Guild of Students of Murdoch University v Patrick Walker, Commissioner of Fair Trading - [2006] WASCA 11

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT : THE COURT OF APPEAL (WA)

CITATION: GUILD OF STUDENTS OF MURDOCH UNIVERSITY -v- PATRICK WALKER, COMMISSIONER OF FAIR TRADING & ANOR [2006] WASCA 11

CORAM: STEYTLER P
MCLURE JA
PULLIN JA

HEARD: 14 NOVEMBER 2005

DELIVERED : 25 JANUARY 2006

FILE NO/S: CIV 2197 of 2003

BETWEEN: GUILD OF STUDENTS OF MURDOCH UNIVERSITY
Applicant
AND
PATRICK WALKER, COMMISSIONER OF FAIR TRADING
First Respondent
FREMANTLE HOUSING ASSOCIATION
Second Respondent

Catchwords:

Prerogative writs - Certiorari - Cancellation of registration of incorporated association - Turns on own facts

Legislation:

Associations Incorporation Act 1987 (WA), s 35, s 36(1)

Result:

Order nisi discharged

Category: B

Representation:

Counsel:

Applicant:     Mr A J Aristei
First Respondent           :     Mr A R Beech SC
Second Respondent       :     Ms L D Chighine

Solicitors:

Applicant:     Mark Andrews & Associates
First Respondent           :     Department of Consumer & Employment Protection
Second Respondent       :     Jackson McDonald

Case(s) referred to in judgment(s):

Nil

Case(s) also cited:

Hot Holdings Pty Ltd v Creasy (1996) 185 CLR 149
Kruger v Commonwealth (1997) 190 CLR 1
Minister for Immigration & Multicultural Affairs v Jia (2001) 205 CLR 507
Padfield v Minister for Agriculture Fisheries & Food [1968] AC 997
Potter v Melbourne & Metropolitan Tramways Board (1957) 98 CLR 337
R v Australian Stevedoring Industry Board; Ex parte Melbourne Stevedoring Co (1953) 88 CLR 100
R v Connell; Ex parte Hetton Bellbird Collieries Ltd (No 2) (1944) 69 CLR 407
Murphyones Inc Pty Ltd v Commonwealth (1976) 136 CLR 1

STEYTLER P: I have read the judgment of McLure JA. I agree with it and would consequently discharge the order nisi.
MCLURE JA: This is the return of an order nisi for a writ of certiorari to quash the decision of the first respondent ("Commissioner") to distribute the surplus property of the Howard Court Community Housing Association Inc ("Association") to the Fremantle Housing Association (Inc) ("FHA"). The background, facts and statutory framework are set out in the reasons of Pullin JA and not repeated here save to the extent required for an understanding of these reasons.
The primary object of the Association was to provide low cost housing for low income students and other low income people. The Association is the registered proprietor of land containing two blocks of three‑storey flats known as Howard Court ("the Howard Court property"). The funding for the purchase of the Howard Court property in 1987 was provided by HomesWest, now the Department of Housing and Works ("DHW"), Murdoch University and a bank loan to the Association which was secured by a registered mortgage. Murdoch University and DHW claim an equitable interest in the Howard Court property which they have protected by caveat. After the Association ceased to function, DHW made the mortgage payments, funded the maintenance of, and appointed FHA to manage, the Howard Court property. DHW, Murdoch University and the bank are the only creditors of the Association referred to in the appeal book. The evidence establishes that the Association has a substantial equity in the Howard Court property. There is no evidence that the Association had any other assets.
The applicant ("Guild") and FHA were competing claimants to the Howard Court property. It seems the Guild had some involvement in the establishment of the Association and was named in its Constitution as a potential beneficiary of its surplus property on its dissolution under the Constitution.
In February 2002 the Commissioner cancelled the incorporation of the Association under s 35 of the Associations Incorporation Act 1987 (WA) ("the Act"). Under s 36 of the Act, the property of the Association vested in the Commissioner. As departmental memoranda to the Commissioner indicate, the objective is to attempt to satisfy the Association's debts and liabilities without selling the Howard Court property so that the property can be transferred to a third party who would continue to operate it for low cost housing. The clear inference from the evidence is that, absent some voluntary arrangement with creditors and

others, the Howard Court property would have to be sold to satisfy the Association's debts and liabilities.

The Guild's primary contention is that the objective is beyond the Commissioner's power in s 36(1)(b) of the Act and is an irrelevant consideration. It says the Association's debts and liabilities must be satisfied directly from the Association's assets. The effect of the Guild contention is that the Howard Court property would have to be sold to satisfy the Association's debts and liabilities. The Guild also contends that the Commissioner's decision is premature; that is, he cannot make a decision about distribution of the surplus until after the Associations' debts and liabilities have been discharged.
First, it is necessary to identify the relevant decision. The Guild contends the Commissioner's decision is embodied in the terms of a letter dated 3 July 2003 from Mr Blakeway, an executive officer of the Department of Consumer and Employment Protection ("Department"). The letter materially states:
"After analysing the legal advice received on this matter, and the submissions and respective eligibility of the two parties interested in receiving the surplus property, the Commissioner has determined that he considers the [FHA] to be the most appropriate recipient of the surplus Howard Court property.
This determination is subject to the FHA remaining agreeable to seeking joint tenancy of the property with the Department of Housing and Works … "
There is no evidence that the Commissioner saw or authorised the contents of this letter. The Commissioner's decision was in fact made on 16 June 2003 and recorded in his approval of a recommendation contained in a Departmental memorandum dated 16 June 2003. The recommendation approved by the Commissioner was for "the distribution of the surplus property of the defunct [Association] to the [FHA]"("Recommendation").
The context for the Recommendation is set out in par 6 of the memorandum. After addressing the merits of the competing claimants and recommending FHA rather than the Guild, the memorandum continued:
"6Subsequent to your decision on this matter, it will be necessary for agreement to be reached between the recipient, DHW, Murdoch University and this department in order to ensure that [the Association's] liabilities are discharged and the surplus property distributed in accordance with s36 of the Act. Since it has always been the objective to achieve this distribution without recourse to selling the property, this will require negotiating an increased equity with DHW to offset its creditor status, reaching agreement with Murdoch University to lift its caveat on the property, and the approval of the mortgagee (BankWest) to transfer the mortgage to FHA."
On the evidence, the only relevant decision made by the Commissioner is his approval of the Recommendation and that is the decision to which the challenge must relate. I turn now to the grounds, starting with the claim that the decision is premature and thus beyond power.
Section 36 of the Act materially provides:
"(1)Where … the incorporation of an incorporated association … is cancelled under section 35 -
(a)the property of the association vests in the Commissioner; and
(b)subject to subsection (3), the Commissioner may give such directions as he thinks just for or with respect to the payment of the debts and liabilities of the association, the distribution of its property and the winding up of its affairs and -
(i)may appoint a person for the purpose of investigating the affairs of the association and attending to the realization of its property, payment of its debts, discharge of its liabilities, distribution of its property and winding up of its affairs; and
(ii)may do all such other acts and things as are reasonably necessary to be done for the purpose of the exercise of the Commissioner's powers under this section.
(2)The Commissioner and a person appointed under subsection (1)(b)(i) are entitled to be paid out of the property of an incorporated association the reasonable costs incurred by the Commissioner and such a person in the exercise of their powers under this section in relation to the association.
(3)Section 33 applies to and in respect of the vesting under this section of property of an incorporated association remaining after satisfaction of the debts and liabilities of the association and the payment of any amount under subsection (2) in the same way as that section applies to and in respect of the vesting of that property in a winding up of an incorporated association."
Section 33(1) and (2) are also relevant and provide:
"(1)In this section a reference to the surplus property of an incorporated association is a reference to that property of the association remaining after satisfaction of the debts and liabilities of the association and the costs, charges and expenses of the winding up of the association.
(2)Notwithstanding any Act or law to the contrary, it shall not be lawful for any part of the surplus property of an incorporated association to be distributed on the winding up of the association -
(a)among the members or former members of the association; or
(b)otherwise than to an incorporated association or for charitable purposes."
Under s 36(1)(b) of the Act, the Commissioner has power to make directions for, or with respect to, inter alia the distribution of surplus property. Surplus property is that remaining after satisfaction of the Association's debts and liabilities and any costs payable under s 36(2) of the Act.
Having regard to the context in which the Commissioner approved the recommendation, it is apparent that the reference to "surplus property" of the Association in the Recommendation is to the property remaining (if any) after the satisfaction of the Association's debts and liabilities and payment of any costs claimed under s 36(2) of the Act. The only express limit on the power to distribute surplus property is that in s 33(2) which requires that it be distributed to incorporated associations or for charitable purposes. There is no implied limit of the type contended for by the Guild. In particular, there is nothing in the terms or objects of s 36 of the Act and related provisions to support the Guild's contention that the Commissioner does not have the power to determine to whom the surplus property of an Association is to be distributed before the satisfaction of the debts and liabilities of the Association. I would dismiss this ground.
The second ground is based on the incorrect premise that the Commissioner's decision is that referred to in Mr Blakeway's letter, with particular reference to the statement that the Commissioner's determination is subject to FHA remaining agreeable to negotiating a joint tenancy of the property with DHW. The Guild contends that the "condition" is an irrelevant consideration. I have concluded that the Commissioner's decision is recorded in the Recommendation. In any event, the substance of this challenge is addressed in the primary ground which is that the Commissioner cannot achieve the objective of transferring the Howard Court property to FHA because the Association's debts and liabilities must be satisfied directly from the assets of the Association. I am not persuaded that the Commissioner's powers are so confined.
It has been noted that the introductory words of subsection 1(b) of s 36 refer to the "payment of the debts and liabilities" whereas subpar 1(b)(i) refers to "payment of its debts [and] discharge of its liabilities". I accept the respondent's contention that the introductory words must be intended to refer to the discharge of liabilities. All debts are liabilities but not all liabilities are debts. Payment is a means of discharging liability for a debt. However, payment may not be a means of discharging a liability that is not for a debt. This is recognised in s 36(3) and s 33(1) of the Act which refer to the "satisfaction" of debts and liabilities. Accordingly, the Commissioner has the power to give a direction for, or with respect to, the discharge of liabilities of the Association.
Thus, the Commissioner's power in s 36(1)(b) is to give directions for or with respect to four separate matters, being:
(1)the payment of the debts of the Association;
(2)the discharge of the liabilities of the Association;

(3)the distribution of the property of the Association; and
(4)the winding up of the affairs of the Association.

It cannot be doubted that the Commissioner's powers include the power to give directions about the payment of debts and discharge of liabilities from the assets of the Association. However, there is no justification in the terms of s 36 or its purpose to require that the debts be paid or liabilities discharged only from the assets of the Association. In particular, there is no justification for confining the power in such a way as to prevent the satisfaction of the Association's debts and liabilities by, for example, a creditor releasing the Association from its debts or liabilities or a third party paying, or agreeing to pay or assume responsibility for, the Association's debts or liabilities. These are the type of options considered by the Commissioner. The Commissioner's objective, and the taking into account of the considerations in par 6 of the 16 June memorandum, in making the Recommendation do not invalidate the Recommendation; it is within the power and purpose of s 36 of the Act. As the precise means by which the Commissioner seeks to achieve the objective has not been determined, it would be premature to comment on the validity of hypothetical alternatives.
For these reasons, I would discharge the order nisi.
PULLIN JA: This is the return of an order nisi for a writ of certiorari seeking to quash the determination of the first respondent to distribute the surplus property of the Howard Court Community Housing Association Inc ("Association") to the Fremantle Housing Association (Inc) ("FHA").
The Association was incorporated on 17 June 1987 pursuant to the Associations Incorporation Act1987 (WA).
The main function of the Association has been to provide community flats for low income tenants including some Murdoch University students. The Association owns the land on which the flats stand.
By letter dated 27 April 2001, a delegate of the first respondent gave notice of the proposed cancellation of the Association pursuant to s 35 of the Act, because the first respondent had reasonable cause to believe that the Association has fewer than six members and has been inoperative for the past 12 months.
On 22 February 2002 the first respondent cancelled the incorporation of the Association.

Section 36(1) reads:
"(1) Where … the incorporation of an incorporated association … is cancelled under section 35 ‑
(a)the property of the association vests in the Commissioner; and
(b)subject to subsection (3), the Commissioner may give such directions as he thinks just for or with respect to the payment of the debts and liabilities of the association, the distribution of its property and the winding up of its affairs and -
(i)may appoint a person for the purpose of investigating the affairs of the association and attending to the realization of its property, payment of its debts, discharge of its liabilities, distribution of its property and winding up of its affairs; and
(ii)may do all such other acts and things as are reasonably necessary to be done for the purpose of the exercise of the Commissioner's powers under this section."
By a memorandum dated 8 May 2002, Mr Denis Blakeway, an officer within the first respondent's department, recommended that an accounting firm be appointed, pursuant to s 36(1)(b)(i) of the Act, in order to discharge the liabilities, distribute the property and wind up the affairs of the Association. This memorandum reported to the first respondent that in 1987, after incorporation, the Association entered into an arrangement with the State Housing Commission ("SHC") to purchase a block of flats in Coolbellup for use as the low cost housing, that the SHC contributed money towards the cost, that the Association took out a mortgage with Bankwest for the remainder and that Murdoch University also provided a grant to assist with the project. The memorandum also reported that during the 1990s, the Association ran into management difficulties, that the FHA was contracted to manage the property on the Association's behalf and that FHA was an experienced operator in low cost housing which managed over 100 properties, most of which were owned by the Department of Housing and Works ("DHW"), which was the successor to the SHC. The memorandum correctly stated that upon cancellation the assets and liabilities of the Association vested with the Commissioner and that the Commissioner could give directions with respect to the payment of the debts and liabilities of the Association. The memorandum noted that the applicant had advised of its interest in the property. The memorandum also noted that Mr Blakeway now considered that the matter was too complex for him to handle and that Hall Chadwick should be appointed to negotiate a settlement of problems associated with the property.
The first respondent accepted the recommendation to appoint Hall Chadwick "in order to discharge the liabilities, distribute the property and wind up the affairs" of the Association. This was a direction pursuant to s 36(1)(b) concerning the discharge of liabilities, payment of debts, winding up and distributing surplus property once the first respondent had made a decision on that point.
By memorandum dated 16 June 2003 ("Memorandum"), Mr Blakeway recommended to the first respondent that he approved the distribution of surplus property of the defunct Association to FHA.
The Memorandum repeated some of the background, referred to the fact that there were two competing claims for the property, one from the applicant and the other from FHA. The Memorandum noted that both entities were eligible recipients; it noted that the DHW had an equity in the property and was a creditor and that Murdoch University had provided an interest free loan. The Memorandum recommended that the distribution of surplus property should be to FHA rather than to the applicant. The Memorandum said that Mr Blakeway considered that FHA was better able to manage the property for the type of tenancy, noted that FHA had similar objects and functions to the Association and noted FHA's extensive experience and other factors which favoured distribution to FHA. Paragraph 6 of the Memorandum read:
"Subsequent to your decision on this matter, it will be necessary for agreement to be reached between the recipient, DHW, Murdoch University and this department in order to ensure that [the Association's] liabilities are discharged and the surplus property distributed in accordance with s36 of the Act. Since it has always been the objective to achieve this distribution without recourse to selling the property, this will require negotiating an increased equity with DHW to offset its creditor status, reaching agreement with Murdoch University to lift its caveat on the property, and the approval of the mortgager (BankWest) to transfer the mortgage to FHA."
The recommendation to distribute the Association's surplus property to FHA was approved by the first respondent by his decision marked on the Memorandum on 16 June 2003 ("Direction"). The Direction is the decision under challenge in these proceedings. (The applicant wrongly identified the date of the Direction in the grounds of the order nisi as being 3 July 2003, which was the date of the letter advising the applicant of the Direction.)

By letter dated 3 July 2003, Mr Blakeway wrote to the applicant advising of the Direction and in that letter said:
"After analysing the legal advice received on this matter and the submissions in respect of eligibility of the two parties interested in receiving the surplus property, the Commissioner has determined that he considers the [FHA] to be the most appropriate recipient of the surplus Howard Court property.
This determination is subject to the FHA remaining agreeable to negotiating joint tenancy of the property with the Department of Housing and Works. … The Commissioner's determination has been made pursuant to section 36(1) of the Act and, in accordance with section 36(1)(b), professional financial advisers will be appointed to deal with the property transfer having regard to outstanding debts and previous agreements of the former Association."
The applicant, in oral submissions, said that the grounds of the order nisi raise three points. The first two are:
(a)The first respondent is not empowered to distribute the surplus property of the Association "as he purported to do so by the [Direction]".
This is explained in particulars to the grounds of appeal. The contention is that:
"… when the First Respondent had purported to make the [Direction], the debts and liabilities of the Association had not been satisfied, nor could the surplus property of the Association yet be ascertained pursuant to sub‑section 33(1) of the Act (as applied by sub‑section 36(3) of the Act)"
In short the applicant submits that the Direction was premature because the debts had not been paid and liabilities had not been discharged.
(b)Alternatively, the applicant submits that first respondent took into account an irrelevant consideration in making the Direction because in Mr Blakeway's letter of 3 July 2003 Mr Blakeway said that the distribution of surplus property of the Association was subject to the FHA remaining agreeable to negotiating a joint tenancy of the property with the Department of Housing and Works.
Counsel for the applicant had difficulty summarising the third point. As I understand it, it is that:
(c)The first respondent was not empowered by s 36(1)(b) to make the Direction because of the proposed transfer of the property to FHA. As I understand the point, the applicant submits that the arrangement proposed in par 6 of the Memorandum is an arrangement not authorised by s 36(1)(b). Alternatively, to take into account the proposed arrangement was to take into account an irrelevant consideration.

Prematurity

The applicant's submission is that a direction concerning distribution of property (in fact surplus property after payment of debts and liabilities) must not be made before the process of discharging debts and liabilities of the Association has taken place. That submission cannot be sustained in fact or as a matter of the construction of s 36.
The facts reveal Hall Chadwick has been appointed to bring about the discharge of debts and liabilities. The Direction neither constitutes nor even contemplates distribution of the surplus property of the Association without there first being a discharge of its debts and liabilities.
As a matter of construction, there is nothing in the language of s 36 which requires the first respondent to await completion of payment of debts and discharge of liabilities before a direction is made about the distribution of any surplus property.

Irrelevant consideration

The applicant submits that the statement in Mr Blakeway's letter of 3 July 2003 that "the distribution of surplus property of the Association was subject to [FHA] remaining agreeable to negotiate a joint tenancy of the property with the [DHW]" reveals that the first respondent took into account an irrelevant consideration. The contents of the letter could not have been taken into account by the first respondent in reaching his decision several days earlier.

Lack of power or irrelevant consideration

This ground concentrates on the course of action proposed in par 6 of the Memorandum. The applicant submits that the first respondent must sell the property and is not empowered to take the course of action proposed in par 6. Section 36(1)(b) confers broad powers on the first respondent to give directions "as he thinks just for or with respect to" payment of debts, discharge of liabilities, distribution of property and winding up. In my opinion, what is contemplated in par 6 of the Memorandum is a way of achieving the payment of debts, discharging liabilities and winding up the affairs of the Association, and it would be within power to give directions "subsequent to" the first respondent's decision to distribute surplus property. Paragraph 6 is concerned with the proposed method of achieving payment of debts and discharge of liabilities, and it was relevant to consider that proposed method when deciding on what direction to make concerning the distribution of surplus property. It is not irrelevant to a Direction under s 36 concerning surplus property.
I would discharge the order nisi.