FEDERAL COURT OF AUSTRALIA
ABORIGINES – Aboriginal corporations – Whether appointment of an administrator under Aboriginal Councils and Associations Act 1976 (Cth) (“ACA Act”) brings to an end or suspends a voluntary administration under Pt 5.3A of the Corporations Law – Whether Registrar did not permit the corporation to show cause why an administrator under the ACA Act should not be appointed - Whether administrator of an Aboriginal Corporation can be appointed for a limited period – Whether Minister’s approval required for appointment of a new administrator
CORPORATIONS – Pt 5.3A of the Corporations Law (“CL”) – Whether opinion as to solvency or likely insolvency formed by Governing Committee pursuant to s 436A of the CL – Whether voluntary administrator appointed for an improper purpose – Consideration of relevance of opinion and purpose of individual members of Governing Committee
CORPORATIONS - annual general meeting – Proxy – Whether a member who gives a proxy to another member is present at the annual general meeting for the purpose of determining if there is a quorum
STATUTE – Interpretation – Reconciling inconsistent provisions in a statute
WORDS AND PHRASES – “subject to this Act”
Aboriginal Councils and Associations Act 1976 (Cth) Pt V, ss 62, 71, 72, 74, 77D, 77E
Corporations Law Pt 5.3A, ss 435A, 436A
Jones v Metropolitan Meat Industry Board (1925) 37 CLR 252 – cited
Project Blue Ski Inc v Australian Broadcasting Authority (1998) 153 ALR 490 – applied
Wagner v International Health Promotions (1994) 15 ACSR 419 – followed
Lanson Investments Pty Ltd v Murray River FM Pty Ltd (Federal Court of Australia, Gray J, 1 December 1993) – cited
In the Matter of Roy Davis Contracting Pty Ltd (Supreme Court of Queensland, Moynihan J, 22 April 1996) - cited
Re New World Alliance Sycotex v Baseler (1994) 51 FCR 425 - cited
Arthur Yates & Co Pty Ltd v The Vegetable Seeds Committee (1946) 72 CLR 37 – considered
Re The Mayor of the City of Hawthorn; Ex Parte The Co-Operative Brick Company Limited (1909) VLR 27 – cited
Darvall v North Sydney Brick & Tile Co (1989) 16 NSWLR 260 – cited
Advance Bank Australia Ltd v FAI Insurance Ltd (1987) 9 NSWLR 464 - cited
Samrein Pty Ltd v Metropolitan Water Sewerage and Drainage Board (1982) 41 ALR 467 – cited
Howard Smith v Ampol Petroleum Ltd [1974] AC 821 - cited
Aloridge Pty Ltd v Christianos & Anor (1994) 13 ACSR 99 – considered
The Aboriginal Land Rights (Northern Territory) Act 1976 and The Alcoota Land Claim No 146 (Federal Court of Australia, Northrop, Cooper and Mansfield JJ, 30 March 1998) - considered
HENRY JOSEPH KAZAR V ROSS ANDREW DUUS AND OTHERS
AG 3005 OF 1998
JUDGE: MERKEL J
PLACE: MELBOURNE (HEARD IN CANBERRA AND MELBOURNE)
DATE: 30 OCTOBER 1998
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IN THE FEDERAL COURT OF AUSTRALIA |
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BETWEEN: |
Henry Joseph Kazar Applicant
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AND: |
Ross Andrew Duus First Respondent
The Registrar of Aboriginal Corporations Second Respondent
LINDSAY ROBERTS THIRD RESPONDENT
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DATE OF ORDER: |
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WHERE MADE: |
THE COURT makes the following orders and declarations:
1. A declaration that the appointment on 20 June 1998 by the Governing Committee of The Goolburri Aboriginal Corporation Land Council (“Goolburri”) of the applicant (“Kazar”) as Administrator of Goolburri was invalid, void and of no effect.
2. A declaration that the appointment by the second respondent (“the Registrar”) of the first respondent (“Duus”) as Administrator of Goolburri on 3 July 1998 and the appointment of the third respondent (“Roberts”) to replace Duus as Administrator on 5 October 1998 were validly made pursuant to the Aboriginal Councils and Associations Act 1976 (Cth).
3. Kazar, whether by his servants, agents or howsoever otherwise, be restrained from acting as an administrator of Goolburri pursuant to his appointment by the Governing Committee of Goolburri on 20 June 1998.
4. An order that Kazar pay the respondents’ taxed costs of and incidental to this proceeding.
5. Liberty to apply is reserved in respect of any matters or issues arising as a result of these orders.
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IN THE FEDERAL COURT OF AUSTRALIA |
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BETWEEN: |
Applicant
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AND: |
First Respondent
The Registrar of Aboriginal Corporations Second Respondent
LINDSAY ROBERTS THIRD RESPONDENT |
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JUDGE: |
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DATE: |
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PLACE: |
REASONS FOR JUDGMENT
Introduction
On 22 June 1994 the Goolburri Aboriginal Corporation Land Council (“Goolburri”), was incorporated as an Association under Pt IV of the Aboriginal Councils and Associations Act 1976 (Cth) (“the ACA Act”). Goolburri’s main function is to provide assistance to traditional land owners, particularly in relation to land rights matters, in the Goolburri region of Queensland. Goolburri is a Native Title Representative Body under the Native Title Act 1992 (Cth). Membership of Goolburri is open to adult Aboriginal persons normally and permanently resident in the “Goolburri region”: see r 8(1) of the Rules of Goolburri. Funding for the services provided by Goolburri is provided primarily by the Aboriginal and Torres Strait Islanders Commission (“ATSIC”).
Management and control of the day to day affairs of Goolburri is vested in a Governing Committee the members of which are elected at each annual general meeting of the Association. The present Governing Committee was elected at the annual general meeting held on 29 March 1998 (“the AGM”).
On 18 June 1998 the second respondent, the Registrar of Aboriginal Corporations (“the Registrar”) served a notice upon Goolburri pursuant to s 71 of the ACA Act calling upon it to show cause, by 26 June 1998, why an administrator should not be appointed under s 71 of the Act. The matters in respect of which cause was to be shown related to significant accounting and financial deficiencies and irregularities that led the auditors of Goolburri to qualify the accounts for the 1996 and 1997 financial years, breaches of reporting requirements and certain complaints to the Minister for Aboriginal Affairs in relation to the management of Goolburri’s affairs.
On 20 June 1998 the Governing Committee of Goolburri resolved that it was of the opinion that Goolburri is insolvent or likely to become insolvent, and appointed the applicant, (“Kazar”) a chartered accountant and partner of the firm Ferrier Hodgson, as Administrator pursuant to s 436A of the Corporations Law (“the CL”).
On 3 July 1998, as a result of the failure of Goolburri to show cause pursuant to the s 71 notice, the Registrar appointed the first respondent, Ross Andrew Duus (“Duus”), as Administrator of Goolburri pursuant to s 71 of the ACA Act.
By a proceeding commenced on 29 July 1998, Kazar sought directions from the Court as to the validity of Duus’ appointment and his entitlement to act as an administrator under the ACA Act. In a later application in the same proceeding the Registrar, supported by Duus, challenged the validity of Kazar’s appointment and his entitlement to act as Administrator under Pt 5.3A of the CL. In these reasons I refer to Kazar’s appointment as one which is made under s 436A or Pt 5.3A of the CL but, as I later explain, those provisions can only apply to Goolburri to the extent they are incorporated into the ACA Act by s 62 of that Act as provisions of the ACA Act.
As Kazar’s entitlement to relief depends upon the validity of his appointment, it is appropriate to first deal with the four grounds on which his appointment is challenged. The first ground is that the scheme for the appointment of an administrator under the ACA Act overrides the CL with the consequence that, to the extent that CL permits the appointment of an administrator under Pt 5.3A, the appointment is subject to the power of the Registrar to appoint an administrator under s 71 of the ACA Act. The second ground is that the election of the Governing Committee at the AGM did not comply with the Rules of Goolburri with the consequence that, on 20 June 1998, the invalidly elected Governing Committee had no power to appoint Kazar as Administrator under Pt 5.3A of the CL. The third ground is that the pre-condition for appointment of an administrator under s 436A, namely that the Governing Committee be of the opinion that Goolburri “is insolvent, or is likely to become insolvent at some future time” was not satisfied with the consequence that the appointment of Kazar as an administrator under the CL was invalid. The fourth ground is that Kazar’s appointment as administrator was made by the Governing Committee for improper or ulterior purposes which were to defeat or impede the power of the Registrar to appoint an administrator under s 71 of the ACA Act and to enable the Governing Committee to continue to influence the conduct of Goolburri’s affairs.
Kazar contends that his appointment under the CL was, and remains, valid. However, he challenges the validity of Duus’ appointment essentially on three grounds. The first ground is that Kazar’s appointment under the CL, being first in point of time, has priority over the Registrar’s subsequent appointment of Duus’ under the ACA Act. The second ground is that the Registrar denied Goolburri natural justice by refusing to allow Kazar to respond to the s 71 notice on its behalf. The third ground is that, as Duus’ appointment was said to be for a limited term, it did not comply with the requirements of s 71 of the ACA Act. A similar issue arises with the appointment on 5 October 1998 of Duus’ successor, the third respondent, Lindsay Roberts (“Roberts”), which was also said to be for a limited term.
Does an appointment of an administrator under the ACA have priority?
Goolburri was incorporated pursuant to s 46 of the ACA Act and, accordingly, is governed by the provisions of that Act. Section 62 of the ACA Act provides as follows:
“Subject to this Act, the provisions of the Corporations Law that relate to compromises or arrangements between companies and their creditors apply, so far as they are capable of application and subject to such modifications, adaptations and exceptions (if any) as are prescribed, to and in relation to Incorporated Aboriginal Associations and, in the application of those provisions:
(a) a reference to a company shall be read as a reference to an Incorporated Aboriginal Association;
(aa) a reference to the Commission shall be read as a reference to the Registrar of Aboriginal Corporations;
(b) a reference to the directors of a company shall be read as a reference to the members of the Governing Committee of an Incorporated Aboriginal Association; and
(c) a reference to the Court shall be read as a reference to the Federal Court of Australia.”
It was contended on behalf of the Registrar that s 62 does not incorporate Pt 5.3A of the CL as the provisions in that Part do not “relate to compromises or arrangements between companies and their creditors”. An identical submission was considered by Kiefel J in Re Deeral Aboriginal and Torres Strait Islanders Corporation (1996) 70 FCR 229. Her Honour considered the relevant provisions of Pt 5.3A and concluded (at 234) that the provisions of Pt 5.3A do “relate” to arrangements with creditors within the meaning of s 62 of the ACA Act. Her Honour observed that:
“The fact that such arrangements lie, for some time, in prospect and that other steps need to be taken to reach the objective does not, in my view, prevent the necessary connection arising.”
I cannot conceive of any valid reason why the restrictive and narrow interpretation contended for by the Registrar should be given to s 62. The purpose of s 62 is to ensure that an Aboriginal Association incorporated under Pt IV of the ACA Act is to have the benefit of all of the provisions of the CL that relate to compromises or arrangements. As is accurately stated in the heading to Pt 5.3A, the Part provides for administration of a company’s affairs “with a view to executing a deed of company arrangement”. It is also equally apparent from the detailed provisions of the Part, that they are structured to ensure that a normal outcome of an administration will be to secure a deed of company arrangement between the company and its creditors where that is the appropriate course: see s 435C(2)(a). Provisions in Part 5.3A relate to procedures that might better enable such an arrangement to be arrived at. The Registrar’s contention that the Part is to be confined so narrowly that it only applies to an arrangement and reconstruction under Pt 5.1, and not to the anterior administration of a company’s affairs with a view to executing a deed of arrangement under Pt 5.3A, would be to defeat rather than give effect to the purpose of s 62.
Accordingly, for the reasons given by Kiefel J and those set out above, I am in agreement with her Honour’s conclusion that s 62 incorporates Pt 5.3A of the CL as if that Part was to be found in the ACA Act.
However that conclusion raises, but does not answer, the question arising in the present case. That question is whether the appointment of an administrator under Pt 5.3A operates to fetter or impede the powers of the Registrar to appoint an administrator under s 71 of the ACA Act. Part 5.3A of the CL relates only to companies which are defined in s 9 of the CL. It is unnecessary to set out the detailed definition in that section, as it clearly does not include an Aboriginal Association incorporated under the ACA Act. Whilst not relevant to the issues in the present case, other provisions of the CL which apply to a corporation as defined in s 57A can apply to an association incorporated under Pt IV of the ACA Act. Thus, the provisions of Pt 5.3A can only apply to an association incorporated under Pt IV of the ACA Act if those provisions are incorporated under s 62. As is made clear by s 62, the incorporation of the provisions of Pt 5.3A is to be “subject to” the ACA Act and only “so far as” those provisions are capable of application. Accordingly, it is necessary to ascertain if, and the extent to which, an administration under Pt 5.3A is inconsistent with an administration under s 71.
After an administrator is appointed under s 436A, the Administrator has control and may carry on the company’s business, property and affairs and may perform any function and exercise any power that the company and its officers could perform or exercise if the company were not under administration: see s 437A(1). The Administrator acts as the company’s agent: see s 437B. While a company is under administration, the powers and functions of officers of the company are suspended and may not be performed or exercised except with the Administrator’s written approval: see s 437C(1).
The provisions of Pt V of the ACA Act in relation to an administrator differ from those under the CL. On appointment of the Administrator all offices of the members of the Governing Committee become vacant, as does the office of the public officer: see s 73. The Administrator is responsible for the conduct of the affairs of the corporation and, in addition, has the functions and duties of the public officer: see s 75. When the Registrar is satisfied that it is no longer necessary for the Administrator to conduct the affairs of the Corporation, the Registrar must conduct an election to fill the offices of the members of the Governing Committee (s 77D) and after the cancellation of the appointment of the Administrator, the conduct of the affairs of the Corporation vests in the elected Governing Committee (s 77E(a)).
As is apparent from the foregoing, the consequences of an administration under Pt 5.3A are fundamentally different to those arising under Pt V of the ACA Act. In particular, under the CL, the powers and functions of officers of the company are suspended whilst under the ACA Act, the offices of the members of the Governing Committee and the public officer become vacant. Further, the broad powers conferred on an administrator under s 437A to control the business, property and affairs of the company for the purposes of Pt 5.3A of the CL are fundamentally inconsistent with the exercise of the general power conferred on an administrator under s 75 of the ACA Act to be responsible for the conduct of the affairs of the Corporation for the purposes of Pt V of the ACA Act.
Although the decision in Re Deeral makes it quite clear that an administration under Pt 5.3A is an administration pursuant to s 62 of the ACA Act, a conflict between the fundamentally different statutory schemes of administration arises if, as has occurred in the present case, an administrator is subsequently appointed under s 71 of the ACA Act. Prior to any such appointment the administration under Pt 5.3A, via s 62, is valid and subsisting. However, upon the exercise of the power to appoint an administrator under s 71, a different situation arises. As the incorporation of Pt 5.3A is subject to the ACA Act and only so far as the provisions of Pt 5.3A are capable of application, I am of the view that the contention on behalf of Kazar that his appointment under Pt 5.3A prevents the Registrar from making an appointment under s 71, ought not to be accepted. Put simply, the express provisions of s 62 require that any appointment under Pt 5.3A is “subject to” an appointment of an administrator at some subsequent date under s 71. The words “subject to this Act” mean “if not inconsistent with or repugnant to any provision of the Act”: see Jones v Metropolitan Meat Industry Board (1925) 37 CLR 252 at 259 per Isaacs J. As his Honour said (at 259) “nothing must be provided” which is contrary to the Act. Kazar’s contention, if correct would result in s 71 being “subject to” s 62 which incorporates Pt 5.3A. In my view, the contention seeks to rewrite, rather than interpret, ss 62 and 71 of the Act. It also reverses the order of priority mandated by s 62 between the two statutory provisions.
It is quite clear that the substantive provisions of Pt 5.3A relating to the Administrator’s powers and functions are not capable of continuing application once an administrator is appointed under s 71. Once an administration commences under s 71 of the ACA Act the Administrator has control of the affairs of the company for the purposes of Pt V and the offices of the members of the Governing Committee and the public officer become vacant. That position is not reconcilable with, and capable of application to, an administration under Pt 5.3A which vests control of the affairs of the company in the Administrator appointed under that Part for the purposes of Pt 5.3A and provides for the powers of the members of the Governing Committee merely to be suspended. Thus the short answer to the contention of Kazar is that s 62 only incorporates the substantive provisions of Pt 5.3A relating to the Administrator’s functions and powers and those of the Governing Committee only for so long as an administrator is not appointed under s 71. Until such an appointment, the Administrator exercises all the powers and functions conferred on the Administrator under Pt 5.3A but the Administrator appointed under Pt 5.3A ceases to be entitled to exercise any powers or functions, which are inconsistent with those to be exercised by the Administrator under Pt V of the ACA Act, upon appointment of an administrator under s 71. I would not go so far as to say that the administration under Pt 5.3A is at an end upon an appointment under s 71; it may be more accurate to say that the administration under Pt 5.3A is suspended for so long as the administration under Pt V of the ACA Act subsists. Clearly, the suspension of the administration under Pt 5.3A will be likely to frustrate the purpose of that administration with the consequence that, usually, it would be appropriate for the Court to make orders under s 447A of the CL bringing to an end the administration under Pt 5.3A.
There is a further and alternative basis upon which I would arrive at the same conclusion. Two inconsistent schemes for administration are contained within the one Act (ss 62 and 71). In such circumstances, the task of the Court is to reconcile, so far as is possible, the conflicting statutory provisions. This task was stated in the following terms in Project Blue Sky Inc v Australian Broadcasting Authority (1998) 153 ALR 490 at 509-510 per McHugh, Gummow, Kirby and Hayne JJ:
“A legislative instrument must be construed on the prima facie basis that its provisions are intended to give effect to harmonious goals. Where conflict appears to arise from the language of particular provisions, the conflict must be alleviated, so far as possible, by adjusting the meaning of the competing provisions to achieve that result which will best give effect to the purpose and language of those provisions while maintaining the unity of all the statutory provisions. Reconciling conflicting provisions will often require the court “to determine which is the leading provision and which the subordinate provision, and which must give way to the other”. Only by determining the hierarchy of the provisions will it be possible in many cases to give each provision the meaning which best gives effect to its purpose and language while maintaining the unity of the statutory scheme.” (Footnotes deleted)
There is no difficulty in determining the leading and the subordinate provisions in the present case. The provisions of Pt V provide for investigation and administration of Aboriginal Corporations where, inter alia, they have failed to comply with the Act, the regulations or the Rules of the corporation or where there has been an irregularity in the Corporation’s financial affairs: see s 61. The power to appoint an administrator is conferred on the Registrar, inter alia, to remedy matters that may have been ascertained after an investigation under Pt V. The grounds upon which an administrator might be appointed under s 71 relate to circumstances where it is in the interests of members, creditors or in the public interest that the Association be placed under administration. The specific grounds include trading at a loss, failure to comply with provisions of the Act or the Rules of the Corporation and members of the Governing Committee acting in their own interest. An administration under Pt V is integral to the Registrar’s role in ensuring that the affairs of an Aboriginal Association are conducted properly and in the interests of members, creditors and in the public interest.
The incorporation of Pt 5.3A is a subsidiary provision to assist an Association when it is seeking a “breathing period” in order to deal with actual or potential insolvency with a view, inter alia, to entering into a deed of arrangement with creditors. Thus, on the principles set out and applied by the High Court in Project Blue Sky, an interpretation of s 62 which gives effect to Pt V as the leading provision and the incorporation of Pt 5.3A under s 62 as the subsidiary provision is to be adopted. Interpreting the provisions on that basis it follows that an administration under Pt 5.3A pursuant to s 62 is, in substance, to be suspended for the duration of an administration under Pt V to the extent of the inconsistency between them. Although there may be some powers or functions of an administrator under Pt 5.3A which are not inconsistent (eg applying to the Court under s 447A(4)) those will be procedural, rather than substantive, functions or powers. The only provisions of Pt 5.3A that might survive an administration under Pt V, are those which are not inconsistent with the operation of Pt V.
It was contended on behalf of Kazar that the incorporation of Pt 5.3A by s 62 only made the incorporation “subject to” the ACA Act at the time an administrator was appointed. As a consequence, so it was said, if there was no appointment under s 71 at that time there could not be one for so long as the s 436A appointment subsists. I do not accept the temporal limitation suggested by senior counsel for Kazar. It is not supported by the words used in s 62, the purpose of the restriction imposed on the incorporation of the CL provisions or the interpretation set out above.
For the above reasons, I am of the view that on 3 July 1998 upon the appointment of Duus as Administrator under s 71 of the ACA Act, Kazar ceased to be entitled to exercise any substantive powers or functions as an administrator under Pt 5.3A for the duration of the administration under Pt V. However, that conclusion leaves open the question as to whether between 20 June and 3 July 1998 Kazar was acting as Administrator under Pt 5.3A and also whether the administration under Pt 5.3A, to the extent it still subsists, should be formally brought to an end by the Court as is sought by the Registrar. The answer to those questions depends upon whether I accept the other grounds upon which the Registrar and Duus have challenged Kazar’s appointment.
Was the Governing Committee of Goolburri validly appointed?
The Registrar and Duus relied upon two alleged procedural irregularities to contend that the Governing Committee that appointed Kazar was not validly elected at the AGM. The first is that there was not a quorum at the AGM. Under the Rules of Goolburri its members are entitled to attend, speak and vote at general meetings (r 8(3)). Rule 15(13) provides that no business shall be transacted at any general meeting without a quorum of the greater of ten members or twenty-five per cent of the membership of the Association “present” at the meeting. The Rules also provide that questions arising at any meeting, shall be decided by a show of hands, unless the meeting decides otherwise (r 16(1)). Rule 16(2) provides that any member shall be entitled to appoint another member as a proxy by notice given to the Secretary at least 24 hours before the meeting.
On 29 March 1998, there were 362 members of Goolburri; accordingly a quorum for the AGM was 91 members. It was common ground that 85 members attended the AGM but that if proxies were counted there was a quorum.
In my view there was a quorum at the meeting. For a quorum, 91 members were required to be “present”: see r 15(13). Under the Rules, a member may attend the meeting either in person or by proxy. The purpose of a proxy is to appoint a member as a proxy to attend and vote at the meeting on behalf of the member as set out in the proxy. Thus, when a proxy appoints a member to attend and vote at the meeting, that member attends on his or her own behalf and also attends, and is therefore, “present”, for and as representing the proxy. There is no reason why a representative is not to be counted in determining whether a quorum of members is present: see Re Kelantan Coconut Estates (Limited and Reduced) (1920) 64 S.J. 700.
It is not to the point whether a member exercises the proxy. In the present case the proxy votes were not exercised as the voting was on a show of hands. However, when a member attends and votes, that member does so on the member’s behalf as well as on the proxy’s behalf. In any event, it is presence at the meeting, rather than voting at the meeting, that determines whether there is a quorum. On the proper construction of the Rules, and in particular r 16(2), a proxy is to be counted as “present” for the purposes of the counting of a quorum under r 15(13).
The second alleged procedural irregularity was that certain persons may have had their nominations for a position on the Governing Committee and their applications for membership wrongly rejected. The persons concerned have not challenged the validity of the election. Rather, complaint is now sought to be made by Duus and the Registrar. The evidence is unclear on these issues. In particular, I am not satisfied that Duus or the Registrar have discharged the onus upon them to establish non compliance with any rule of Goolburri which is a pre-condition to the validity of the election of the Governing Committee. I am also not satisfied that either Duus or the Registrar is entitled to seek to have the Court treat the election as invalid in proceedings to which the committee members (whose rights will or are likely to be affected by this issue) are not parties and on an issue in respect of which they have had no notice: cf Gregg v Tasmanian Trustees Ltd (1997) 73 FCR 91 at 129-130. Further, s 47(2) of the ACA Act provides for the Rules to have the effect of a contract, inter alia, between the Association, its members and the Governing Committee. Even if the Association, through the Administrator, had a right to challenge the election of the Governing Committee, the failure to do so until now raises questions of waiver and estoppel which have not been addressed by the Registrar or Duus.
Was Kazar validly appointed as Administrator?
(a) The facts
Goolburri’s income was derived primarily from grants received by ATSIC but also from royalties paid to it for the benefit of the traditional owners. In the year ended 30 June 1997, Goolburri received income of approximately $3.6 million which left it with a surplus of approximately $1 million which was distributed to the traditional owners. Although Goolburri’s accounts were heavily qualified by their auditors, prior to 20 June 1998, it was not suggested that Goolburri was in financial difficulty. As at 20 June 1998, Goolburri had cash funds of approximately $446,000 and was due to receive further grants of approximately $2 million from ATSIC for the financial year commencing on 1 July 1998. Of that amount, approximately $538,000 was due to be paid by ATSIC for expenditures to be incurred in the first quarter of that financial year. Although a significant part of the $446,000 was allocated for special projects, as at 20 June there was no reason to conclude that the balance available was not sufficient to meet Goolburri’s obligations to its creditors. Indeed the Report prepared by Kazar on 9 July 1998 as to estimated current assets and liabilities showed a surplus of $397,930. There were no legal proceedings or claims by creditors for outstanding debts; apparently the creditors of Goolburri were being paid in the ordinary course of trade.
The Governing Committee recognised the serious deficiencies and irregularities that had occurred in relation to the finances and financial accounts of Goolburri. As a consequence it had engaged Peter Thomas (“Thomas”), who was the accountant for the National and Queensland Secretariats for NAILSS and QAILSS, to provide assistance to Goolburri in an endeavour to get its accounts in order. As at 20 June 1998, Thomas was the person best placed to ascertain and advise as to the financial position of Goolburri. His view at that time, which he proffered to the meeting of the Governing Committee on 20 June 1998 and confirmed in a letter two days later, was that although the financial records of Goolburri were a “disaster”, it was not possible to ascertain what its financial position was. Thomas was not of the view that Goolburri was, or was likely to become, insolvent.
The problem confronting the Governing Committee on 20 June 1998 was the imminent appointment of an administrator by the Registrar as a consequence of the s 71 notice. Ray Robinson (“Robinson”), the Chairman of the Governing Committee, was of the view that the Registrar was conducting a vendetta against him and was biased. The members of the Governing Committee were aware of Robinson’s animosity towards the Registrar and were concerned that the appointment by the Registrar of an administrator would mean that they would lose control and influence over the conduct of the affairs of Goolburri. That was a situation that the Committee wished to avoid, if possible.
It was in that context that on 19 June 1998 Russell Belair and Robinson approached Anthony Hanrahan (“Hanrahan”), a consultant and national director of Ferrier Hodgson, to seek Ferrier Hodgson’s assistance. Hanrahan headed a special division established by Ferrier Hodgson to specialise in indigenous affairs. Hanrahan sought Kazar’s assistance and made arrangements for Kazar, Mr Ian Nicol (“Nicol”), a solicitor from Blake Dawson Waldron which was acting for Ferrier Hodgson, and himself to attend the meeting of the Governing Committee the following day to see if they could “do” something to assist.
Although Kazar and Hanrahan had no knowledge as to Goolburri’s financial situation they prepared proposed minutes (with draft resolutions) and an instrument of appointment of Kazar as Administrator of Goolburri under Pt 5.3A of the CL to take with them to the meeting of the Governing Committee on 20 June 1998. The draft resolutions were expressed as follows:
“RESOLUTIONS
It was resolved:
(a) ‘That in the opinion of the directors, the organisation is insolvent/is likely to become insolvent at some future time, and an administrator should be appointed.’
(b) ‘That Henry Joseph Kazar be appointed by the Board as administrator of the organisation under Part 5.3A of the Corporations Law.’
(c) ‘That the Common Seal of the organisation be affected to the following documents:
- Instrument of Appointment of Administrator.
There being no further business, the meeting was declared closed.’”
The meeting of the Governing Committee was held in Brisbane on 20 June 1998. It was chaired by Robinson; sixteen other persons were recorded as being in attendance. Only one member of the Governing Committee, Ms Janelle Ray Lawton, gave evidence. However, several witnesses who were in attendance at the meeting, but who were not members of the Governing Committee, gave evidence in relation to the meeting. Those witnesses were Kazar, Hanrahan, and Ms Jackie Menhinnitt, the bookkeeper for Goolburri, who made handwritten notes at the meeting which became the minutes of the meeting. Apart from Ms Menhinnitt none of the other witnesses took any notes at, or of, the meeting and had to rely upon their recollection in giving their evidence. Although the minutes are in the form of a handwritten summary, they constituted reasonably reliable evidence of what transpired at the meeting. There was some dispute about the detail and order of events at the meeting but there was little dispute as to the substance of what occurred. I make the following findings in respect of the meeting.
Robinson expressed his concern that the Registrar had a personal vendetta against him and was misusing his position; Robinson also informed the meeting that he had been to the Minister to “wind up the Registrar”. He said that it was clear that the Registrar was going to appoint an administrator, that there was no way out under s 71 and that the Committee “is as good as sacked”. The meeting was informed by Robinson that Hanrahan was a chartered accountant from Ferrier Hodgson which had been requested to attend the meeting to discuss an alternative to the Registrar’s proposed appointment of an administrator. The Governing Committee was anxious to avoid the imminent appointment of an administrator by the Registrar and was amenable to any alternative to that course that was offered, particularly if it was one which enabled the Committee to influence the future course of affairs of Goolburri.
It was in that context that Kazar offered the alternative of appointing him as an administrator under the CL. Kazar and Hanrahan were aware of the desire of the Governing Committee to be able to take matters into their own hands so that they could have input into the running of the Association. Kazar assured the members that he would co-operate with the Committee which could continue to have an input if he was appointed Administrator. After Kazar informed the meeting of the proposal for him to be appointed as an administrator under the CL, he said that that proposal required the Committee to form the view that Goolburri was or was likely to become insolvent. Thomas informed the meeting that although Goolburri’s financial records were a disaster it was simply not possible to ascertain what its financial position was at that point of time. Thomas did not suggest, nor was it his view, that Goolburri was in financial difficulty. It is quite clear that no one attending the meeting was aware of, or was in a position to ascertain, the current asset and liability situation of Goolburri. Someone asked whether appointing Mr Kazar under the CL will “stymie” the Registrar. Nicol, who attended the meeting to advise as to legal issues in relation to Kazar’s appointment, said “yes” and explained that there could not be a dual appointment. There was discussion about a number of potential financial problems that might arise including liabilities arising from certain claims for unfair dismissal. The central problem was that no one was able to form a view as to whether Goolburri was, or was likely to become, unable to pay its debts. In his evidence, Kazar conceded that he understood that the Governing Committee did not have the information available to make an informed decision as to solvency or otherwise. Kazar’s evidence was that, in substance, he advised the meeting that:
“Unless they’re able to form an opinion that the organisation can pay its debts as and when they fall due, the implication must follow that at some point in the future there’s a possibility that it might not.”
and that:
“…if there was some concern about the organisation [being] able to pay its debts as and when they fall due, then that is a ground upon which they could pass [the] resolution.”
I am satisfied that the impression created by Kazar, and intended by Kazar to be created, with members of the Committee at the meeting was that if they could not form a view as to solvency of Goolburri it followed that it was or was going to become insolvent.
Ms Lawton said that she understood the resolution proposed by Kazar to mean:
“that we didn’t know if we were solvent or insolvent at the time.”
Kazar then left the meeting to enable the Committee to discuss his proposal but Nicol remained in the event that any legal advice was sought. There was some discussion about various aspects of Goolburri’s financial problems including the outstanding unfair dismissal claims and their potential cost. After Kazar’s return to the meeting, five matters relating to Goolburri’s finances were formulated and put to the meeting which agreed upon each of them. It is unnecessary to outline the detail of the matters save that they relate to the Committee’s concerns about the need to get its financial accounts in order, the unfair dismissal claims, the uncertainty of Goolburri’s financial position and the possibility that the notice under s 71 might have an adverse affect on the viability of Goolburri. The resolution proposed by Kazar was then passed and his letter of appointment approved.
The handwritten minutes prepared by Ms Menhinnitt record that Kazar and Hanrahan had undertaken to “work with” the Committee. Finally they record Thomas’ thanks to the Committee for entrusting him to work with Goolburri. Somewhat ironically, the final observation made by Thomas, and recorded in the Minutes, is that working with the current staff of Goolburri he “would have things working well in a month or more”.
(b) Did Kazar’s appointment comply with s 436A?
Section 436A provides:
“A company may, by writing, appoint an administrator of the company if the board has resolved to the effect that:
(a) in the opinion of the directors voting for the resolution, the company is insolvent, or likely to become insolvent at some future time; and
(b) an administrator of the company should be appointed.”
Solvency is defined in s95A(1) which provides:
“A person is solvent if, and only if, the person is able to pay all the person’s debts, as and when they become due and payable.”
Section 95A(2) provides that:
“A person who is not solvent is insolvent.”
It is a pre-condition to the valid exercise of the power to appoint an administrator that the board (or in the present case, the Governing Committee) form an opinion as to the insolvency, or likely insolvency, of the corporate entity.
It is implicit in the statutory requirement that the opinion be bona fide and genuinely formed. Further, statutory decisions that are conditional upon the formation of an opinion, satisfaction as to certain matters or other subjective criteria can be reviewed and vitiated where they involve, for example, an error of law: see Buck v Bavone (1976) 135 CLR 110, 118-119 and Minister for Immigration and Ethnic Affairs v Wu Shu Liang 185 CLR 259, 275-276, 291. In Wu Shu Liang, the majority of the High Court affirmed the dictum of Dixon J in Avon Downs Pty Ltd v Federal Commissioner of Taxation (1949) 78 CLR 353 at 360, where his Honour observed that a decision based upon subjective criteria was reviewable, inter alia, if the decision maker does not address the question which the statute formulates or if the conclusion is affected by some mistake of law.
An inability to determine whether a corporation is or is not solvent, without more, cannot found an opinion that it is or is not insolvent or likely to become insolvent. As was emphasised by Santow J in Wagner v International Health Promotions (1994) 15 ACSR 419 at 421, s 436A requires a “concluded” rather than a tentative opinion. For example his Honour found that having reason to believe a company may be insolvent was not a concluded opinion that it is insolvent.
Judicial views have differed as to whether an opinion must be separately formed as to insolvency or as to likely insolvency (see Lanson Investments Pty Ltd v Murray River FM Pty Ltd, Federal Court of Australia, Gray J, 1 December 1993, at 5-6) or whether a single opinion as to “actual or likely insolvency” will satisfy the requirements of the section (see In the Matter of Roy Davis Contracting Pty Ltd, Supreme Court of Queensland, Moynihan J, 22 April 1996 at 3). There is a fine line between the concepts of actual or likely insolvency which need to be viewed “as it would be by someone operating in a practical business environment” Re New World Alliance Sycotex v Baseler (1994) 51 FCR 425 at 434 per Gummow J. Viewing the concepts in that way, if an opinion is genuinely formed as to “actual”, “likely” or “actual or likely” insolvency, that opinion will satisfy the requirements of the s 436A. Thus, I would not treat the resolution of “actual or likely” insolvency in the present case as one which does not satisfy s 436A merely because it failed to form a separate opinion as to actual or as to likely insolvency.
Thus, the validity of the decision to appoint Kazar as an administrator of Goolburri pursuant to s 436A of the CL requires that:
· Goolburri’s governing Committee form a genuine, bona fide and concluded opinion as to insolvency ie Goolburri is or is likely to be unable to pay its debts as and when they become due and payable;
· in forming the requisite opinion, the Governing Committee address the question formulated in the section and not err in law in doing so.
The requisite opinion is that of the Governing Committee rather than that of each of its individual members. In Arthur Yates & Co Pty Ltd v The Vegetable Seeds Committee (1946) 72 CLR 37 at 82 Dixon J, in considering whether a Committee consisting of four members had not exercised a power bona fide for the purposes for which the power was conferred, commented upon the need to distinguish between the motives actuating individual members and the purpose disclosed by the character and operation of the measure in relation to the actual facts and circumstances. His Honour cited Re The Mayor of the City of Hawthorn; Ex Parte The Co-Operative Brick Company Limited (1909) VLR 27 at 51-52 where Cussen J observed in relation to whether a by-law had been passed in bad faith by an elective municipal council:
“Each councillor may be actuated by many reasons, each having some different reasons from the others, and it seems to me almost, if not quite, impossible to penetrate into their minds.”
Similarly, Kirby P in Darvall v North Sydney Brick & Tile Co (1989) 16 NSWLR 260 at 281 commented upon the multiple purposes that might actuate particular directors forming part of a collegiate body, such as a board of directors, to make a decision. However, his Honour observed that ultimately the task of the court is one of “characterisation”. Although the cases to which I have referred relate to improper purpose the same principles apply to a determination of whether a collegiate body such as the Governing Committee has formed the “opinion” required by statute to be formed.
In the present case it is not possible to penetrate the minds of each of the members of the Committee as, putting all else aside, only one of the members gave evidence. However, that fact cannot immunise the decision from challenge. The task of the Court is to determine, having regard to the actual facts and circumstances, whether on the balance of probabilities the opinion required to be formed by the repository of the power (ie the Governing Committee) as a condition of its exercise, has been formed. Although statements as to subjective intention must be relevant the court must approach its task of classification of the conduct in question objectively: see Advance Bank Australia Ltd v FAI Insurance Ltd (1987) 9 NSWLR 464 at 485 per Kirby P.
Was the opinion purportedly formed by the Committee bona fide and genuinely formed by it? My findings, which I have set out above, satisfy me that:
· the Committee members were not able to form any view as to the solvency or likely insolvency of Goolburri on the basis of the information available to them at the meeting on 20 June;
· the Committee members did not form an opinion at that meeting that Goolburri was insolvent or likely to become insolvent at some future time on the ground that it was likely to be unable its debts as and when they fall due;
· the opinion in fact formed by the Committee was that it was unable to determine Goolburri’s actual or likely ability or inability to pay its debts as and when they fall due;
· at the time the resolution required by s 436A was passed, the Governing Committee was of the opinion that if it was unable to form any view as to the solvency of Goolburri it was appropriate to pass the resolution.
On the basis of those findings, it must follow that the opinion required by s 436A was not, as a matter of fact, formed by the Governing Committee. I would add that even if the Committee had, as a matter of fact, formed the requisite opinion I would have concluded that the opinion was vitiated by a mistake or error of law. It is quite clear that the Committee, in passing the resolution, was of the view that the legal requirement for the resolution to be passed was that its members form an opinion that they were unable to determine whether Goolburri was or was likely to become unable to pay its debts. Plainly, that view is an error of law. Consequently, the Governing Committee failed to address the question required to be addressed by s 436A and therefore did not validly exercise the power conferred by the section.
(c) Improper purpose
A statutory power must be exercised for the purpose for which it was conferred. If the power is exercised for more than one purpose, where one of those purposes is improper, the exercise of the power will be vitiated if the improper purpose was a substantial purpose in the sense that the decision would not have been made but for the ulterior purpose: see Samrein Pty Ltd v Metropolitan Water Sewerage and Drainage Board (1982) 41 ALR 467 at 468, and Thompson v The Council of the Municipality of Randwick (1950) 81 CLR 87 at 106 cf Knuckey v The Commissioner of Taxation (Full Court of Federal Court of Australia, Black CJ, Tamberlin and Goldberg JJ, 16 September 1998) at 11-13.
The purpose of Pt 5.3A is succinctly summarised in the heading to the Part:
“Administration of a Company’s Affairs with a View to Executing a Deed of Company Arrangement”
Section 435A provides that:
“The objects of Pt 5.3A are to provide for the business, property and affairs of an insolvent company to be administered in a way that:
(a) maximises the chances of the company, or as much as possible of its business, continuing in existence; or
(b) if it is not possible for the company or its business to continue in existence- results in a better return for the company’s creditors and members than would result from an immediate winding up of the company.”
Under s 435C the administration ends when one of three outcomes, which are each expressed as the “normal” outcome of the administration, occurs. Those outcomes are that a deed of company arrangement is executed, the company’s creditors resolve that the administration should end or the company’s creditors resolve that the company be wound up.
It is clear from the foregoing that the exercise of the power to appoint an administrator under s 436A must be in furtherance of the object of Pt 5.3A as set out in s 435A. Thus, if the power to appoint an administrator is exercised for a purpose unrelated to that object but for an ulterior or extraneous purpose then it will be invalidly exercised. A purpose of preventing the Registrar from appointing an administrator under s 71 of the ACA Act would in my view clearly be an appointment for an ulterior, and therefore improper purpose, as such a purpose is unrelated to the object or purposes to which I have referred.
It would also be an improper purpose to exercise the power conferred under Pt 5.3A to perpetuate control or positions of the directors or the Governing Committee: see Howard Smith v Ampol Petroleum Ltd [1974] AC 821at 837; Ngurli v McCann (1953) 90 CLR 425 at 439-440, 447-448 and Aloridge Pty Ltd v Christianos & Anor (1994) 13 ACSR 99 at 102. In Aloridge, Burchett J terminated the appointment of an administrator under Pt 5.3A which was made, not for a statutory purpose, but in order to “wrest control” of the affairs of the company from a previously appointed provisional liquidator, with whom the directors were having a dispute. Similarly in the present case, it would be an improper purpose of the Governing Committee to exercise its power to appoint an administrator under Pt 5.3A if in doing so the purpose, or a substantial purpose, was enabling it to retain influence or control over the affairs of Goolburri.
In summary, a purpose of impeding the Registrar or a purpose of the Committee members retaining influence or control is unrelated to the object set out in s 435C and to the purpose of administering a company’s affairs with a view to achieving any of the “normal” outcomes provided for by s 435C(2).
As pointed out above, determination of the purpose of a deliberative body constituted by a number of individuals requires consideration of the actual facts and circumstances rather than the penetration of the mind of each member of the body. In the present case the actual facts and circumstances leave little doubt as to the purpose of the Governing Committee in purporting to exercise its power to appoint Kazar as Administrator. The purpose, or more accurately, the purposes which actuated the Governing Committee to appoint Kazar as Administrator were to prevent the Registrar from exercising his power to appoint an administrator under s 71 of the ACA Act and to enable the Governing Committee to continue to have input and influence over the conduct of the affairs of Goolburri through their appointee, Kazar. Those purposes are not purposes for which the power under s 436A might properly be exercised and are ulterior and improper purposes.
On 20 June 1998, the problems that were required to be addressed by Goolburri were the deficiencies and irregularities which were the subject of the s 71 notice, rather than any difficulties with creditors. At that time, Thomas had been addressing the accounting and financial problems of Goolburri. If the Governing Committee was of the view that Thomas was not sufficiently addressing those problems, it was quite open to it to engage Kazar or his firm to do so. There was no need for Kazar to be appointed as an administrator to achieve that object. Further, there were no outstanding claims being pressed by creditors and no evidence available at the time of actual or potential insolvency. In these circumstances, any argument that the power might have been exercised for the purposes of Pt 5.3A, as set out above, is untenable.
Accordingly, the appointment of Kazar is also invalid on the ground that the Governing Committee’s appointment of Kazar was actuated by an impermissible purpose.
(d) Actual insolvency
Evidence was adduced by Kazar as to actual insolvency as at 20 June and by Duus as to actual solvency as at 20 June 1998. The material relied upon was not available to the Governing Committee on 20 June 1995 and therefore can have no relevance to its opinion or purpose as at 20 June 1998. Further, the evidence is subject to many contingencies and requires a more detailed examination of the issues raised by it than has occurred or was possible in these proceedings.
(e) Conclusion
For the reasons set out above, I am satisfied that Kazar’s appointment on 20 June 1998 as Administrator under s 436A was invalid, void and of no effect.
However, that conclusion does not resolve all of the issues raised by the proceedings. Important issues were raised as to the validity of the Registrar’s appointments of Duus and, later, of Roberts. These issues require resolution since if Kazar’s contentions on these matters are accepted, that will have the consequence that the Governing Committee has remained in office since 20 June 1998. The resolution of these issues may also have costs, and possibly other, implications.
Was Duus’ validly appointed as an administrator pursuant to s 71?
(a) Does Pt 5.3A have priority?
For the reasons set out earlier, the incorporation of Pt 5.3A into the ACA Act by reason of s 62 of the Act was subject to the ACA Act. As a consequence, upon an administrator being appointed under s 71 of the ACA Act, Kazar was no longer entitled to exercise the substantive powers and functions of an administrator under the CL. Accordingly, the appointment of Duus under s 71 had priority over any earlier subsisting appointment of Kazar as Administrator under Pt 5.3A. Thus, the validity of Duus’ appointment, and the powers he was entitled to exercise, were not affected by the anterior appointment of Kazar as Administrator under Pt 5.3A even if Kazar’s appointment had been valid.
(b) Did the Registrar deny natural justice to Goolburri?
Section 71(1) of the ACA Act provides for the Registrar to serve a notice in writing
“calling upon the corporation to show cause, within a reasonable period specified in the notice, why an Administrator should not be appointed.”
Section 71(2) provides that after that period and
“having considered any representations made by the Corporation”
the Registrar may appoint an administrator if satisfied that any of the grounds set out in s 71(2) have been established.
It follows from the foregoing that the valid exercise of the power of appointment of an administrator under s 71 requires that:
· the s 71 notice provide a reasonable period for the Corporation “to show cause”;
· the Registrar not appoint an administrator until after the expiry of the period specified and after having considered any representations made by the Corporation;
· the Registrar afford the Corporation a reasonable opportunity to make the representations which the Registrar is required to consider before exercising the power of appointment under s 71.
Kazar contended that the Registrar had not afforded him a reasonable opportunity of making representations to him in the manner required by s 71. The relevant facts are as follows.
After his appointment, Kazar was anxious to discuss the implications of it with the Registrar and with that end in view he made an appointment to see the Registrar which was subsequently cancelled by the Registrar. The Registrar, through his officers, indicated that he was considering the implications of Kazar’s appointment under Pt 5.3A and accordingly, did not wish to meet with him. Kazar corresponded with the Registrar concerning the proposed meeting but did not state in the correspondence or otherwise that he was seeking to meet with the Registrar in order to show cause why an administrator should not be appointed or to otherwise respond to the matters raised by the Registrar in his s 71 Notice. Rather, the purpose of the meeting was to discuss with the Registrar Kazar’s responsibilities under Pt 5.3A and the implications of Kazar’s appointment to any proposed course of action the Registrar may wish to take which was inconsistent with that appointment. Although Kazar’s discussions were with officers of the Registrar, I accept that the Registrar was accurately informed of those discussions when he said in his evidence that Kazar
“…did not say at any time that he wanted to meet with me for the purpose of providing a response to the show cause notice. Had he done that, my approach to him might have been different.”
I also accept the Registrar’s evidence, which is supported by the notes and correspondence of his officers, that Kazar had not said or indicated that he wished to have a meeting with the Registrar for the purpose of responding to the show cause notice. In his letter of 3 July to Goolburri advising of Duus’ appointment, the Registrar noted that it “has not responded to the show cause notice”. I would add that the contemporaneous facts fully support the view taken by the Registrar of the approaches by Kazar at the time. Those facts may be summarised as follows:
· Kazar did not undertake to the Governing Committee, nor did he accept that it was part of his duty as Administrator, to respond to the s 71 notice on behalf of Goolburri;
· at no time prior to this issue being raised in the course of these proceedings, did Kazar make any complaint that he had been denied an opportunity to show cause in response to the s 71 Notice;
· Kazar took no steps to analyse or address the detailed and specific matters in respect of which Goolburri was required to show cause under the s 71 Notice;
· an employee of the Registrar contacted Goolburri on 26 June to remind it that the response to the s 71 notice was due on that day and was informed by Ms Thompson, an employee of Ferrier Hodgson, that a response was not required because of Kazar’s appointment as Administrator.
There was a potential overlap between the endeavours of Kazar to meet with the Registrar for the purpose of enabling Kazar to continue as Administrator under Pt 5.3A and, to that end, persuade him not to appoint an administrator under s 71 of the ACA Act. However, I am satisfied that Kazar was not seeking to meet with the Registrar or his officers to show cause in response to the s 71 notice and I am satisfied that the Registrar and his officers did not refuse or deny to Kazar the opportunity to respond to the show cause notice. Accordingly, there was no denial of natural justice in relation to the show cause notice.
(c) Can an appointment of an administrator be for a limited period?
Section 71(2) confers power on the Registrar to appoint an administrator upon being satisfied that any of the grounds set out in s 71(2) have been established. Section 72 provides for publication in the Gazette and in a local newspaper of “notice of the appointment and the period of the appointment…”
Section 74 provides for the Administrator to receive such remuneration as the Registrar determines. Finally ss 77D and 77E provide as follows:
“77D. If the Registrar is satisfied that it is no longer necessary for the Administrator to conduct the affairs of the corporation, the Registrar must conduct an election to fill the offices of the councillors or the members of the Governing Committee, as the case may be.
77E. If the Registrar cancels the appointment of the Administrator, and does not immediately appoint another:
(a) the conduct of the affairs of the corporation vests in the Council or the Governing Committee, as the case requires; and
(b) section 36 or 56, as the case requires, applies as if the office of public officer had become vacant on the cancellation of the appointment of the Administrator.”
Although the statutory scheme is not as clear as it could have been, it seems to me that it provides that:
· the appointment of an administrator may be for a period: see s 72;
· termination of the administration occurs upon cancellation of the appointment of an administrator under s 77E, unless another administrator is appointed in place of the one whose appointment is cancelled: see s 77E.
The relevant facts in relation to the appointments under challenge can be briefly summarised. By an instrument of appointment signed 3 July 1998, the Registrar appointed Duus to be the Administrator of Goolburri “pursuant to Section 71 of the Act subject to the powers and requirements of the Act”. Notice of the appointment was published in the Gazette by the Registrar and accurately stated that the appointment was “from 3 July 1998 until such time as I cancel the appointment”. Thus, pursuant to the instrument of appointment, in accordance with the ACA Act, the appointment of Duus was for a period being from 3 July 1998 until the appointment was cancelled pursuant to the powers of the Registrar to cancel an appointment under s 77E of the ACA Act. On 5 October 1998, the Registrar cancelled Duus’ appointment pursuant to s 77E of the Act. On the same day by instrument of appointment, which was in identical terms to Duus’ appointment, the Registrar appointed Roberts as the Administrator pursuant to s 71 of the ACA. As with Duus, Roberts’ appointment pursuant to s 71 was not for any fixed period but was to be from 5 October 1998 until the appointment was cancelled pursuant to the Registrar’s powers to cancel an appointment under s 77E of the ACA Act. An almost identical appointment was held to be a valid appointment pursuant to s 71 of the ACA Act by the Full Court in The Aboriginal Land Rights (Northern Territory) Act 1976 and The Alcoota Land Claim No 146 (Federal Court of Australia, Northrop, Cooper and Mansfield JJ, 30 March 1998) at 19-22. In that case, the Full Court (at 23) held that an administrator’s appointment under s 71 operates until its cancellation under s 77E and not by effluxion of time.
The problem that has arisen in this case is that the Registrar called for tenders for the position of Administrator from Duus and Roberts. The tenders, which were accepted by the Registrar, provided that the tender was to apply initially for a period of two months. The two month period for Duus was later extended by one month.
It was contended on behalf of Kazar that the appointments were invalid as the ACA Act does not provide for an appointment of an administrator to be for a limited two month period. This submission is misconceived. As pointed out above, the statutory scheme does appear to provide for an appointment to be for a “period” see s 72. Thus, an appointment may be made for a period commencing from the date of appointment until cancellation or for a defined period at the conclusion of which the Registrar would be required to cancel the appointment and to appoint a replacement Administrator (s 77E) or, if satisfied that it is no longer necessary for an administrator to conduct the affairs of the Corporation, to conduct an election to fill the vacant offices of the members of the Governing Committee (s 77D). It is an implicit requirement that “the period” of appointment be related to the purpose for which the power of appointment is conferred.
However, there is a more fundamental problem with the contention. I am satisfied that under each of the instruments of appointment Duus and Roberts were not appointed for a limited period of two months; rather they were appointed until their appointment was cancelled. If, and to the extent that, the private tender arrangements were inconsistent with the statutory appointment, then the private arrangements would be ineffective or unenforceable to the extent of the inconsistency. However, it is not necessary to go that far in the present case as I am of the view that although the tender documents may have only related to a two month period, the tender related to the financial arrangements which would apply to that period rather than to whether the statutory appointment was to terminate pursuant to the Act at the end of that period. Operating in that way, the contractual arrangements made by the Registrar with Duus, and later with Roberts, in respect of the remuneration and the other matters dealt with in the tender, can properly be seen to be consistent with s 74 of the ACA Act and are not inconsistent with the instruments of appointment. Thus, the statutory appointments of Duus and Roberts were only able to be terminated upon cancellation of the appointments under s 77E, rather than pursuant to the terms of any private arrangement.
Accordingly, I am satisfied that the appointments of Duus and Roberts satisfied the requirements of the Act. If, and to the extent that, the terms of the private arrangements were inconsistent with the requirements of the statutory provisions that would not have the affect of rendering the appointments under the statute invalid; rather it would have the effect of rendering the inconsistent provisions unenforceable. It is unnecessary for me to determine those matters as the issues with which I have been concerned relate solely to questions concerning the validity of the appointments in question.
I would add that the confusion created by the tender documentation is something that should be avoided in the future. Whilst it may be permissible for the Registrar to agree to financial terms for part of the period of an appointment, it is quite clear that the Registrar should not enter into private arrangements which, on their face, might be seen to be inconsistent with the terms of the statutory appointment.
Finally, it was contended on behalf of Kazar that the Minister had not approved Roberts’ appointment, as was required under s 71(3), with the consequence that the appointment was invalid.
Section 71 provides for the Registrar to appoint an administrator after serving a notice to show cause and considering any representations made by the corporation, if satisfied that any of the grounds set out in s 71(2) has been established and the Minister has given prior approval to the appointment under s 71(3). However, s 77E provides for the Registrar to cancel the appointment of the Administrator appointed under s 71 and, if another Administrator is not immediately appointed, the section provides for the conduct of the affairs of the Corporation to vest in the Governing Committee which would have to be elected under s 77D. The contention raised by Kazar requires consideration of whether a replacement Administrator can only be appointed if the Minister has given prior approval to the replacement under s 71(3).
In my view there is a short answer to Kazar’s contention. It is implicit in s 77E that upon the Registrar cancelling the appointment of an administrator, the Registrar has power to immediately appoint another Administrator to replace the appointment he has cancelled. Thus if the appointment is an implicit exercise of power under s 77E and not an appointment pursuant to s 71, there is no reason to import a requirement into s 77E of prior ministerial approval to the appointment of the replacement Administrator. My interpretation is supported by the structure of s 71. The only express power of appointment of an administrator under the Act is in s 71(2) but that section provides only for the appointment of the original Administrator after a show cause notice and upon the Registrar having been satisfied that one of the grounds set out in s 71(2) has been established. The statutory scheme then requires the minister’s approval under s 71(3) to the corporation being placed in administration.
However, I see no reason to import the requirement of ministerial approval to the appointment of the replacement Administrator. The company is and remains under administration when an administrator’s appointment is cancelled, but the Administrator is replaced by another Administrator. In these circumstances it is both consistent with the statutory scheme and the purpose of requiring ministerial approval to an administration to interpret the provisions as only requiring ministerial approval prior to a corporation being placed in administration but not requiring ministerial approval where a corporation under administration merely has the Administrator replaced under s 77E. Accordingly, I do not accept this ground of challenge to Roberts’ appointment.
It would also follow from the view I have expressed that s 33(4) of the Acts Interpretation Act 1901 (Cth) would have no application as, on my construction of ss 71(3) and 77E, there is a legislative intention that only an appointment under s 71(2) requires prior ministerial approval. In those circumstances, there is no basis upon which the provisions of s 33(4) could have any application.
Roberts’ appointment purported to be “pursuant to Section 71” of the ACA Act. However, I am satisfied that, as a matter of law, the appointment of Roberts was intended to be as a replacement administrator, under s 77E, rather than s 71. A wrong reference to the power exercised will not prevent an exercise of a power from being valid if the intention to exercise the power is otherwise clear: see G Farwell A Concise Treatise on Power (1893) at 186; Re Eardley Wilmot (1861) 29 Beav 644; 54 ER 577.
Conclusions
For the above reasons I am satisfied that Kazar’s appointment as administrator under Pt 5.3A was invalid, void and of no effect. I am also satisfied that the Registrar’s appointment of Duus on 3 July 1998 and his subsequent appointment of Roberts on 5 October 1998 (after the cancellation of Duus’ appointment) were both valid appointments with the consequence that at all material times each was acting, and entitled to act, as Administrators of Goolburri pursuant to Pt V of the ACA Act.
The present case offers a disturbing example of how easily matters can go wrong. Goolburri is an Association of significance in relation to the interests of traditional owners in the Goolburri region of Queensland. It is quite understandable that the Governing Committee would desire to pursue self determination rather than have an externally appointed Administrator. But that desire, no matter how bona fide or genuine, can only be carried into effect in accordance with law. In that regard, Goolburri was well endowed with existing legal and accounting advisers who were capable of assisting it.
However, those advisers were supplanted on 20 June 1998 by a new set of advisers from Ferrier Hodgson and Blake Dawson Waldron in Canberra. Those advisers, who had no prior association with Goolburri, offered a solution which obviously would be fraught with difficulty notwithstanding that it would be highly attractive to the Governing Committee, particularly its chairman. The circumstances imposed significant professional responsibilities on the new advisers who ought to have been well equipped to discharge those responsibilities. Regrettably, they failed to do so.
Kazar and Nicol attended the meeting on 20 June to offer the Governing Committee expert advice in relation to the legal and financial questions that arose in respect of the appointment of an administrator under s 436A. The advice given by Kazar to the Governing Committee as to the requirements of s 436A of the CL was plainly wrong. The advice given by Nicol as to the effect of an appointment under s 436A on the Registrar’s powers under the ACA Act was also plainly wrong. The advice induced the Committee to pass a resolution which was invalid on the basis of the failure to satisfy the statutory precondition for an appointment under s 436A and improper purpose.
I have expressed my concern at what has occurred for two reasons. Ferrier Hodgson has established a special indigenous affairs department, presumably to assist indigenous organisations in the conduct of their financial affairs. However, in instances where such organisations do not themselves have legal or accounting expertise they will be particularly reliant on the professionals assisting them for advice. Those professionals have a corresponding duty to ensure that the advice that is given is given competently, with due skill and diligence and an awareness that the persons to whom the advice is given fully understand the advice and its implications. Kazar and Nicol failed to discharge those duties in the present case. It is a matter of some importance that other advisers in similar circumstances are conscious of their responsibilities and ensure that they are discharged.
The second reason I have raised the above matters is that they may be relevant to the question of the entitlement, if any, of Kazar or Ferrier and Hodgson to recover costs and expenses incurred by them in acting on Goolburri’s behalf in accounting and financial matters during the period of Kazar’s Administration. Although I have concluded that the administration under s 436A was invalid, void and of no legal effect, it does not follow that a claim for the recovery of costs and expenses, for example on a quantum meruit basis, may not be made.
Finally, the point was made by Kazar’s senior counsel that I ought to desist from criticising Nicol, as he did not give evidence and was not a party to the proceeding. However, the respective roles of both Kazar and Nicol at the 20 June meeting were an issue which was fully ventilated in evidence. It was open to Kazar to call Nicol as a witness but he did not do so. I can only infer that the evidence given would not have assisted Kazar’s case: see Jones v Dunkel (1959) 101 CLR 298.
In all the circumstances the following relief is appropriate:
1. A declaration that the appointment on 20 June 1998 by the Governing Committee of Goolburri of Kazar as Administrator of Goolburri was invalid, void and of no effect.
2. A declaration that the appointment by the Registrar of Duus as Administrator of Goolburri on 3 July 1998 and the appointment of Roberts to replace Duus as Administrator on 5 October 1998 were validly made pursuant to the ACA Act.
3. An injunction restraining Kazar, whether by his servants, agents or howsoever otherwise, from acting as an administrator of Goolburri pursuant to his appointment by the Governing Committee of Goolburri on 20 June 1998.
4. An order that Kazar pay the Registrar’s, Duus’ and Roberts’ taxed costs of and incidental to this proceeding.
5. Reserve liberty to apply in respect of any matters or issues arising as a result of these orders.
The reservation of liberty to apply is appropriate as the applications of Kazar and the Registrar raise additional questions or issues that might arise as a result of the relief I have granted.
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I certify that this and the preceding thirty (30) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Merkel |
Associate:
Dated:
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Counsel for the Applicant: |
Mr M Neil QC |
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Solicitor for the Applicant: |
Blake Dawson Waldron |
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Counsel for the First Respondent: |
Mr D Cooper with Mr I R Perkins |
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Solicitor for the First Respondent: |
Minter Ellison |
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Counsel for the Second Respondent: |
Mr J Lenczner |
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Solicitor for the Second Respondent: |
Australian Government Solicitor |
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Counsel for the Third Respondent: |
Mr D Cooper with Mr I R Perkins |
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Solicitor for the Third Respondent: |
Minter Ellison |
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Date of Hearing: |
3, 4 and 25 September 1998; and 9 October 1998 |
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Date of Judgment: |
30 October 1998 |
