8 February 2011 at paragraphs 17.7-17.9. Nevertheless, in the notice of 11 February 2011 you still have not made that acknowledgment, indicating that you have made up your mind on this aspect and are not open to persuasion.

6.4 In section 2.3.2 you cite the failure of the directors to resolve disputes between members and directors of the corporation as a ground for fiding that the directors have acted in the affairs of the corporation in a way that appears to be unjust and unfair to members of the corporation. That can only be so if the directors are in the wrong. But nowhere in the notice do you explicitly say so, nor do you set out why you consider that might be so. Accordingly, a fair-minded observer cognisant of the facts might reasonably conclude that you might have made up your mind as to where the fault lies with regard to those disputes.

7. We submit that having regard to the matters set out above, singly and collectively, a fair-minded lay observer, who is properly informed as to the nature of the proceedings, the matters in issue and the conduct which is said to give rise to an apprehension of bias, might reasonably apprehend that you might not bring an impartial mind to the question of whether to make a determination under s 487-1 of the Act.

Notice is defective in content

8. In our letter of 8 February 2011 we identified some of the reasons why our client regarded the notice of 31 January 2011 to be invalid. As the notice of 11 February 2011 has not addressed those matters in a satisfactory way, the fresh notice also suffers from those defects. Other defects in the notice of 31 January 2011, not particularised in our letter, also remain. Without canvassing all of the defects in the notice of 11 February 2011, we identify in the paragraphs that follow some of the matters which our clients regard as providing grounds to have the notice set aside.

9. In section 1.4 of the notice of 11 February 2011 you state that you can determine that the corporation is to be under special administration “if I am satisfied that the appointment of the special administrator is required because of disputes between the corporation’s members and officers”.

10. We firstly note that this is an erroneous statement of the test under s 487-5(1)(f) of the Act. Consequently, a determination made on that basis would constitute an error of law. Clearly, what the section requires is that you be satisfied that the disputes between the corporation’s members and the corporation’s officers are interfering with the proper conduct of the corporation’s affairs.

11. Consequently, unless you acknowledge that the notice is in error in this respect and withdraw it, we submit that this erroneous statement of the law is a ground to restrain you from purporting to make a determination under s 487-1 of the Act based on the ground stated in section 1.4 of the notice.

12. Furthermore, in section 2.5 you set out the reasons why you consider that you would be justified in making a determination under s 487-1 of the Act based on the ground in s 487-5(1)(f) of the Act. In doing so you refer to “a large number of complaints” from members, which you say is “protected information” under s 604-5 of the Act. You then set out “a summary of the substance of the complaints”, without indicating that they or any of them are justified. In fact you state that you do not rely on the substance of the complaints as potential grounds for a determination unless otherwise specified in the notice. As far as we can determine from the notice, only one of the listed complaints has been specified elsewhere in the notice, namely, “the failure to deal with the processing of outstanding membership applications made in 2008”.

13. We submit that the fact that complaints have been made is not of itself “an indication of the existence of disputes between members and directors of the corporation” for the purposes of s 487-5(1)(f) of the Act. This is particularly so where it is not suggested that the complainants have made the complaints to the directors. Furthermore, it is difficult to conceive how uncommunicated complaints could interfere with the proper conduct of the corporation’s affairs as its required to be the case under s 487-5(1)(f) of the Act.

14. In fact, you do not attempt to state how those complaints are interfering with the proper conduct of the corporation’s affairs. It is only in relation to what you describe as “the underlying dispute”, whatever that might be intended to mean, that you attempt to show how disputes might be said to interfere with the proper conduct of the corporation’s affairs. In that context the only matters you raise are:

14.1 the expenditure of “Significant legal costs” that could have been used otherwise (which as pointed out in our letter of 8 February 2011 is based on an unfounded assumption): and

14.2 that the directors are devoting significant time to “the disputes” rather than meeting their obligations (which is an unsubstantiated and unparticularised assertion).

15. Essential to the making of a determination under s 487-1 of the Act is the existence of the jurisdictional fact that disputes between the corporation’s members and the corporation’s officers are interfering with the proper conduct of the corporation’s affairs. The notice of 11 February 2011 does not reveal how that might be so. Accordingly, in respect of this aspect, no adequate opportunity to respond is provided by the notice.

16. We submit, therefore, that a determination under s 487-1 of the Act made on the basis of ground 1.4 would be null and void.

Reliance on examination report

17. Another respect in which the notice is defective relates to the inclusion in the notice of 11 February 2011 of the material in section 2.1.6 (which relates to the examiner’s report regarding processing of membership applications).

18. In sections 2.2 and 2.5 you expressly rely, inter alia, on the information in section 2.1.6. However, the examiner’s report referred to in that section has never been given to DECAC, apart from a short extract provided by the Registrar on 10 June 2010.

19. In footnote 4 on page 8 of the notice of 11 February 2011 you state, “A copy of the examination report has been produced to Ruth Campbell, Mary-Lou Buck and the corporation’s solicitor”. What you omit to state is that your office provided a copy of the examination report to those individuals by letter dated 5 February 2011 in the context of the Registrar having received an application under the Freedom of Information Act 1982 by a third party for access to the examination report. The letter invited the individuals to comment on the possible release of the document. Therefore, in no way can it be said that the giving of the examination report to those individuals for that purpose amounts to its being given to DECAC for the purpose of responding to the notice of 11 February 2011.

20. It is apparent from the notice of 11 February 2011 that you are proposing to base your determination under s 487-1 of the Act upon adverse findings in the examination report, notwithstanding that DECAC has never been given a copy of the report let alone an opportunity, in line with the principles set out in Mahon v Air New Zealand, to comment on it and to put forward additional material of probative value which, had it been placed before the examiner, might have deterred him from making those findings. Even the extract which the Registrar provided to DECAC on 10 June 2010 was not given to DECAC for the purpose of giving DECAC an opportunity to comment and provide additional material to the examiner. In any event, that extract appears to have been taken from pages 7-8 of the examination report only, whereas in the notice of 11 February 2011 you also refer specifically to other parts of the examination report not included in the extract.

21. The examination was conducted in September/October 2008, almost 2½ years ago. In all the time that has since elapsed the Registrar has not considered it necessary to give DECAC a copy of the report and an opportunity to comment on it in accordance with the principles in Mahon v Air New Zealand. Our client has had and continues to have a legitimate expectation that the Registrar would not seek to rely on findings in the examination report as “information” upon which he is entitled to rely in making a determination under s 487-1 of the Act. If you, as the delegate of the Registrar, were to rely on the report in that way, it would constitute a denial of procedural fairness which would vitiate the determination.

Failure to allow adequate opportunity to show cause

22. Section 487-10 of the Act requires that the Registrar must, before determining that an Aboriginal and Torres Strait Islander Corporation is to be under special administration, give the corporation notice in writing inviting the corporation to show cause, within a reasonable period specified in the notice, why the determination should not be made and must consider any representations the corporation makes to the Registrar within that period.

23. Procedural fairness requires that in order to comply with that section you provide our client with an adequate opportunity to make representations. To satisfy that obligation it is essential that our client be made aware of the material on which you intend to rely for the purposes of making a determination under s 487-1 of the Act and that our client be given adequate opportunity to present other materials and submissions to you in opposition to the making of the determination.

24. Our client considers that the notice of 11 February 2011 does not satisfy the obligation to accord it procedural fairness. Its reasons for doing so include the following:

24.1 In section 2.2.1 you state that on the basis of “material available” to you that you consider that the conclusions you then set out are available to you. However, you do not identify what that material is. As noted above and in our letter of 8 February 2011 you have failed to refer in the notice of 31 January 2011 and 11 February 2011 to documents that are relevant to the consideration of whether or not a determination should be made under s 487-1 of the Act. Therefore, it is apparent that the notice does not itself identify all of the material which you propose to take into account when considering to make a determination under the section. In order for our client to have a reasonable opportunity to make submissions to you, it is essential that it be provided with a copy of all the material on which you intend to rely in making a determination under s 487-1 of the Act.

24.2 It is readily apparent from a reading of the notice of 11 February 2011 that you consider the ongoing existence of disputes between members of the corporation and its directors to be a significant factor in your consideration of whether to make a determination under s 487-1 of the Act. However, as noted above, it is difficult to determine from the notice itself precisely what the disputes are that you assert might be relevant to the determination.

24.3 The word “disputes” is used liberally throughout the notice. However, but for two instances, the word is used without specificity. Sometimes it is used in the context of the question of the outstanding membership applications, from which one might infer that that is the subject matter of the dispute under discussion. But at other times “disputes”: is used in contradistinction to that question. For example: “The actions of the directors in not resolving the disputes and not dealing with the membership applications are not in good faith or for a proper purpose” (second bullet point on page 11). In such a case it is not clear what is the nature of the dispute to which you refer.

24.4 As noted, there are only two instances in the notice where the word “dispute(s)” is used with specificity. The first instance is in section 2.2.1:

The disputes relates to the governance of the corporation, including the use of its financial resources and the failure to deal with the approximately 100 applications for membership from persons claiming to be Dunghutti people. Refer to 2.1.4, 2.1.5 and 2.1.6 above for further information.

Sections 2.1.4, 2.1.5 and 2.1.6 occupy four pages of the notice, of which all but five lines relates to the question of membership applications. The five lines occur in the first paragraph of section 2.1.4 and refers to the concerns of some members regarding “the governance of the corporation, including the use of its financial resources”, said to have been raised in 2007 – some 3½ years ago.

24.5 The second instance of the notice providing specificity to the term “disputes” is in section 2.5.1, where reference is made to complaints made to the Registrar in confidence which you state are “protected information” under s 604-5 of the Act. However, in that instance you state that you do not rely on the substance of the complaints as potential grounds for a determination unless otherwise specified in the notice. As noted above, that relates only to “the failure to deal with the processing of outstanding membership applications made in 2008”.

25. In order for our client to have a reasonable opportunity to make submissions to you, it is essential that you specify the nature and the currency of the disputes which you consider are relevant to your making a determination under s 487-1 of the Act. Apart from the question of outstanding membership applications, the notice of 11 February 2011 does not identify any disputes which are current or which are less than three years old.

26. Upon receipt of a copy of the material on which you intend to rely in making a determination under s 487-1 of the Act and upon receipt of the particulars of the disputes which you consider are relevant to your making such a determination, our client will need more time than the period specified in the notice in order to be given an adequate opportunity to present other materials and submission to you in opposition to the making of the determination. We would be happy to discuss with you what might be a reasonable period once we have seen the extent of the material upon which you intend to rely.

27. If you decline to provide that material and the requested particulars to us then our client will seek an order from the Federal Court restraining you from making a determination until such material and particulars are provided and a reasonable time is given thereafter to respond.

Conclusion

28. We are instructed on behalf of DECAC to request that you acknowledge the invalidity of the notice of 11 February 2011, purportedly given under s 487-10 of the Act, and that you withdraw it.

29. If we do not receive written notification of the withdrawal of that notice by 4 pm on 23 February 2011, DECAC will seek such relief as it is advised is appropriate.

30. If you withdraw the notice and the Registrar proposes to serve a valid notice, the Registrar should, when giving that notice:

30.1 provide DECAC with copies of all the material upon which the Registrar intends to rely in deciding whether to make a determination under s 487-1 of the Act and particulars of the disputes which he considers are relevant to making such a determination; and

30.2 allow a more extensive time period in which to respond than that which was given in the notice of 11 February 2011.

31. We are sending a copy of this letter to the Registrar and will request that if he proposes to serve a valid notice he should appoint a delegate other than yourself to exercise his powers under Division 487 of the Act.

THE PROCEEDINGS BELOW

28 The validity of the February notice was challenged by the appellant in proceedings brought pursuant to s 39B(1) of the Judiciary Act 1903 (Cth). That provision confers on the Federal Court of Australia “jurisdiction with respect to any matter in which a writ of mandamus or prohibition or an injunction is sought against an officer of the Commonwealth”.

29 The appellant’s application was based on a number of grounds. These grounds of challenge were supported by arguments which tended to overlap. This is not said by way of criticism, but simply to make the point that, in the interests of comprehensibility and coherence, these arguments may be considered together in groups as follows:

(a) apprehended bias. This ground and the following ground involved, among other things, the respondents’ reliance on a report by an accountant, Mr Lindsay Roberts dated October 2008, in the February notice. This report was compiled by Mr Roberts pursuant to Div 453 of the CATSI Act. It was also said that the second respondent’s continued reliance in the February notice upon grounds of concern said to have been incontrovertibly rebutted in the appellant’s response to the January notice was apt to create a reasonable apprehension of bias;

(b) a denial of procedural fairness by reason of the failure to state in the February notice with sufficient particularity, by reference to the grounds in s 487-5 of the CATSI Act the matters of concern to the respondents in relation to disputes and complaints, or to seek the appellant’s response to Mr Roberts’ report before issuing the February notice;

(c) there was “no evidence” to support the decision to issue the February notice. This argument was to the effect that the statement in the February notice that it was “not possible…to determine how much of the total legal costs were incurred directly or indirectly as a result of the disputes…” meant that there was “no evidence” to support the later statement in the February notice that the “expenditure on legal costs…is not in the best interests of the corporation and has not been made for a proper purpose”;

(d) a failure to comply with s 487-10(1)(a) of the CATSI Act by affording the appellant a “reasonable period to respond” to the February notice; and

(e) the February notice was not a notice for the purposes of s 487-10(1) of the CATSI Act because the CATSI Act did not, on the proper construction of s 487-5(1)(b), (d), (e) and (f), permit the giving of the February notice in the terms in which it was given.

30 On 14 April 2011 the primary judge rejected each of the appellant’s arguments, and dismissed its application with costs (Dunghutti Elders Council (Aboriginal Corporation) RNTBC v Registrar of Aboriginal and Torres Strait Islander Corporations [2011] FCA 370).

31 Pending the hearing of this appeal, on 20 April 2011 the parties consented to a number of orders, order 2 of which obliged the appellant not to spend its funds otherwise than in accordance with a regime which, among other things, limited expenditure on the legal fees incurred by the appellant in respect of this appeal to $50,000.00. This interlocutory regime expired at 4.00 pm on 8 June 2011, the date of the hearing of the appeal. At the conclusion of the hearing of the appeal, order 2 of 20 April 2011 was extended until the delivery of judgment in the appeal. The respondents indicated that they would not act upon the February notice in the meantime.

THE ISSUES IN THIS COURT

32 The appellant’s principal submission to this Court is that the primary judge erred, both in failing to declare that the February notice was not a proper notice within s 487-10(1) of the CATSI Act, and in failing to restrain the making of a determination by the second respondent on the basis that any determination by him under s 487-1 made on the basis of the February notice would be invalid. With two exceptions, the arguments advanced by the appellant in support of these submissions follow the arguments advanced and rejected below. It is, therefore, convenient to proceed directly to a consideration of the arguments agitated on the appellant’s behalf in this Court.

33 The respondents’ principal submission is that the appellant’s proceeding is premature save for its complaint as to apprehended bias. Further, the respondents submit that none of the appellant’s challenges to the February notice have merit; the challenge on the ground of apprehended bias is said to be especially devoid of substance. Finally, the respondents submit that, even if some of the grounds were made out, this Court should exercise its discretion to deny relief as an adequate alternate remedy.

34 To the extent that the appellant challenges the validity of the February notice on the bases that it does not conform with s 487-10(1)(a) and s 487-5(1)(b),(d),(e) and (f) of the CATSI Act, it will be necessary to address the appellant’s particular challenges to the validity of the February notice as a notice under s 487-10(1). It is preferable, however, to begin a consideration of the parties’ arguments with a discussion of the broader difficulties with the appellant’s case.

CONSIDERATION

35 It must be said immediately that whether or not a determination should be made under s 487-1(1) of the CATSI Act is not a question for this Court: the power to make such a determination is vested in the first respondent (and in this case in the second respondent as the first respondent’s duly authorised delegate). The Court’s role is to ensure that the power to make a determination is exercised within the legal framework erected by the CATSI Act supplemented by the principles of procedural fairness which operate within that framework: see Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 at 574-577.

36 It is not disputed by the respondents that the appellant must be accorded procedural fairness before a determination by the second respondent is made under s 487-1. It must be understood, however, that the issuing of the show cause notice under s 487-10(1) is the beginning of the process which engages the appellant’s entitlement to be accorded procedural fairness.

37 In Murdaca v Australian Securities and Investments Commission (2009) 178 FCR 119 esp at [98]-[126] (Murdaca), this Court was at pains to emphasise the central importance of the legislative scheme for disqualification from office as a director which prescribes the procedural steps necessary to effect a disqualification as the determinant of the scope of the director’s entitlement to procedural fairness. In Murdaca, the Court deprecated an attempt to introduce a layer of process, and attendant procedural entitlement in respect of that process, at a point anterior to the process prescribed by the statute.

38 Similarly, in the present case the appellant’s invitation to introduce a level of process and procedural entitlements as precursors to the commencement of the show cause process finds no foothold in the CATSI Act. Indeed, the proceeding instituted by the appellant is an attempt to forestall the process for which the CATSI Act provides. To the extent that the appellant’s argument depends upon asserted flaws in matters of process which are anterior to the statutory process for which the CATSI Act provides, the argument is misconceived.

39 Next, to the extent that the appellant claims that the decision to be made at the end of the s 487-10 process will inevitably be invalid, there is no reason to conclude that the matters of which the appellant complains in terms of the particularisation of the second respondent’s concerns identified in the February notice could not, and would not, be addressed satisfactorily upon the appellant’s responding to the substance of the respondents’ concerns. An injunction will be granted to a party “quia timet”, ie because it fears that it will wrongfully be harmed by the actions of another, only where there is “a strong probability, almost amounting to a moral certainty” that that party will be wrongfully harmed: Attorney-General v Nottingham Corporation [1904] 1 Ch 673 at 677. In this case, the appellant does not establish such a probability by pointing to arguable deficiencies in the particularisation of the show cause notice which may not be acted upon or which may be resolved before they are acted upon.

40 In any event, the evidence does not reveal a determination on the part of the second respondent to conduct unfairly a process which it is open to him to conduct fairly and which he may be expected to conduct fairly. The appellant requires this Court to speculate that if the show cause process is allowed to proceed, the appellant will not enjoy a full and fair opportunity to persuade the second respondent not to make a determination adverse to the appellant. The Court cannot act upon such speculation to grant such an injunction to restrain the continuation of the process. To say this is not to accede to the respondents’ argument that relief should be refused to the appellant because of the availability of an adequate alternative remedy: rather, it is to say that the appellant has provided no reason to warrant the granting of an injunction at this stage in the show cause process.

41 Thirdly, the adversarial and argumentative stance adopted by the appellant in its responses to the January and February notices calls to mind criminal proceedings. It should be appreciated that the present proceedings are not criminal in nature; the appellant does not stand in the position of a defendant in criminal proceedings. The ultimate issue is not whether the appellant (or its directors) should be punished for misconduct, but whether the appellant should continue under its present management as the steward of the native title interests and compensation moneys of the Dunghutti people.

42 Criminal proceedings are accusatory in character and there is no expectation in such proceedings that the defendant will give evidence: see RPS v The Queen (2000) 199 CLR 620 at [25]-[29]. The present proceeding is not of that character. Further, the appellant has responsibility for the stewardship of property held for the Dunghutti people under the regime established under the CATSI Act. The appellant is, as we have said, entitled to procedural fairness in relation to whether it should be put under special administration, but the practical content of procedural fairness in the present context is not the same as the procedural fairness to which a person accused of a crime is entitled. The appellant can reasonably be expected to engage responsively and responsibly to concerns as to its stewardship expressed by the first respondent.

43 We consider that it is wrong to approach the issue on the basis that such further information as may genuinely be required by the appellant to enable it to give a full response could not be expected to be forthcoming if it were to engage meaningfully with the respondents on issues which are, obviously, of vital importance to the Dunghutti people. In any event, in the light of the terms of the February notice, and the absence of evidence from the appellant showing difficulty in making a response, we are unable to accept that the appellant cannot expect to be able to give a fully responsive account of those aspects of its stewardship called into question by the February notice.

44 With those broad observations, we turn now to address the specific grounds of the appellant’s challenge.

(a) Apprehended bias

45 In support of the argument that a reasonable observer might conclude that the second respondent had already made up his mind as to the facts he intended to act upon in making a determination as to whether a special administrator ought to be appointed, the appellant contends that the appellant’s reply to the January notice identified errors and omissions in the respondents’ stated concerns which were “incontrovertible”. These errors and omissions were not acknowledged and rectified in the February notice; instead, the second respondent added fresh material by making reference to Mr Roberts’ report of October 2008.

46 The “incontrovertible” facts which the appellant contends were misstated in, or omitted from, the January notice and not acknowledged in the February notice, relate to circumstances which are said to explain the appellant’s level of expenditure on legal costs, such as difficulties involved in the processing of membership applications, particularly difficulties experienced in obtaining genealogical records from the Native Title Services Corporation; and the appellant’s role in proceedings in the Administrative Appeals Tribunal arising out of its failure to register certain persons as members of the Dunghutti people. The appellant argues that its position should have been treated more favourably in the February notice when taking into account the delays in obtaining the genealogical records, the effect that legal work related to drafting a constitution had on the total legal costs, and on the compensation negotiations with the State, all of which it is argued were clearly in the interests of the appellant and for proper purposes. The respondents’ failure to abandon reliance on these allegations is, it is submitted, such as to raise a reasonable apprehension of bias in the mind of a fair minded observer.

47 In rejecting the appellant’s contention, the primary judge said at [73]:

…the very purpose of a notice issued under s 487-10(1) is to put a corporation on notice as to the concerns that may warrant placing a corporation under special administration and affording the corporation an opportunity to make “representations” before a decision is made. If a corporation is of the view that some facts are “incontrovertible”, it may make that very point in its “representations”. The mere fact that a delegate has had that submission previously advanced in respect to a notice that is said to be invalid, does not preclude the giving of a subsequent notice repeating facts as previously stated. The delegate may or may not regard the facts as “incontrovertible”. The repetition of the same facts in the February Notice now under challenge, it is considered, would not lead a hypothetical bystander to believe that the delegate did not have an open mind.

(Emphasis added)

48 The primary judge went on to say (at [75]):

Before issuing a notice to show cause, a view must necessarily have been formed that there is a sufficient legal and factual basis upon which such a notice should be issued. The withdrawal of one notice to show cause and the issue of a subsequent notice, in the circumstances of the present case, says little other than that there remained a continuing concern as to the conduct of the Applicant.

49 As to the “incontrovertible fact” asserted by the appellant relating to the Administrative Appeals Tribunal proceedings, the primary judge rejected the appellant’s argument, observing (at [78]):

….the omission from the February Notice of a more extensive account of the proceeding before the Tribunal does not render the account in fact given misleading or so incomplete as to manifest any unwillingness on the part of the delegate to maintain an open mind and to genuinely consider any “representations” that may have been made. The purpose of the notice to show cause, it should be recalled, was not to set forth a complete account of past events; its purpose was to outline in as succinct a manner as appropriate the facts to be considered and to put the Applicant in a position to answer — if it wished to do so — the matters of concern to the delegate.

(Emphasis added)

50 In our respectful opinion, the primary judge was right to reject this ground of challenge. The function of a notice under s 487-10(1) of the Act is not to produce a factual narrative or a draft judgment inviting acknowledgment and assent from the corporation to whom it is given. Its purpose is to afford that corporation the opportunity to show cause as to why a determination should not be made in conformity with the allegations in the notice. The withdrawal of the first notice was consistent with an intention to avoid arid disputation and pointless delay in resolving the substantive issue. In relation to supposedly “incontrovertible facts” which might explain substantial expenditure upon legal costs, the appellant has the opportunity to state its case to the respondents on the topic, for example, by way of providing itemised invoices. Any matters supposed to be “incontrovertible” will need to be fairly considered by the second respondent in the light of any explanation which the appellant might choose to advance.

51 As to how a hypothetical “reasonably informed” bystander would assess the situation, his Honour said at [74]:

…it is not considered that any hypothetical bystander would conclude that the delegate was biased by reason of his repeating a concern which had previously not been addressed on its merits when it could readily have been addressed.

52 As the primary judge said at [66] an administrator must “retain a mind open to persuasion”. This must be as judged by a reasonable, informed bystander. However, an administrative decision maker need not approach his or her task “with a ‘blank mind’”: see Minister for Immigration and Multicultural Affairs v Jia Legeng (2001) 205 CLR 507 [71]-[72] (531-532) (Jia Legeng).

53 We respectfully agree with the conclusions of the primary judge.

54 The test of apprehended bias is authoritatively stated in Johnson v Johnson (2000) 201 CLR 488 at [11]-[12] (Johnson v Johnson) by Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ. Their Honours said:

…It has been established by a series of decisions of this Court that the test to be applied in Australia in determining whether a judge is disqualified by reason of the appearance of bias (which, in the present case, was said to take the form of prejudgment) is whether a fair-minded lay observer might reasonably apprehend that the judge might not bring an impartial and unprejudiced mind to the resolution of the question the judge is required to decide.

That test has been adopted, in preference to a differently expressed test that has been applied in England, for the reason that it gives due recognition to the fundamental principle that justice must both be done, and be seen to be done. It is based upon the need for public confidence in the administration of justice. “If fair-minded people reasonably apprehend or suspect that the tribunal has prejudged the case, they cannot have confidence in the decision”. The hypothetical reasonable observer…is postulated in order to emphasise that the test is objective…

(Footnotes omitted).

55 It will usually be difficult for a party to make a sufficient case to forestall the making of a decision on the ground of apprehended bias. That is because of the expectation that the decision maker will decide fairly on the basis of the evidence. The difficulty which confronts a litigant who seeks to invoke a reasonable apprehension of bias in order to forestall the making of a decision by a decision-maker appointed by Parliament to make that decision is illustrated and explained by the decision of the High Court in R v Australian Stevedoring Industry Board; Ex parte Melbourne Stevedoring Co Pty Ltd (1953) 88 CLR 100 (Ex parte Melbourne Stevedoring Company) where the point was made that the existence of a preconceived opinion on the matters in issue is not inconsistent with the making of an unbiased decision on the evidence.

56 In that case the delegate of the Board held an inquiry as to whether a registered employer of waterside workers was unfit to continue to be registered. Prior to the inquiry, the delegate made statements to a journalist which suggested that he had an adverse preconceived opinion as to the employer’s business practices. The High Court held that this did not afford a basis for the grant of a writ of prohibition to prevent the delegate from determining the application. Dixon CJ, Williams, Webb and Fullagar JJ said at 116:

He therefore must act judicially in the sense that he must give effect to the general principles of fairness and propriety which are sometimes given the description of natural justice. He may therefore be disqualified by bias from executing the duty arising from his delegation with reference to s.23. It is not difficult to understand that the employer whose case he must judge should feel alarmed at a statement appearing in the press from which it might well be inferred that upon some of the contentions he wished to advance his case had been prejudged. But when bias of this kind is in question, as distinguished from a bias through interest, before it amounts to a disqualification it is necessary that there should be strong grounds for supposing that the judicial or quasi-judicial officer has so acted that he cannot be expected fairly to discharge his duties. Bias must be “real”. The officer must so have conducted himself that a high probability arises of a bias inconsistent with the fair performance of his duties, which the result that a substantial distrust of the result must exist in the minds of reasonable persons. It has been said that “preconceived opinions – though it is unfortunate that a judge should have any – do not constitute such a bias, nor even the expression of such opinions, for it does not follow that the evidence will be disregarded”, per Charles J., Reg. v London County Council; Ex parte Empire Theatre.

It is unfortunate that the respondent Neil permitted himself to be interviewed by a reporter on the subject in which he was called upon to act quasi-judicially. But, accepting his version of what occurred, it cannot be said that he has so conducted himself as to raise a sufficient case of bias to justify a writ of prohibition.

57 While there may be room for argument as to the extent of the knowledge of the law that may be imputed to the hypothetical reasonable bystander, it is well settled by decisions such as Ex parte Melbourne Stevedoring Company and Johnson v Johnson that a person charged by law with the function of deciding a matter may reasonably be expected to decide the matter fairly on the basis of the evidence and to alter any preconceptions he or she might have had to reflect that evidence.

58 The appellant also contended that the reasonable bystander should be assumed to know that the appellant’s assertion of “incontrovertible facts” was accurate beyond the possibility of a contrary view. But the role of the hypothetical reasonable bystander is not to determine where the truth lies but to test whether the adjudicator’s mind might be “incapable of alteration, whatever evidence or arguments may be presented”: see Jia Legeng at [72].

59 It must also be understood that the purpose of the show cause notice is to raise concerns, not to resolve them. The legislature has authorised a person, who is, ex hypothesi, sufficiently suspicious to give a notice raising a concern, to proceed to determine whether that concern is well-founded after affording the affected corporation the opportunity to put its case. Accordingly, the existence of a belief on the part of the second respondent as to the existence of grounds for a show cause notice cannot itself be a circumstance of disqualification of the first respondent (or his or her delegate) under s 487-10 of the CATSI Act. Section 487-10 would be rendered self-stultifying, in that the person authorised to begin and conclude the process could not lawfully do so. One cannot attribute such an absurdity to the legislature.

60 Finally under this heading, in the appellant’s letter of 8 February 2011, the appellant complained of the respondents’ acknowledgment of their lack of knowledge of the details of the appellant’s legal expenses. That was an extraordinary position for the appellant to take vis-À-vis a statutory officer with a responsibility for protecting the interests of those for whom corporations such as the appellant are also responsible. The appellant could simply have provided copies of its lawyers’ itemised invoices for legal expenses charged to the appellant if that course was likely to allay the respondents’ concerns. The course taken by the appellant was calculated to provoke or heighten concern rather than to allay it.

(b) Denial of procedural fairness

61 The appellant argues that pursuant to the rules of the common law and the statutory process under s 487 of the CATSI Act the appellant ought to have been provided with the examination report of October 2008, the letters of complaint and other “extraneous documents”. The failure to do so is said to have adversely affected the appellant’s ability to fully respond to the notice. For example, the appellant argues that, contrary to the primary judge’s view, a reasonable opportunity to respond to complaints was not afforded as the date of the complaints or disputes was not given, nor were details of the number of complaints or whether they were current. Additionally, it is said not to have been made clear as to whether or not the complaints were even known to the appellant.

62 In Baker v Gough [1963] NSWR 1345 at 1360, Jacobs J said that:

…where a person is given the right to show cause or the opportunity to be heard before action is taken against him, he is entitled to know the ground upon which it is proposed to take that action so that he can have a true opportunity of showing cause against it. It seems to me that the degree of precision in relation to those grounds may vary according to the particular type of case and the particular allegation which is made, or matter which is to be determined…

63 As to the asserted “denial of procedural fairness” by reason of a “failure to disclose factual materials”, the primary judge summarised at [32] the case for the appellant: “the delegate had in fact available to him material and documents which he took into account but had failed to make these materials and documents available to the [appellant]”. Three categories of material were said to be relevant here: the report prepared by Mr Roberts in October 2008 and submitted to the Registrar; complaints and letters written by members in 2008 and 2010 sent to the Registrar; and “extraneous documents”.

64 As the primary judge said at [45], whether the obligation to afford procedural fairness has been discharged is a “practical” matter that was “not to be evaluated minutely”: Habib v Director-General of Security (2009) 175 FCR 411 at 430 per Black CJ, Ryan and Lander JJ. Regardless of whether the disclosure requirement finds its content in the common law or in s 487-10 of the CATSI Act, his Honour was of the view at [34] that the requirements of procedural fairness are satisfied where “the substance of the legal and factual concern is disclosed”. In expressing that view, his Honour relied upon Plaintiff M61/2010E v Commonwealth (2010) 272 ALR 14 at 36 per French CJ, Gummow, Hayne, Heydon, Crennan, Kiefel and Bell JJ. His Honour held that the February notice satisfied the requirements of procedural fairness in that it identified the factual substance of the first respondent’s concerns as well as the relevant provisions of s 487-5 of the CATSI Act under consideration.

65 As to Mr Roberts’ report of 2008, the primary judge found at [36] that it had, in fact, been made available to the appellant. The appellant now accepts that the report was in the possession of the appellant when the February notice was received but asserts that the appellant had not previously been given the report by the respondents, with a request to address any observations in that report which were adverse to it.

66 As to the complaint about the identification of complaints, the primary judge held at [39] that:

The issue that the Applicant was being called upon to answer was the fact that complaints had been made and not the substance of those complaints. And, to the extent that the substance of the complaints may have been relevant to making “representations”, the substance of those complaints was disclosed in considerable detail.

67 In our respectful opinion, his Honour’s view that the appellant was called to address the fact that complaints had been made was correct. What is relevant here is that there are ongoing unresolved disputes which are draining funds held for the Dunghutti people. It is the failure to resolve the disputes which is of concern.

68 As to other “extraneous documents”, his Honour observed (at [40]) that what the appellant said needed to be disclosed in order to afford “the [appellant] a meaningful opportunity to respond to the notice to show cause nevertheless remained elusive”. In the end, his Honour held (at [46]) that “the onus cast upon the [appellant] of making out a case of any denial of procedural fairness was not discharged”.

69 We agree with the primary judge’s conclusions under this heading.

70 As to Mr Roberts’ report, the undeniable fact is that the appellant was previously provided with a copy of the examination report prior to the February notice. Indeed, the bulk of the matter referred to in this respect in the February notice was provided in June 2010.

71 In any event, the show cause process affords the appellant the opportunity to respond to adverse material. The idea that the respondents are under an obligation to disclose material adverse to the appellant before giving the show cause notice is not consistent with the CATSI Act. The appellant now has the opportunity to say what it wants to say about aspects of the report adverse to it in its response to the show cause notice.

72 On the appellant’s behalf it was said (many times in oral argument) that Mr Roberts’ report had been compiled in 2008 and that since that time the appellant had not been invited to comment upon aspects of the report adverse to it. The point seemed to be that it would now be a hardship for the appellant to be required to address matters adverse to it after this lapse of time. Since Mr Roberts’ report was based on his inspection of the appellant’s records – and there is no suggestion that the records have been destroyed or lost – it is difficult to see how the appellant would have been prejudiced by the lapse of time; but in any event, if the appellant has been prejudiced in some way in making a response now to that part of Mr Roberts’ report cited by the second respondent, that point may be made to the second respondent in the appellant’s response to the show cause notice.

73 The appellant relied upon the decision of the Privy Council in Mahon v Air New Zealand Ltd [1984] AC 808 at 820-821 (Mahon’s Case) in support of an argument that the second respondent could not rely upon Mr Roberts’ report because conclusions in the report adverse to the appellant had not been put to the appellant’s directors to enable them to answer those adverse findings. In this regard, it was argued that Mr Roberts failed to accord the appellant procedural fairness in compiling his report in 2008, and because of this defect, it was not open to the respondents ever to raise with the appellant in the show cause notice any concerns as to the appellant’s governance which might arise from that report.

74 The appellant complains that the primary judge did not address this argument. It seems, in strictness, to be true that the primary judge did not address this argument directly. That may be because the case originally presented was that the appellant did not have Mr Roberts’ report before the February notice was issued. For the appellant, it is said that the Roberts’ report, material parts of which the appellant received in June 2010, was not provided to the appellant for the purpose of showing cause. But whatever the purpose for which the parts of the Roberts’ report were provided to the appellant, it is simply not the case that the February notice was the first occasion on which the appellant was made aware of the adverse material in that report on which the respondents relied in the February notice. One can understand why his Honour did not address an argument based on this false premise.

75 That this argument was only faintly raised before the primary judge is apparent from the circumstance that neither the appellant’s notice of appeal nor its written submissions asserted that his Honour erred in failing to conclude that Mr Roberts had failed to accord the appellant procedural fairness before producing his report and in failing to conclude that this defect precluded the second respondent from raising it as a matter of concern in a show cause notice issued under s 487-10(1) of the CATSI Act. It is clear from the appellant’s written submissions below and the transcript of the oral argument below that his Honour was not asked to make such findings. In consequence, it cannot now be asserted that his Honour erred in failing to reach the conclusions for which the appellant contends. That is because whether or not Mr Roberts denied the appellant procedural fairness in compiling his report depends upon issues of fact as to the conduct of Mr Roberts’ investigation which were simply not agitated below.

76 In any event, this aspect of the appellant’s argument draws no support from Mahon’s Case. To the extent that it might be the case that Mr Roberts did deny the appellant procedural fairness, the appellant now has the opportunity to urge the second respondent not to make a determination to put the appellant under special administration on the basis of matters adverse to the appellant in the Roberts’ report.

77 The appellant’s argument fails to identify with precision the nature and extent of the respondents’ reliance on Mr Roberts’ report. It may readily be accepted, consistent with Mahon’s Case, that the second respondent may not rely upon Mr Roberts’ report to make a determination adverse to the appellant without first affording the appellant the opportunity to address the adverse passage on which the second respondent is disposed to rely. But that is precisely the opportunity which the February notice afforded the appellant.

78 Indeed the appellant’s case is, in important respects, inconsistent with the reasoning of the Privy Council in Mahon’s Case. As we have said, the appellant’s entitlement to procedural fairness in the process ordained by s 487-10 of the CATSI Act should not be confused with the safeguards applicable to criminal proceedings. Further, the appellant’s entitlement to procedural fairness is measured by the need to ensure that it has an opportunity to place such material before the second respondent as might deter him from making a decision to place the appellant under special administration. In this regard, in Mahon’s Case at 820-821, the Privy Council said:

The rules of natural justice that are germane to this appeal can, in their Lordships’ view, be reduced to those two that were referred to by the Court of Appeal of England in Reg. v. Deputy Industrial Injuries Commissioner, Ex parte Moore [1965] 1 QB 456, 488, 490, which was dealing with the exercise of an investigative jurisdiction…The first rule is that the person making a finding in the exercise of such a jurisdiction must base his decision upon evidence that has some probative value in the sense described below. The second rule is that he must listen fairly to any relevant evidence conflicting with the finding and any rational argument against the finding that a person represented at the inquiry, whose interests (including in that term career or reputation) may be adversely affected by it, may wish to place before him or would have so wished if he had been aware of the risk of the finding being made.

The technical rules of evidence applicable to civil or criminal litigation form no part of the rules of natural justice. What is required by the first rule is that the decision to make the finding must be based upon some material that tends logically to show the existence of facts consistent with the finding and that the reasoning supporting of the finding, if it be disclosed, is not logically self-contradictory.

The second rule requires that any person represented at the inquiry who will be adversely affected by the decision to make the finding should not be left in the dark as to the risk of the finding being made and thus deprived of any opportunity to adduce additional material of probative value which, had it been placed before the decision-maker, might have deterred him from making the finding even though it cannot be predicted that it would inevitably have had that result.

79 Finally, in relation to this ground of challenge, it needs to be borne in mind that the onus of establishing the facts which are said to establish a denial of procedural fairness is upon the party making the assertion: see VAAD v Minister for Immigration and Multicultural and Indigenous Affairs [2005] FCAFC 117 at [45]. In the present case the appellant adduced no evidence to make good its assertion of its ignorance of the complaints made about it and its inability to address those complaints.

80 The argument of the appellant under this heading as set out by the primary judge at [91] was based on the statement by the delegate in the February notice that:

[I]t was “not possible … to determine how much of the total legal costs were incurred directly or indirectly as a result of the disputes … ” [this] necessarily had the consequence that there was “no evidence” in support of the later statement that the “significant expenditure on legal costs … is not in the best interests of the corporation and has not been made for a proper purpose”.

(Emphasis added)

81 The primary judge rejected the appellant’s argument, noting at [96]-[97] that:

If the Applicant wished to supplement the available factual material so that a more informed conclusion could be drawn, it was free to do so. Indeed, that was the very purpose of giving to the Applicant a notice to show cause.

Moreover, even if attention is confined to the information set forth in the February Notice, there would appear to be a more than sufficient factual basis upon which a concern could be expressed as to the expenditure of monies on legal costs. Even if attention is confined to the quantum of expenditure on legal costs and its percentage to total expenditure, the “conclusion” expressed in the notice was founded upon logically probative material.

(Emphasis added)

82 The appellant submits that the primary judge fell into error in rejecting its “no evidence” submission in relation to statements about legal costs in the January notice. The statement in the February notice that “the significant expenditure on legal costs by the corporation...at the direction of directors is not in the best interests of the corporation and has not been made for a proper purpose” is said to have been made without legally probative evidence.

83 The appellant’s argument under this heading advances as if the present proceedings were by way of judicial review of the Registrar’s decision to make an order under s 487-1 of the CATSI Act. That approach is misconceived. The appellant’s argument also fails to appreciate that evidence apt to justify the commencement of the show cause process is not required to rise to a standard sufficient to justify a final conclusion adverse to the appellant. In this regard, it is sufficient that there be evidence of a state of affairs which, if left unexplained, would permit an adverse inference against the party to whom the show cause notice is addressed. The February notice provided detail of legal expenditure, stating that $881,080.00 had been spent on legal costs in 2008/09 and 2009/10. This sum was said to amount to approximately 13% of the monies held in trust and to constitute 50.8% of the appellant’s expenditure during this period. On these figures alone, the primary judge was entitled to reject the appellant’s argument and to proceed to the conclusion that there was a sufficient basis for concern warranting the issue of the show cause notice.

(d) Reasonable time period

84 The primary judge noted (at [47]) that s 487-10 requires a response to a show cause notice “within a reasonable period specified in the notice” and does not stipulate a set period. In this regard, it was said at [49] that the common law:

…imposes a like requirement that a person be afforded a reasonable period of time in which to answer a complaint being made: e.g, Lee v Department of Education and Science (1967) 66 LGR 211 (UK).

85 His Honour held at [52] that “a ‘reasonable period’… is a period which is to be objectively determined and the period of time prescribed in a notice is not conclusive: Guiseppe v Registrar of Aboriginal Corporations [2007] FCAFC 91, 160 FCR 465”. In determining what constitutes a reasonable time to undertake a task his Honour said at [53] that…“reference must necessarily be had to the tasks required to be undertaken: Balmain Association Inc v Planning Administrator for the Leichardt Council (1991) 25 NSWLR 615”.

86 In the primary judge’s view, a consideration of the following matters was required in order to determine what was a “reasonable period” for the purposes of s 487-10(1)(a) (at [57]):

• the number of issues raised in the show cause notice;

• the factual complexity of each of those issues;

• the need to assemble factual material if any “representations” are to be meaningful;

• the need for prompt action to be taken; and

• the need or desirability of obtaining independent legal or other advice.

(Emphasis added)

87 In light of these considerations, his Honour held that a period of two weeks was a reasonable period within which to call upon the appellant to respond. The primary judge stated at [59] that:

Notwithstanding the detail contained within the notice, the issues themselves to be addressed by the Applicant considerably overlapped. They were within a confined compass and were manageable and could have been the subject of submissions within the period permitted. The Applicant never sought from the delegate further time within which to respond or raised with the delegate any particular issue which may have required an extension of time. The response of the Applicant was not that it required further time within which to respond; its response was to assert the invalidity of the notice.

88 The circumstance that the respondents’ concern was as to the propriety of expenditure favours a conclusion that promptness in replying was warranted. In this regard, his Honour stated at [60]:

Reinforcing the conclusion otherwise reached that the period of time permitted was a “reasonable period” is the fact that the delegate’s concern as to the expenditure by the Applicant of limited funds was a matter which could have been — and should have been — the subject of prompt response. The February Notice thus drew to the attention of the Applicant the fact that for “the 2008/09 and 2009/10 financial years the corporation spent a total of $881,080 on legal costs” and that such expenditure “amounted to 50.8% of the corporation’s total expenditure”. This was a concern presumably informed by reference to the constraints imposed upon the use of the Applicant’s monies by both the Objectives and r 19 of the Applicant’s own Rule Book.

(Emphasis added)

89 On these bases, the primary judge rejected (at [62]) the argument that the February notice had not provided a reasonable period within which to respond.

90 We respectfully agree with the primary judge’s conclusions.

91 The primary judge is said to have erred in finding that a concern as to the possibility of ongoing imprudence in the expenditure of funds held by the appellant was relevant to the fixing by the second respondent of the time specified in the show cause notice. It is argued that if that was really the respondents’ concern, a determination would have been made under s 487-10(2) without the need for notice under s 487-10(1). It hardly lies in the appellant’s mouth to say that the respondents are to be faulted for not taking more draconian action against the appellant. No doubt s 487-10(2) is intended for cases of serious emergency. It was open to the second respondent to regard this case as not one of serious emergency but as one where a prompt response was necessary.

92 The CATSI Act requires that the show cause notice allow a reasonable time for a response. There can be no doubt that the concern as to the appellant’s stewardship of moneys held by it in trust was of such a nature as to make a demand for a prompt response reasonable.

93 It has long been settled that “the first and primary duty of every…trustee having money in [its] hands to be received and to be paid is that an account of his receipts and payments should be kept, to be produced to those interested in the account when it is properly demanded”: Wroe v Seed (1863) 66 ER 773 at 775-776; also Waterhouse v Waterhouse (1998) 46 NSWLR 449 at 494.

94 The obligation of a trustee to be able to render a timely account of his or her stewardship is an incident of the trustee’s obligation to hold and deal with trust property for the benefit of the persons for whom it is held: Craig, Re (1952) 52 SR (NSW) 265 at 267; Re Simersall; Blackwell v Bray (1992) 35 FCR 584 at 588-589.

95 Of course, we do not suggest that the respondents stand in the position of beneficiaries of a trust vis-À-vis the appellant. We seek merely to make the point that, because the appellant is obliged to stand ready to render a prompt account of its stewardship to those beneficially entitled to the funds held by it, it cannot be unreasonable to expect it to be ready to respond promptly when required to render an account to the first respondent.

96 The final point made on behalf of the appellant under this rubric which should be addressed is that the respondents’ reference to Mr Roberts’ report in the February notice incorporates all of the adverse reflections upon the governance of the appellant contained in that report. On this basis, it is said that the preparation of a comprehensive response to the February notice is an onerous exercise which could not reasonably be expected to be completed in the fourteen days allowed by the notice. This point is without substance. Reference to the terms of the February notice shows that the respondents’ reliance on Mr Roberts’ report is quite narrowly confined. Having regard to the terms of the February notice, it is difficult to accept that the appellant apprehends that it is at risk of an adverse determination by the respondents on the basis of any adverse material in Mr Roberts’ report other than that set out in the February notice.

(e) The proper construction of s 487-5

97 The appellant advanced a number of arguments to the effect that the February notice was not a notice of the kind contemplated by s 487-5 of the CATSI Act.

98 As to s 487-5(1)(b), at [100] the primary judge set out the appellant’s argument that the appellant “could not be said to have ‘failed to give… a satisfactory explanation’” without proof that a request had been made of the appellant and that the appellant had not responded, and accordingly the notice was invalid. This argument must be rejected. Section 487-5(1)(b) does not require that there be a request for explanation as a prerequisite to the issue of a s 487-10 notice. In any event, it may be noted the primary judge did not make a finding of fact that no request for explanation was made; that is hardly surprising, given that he was not asked to make such a finding. This argument is one which ought to have been made at first instance, if it was to be made at all, since it depends on matters of evidence.

99 Another argument advanced on behalf of the appellant in relation to s 487-5(1)(b) is to the effect that the February notice is deficient in that it does not assert that the disputes between the corporation’s members and its officers are interfering with the proper conduct of the corporation’s affairs. This argument might not have been out of place if the February notice were a complaint of a criminal offence: in such a case there would be scope for an argument that the complaint did not disclose a charge known to the law. But as we have said, this approach is out of place here. In any event, the argument has no basis in fact: reference to the text of section 2.5 of the February notice shows that the notice asserts in terms which cannot be misunderstood that the disputes “are interfering with the proper conduct of the corporation’s affairs”.

100 In relation to s 487-5(1)(d) and (e), the appellant’s argument was that the February notice should have expressly negatived the possible application of s 487-5(2) of the CATSI Act. In other words, the February notice should have alleged that the appellant’s officers were not acting at [105]:

“in good faith”; and “with the belief that the doing (or refraining from doing) the act is necessary to ensure that the corporation complies with a Native Title legislation obligation”.

101 The primary judge rejected this argument at [106] on the basis that s 487-10(1) had “no express requirement…as to what may or must be inserted in a notice to show cause” (at [107]). We respectfully agree with his Honour. Further, there is no apparent reason why it would be thought that the show cause notice should assert matters proof of which lies peculiarly within the appellant’s knowledge.

102 Section 487-5(1)(f) was said by the appellant to be a fatal defect in the February notice in that it did not include an allegation that the disputes between the corporation’s members and its officers were “interfering with the proper conduct of the corporation’s affairs”. Further, the disputes in question were said to be insufficiently identified. These arguments were rejected. The primary judge said at [113] that:

It is not at all clear that the notice suffers from the fatal defect being advanced on behalf of the Applicant. Nor is it considered appropriate that the notice to show cause should be construed in the same manner as (for example) a complaint or charge in criminal proceedings.

103 As to the sufficiency of the identification of disputes, his Honour held that the detail in the February notice at [114]:

…denies any substance to a submission of the Applicant that it could not meaningfully respond to the concerns being raised. There is no reason to question the concluding statement as to what had in fact been relied upon. No question, it is concluded, arises as to the delegate considering potentially further prejudicial material and there being a “subconscious influence of non-disclosed material”: Billabong Aboriginal Corporation v Registrar of Aboriginal Corporations [2007] FCA 1496 at [41], 100 ALD 42 at 50.

(Emphasis added)

104 We respectfully agree with the primary judge’s conclusions.

(f) Alternative remedy?

105 The respondents submit that any determination made under s 487-1(1) is a “reviewable decision”. Accordingly, the availability of such review is a discretionary reason to refuse any relief to the appellant.

106 As is apparent from the reasons given above, it is not necessary to consider whether the existence of an adequate alternative remedy, in this case the right to internal and external merits review, is a reason supporting the denial of relief as a matter of discretion.

CONCLUSION

107 The appeal should be dismissed.

108 As has been noted, on 20 April 2011, orders were made to limit the appellant’s expenditure of its funds. Evidence before this Court showed that as at May 2011, $1.35 million of the compensation money received by the appellant on behalf of the Dunghutti people had been spent by the appellant on legal fees. The proceedings below and the responses to the show cause notices have involved the appellant in the expenditure of $182,269.00. The order of 20 April 2011 was extended, without substantial opposition, at the hearing of the appeal until judgment.

109 At the conclusion of the hearing in this Court, Counsel for the respondents asked that in the event that the appeal were to fail, the order dismissing the appeal be stayed for 21 days and the order of 20 April 2011 be continued for 21 days. That request was not opposed by the appellant. We consider that those orders are appropriate to prevent further expenditure by the appellant until the making of a determination.

110 The respondents argue that, if the appeal fails, costs should be ordered against the directors of the Dunghutti Elders Council (Aboriginal Corporation) RNTBC instead of being paid from the funds held on trust by the corporation. The directors of the appellant have been put on notice that this order would be sought if the appeal failed. For that reason this Court will not make any order as to the disposition of the costs of the appeal at this stage.

ORDERS

111 The Court orders that:

1. The appeal be dismissed.

2. Order 1 above be stayed for 21 days.

3. Order 2 made by Bennett J in proceeding NSD 181 of 2011 continue for 21 days.

7. Each party have liberty to apply in respect of Orders 2-6 above on such notice as a member of the Full Court might direct.

I certify that the preceding one hundred and eleven (111) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Chief Justice Keane and Justices Lander and Foster.

Associate:

Dated: 21 July 2011

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