FEDERAL COURT OF AUSTRALIA

Henry v Sandlewood Aboriginal Projects Limited (No 2) [2019] FCA 2061

ORDERS

THE COURT ORDERS THAT:

1.    The seventh applicant have judgment on that part of its claim against the second respondent and the third respondent pleaded in paragraph 70 of the further amended statement of claim, in the sum of $1,014,924, plus interest in the sum of $284,428.98.

2.    The seventh applicant have judgment on that part of its claim against the second respondent pleaded in paragraph 70 of the further amended statement of claim, in the sum of $329,000, plus interest in the sum of $92,201.12.

3.    The seventh applicant have judgment on that part of its claim against the third respondent pleaded in paragraph 70 of the further amended statement of claim, in the sum of $376,044, plus interest in the sum of $105,385.04.

4.    Unless the Court otherwise orders, the second and third respondents pay the judgment sums pursuant to each of orders 1, 2 and 3 into Court and not otherwise.

5.    The second and third respondents pay the applicants’ costs of:

(a)    those parts of the proceedings referred to in orders 1, 2 and 3; and

(b)    the interlocutory application filed on 21 June 2019.

6.    By 11 October 2019, the respondents file and serve any defences to the further amended statement of claim.

7.    By 1 November 2019, the applicants file and serve any replies to any defences filed under order 6.

8.    By 29 November 2019, the parties identify, in correspondence, any categories of documents for discovery required.

9.    By 13 December 2019, the parties file and serve any application for discovery.

10.    The proceeding be provisionally listed for case management hearing and interlocutory hearing of any application for discovery on 12 February 2020 in Brisbane.

11.    All parties be granted access to all documents produced under subpoena to which access has already been granted to any party.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

(REVISED FROM THE TRANSCRIPT)

RARES J:

1    This is an application for summary judgment under s 31A of the Federal Court of Australia Act 1976 (Cth) or for judgment in default against the second and third respondents, Russell Doctor and Jason Jarro. Earlier today, I refused Mr Doctor’s application for an adjournment, so as to enable him to file a defence to the further amended statement of claim: Henry v Sandlewood Aboriginal Projects Ltd (No 1) [2019] FCA 2060. Mr Jarro did not appear today.

Background

2    Mr Doctor, held, among other offices, a directorship of Western Downs Group Limited. I had joined Western Downs earlier as the seventh applicant under s 237 of the Corporations Act 2001 (Cth): see Henry v Western Downs Group Limited [2018] FCA 1168. Mr Doctor appeared in the proceeding prior to that amendment. On 3 May 2018, he swore a long affidavit in compliance, or attempted compliance, with the order I made on 8 February 2018. That order required each of him, Mr Jarro and Kerry-Anne Lacey, to file and serve an affidavit deposing as to his or her knowledge about the distribution of the $5.75 million paid to Western Downs (which then was the first respondent) under an Indigenous Land Use Agreement (or ILUA) dated 10 December 2012 between Arrow Energy Pty Ltd and the “Native Title Party”, including all money that each of Mr Doctor, Mr Jarro and Ms Lacey had received personally and the basis of each receipt.

3    Subsequently, on 30 October 2018, I ordered that the applicants have leave to file and serve an amended originating application and an amended statement of claim, joining Western Downs as the seventh applicant, and substituting Sandlewood Aboriginal Projects Limited as first respondent. On that occasion, I also ordered that the respondents file and serve any defences to the amended statement of claim on or before 7 December 2018.

4    Mr Doctor filed a defence dated 9 January 2019. On 7 February 2019, I ordered that any request by the applicants for further and better particulars of Mr Doctor’s defence be served on or before 14 February 2019 and that he serve any response to that request on or before 1 March 2019. I also gave the applicants leave to file and serve any interlocutory application to be fixed for hearing originally on 25 March 2019 in respect of Mr Doctor’s defence and any reply he gave to the request for particulars, and also set the matter down for a case management hearing.

5    On 25 March 2019, I ordered that Mr Doctor serve, on or before 8 April 2019, particulars that complied with rr 16.41 and 16.45 of the Federal Court Rules 2011, in response to the applicants’ request made on 14 February 2019, so as to give the applicants fair notice of the case to be made against them, in default of which Mr Doctor’s defence be struck out.

6    In the event, Mr Doctor served particulars in a document, filed by his former solicitor, dated 8 April 2019 and headed, “Further and Better Particulars to the Defence of the Second Respondent”. But on 28 May 2019, having considered it, I found that this document did not constitute proper particulars or fair notice of his defence. I ordered that his defence be struck out with effect from the default that had occurred on 8 April 2019.

7    There the position stood until earlier this week, when Mr Doctor retained new solicitors, his former solicitors having ceased to act some time ago.

8    I described some of the presently relevant circumstances of the parties in the following passages of my reasons in Henry v Western Downs Group Limited [2018] FCA 1168 [2]-[19], when I granted leave to the then applicants to add the then first respondent, Western Downs, as an applicant and for the other applicants to conduct the proceeding on its behalf under s 237 of the Corporations Act 2001 (Cth):

2.    The circumstances relevant for the present purposes can be briefly stated. A substantial amount of material has been deployed in evidence before me, but it is not necessary to set out much of it for the purposes of these reasons.

3.    On 10 December 2012 a number of individuals, including Ms Henry, Ms Conlon, Mr Emmerson, Mr Doctor, Mr Jarro and Ms Lacey, entered into an indigenous land use agreement (the ILUA) with Arrow Energy Pty Ltd on their own behalf and on behalf of persons who then understood themselves to comprise 11 native title, or potential native title, claim groups (that the ILUA defined as the “Western Downs Unclaimed Area Native Title Group”) with an interest in land and waters in south-east Queensland, in the Western Downs area, not then the subject of any determination of native title under the provisions of the Native Title Act 1993 (Cth).

4.    The ILUA recorded that there were no registered native title claims on the Register of Native Title Claims at the authorisation date over the ILUA area, and that Arrow was intending to conduct a project that would, first, involve physical disturbance to land and waters and, therefore, secondly, have the capacity to cause harm to Aboriginal cultural heritage and to the lands and waters of which the indigenous people are spiritual guardians. Under the ILUA, Arrow was to pay a total of $5.75 million (defined as “the Benefits”) to a “Corporate Entity”, that the ILUA defined as an entity established by the native title party (comprising those persons who had signed the ILUA) and that fulfilled the requirements prescribed in cl 7. It is common ground that Western Downs became the “Corporate Entity” for the purposes of the ILUA.

5.    Clause 7.2 of the ILUA provided that the native title party had to ensure that Western Downs, as the Corporate Entity, have a constitution or other legally binding rules that provided that, among other matters:

•    only members of the broader native title claim group, that included the 11 identified native title claim groups, could be members, shareholders or directors of it; and

•    “the Benefits received are distributed in a fair and equitable manner to the members of the Western Downs Unclaimed Area Native Title Group”.

6.    Under cl 7.2, the native title party also had to ensure that Western Downs became the trustee of a trust established to distribute the benefits to the claim group, and that the trust deed had to contain similar requirements to Western Downs’ constitution.

7.    Ultimately, Western Downs was incorporated as a company limited by guarantee. Its constitution provided that:

•    the distribution amounts would be the amounts that it received, pursuant to the ILUA, less a reasonable amount, as determined by its directors, to meet its expenses; and

•    there would be 11 identified groups comprising descendants of named apical ancestors, together with any innominate (but never formed) “group of persons who hold or may hold native title (as defined in the Native Title Act 1993 (Cth)), in the ILUA Area as determined by a resolution passed by more than 75% of the Directors”.

8.    The constitution excluded the replaceable rules under the Corporations Act by cl 4.1. Clause 5.1 defined the purposes for which Western Downs was established and would be maintained, namely to promote and benefit the beneficiaries by pursuing, substantively, charitable objects, to the extent that they comprised charitable purposes, as recognised by the law of equity, the Income Tax Assessment Act 1997 (Cth) and Charities and Not-for-profits Commission Act 2012 (Cth) and any other applicable legislation.

9.    Importantly, cl 7 provided:

7 APPLICATION OF INCOME AND PROPERTY

7.1    The income and property of the Company however derived shall be applied solely towards the promotion of its Purposes and no part shall be paid or transferred directly or indirectly to or among the Members (in their capacity as Members) PROVIDED HOWEVER that: -

(a)    nothing shall prevent the payment in good faith of interest to any such Member in respect of moneys advanced by him or of remuneration to any Directors, officers or servants of the Company or to any Member, or other person in return for any services actually rendered to the Company; and

(b)    nothing herein contained shall be construed so as to prevent the repayment to any Member of out-of-pocket expenses or interest on money lent, or rent for hire of goods or for premises demised to the Company.

7.2    In the promotion of its Purposes, the Company will pay or distribute the Distribution Amounts in equal shares to, or for the benefit of, the Groups within a reasonable time after receipt.

7.3    The Native Title Party signatories to the ILUA representing a Group or the Director appointed by that Group or other authorised representatives of that Group may nominate in writing to the Company a Group Representative Company, that they have been authorised by that Group to nominate, to receive a Group’s share of the Distribution Amounts.

7.4    The Company may only pay or distribute a Group’s share of the Distribution Amounts to a Group Representative Company if that Group Representative Company at the time of payment or distribution:

(a)    is a “not for profit” entity whose constitution prohibits the payment or distribution of its income or property to its individual members;

(b)     has a majority of members and directors who are members of the relevant Group or which agrees in writing to only use such payments to benefit the relevant Group;

(c)    is not insolvent, the subject of a winding-up application or under the control of administrators, receivers, liquidators or controllers; and

(d)    is not in material breach of financial reporting, audit and other requirements under the legislation regulating that company.

7.5    If a Group has not nominated a Group Representative Company or that Group Representative Company does not meet the requirements in Clause 7.4, the Company will pay or apply that Group’s share of the Distribution Amounts for the benefit of that Group as directed in writing by the Native Title Party signatories to the ILUA representing that Group, the Director appointed by that Group or by other authorised representatives of that Group or as reasonably determined by the Board. (emphasis added)

 10.    Clause 9 required Western Downs to keep records.

11.    In the event, Western Downs held some early directors’ meetings and established a bank account. After this occurred, it is common ground that, on about 10 January 2014, Arrow paid Western Downs $5.75 million.

12.    The applicants seek that Western Downs be joined as an additional applicant so that they can make a claim in its name against each of Mr Doctor, Mr Jarro and Ms Lacey, for breach of fiduciary duty in paying, or causing to be paid to themselves or their associates, very large amounts of the trust money, that were intended to be for the benefit of the native title claim groups and their members. […]

13.    The applicants, through their solicitors, conducted extensive searches, aided by the use of subpoenas, to ascertain what became of the $5.75 million that Arrow paid to Western Downs. They assert that four of the 11 native title claim groups to which cl 7.2 of the ILUA contemplated equal distributions (of about $520,000) of that sum should have been made, received either nothing or very little. A number of allegations that the applicants wish Western Downs to make against Mr Doctor and Mr Jarro require consideration. The applicants allege that Mr Doctor and Mr Jarro received $330,000 or more each, (and they do not appear to dispute) through payments made by Sandlewood in respect of fees for alleged meetings or consultancy work that they undertook for Western Downs during the course of 105 meetings with one another. The minimum rate of their remuneration was $2,500, and in some cases, $3,500 per meeting. In a number of instances, the alleged meetings occurred on sequential days.

14.    For example, on 29 August 2014, Mr Jarro sent an email to Sandlewood, asking it to pay, on that day, sitting fees to Mr Doctor by a deposit…into his bank account. He added:

As for the other groups, Russell [Doctor] and myself have spoken and they aren’t to receive anything. (emphasis added)

15.    Indeed, they did not. On another occasion, on 14 January 2015, Mr Jarro emailed Sandlewood asking it to pay, first, fees of $2,500 to himself and to Mr Doctor for 6 and 7 January (a total of $10,000), secondly, fees of $3,500 for “Consultancy Meeting 12 & 14” (a total of $14,000), and, thirdly, fees of $3,500 to Mr Jarro himself for “Consultant meeting 9th, 10th, 11th” (a total of $10,500). Mr Jarro noted in that email that he would require another consultant fee to be paid to Mr Doctor the next day, but added that it could be paid on the same day “if it is easier” (making a total of $38,000 in fees for the two men over eight days).

16.    Mr Doctor was associated with the Bigambul claim group, which was one of the 11 native title claim groups named in the ILUA and Western Downs’ constitution as a beneficiary of the trust. It received its exact share of $522,727.27, being one-eleventh of the total payment paid by Arrow. But, Bigambul also received approximately another $1 million, much of which came to it through payments that Western Downs made to Sandlewood. Mr Doctor gave evidence that he had opened Bigambul’s three bank accounts. Although he could operate them with another director, one signatory could effect any transactions. He admitted that he received from one Bigambul bank account about $465,000, and from another, about a further $486,500.

17.    Mr Doctor claimed that Bigambul had employed Ms Davis at a salary of about $95,000 per annum, that it paid her for three years. He admitted that Bigamul also had paid him a total salary of over $260,000, which may have included director’s fees, also that it had paid $94,000 in tax for him, and another $35,000 for his car to be repaired because he claimed that that car was part of his “package”.

18.    One might be forgiven for thinking that these salaries and benefits reflected appropriate remuneration for executives of companies that had extensive businesses and dealings. However, there is nothing in the evidence to suggest in what way any of these payments, prima facie, benefited any of beneficiaries of the trust, being the native title claim groups, or achieved, or were directed to, the charitable purposes for which Western Downs was established. Mr Doctor, however, said that these payments were necessary for him to undertake work on behalf of Bigambul. No doubt that will be a matter for trial. He also said in his affidavit of 3 May 2018 that:

Bigambul did receive its benefits amount of $522,727.27 but also received the other money as a service provider for [Western Downs] and carried out that function in spending that extra money in a similar way as Sandlewood was employed by [Western Downs] as authorised by the board.

19.    Mr Doctor accepted that Bigambul had received in total $1.537 million from Western Downs, either directly or through Sandlewood. The statement of claim alleges that in total, Mr Doctor personally received over nearly $1.5 million out of the trust moneys paid by Arrow, and any interest those moneys may have earned in the brief time they appear to have remained in a bank account.

(emphasis in original)

9    The further amended statement of claim alleged that both Mr Doctor and Mr Jarro signed the ILUA. It set out the substantive terms of the ILUA. The statement of claim alleged that:

    both Mr Jarro and Mr Doctor, among others, were directors of Western Downs;

    parts of Western Downs’ constitution, including cl 7, required it to distribute the benefits it received under the ILUA in a fair and equitable manner (par 29);

    Mr Doctor was appointed chairman of Western Downs from 18 November 2013 and was a signatory of one of its bank accounts;

    all of the native title family groups and individuals representing them had agreed, or had a common understanding, that each family group would receive one-eleventh of the moneys paid by Arrow under the ILUA;

    on 4 June 2014, Mr Jarro became a signatory of the bank account of Western Downs and that two directors had authority to sign on the company’s behalf;

    in pars 41 and 42:

41. By reason of their position as directors and officers of WDGL and/or as signatories to the WDGL Account, each of Russell Doctor, Jason Jarro and Kerry-Anne Lacey owed fiduciary duties to:

(a) WGDL; and

(b) The Family Groups.

42. Those duties were:

… [sic]

(a) an obligation to conduct the affairs of the company, and to distribute the Benefit received from Arrow:

(1) fairly and equitably

(2) in accordance with the Purposes set out in clause 5 of the company’s Constitution; and

(2) [sic] consistently with the agreement, or common understanding, of the Native Title Party to distribute the Benefit by way of 11 equal shares.

(b) an obligation to not place themselves in a position where their private or personal interests came into conflict with the interests of the members of the native title family groups;

(c) an obligation to not pursue and secure a personal benefit;

(d) an obligation to not make a profit from their position unless expressly permitted to do so with the informed consent of the native title claim family groups;

(e) an obligation to not place themselves in a position where their personal interests or duties conflicted with duties owed to the native title family groups.

    Western Downs received, in benefits from Arrow under the ILUA, together with interest earned on interest bearing deposits, a total of $5,823,801.94, which was paid out to various recipients, including $1,537,651 to Bigambul (par 50);

    Mr Doctor received “Meeting Fees” totalling $335,945 (which I infer included $329,000 that Sandlewood allegedly paid him as meeting fees (as claimed in par 61)) and Mr Jarro received “Meeting Fees Grants” totalling $376,044 (par 68);

    Mr Doctor, Mr Jarro and Ms Lacey used their positions as directors and officers of Western Downs and or signatories to its bank account to effect or authorise payments of moneys held in trust by Western Downs in breach of the fiduciary obligations that they owed to it and to the native title party applicants, in that, first, the payments complained of, to which I have referred, were not made in accordance with:

(1)    the purposes in cl 5 of Western Downs’ constitution, being its charitable or quasi-charitable purposes;

(2)    the terms of cl 8 of schedule 4 of the ILUA;

(3)    the agreement or common understanding as to the distribution of the benefits received from Arrow;

(4)    the interests or, to the benefit of, Western Downs and or the native title family groups as the whole; and

(5)    an obligation to distribute the benefits received from Arrow fairly and equitably; or secondly, the payments complained of conferred a benefit on Bigambul Limited, Mr Doctor, Mr Jarro, Sandlewood and Ms Davis, in circumstances that constituted a breach of each of those person’s fiduciary duties (par 70).

10    Mr Jarro (acting for himself) filed a defence on 17 January 2018 that pleaded only to paragraphs in the originating application. He has never filed a defence to any version of the statement of claim but, in his defence, he admitted that he had received (unspecified) money from Western Downs between 10 January 2013 and 30 May 2017 for:

a.    having Iman descent;

b.    attending and sitting at meetings (including travel);

c.    performing consulting work.

11    The applicants seek orders today that Mr Doctor and Mr Jarro pay sums, to which I have referred, to Western Downs or, alternatively, as the Attorney-General for the State of Queensland, who has intervened, suggested, into Court.

12    The solicitor for the applicants, Trevor Hauff, gave evidence summarising the nature of the payments that Mr Doctor and Mr Jarro received for participating in various meetings. Mr Hauff identified payments for the 105 meetings held between 1 April 2014 and 17 July 2015, for which Mr Doctor received $281,000 and Mr Jarro, $297,500. Mr Hauff attached to his affidavit sworn on 12 September 2019 copies of the invoices together with his summaries. The invoices claimed payment on the letterhead of Sandlewood and were addressed to Western Downs. As I observed in Henry [2018] FCA 1168 at [18], such a level of payments or benefits might be thought to reflect appropriate remuneration for executives of companies that had extensive business and dealings. There is not the slightest evidence that Western Downs engaged in any activity requiring such a large number of expensive meetings.

13    Many of the invoices in support of the payments for the meetings between Mr Jarro and Mr Doctor contain no indication of time spent or other detail, except for the date on which the meeting was said to have taken place and its location. For example, a total of $24,200 for four invoices claimed “Meeting Sitting Fees” and described the only participants as “Jason Jarro – Iman”, located in Brisbane and “Russell Doctor – Bigambul”, located in Gympie. Each invoice claimed $2,500 due to each of Mr Doctor and Mr Jarro for four meetings on respectively 30 June 2014, 3 July 2014, 7 July 2014 and 8 July 2014. Each of those invoices to Western Downs totalled $6,050, which included the “Admin Fee 10%” claimed by Sandlewood, together with the meeting sitting fees and the additional expense of $550 for GST. And each invoice contained a notation that Western Downs “requested the Iman/Bigambul appear on the budget and invoices” [sic].

14    The applicants also claimed that, in addition to the moneys that Mr Doctor and Mr Jarro received for their 105 meetings with each other, they received further sums totalling about $125,000 in respect of various meetings held with other persons, including for six board meetings of Western Downs of its full board, for Mr Jarro’s receipt of what was called a “sport grant,” of $15,808.50 and other miscellaneous meetings.

Mr Doctor’s submissions

15    Mr Doctor’s solicitor argued that this was a complicated matter and that it was appropriate, in all of the circumstances, for it to go to trial rather than being determined on this present interlocutory application. He referred to the nature of the evidence to which I was taken today in the course of the hearing, including the three paragraphs that the applicants tendered from Mr Doctor’s affidavit of 3 May 2018. There, Mr Doctor accepted that, first, the payments to Bigambul totalling $1,537,651 had been made out of the bank account of Western Downs, but, he added, “I say the payments were properly authorised by the Board” of Western Downs and, secondly, Bigambul had received the benefit of an eleventh share of the payments, under the ILUA, by Arrow, being $522,727.27, to which it was entitled, but he added that Bigambul:

…also received the other money as a service provider for [Western Downs] and carried out that function in spending that extra money in a similar way as Sandlewood was employed by [Western Downs] as authorised by the Board.

(emphasis added)

16    Mr Doctor argued that, as these assertions formed part of the evidence in support of summary or default judgment, it was apparent that they raised matters that ought properly to be allowed to go to trial in accordance with observations that I made earlier in Henry [2018] FCA 1168.

17    Mr Doctor’s submissions did not explain why such a large number of meetings between Mr Doctor and Mr Jarro was necessary or could have been justified using the funds of Western Downs to pay two of its directors, in any capacity, very often meeting only with one another, including as representatives of the two claim groups mentioned in some of the invoices. They received more money in total than a one-eleventh share of what Arrow had paid under the ILUA for the benefit of the 11 native title family groups.

18    Mr Doctor argued that I should not make orders against him as sought in the interlocutory application today because, ordinarily, the Court exercises considerable caution before granting summary judgment. He also contended that the basis on which the applicants seek judgment in default was not sufficient to warrant the exercise of my discretion to grant such relief. He referred to the approval by Griffiths J in Deputy Commissioner of Taxation v Ziolkowski (2018) 359 ALR 598 at [7] of what Flick J had held in Speedo Holdings B.V. v Evans (No 2) [2011] FCA 227 at [19]-[26] about the nature of the Court’s discretion to give default judgment under r 5.23, particularly the need to be satisfied of there being serious defaults by the respondent concerned before shutting that party out from defending the proceeding.

19    Mr Doctor pointed to the definition of “distribution amounts” in the constitution of Western Downs. He contended that the definition raised the possibility of there being a real issue as to the justifiability of the payments, which he and Mr Jarro received and those paid to Bigambul.

Consideration

20    The discretionary power to give judgment under r 5.23 is enlivened by an application for it by a party when another party is in default: Speedo [2011] FCA 1227 at [22]. There, Flick J noted the need to be satisfied, in order to give judgment under that rule, that “each element of the relevant civil wrong involved is properly and discretely pleaded in the statement of claim”: Speedo [2011] FCA 1227 at [24]. As Gordon J said in Yeo v Damos Earthmoving Pty Limited, in the matter of Beachwood Developments Pty Limited (in liq) [2011] FCA 1129 at [9]:

Rules 5.22 and 5.23 are akin to O 35A r 2 and O 35A r 3 respectively of the previous Federal Court Rules: see rr 5.22.5 and 5.23.5 of the Rules. In my view, the cases which considered O 35A r 2 and O 35A r 3 of the previous Federal Court Rules apply equally to the Rules so that an order for judgment in default under rr 5.22 and 5.23:

1.    does not require proof of the claim by evidence, but only requires that – on the face of the statement of claim – there is a claim for the relief sought; and

   2.     the claim must fall within the jurisdiction of the Court:

see Arthur v Vaupotic Investments Pty Ltd [2005] FCA 433 at [3]. See also Quatre-Bornes Pty Ltd v John H Walker & Associates [2010] FCA 492; Turner, In the matter of L.A. Technologies Pty Ltd (ACN 092 001 495) (In Liquidation) [2009] FCA 805; Chanel Limited v Donoghue [2008] FCA 1643; Nokia Corporation v Yu (No 2) [2008] FCA 1088 and Australian Competition and Consumer Commission v 1Cellnet LLC [2005] FCA 856.

21    In Searson v Salmon [2014] FCA 748 at [6]-[9], I explained the principles for the making of an order for judgment in default under r 5.23 as follows:

Principles

6.    A plaintiff or applicant who seeks relief in proceedings started by an originating application supported by a statement of claim is entitled upon a default by a defendant or respondent, under r 5.23, to seek judgment based on the statement of claim without needing to rely on evidence supporting that claim. The Court may give judgment in the party’s favour provided that the pleading, on its face, makes that claim and the claim falls within the jurisdiction of the Court: Australian Competition and Consumer Commission v dataline.net.au Pty Ltd (2006) 236 ALR 665 at 677-678 [45] per Kiefel J; Yeo v Damos Earthmoving Pty Ltd; in the matter of Beachwood Developments Pty Ltd (in liq) [2011] FCA 1129 at [9] per Gordon J; Sanko Steamship Co Ltd v Australia Gloria Energy Group Pty Ltd [2012] FCA 798 at [6] per myself.

7.     However, as Kiefel J noted in Dataline 236 ALR at 678-679 [49]-[51], the Court could permit the applicant to lead some evidence in relation to the relief sought. That is because r 5.23 operates on the premise that the defaulting party has admitted the facts of the claims as pleaded and the Court then considers whether those facts establish an entitlement to the relief claimed. Her Honour held that the analogue of the rule required that the face of the statement of claim must show a right to some form of relief (236 ALR at 679-680 [53]).

8.    Kiefel J held that the matters alleged in the statement of claim must permit the conclusion that some relief may be granted, even if its grant were subject to other considerations. Such a conclusion is at least possible in cases where a declaration and an injunction are sought. An applicant may establish some right or legal interest or legal conclusion capable of resolving a controversy that might properly be expressed in the form of a declaration or establish the infringement of a right or a standard set by a statute.

9.    Subject to considerations that might weigh against the grant of relief of those kinds, the applicant may be said to have an “entitlement”. It does not have to be absolute for the purposes of the rule, which is discretionary in nature in any event. Her Honour suggested that, in an appropriate case, such as one brought by a regulator in respect of protecting the public interest, the court might make a qualified declaration, notwithstanding the traditional restraint exercised by courts in making binding declarations without having held a contested hearing of the disputed facts (236 ALR at 680-681 [54]-[59]). She suggested that, in a default judgment context, such declarations might be prefaced by a statement (236 ALR at 681 [59]):

“Upon admissions which [the respondent in question] is taken to have made, consequent upon non-compliance with orders of the court.”

22    The relationship of director and company is a well-recognised fiduciary relationship: Pilmer v Duke Group Limited (in liq) (2001) 207 CLR 165 at 196 [70] per McHugh, Gummow, Hayne and Callinan JJ. Their Honours identified that (at 199 [78]):

In particular, the fiduciary is under an obligation, without informed consent, not to promote the personal interests of the fiduciary by making or pursuing a gain in circumstances in which there is “a conflict or a real or substantial possibility of a conflict” between personal interests of the fiduciary and those to whom the duty is owed. That is how the matter was put by Mason J in Hospital Products [Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 103. See also Clay v Clay (2001) 202 CLR 410 at 432-433 [46]-[47]].

23    McHugh, Gummow, Hayne and Callinan JJ also approved what Gaudron and McHugh JJ had said in Breen v Williams (1996) 186 CLR 71 at 113, namely that fiduciary obligations arise because a person has come under an obligation to act in another’s interests. They held that equity imposes on the fiduciary the following proscriptive obligations: first, not to obtain any unauthorised benefit from the relationship and, secondly, not to be in a position of conflict. If either of these obligations is breached, the fiduciary must account for any profits and make good any losses arising from the breach: Pilmer 207 CLR at 198 [74].

24    The test in s 31A(1) of the Federal Court Act enables the Court to give judgment for one party against another in relation to the whole or any part of a proceeding, if the first party is prosecuting the proceeding, or that part of the proceeding, and the Court is satisfied that the other party has no reasonable prospect of successfully defending the proceeding or that part of the proceeding. The exercise of that power is not to be undertaken lightly: see Trkulja v Google LLC (2018) 263 CLR 149 at 157 [22] per Kiefel CJ, Bell, Keane, Nettle and Gordon JJ. However, as their Honours recognised (at 158 [23]), in respect of an analogue to s 31A(2), the provision allows a plaintiff’s case to be dismissed in cases where, although not hopeless or bound to fail, it does not have a real prospect of succeeding. Similarly, summary judgment under s 31A(1) is available if there is no real prospect of a defence succeeding.

25    The constitution defined “distribution amounts” as meaning the amounts that Western Downs received pursuant to cl 1 of sch 4 of the ILUA, “…less a reasonable amount determined by the Directors to meet the Company’s expenses”. I reject Mr Doctor’s argument that this definition, coupled with his assertions in the three paragraphs that the applicants tendered from his affidavit in evidence, could support a conclusion that the directors of Western Downs had determined as a reasonable amount to pay, first, over $250,000 each to Mr Doctor and Mr Jarro for their many meetings and, secondly, over $1 million to Bigambul in excess of its one-eleventh share, being $522,727.27.

26    In my opinion, there is no reasonable prospect that Mr Doctor or Mr Jarro could establish that such payments were reasonable amounts to meet bona fide expenses of Western Downs made under the ILUA. The amounts are out of all proportion to what might be a reasonable fee or expense to be incurred in respect of the distribution of funds that Western Downs received under the ILUA in its capacity as the entity intended to hold those funds for the sole purpose of distributing them in the manner that its constitution provided in cl 7.2, namely in the promotion of Western Downs’ purposes by paying or distributing the distribution amount in equal shares to, or for the benefit of, the native tile family groups within a reasonable time after Western Downs’ receipt of Arrow’s payment.

27    Both Mr Jarro and Mr Doctor are not themselves the direct object of cl 7.2 of the constitution, although they may be members of two of the native title family groups. Nor could any reasonable person think that two directors could need to hold 105 meetings at extraordinary fees of $2,500 each for each meeting, including where some of those meetings appear to have happened within days of each other, in order for them to work out how to undertake the very simple task of dividing the money paid by Arrow into 11 portions and distributing it to the 11 sets of native title family group beneficiaries.

28    No reasonable person could consider the conduct of Mr Doctor and Mr Jarro in holding so many meetings, so frequently and at such cost to Western Downs and the estate, to be anything other than a flagrant breach of their fiduciary duties. There is no material before me that raises any basis to suggest that Western Downs could possibly have given its fully informed consent for the impugned payments and activities. Mr Doctor has been unable to provide any proper explanation as to what the purposes of Western Downs were, or could possibly have been, for which he contended, it made or authorised the impugned payments for his and Mr Jarro’s benefit.

29    In all the circumstances, it is appropriate to proceed on the basis that these should be default judgment under r 5.23 against Mr Doctor and Mr Jarro. In my opinion, having regard to the fact that judgment by default is available, it is neither necessary nor desirable to deal with the application for summary judgment. The significant detail of the pleadings and substantial volume of evidence would require the preparation of complex reasons for judgment in order to address that application. Nonetheless, my present view is that, probably, I would have been able to be satisfied to the standard necessary to summarily dismiss the proceeding. However, I am satisfied that this application should be resolved on the basis that the defaults of each of Mr Doctor and Mr Jarro have disentitled them to a final hearing at which the parties’ legal rights and obligations can be determined, particularly having regard to the lengthy history of delays and Mr Doctor’s and Mr Jarro’s failure properly to engage with their obligations as litigants in the Court.

30    Mr Doctor is in default, first, within the meaning of r 5.22(a) and (b), because, as noted in the orders made on 28 May 2019, his defence was struck out for his failure to comply with the self-executing order I made on 25 March 2019 that he provide proper particulars of it on or before 8 April 2019 and, secondly, within the meaning of r 5.22(d) because he has failed to defend the proceeding with due diligence. Mr Doctor only instructed his new solicitor this week, in circumstances where, without any explanation, he had not been represented since mid-May 2019. His conduct prior to the default that caused the striking out of his defence demonstrates also that he has not defended the proceeding with due diligence. Nor has he sought to remedy his default since late May 2019.

31    Likewise, Mr Jarro is in default within the meaning of r 5.22(b) and (c). He has not complied with the earlier order made on 30 October 2018 that he file a defence to the amended statement of claim, and has not attended today or on numerous previous occasions. Nor has he defended the proceeding with due diligence within the meaning of r 5.22(d). Mr Jarro’s defence asserted that he had received moneys from Western Downs, because he had Iman descent and that he had travelled for and attended at meetings, as well as performed consulting work. As I have explained, given the scale and nature of his receipts in Western Downs’ circumstances, without any apparent justification for their enormity or the need for so many meetings, the payments that he procured do not appear to be ones for which there is any realistic prospect that he could make out a defence in respect of the matters alleged against him in the statement of claim.

32    I am satisfied that Western Downs is entitled to judgment in default on the claims for the relief sought in the statement of claim that are based on the allegations of breaches by each of Mr Doctor and Mr Jarro of their fiduciary duties in his capacity as a director of Western Downs in causing Bigambul to be overpaid by more than $1 million and in causing payments to be made benefiting each of Mr Doctor and Mr Jarro in the amounts of $329,000 and $376,044 respectively in respect of the meeting and other fees, as pleaded.

Conclusion

33    For the reasons above, it is appropriate to grant relief on the basis that the following judgment sums be paid into Court, as proposed by the Attorney-General, namely that Western Downs have judgment on the parts of its claim pleaded in par 70 of the statement of claim for the sums:

(a)    $1,014,924 plus interest in the sum of $284,428.98, against Mr Doctor and Mr Jarro;

(b)    $329,000 plus interest in the sum of $92,201.12 against Mr Doctor; and

(c)    $376,044 plus interest in the sum of $105,385.04 against Mr Jarro.

34    Each of Mr Doctor and Mr Jarro should pay the applicants’ costs of the interlocutory application and the proceeding as against him.

Associate:

Dated:    6 December 2019

SCHEDULE OF PARTIES