Hillig v Darkinjung Pty Ltd - [2008] NSWCA 75

No judgment structure available for this case.

New South Wales

Court of Appeal

CITATION: Hillig v Darkinjung Pty Ltd & Ors [2008] NSWCA 75
This decision has been amended. Please see the end of the judgment for a list of the amendments.

HEARING DATE(S): 9 May 2007

JUDGMENT DATE:
29 April 2008

JUDGMENT OF: Beazley JA at 1; Giles JA at 2; McColl JA at 11

DECISION: 1. Appeal allowed.
2. Orders and declarations made by Austin J on 19 June 2006 set aside.
3. Interlocutory processes filed by the first to sixth respondents on 29 May 2006 dismissed.
4. Costs reserved.

CATCHWORDS: ABORIGINALS — Aboriginal land councils — powers and functions — appointment of administrator to exercise all the functions of Local Aboriginal Land Council — whether members of Local Aboriginal Land Council retained voting function to exercise resolution-making power conferred by provisos to clauses in constitution of company in which Local Aboriginal Land Council held the sole share - STATUTORY INTERPRETATION — characterisation of Local Aboriginal Land Council constituted under Aboriginal Land Rights Act 1983 — authority and capacity as a statutory corporation — statutory functions, duties and responsibilities — role of officers and members.

LEGISLATION CITED: Aboriginal Land Rights Act 1983
Aboriginal Land Rights Amendment Act 2006
Interpretation Act 1987
Corporations Act 2001 (Cth)

CATEGORY: Principal judgment

CASES CITED: Bass v Permanent Trustee Co Ltd [1999] HCA 9; (1999) 198 CLR 334
Bonan v Hadgkiss [2007] FCAFC 113; (2007) 160 FCR 29
Commissioner for Railways (NSW) v Cavanough [1935] HCA 45; (1935) 53 CLR 220
Darkinjung Pty Ltd v Darkinjung Local Aboriginal Land Council; Hillig v Darkinjung Pty Ltd; Darkinjung v Warner [2006] NSWSC 1008; (2006) 203 FLR 394
Darkinjung Pty Ltd v Darkinjung Local Aboriginal Land Council; Hillig v Darkinjung Pty Ltd [2006] NSWSC 1217
Hadkinson v Hadkinson [1952] P 285
Harrington v Rich [2008] FCAFC 61
Hillig v Darkinjung Pty Ltd [2006] NSWSC 1371
Hillig v Darkinjung Pty Ltd [2006] NSWSC 594; (2006) 201 FLR 148
Hillig v Darkinjung Pty Ltd [2007] NSWSC 683
In re F (Mental Patient: Sterilisation) v West Berkshire Health Authority [1991] UKHL 1; [1990] 2 AC 1
Isaacs v Robertson [1985] AC 97
Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61; (2007) 82 ALJR 345
New South Wales Aboriginal Land Council v Jones (1998) 43 NSWLR 300
Sanpine Pty Ltd v Koompahtoo Local Aboriginal Land Council [2006] NSWCA 291
Sanpine Pty Ltd v Koompahtoo Local Aboriginal Land Council [2005] NSWSC 365

PARTIES: Peter Hillig in his capacity as Administrator of Darkinjung Local Aboriginal Land Council - Appellant
Darkinjung Pty Ltd - First Respondent
Jeffrey John Bradford - Second Respondent
David Pross - Third Respondent
Greg Flanders - Fourth Respondent
George Alexander Watts - Fifth Respondent
Michael Stuart Jones - Sixth Respondent
Ian Cunliffe - Seventh Respondent

FILE NUMBER(S): CA 40489 of 2006; 40386 of 2006

COUNSEL: Mr D H Murr SC with Mr D A Smallbone - Appellant
Mr S D Epstein SC - Second to Seventh Respondents

SOLICITORS: Patrick Woods & Co - Appellant
Tony Simpson & Co - First Respondent - submitting appearance
Norton White Melbourne - Second to Seventh Respondents - submitting appearances

LOWER COURT JURISDICTION: Supreme Court - Equity Division

LOWER COURT FILE NUMBER(S): SC 2842 of 2006

LOWER COURT JUDICIAL OFFICER: Austin J

LOWER COURT DATE OF DECISION: 15 June 2006

LOWER COURT MEDIUM NEUTRAL CITATION: [2006] NSWSC 594

CA 40489/06, 40386/06
SC 2842/06
BEAZLEY JA
GILES JA
McCOLL JA
Tuesday 29 April 2008

Peter Hillig in his capacity as Administrator of Darkinjung Local Aboriginal Land Council v Darkinjung Pty Ltd & 6 ors

Judgment

1 BEAZLEY JA: For the reasons given by Giles JA and McColl JA, I agree with the orders proposed by McColl JA.

2 GILES JA: I have had the benefit of reading the reasons of McColl JA in draft. Drawing upon them, I can state with brevity my reasons for upholding the appeal.

3 Pursuant to the Provisos, the resolutions of DPL by which the appellant took control of it and its assets were conditional on -

“ … the Council [DLALC] passing a resolution … in materially the same terms as the resolution passed by the company [DPL] by a majority of 66% of the members present and voting at such meeting”.

4 By the resolution in the minute signed by the appellant, DLALC passed a resolution in materially the same terms as the resolution passed by DPL. The resolution was effectively passed because -

(a) the share in DPL was property of DLALC;

(b) the functions of DLALC included doing anything in relation to the share that it could lawfully do if it were a natural person (ALR Act, s 41);

(c) passing the resolution was in relation to the share;

(d) the appellant had all the functions of DLALC to the exclusion of DLALC (s 222(4) and Instrument of Appointment); and so

5 The question then is the effect of the words in the Provisos “by a majority of 66% of the members present and voting at such a meeting” (“the majority words”). On one view, the resolution in the minute signed by the appellant satisfied the majority words, in that the appellant’s resolution represented a 100 per cent vote in passing the resolution in relation to the share. On the contrary view, the majority words required that the resolution be one passed at an actual meeting and by the actual members with the requisite majority, and the Provisos could not be satisfied by a resolution passed by an administrator exercising the functions of DLALC.

6 The answer lies in the construction of cll 6.1 and 14.4 of DPL’s constitution.

7 The Provisos began the condition with the words “on the Council passing a resolution”. The subsequent majority words described the nature of the resolution, one which commanded more than the customary simple majority. But they did not stipulate a strict requirement. A majority of 80 per cent of members present and voting at a meeting, rather than 66 per cent, would suffice as an expression of DLALC’s will, as would a resolution passed by a sole member in the unlikely event that there was only one member of DLALC. So also, in my view, would the absolute expression of DLALC’s will through an administrator’s resolution, which necessarily represented more than the customary simple majority and more than a 66 per cent majority. The clauses confined the circumstances in which the constitution could be amended or the directorships altered by stipulating for DLALC’s concurrence; if that concurrence came about by an absolute expression of DLALC’s will, through a sole member or an administrator exercising a function of DLALC, there was no question of a 66 per cent majority and the resolution representing a 100 per cent vote provided DLALC’s concurrence.

8 So to construe cll 6.1 and 14.4 gives effect to their evident purpose of ensuring that DLALC had control over the constitution of DPL and the membership of its board of directors, DLALC for this purpose meaning DLALC when subject to the appointment of an administrator as well as in ordinary circumstances. There is no justification for terminating the control upon the appointment of an administrator, at a time when it may be that the control is particularly needed. On the contrary view abovementioned, control would be in the hands of the members of DLALC as a voting body distinct from DLALC, excluding an administrator exercising DLALC’s functions. That could not stand with the words “on the Council passing a resolution”, and would also mean that important control over DLALC property would lie not in DLALC but in an outside voting body unrecognised in the ALR Act; quite contrary to the strict scheme of the Act protective of the property of Local Aboriginal Land Councils. Such a construction would not readily be adopted, and in my view it should not be adopted.

9 It is unnecessary to decide whether DPL’s constitution could validly stipulate for the concurrence of an outside body, DLALC, or to enter upon whether the validity of the Provisos or cll 6.1 and 14.4 as a whole can be impugned for repugnancy to the ALR Act. It is enough that, assuming the validity of the clauses including the Provisos, as a matter of construction they accommodated DLALC passing a resolution in the exercise by an administrator of DLALC’s functions.

10 I agree with the orders proposed by McColl JA.

11 McCOLL JA: Darkinjung Local Aboriginal Land Council (“DLALC”) owned waterfront land at North Entrance on the Central Coast. On 24 September 2002 it contracted to sell that land to Mirvac Projects Pty Ltd for the overall consideration of $42 million which was to be paid in stages.

12 DLALC decided to set up a trust into which to place the proceeds of the sale. By trust deed dated 9 March 2004 Darkinjung Pty Ltd (“DPL”) was appointed to act as trustee for the Darkinjung Local Aboriginal Land Council Trust (the “Trust”), an entity “purportedly a charitable trust established on very broadly expressed terms essentially mirroring the structure and powers of the Land Council”: Hillig v Darkinjung Pty Ltd [2006] NSWSC 594; (2006) 201 FLR 148 (at [47]). DLALC was the sole shareholder in DPL.

13 At about the same time DLALC also established “enterprise companies” with the intention that they be financed by the Trust and carry out various activities for the benefit, direct or indirect of DLALC.

14 On 2 May 2006 the Minister for Aboriginal Affairs appointed the appellant, Mr Peter Hillig, as Administrator of DLALC “with all the functions of Darkinjung Local Aboriginal Land Council”.

15 On 19 May 2006 the appellant applied to the Supreme Court for ex parte orders relating to his concern that the assets of DLALC were being rapidly disbursed. He sought to be appointed as receiver of the property of DPL. Alternatively he sought orders restraining the directors of DPL from dealing with or disposing of DPL’s assets or moneys or orders appointing a provisional liquidator to DPL. The primary judge refused that application and ordered that the action return before him on an inter partes basis on 23 May 2006.

16 On 22 May 2006, the appellant took a number of steps by which he sought to gain effective control of DPL. It is convenient to reproduce the primary judge’s summary of what he did:

(1) separate minutes of resolutions of Darkinjung, by its sole member, for the removal from the office of director each of the 5 directors of Darkinjung (and in the case of Mr Bradford, to remove him as secretary);

(2) an instrument by which he consented to be appointed to the office of director and secretary of Darkinjung;

reducing the number of directors of the company to one director;

removing para 6.1(c) from the Constitution;

appointing himself to the office of director;

(4) a minute of resolutions of the Land Council, approving and confirming Darkinjung’s resolutions in paras (1) and (3) above, and ‘to the extent that it is necessary, in order that resolutions in those terms by the Company may have effect’, adopting equivalent resolutions;

first, a resolution to remove Mr Bradford as secretary of the Company; and

17 Three applications came on for hearing before the primary judge on 8 June 2006 ostensibly on an interlocutory basis.

18 First, the appellant sought to challenge the retainer of the solicitor acting for DPL (the seventh respondent) due to an asserted conflict of interest on the basis that the solicitor had previously acted for DLALC. This challenge appears to have been made by application to strike out the notice of appearance on behalf of DPL, and an order that the solicitor pay the costs of the application. His Honour decided it was not appropriate to deal with that application both because he did not believe it was ready for determination and because he thought the form of the application was inappropriate to raise conflict of interest issues against the solicitor: primary judgment (at [63] – [64]).

19 Secondly, DPL and its directors sought (primary judgment at [2]):

the Resolutions’

20 Finally, the appellant sought declarations that he, and not the second to sixth respondents, was the sole director of DPL.

21 As the primary judge pointed out:

“[4] The three applications are related to a single main issue, whether Mr Hillig, by the Resolutions, validly removed the defendant directors as directors of Darkinjung, reduced the number of directors of the company to one, appointed himself to that position and repealed the company's constitution…”

22 That issue turned to a large extent on the interaction between the Aboriginal Land Rights Act 1983 (the “ALR Act”) and provisos to clauses of DPL’s constitution which, in substance, required a resolution of 66% of the members of DLALC in substantially the same terms as the Resolutions (the “Proviso issues”). The primary judge held that the Resolutions were invalid and of no effect because no 66% resolutions had been passed by DLALC. The appellant seeks to challenge that decision.

23 At the time of trial before the primary judge DLALC had received approximately $25 million of the sale price and a large part of the proceeds of the sale had been transferred from DLALC to DPL. DPL had transferred some of those funds on to a number of companies related to its activities (the “related companies”).

24 By the time the appeal came on for hearing Barrett J had declared, in substance, in what I will call the Commercial List proceedings, that the funds received by DPL were held on trust by it for DLALC, on 12 December 2006 had ordered that DPL be wound up on DLALC’s application pursuant to s 461(1)(a), Corporations Act 2001 (Cth) and appointed a liquidator. I will return to the significance of these actions.

Procedural aspects of the appeal

25 The appellant filed a Notice of Appeal with appointment on 23 June 2006. On 17 July 2006 the respondents filed a Notice of Motion seeking orders that the appeal be struck out as incompetent and costs. On 9 August 2006 the appellant filed a Summons seeking a declaration that his appeal lay as of right, alternatively an order granting leave to appeal from the primary judgment and an extension of time to seek that leave.

26 Following the appointment of the liquidator to DPL a notice of change of solicitor and a submitting appearance were filed on its behalf. On 13 March 2007 the second to seventh opponents filed an appearance submitting to such order as the Court may make save as to costs.

27 When the matter was called on for hearing, Mr D Murr of Senior Counsel appeared with Mr D Smallbone for the appellant. Mr S Epstein of Senior Counsel appeared for the second to seventh respondents.

28 Despite his clients’ submitting appearance, Mr Epstein informed the Court that the second to seventh respondents would contend “to the extent necessary” that the appeal should be held to be not competent and that leave should not be granted. He said, however, that he did not propose to move on the competency motion, nor make submissions in support of the orders sought therein.

29 The Court raised with Mr Murr what the point of the proceedings was having regard to the orders made by Barrett J on 12 December 2006. He informed the Court that the principal practical consequence of the success of the appeal was costs. He contended that because Austin J had determined as a separate question what I will describe, briefly, as the Provisos issues, Barrett J had been bound by that decision. Accordingly, as I understood his argument, the utility of the appeal for the purposes of proceedings No 2842 of 2006, was that it may affect the final costs orders of the Commercial List proceedings. That would be a valid basis upon which an appeal court could consider hearing an appeal where its subject matter had otherwise been rendered moot: Bonan v Hadgkiss [2007] FCAFC 113; (2007) 160 FCR 29; Harrington v Rich [2008] FCAFC 61.

30 It appears that by the time the appeal was heard DPL had transferred substantially all its assets to DLALC except for an amount of $430,000 set aside in Barrett J’s December 2006 orders. The outstanding costs issue which Barrett J has yet to resolve turned, Mr Murr informed the Court, on the validity of the appellant’s steps of 22 May 2006. Notwithstanding this statement, at the end of the oral argument, Mr Murr submitted that if the Court upheld the appeal it should order the respondents to pay the appellant’s costs both of the proceedings before Austin J and of the appeal.

31 The Court determined that if leave to appeal were required, it would grant that leave. It also determined that it should deliver reasons on the issues raised by the appeal, save those as to costs. The issue of costs is to be determined once the substantive appeal is resolved.

32 Mr Murr submitted, in support of the utility of the appeal, that if successful the appellant would argue as relevant to the question of costs (whether in this Court or before Barrett J was not made clear) that the proceedings before Barrett J were conducted by people who had been removed from office and who had no proper authority to conduct them.

33 This submission appeared to me to be based on a misconception. Acts done according to the exigency of a judicial order afterwards reversed are protected as being “acts done in the execution of justice, which are compulsive”: Commissioner for Railways (NSW) v Cavanough [1935] HCA 45; (1935) 53 CLR 220 (at 225) per Rich, Dixon, Evatt and McTiernan JJ. This principle is a corollary of the proposition that an order made by a court of competent jurisdiction must be obeyed unless and until that order is discharged: Hadkinson v Hadkinson [1952] P 285 (at 288) per Romer LJ, cited with approval by Lord Diplock in delivering the judgment of the Privy Council in Isaacs v Robertson [1985] AC 97 (at 101-102).

34 There is nothing in Barrett J’s judgment which indicates that the outcome of the Provisos hearing affected the points his Honour had to determine. While the outcome of the Provisos hearing stood, and the parties acted as bound by it, I should have thought the principles I have cited meant his Honour had to determine any costs application as if the second to seventh respondents were authorised to act. However these matters were not explored in argument and it is not necessary to express a final opinion on them.

Legislative Framework

35 In order to determine the appeal it is necessary to have regard to the ALR Act. That Act was substantially amended in 2006 by the Aboriginal Land Rights Amendment Act 2006 (the “2006 Amendment Act”) which was assented to on 4 December 2006. References to the legislation in these reasons are references to the ALR Act as in force at the time of the proceedings before the primary judge.

36 Local Aboriginal Land Councils in New South Wales are bodies corporate constituted pursuant to s 50 of the ALR Act for each “Local Aboriginal Land Council area”.

37 Sections 4(2) and 41 of the ALR Act provide:

“ 4 Definitions

‘voting rights’, in relation to a Local Aboriginal Land Council, means the right of a member of the Council to vote in the elections held by, and on any matter to be decided by, the Council.
…

(2) A reference in this Act to:

(a) a function includes a reference to a power, authority and duty, and

(b) the exercise of a function includes, where the function is a duty, a reference to the performance of the duty.”

41 Powers of Aboriginal Land Councils with respect to property
Subject to this Act, an Aboriginal Land Council may do or suffer in relation to its property any act or thing that it could lawfully do or suffer if it were a natural person having, in the case of land, the same estate or interest in the property as the Council and, in particular, but without prejudice to the generality of the foregoing, it may do or suffer any such act or thing to enable it to:

(a) improve, or cause to be improved, any land vested in it, or
(b) explore for and exploit, or cause to be explored for or exploited, mineral resources, or other natural resources, vested in it.”

38 The Minister constitutes an area as a Local Aboriginal Land Council area: s 49(1). A Local Aboriginal Land Council is constituted by the ALR Act for each Local Aboriginal Land Council area: s 50(1). Each Local Aboriginal Land Council is a body corporate: s 50(2).

39 Section 52 sets out the functions of a Local Aboriginal Land Council. As at 22 May 2006 it provided:

52 Functions of Local Aboriginal Land Councils (cf former section 12)

(1) The functions of a Local Aboriginal Land Council are as follows:

(a) in accordance with any regulations, to acquire land and to use, manage, control, hold or dispose of, or otherwise deal with, land vested in or acquired by the Council,

(b) to negotiate the acquisition by the Council or by the Council and one or more other Local Aboriginal Land Council s of lands of cultural significance to Aboriginal persons that are listed in Schedule 14 to the NPW Act and the lease of those lands to the Minister administering that Act,

(c) to submit proposals to the Director-General of National Parks and Wildlife for the listing in that Schedule of other lands of cultural significance to Aboriginal persons that are reserved or dedicated under the NPW Act,

(d) to negotiate the lease by the Council or by the Council and one or more other Local Aboriginal Land Council s of lands to which section 36A applies to the Minister administering the NPW Act,

(e) to make applications in writing to the New South Wales Aboriginal Land Council for the acquisition by the New South Wales Aboriginal Land Council of land on behalf of, or to be vested in, the Local Aboriginal Land Council,

(f) to make applications in writing to the New South Wales Aboriginal Land Council or other persons or bodies for the granting of funds for the payment of the costs and expenses of the Local Aboriginal Land Council,

(g) to implement the wishes of its members (as decided at a meeting of the Council) with respect to:

(ii) the acquisition, establishment and operation of enterprises (including enterprises that promote employment and employment training as a means of obtaining self-sufficiency for Aboriginal persons),

(i) to make claims to Crown lands,

(j) to acquire, construct, upgrade or extend residential accommodation for Aboriginal persons in its area,

(k) to protect the interests of Aboriginal persons in its area in relation to the acquisition, management, use, control and disposal of its land,

(l) to negotiate with persons desiring to use, occupy or gain access to any part of its land,

(m) to promote the protection of Aboriginal culture and the heritage of Aboriginal persons in its area,

(n) to ensure that no part of the income or property of the Council is transferred directly or indirectly by way of dividend or bonus or otherwise by way of profit to members of the Council (nothing in this paragraph prevents the payment in good faith of remuneration to any officer or member of staff of the Council),

(o) such other functions as are conferred or imposed on it by or under this or any other Act.

Note. Section 50 of the Interpretation Act 1987 provides for the powers of a statutory corporation.”

40 The members of the Local Aboriginal Land Council for a Local Aboriginal Land Council area are the adult Aboriginal persons who are listed on the Local Aboriginal Land Council membership roll for that area: s 53. An Aboriginal person can be a member of more than one Local Aboriginal Land Council, but is entitled to voting rights in relation to one Local Aboriginal Land Council only at any one time: s 55(1) and (2).

41 As at May 2006 the members of a Local Aboriginal Land Council were required to elect at every second annual meeting a Chairperson, a Secretary and a Treasurer: s 61. Those persons were officers of the Council: s 4. Their role was, relevantly:

“(a) to direct and control the affairs of the Council in accordance with this Act and the resolutions and decisions of the members of the Council as expressed through Council meetings…”

42 A Local Aboriginal Land Council was to hold meetings at such times as the Council determined, subject to an obligation to hold such meetings at least once in every 3 months and annual meetings: s 73. Subject to the ALR Act, a decision supported by a majority of the votes cast at a meeting of the Council at which a quorum was present was the decision of the Council: s 77.

43 Section 222 provided for the appointment of an administrator, relevantly as follows:

“ 222 Administrators – Local Aboriginal Land Councils

to the exclusion of the Council

44 On the appointment of an administrator to administer all of the functions of a Local Aboriginal Land Council, the officers of the Council were removed from office and fresh elections to fill the vacancies were to be held at the time and in the manner specified by the regulations: s 226(1). The administrator of an Aboriginal Land Council could call meetings of the Council: s 228. The administrator was required to report at least once a month to, inter alia, the Local Aboriginal Land Council concerned: s 229(1)(c). The administrator could not dispose of or otherwise deal with land vested in or acquired by the Council without the consent of the Council (as decided at a meeting): s 230.

45 For the purposes of s 226(1), after the appointment of an administrator to administer all of the functions of a Local Aboriginal Land Council, the Minister was required, after consulting the administrator and the New South Wales Aboriginal Land Council, to determine a date for a meeting of the Local Aboriginal Land Council at which the office holders of that Council were to be elected. The meeting was required to take place no later than 12 months after the appointment of the administrator: cl 98(2), Aboriginal Land Rights Regulation 2002. There was no suggestion that such a meeting had been held by the time the primary judge heard the proceedings.

Darkinjung Pty Ltd’s constitution

46 DPL’s constitution relevantly provided:

“ 5.10 Resolutions of single member company

6.1 Appointment and removal of directors

(a) Subject to rule 6.1, there must be five directors.

(b) The directors in office on the date that this constitution was adopted by the company continue in office but on the terms and conditions set out in this constitution.

(c) At all times:

(i) there must be more Internal Directors than External Directors; and

(ii) no more than one director may be an officer (as that term is defined in the Aboriginal Land Rights Act) of the Council.

provided that if at the time of such resolution the Council holds any shares, the resolution of the company is conditional on the Council passing a resolution (prior to the resolution by the company or within one month after the passing of a resolution by the company) in materially the same terms as the resolution passed by the company by a majority of 66% of the members present and voting at such meeting.

that if at the time of such appointment or removal the Council holds any shares, the resolution of the company is conditional on the Council passing a resolution (prior to the resolution by the company or within one month after the passing of a resolution of the company) in materially similar terms as the resolution passed by the company by a majority of 66% of the members present and voting at such meeting.

(f) Subject to rules 6.1(a) and 6.1(c), the directors may appoint any natural person to be a director, either to fill a casual vacancy or as an additional to the existing directors, but the total number of directors must not at any time exceed the maximum number allowed under this constitution.

(g) Subject to rule 6.2 and to the terms of any agreement entered into between the company and the relevant director, a director holds office until the director dies or is removed from office pursuant to rule 6.1(e).” (emphasis added)

47 Clause 14.4 provided:

14.4 Amendment of this constitution

If at the time of such resolution the Council holds any shares, the resolution of the company is conditional on the Council passing a resolution (prior to the resolution of the company or within one month[s] after the passing of a resolution by the company) in materially similar terms as the resolution passed by the company by a majority of 66% of the members present and voting at such meeting.

48 The Council referred to in the clauses I have extracted was DLALC. The sections I have emphasised were referred to by the primary judge, and are referred to in these reasons, as “the Provisos”.

49 Clause 6.14 provided that a sole director could pass resolutions or make declarations by signing a minute.

50 The Dictionary to the Constitution relevantly required that it be interpreted subject to the Corporations Act: cl 2(a). DPL could exercise any power permitted by the Corporations Act which a company limited by shares might exercise if authorised by its constitution: cl 3(a).

51 Where the constitution conferred a power to do a particular power or thing it was taken, absent contrary intention, to include a power exercisable in a like manner and subject to like conditions, to repeal, rescind, revoke, amend or vary that power or thing: cl 3(c).

52 Clause 4 of the Dictionary excluded the replaceable rules applicable to a proprietary company in the Corporations Act.

53 Clause 5 provided, in effect, that where a company only had one member, references to “members” were references to that member.

Appointment of the administrator

54 The appellant’s Instrument of Appointment stated, relevantly:

POWERS OF APPOINTMENT

The Administrator must administer all of the functions of the Local Aboriginal Land Council in accordance with the Aboriginal Land Rights Act 1983 (‘ALRA’), the Aboriginal Land Rights Regulation 2002 (‘ALRR’) and relevant laws.
…
4 SPECIFIC FUNCTIONS AND DUTIES

4.1 The Administrator shall discharge all the functions and exercise all the powers of LALC as necessary in the best interests of the LALC and consistently within the provisions of the ALRA, the. ALRR and relevant laws.
4.2 The Administrator shall direct and control the financial affairs of the Council in accordance with the ALRA, and perform the functions of the Council's members and office holders in relation to the authorisation of expenditure by the Council
4.3 The Administrator shall resolve and make any decisions that the members and office holders would otherwise be entitled to make concerning, the dispute with the auditors, including and if necessary, determining whether the Trust is a controlled entity or if DLALC has significant influence over the Trust.
…
4.8 The Administrator is to hold regular LALC meetings, in accordance, with relevant sections of the ALRA.
…
7 OPERATIONS OF THE LALC
7.1 The Administrator is to undertake all the functions of the LALC as prescribed by section 52 of the ALRA, in accordance with the rules of the LALC as stated under section 84 of the ALRA and relevant laws
7.2 The Administrator is to appoint suitable sub-committees in accordance with Model Rule 14 for LALCs.”

The primary judgment

55 The appellant did not seek approval for his actions from the DLALC as was required by the Provisos. He advanced four arguments before the primary judge to contend that, despite the Provisos, his actions of 22 May 2006 were valid. As described by the primary judge, these arguments were:

Corporations Act

12 Secondly, he contended, as a matter of construction, that the Provisos are satisfied by resolutions of the Land Council by its Administrator, because where an Administrator has been appointed the Provisos do not require a resolution of a meeting of members of the Land Council.

13 Thirdly, he submitted that if (contrary to his second submission) the Provisos are not satisfied by decisions of the Administrator on behalf of the Land Council, then they are repugnant to the Aboriginal Land Rights Act 1983 (NSW) (‘ALR Act’) and are void.

14 Fourthly, he said that the establishment of the trust and the incorporation of Darkinjung as trustee with the Constitution that it has, are parts of a scheme to achieve an improper purpose. He did not seek to suggest any moral turpitude, or dishonesty, but simply that the adoption of the scheme was improper in the sense that it was designed to achieve something contrary to the scheme of administration of aboriginal land and aboriginal funds that had been established by the legislature.”

All four arguments failed.

56 The first argument turned on the proposition that the Provisos were express restrictions on DPL's exercise of its powers to remove its directors and to amend its constitution so that, by force of s 125(1) of the Corporations Act, the exercise by the appellant of those powers was not invalid merely because (there being no resolution passed by a majority of 66% of the members present and voting at a meeting of members) it was contrary to the restrictions in the Provisos: primary judgment at [18]. The primary judge rejected that argument because he held (at [26] ff) that a resolution of the company's sole member to remove a director or to amend the company's constitution was not an exercise of a power by the company within s 125(1) of the Corporations Act. In short, his Honour (at [27]) regarded the subject matter of the clauses in which the Provisos appeared as, “inherently, to do with the internal management of the company, by allocation of a decision-making function to a company organ”.

57 Mr Murr does not pursue the s 125 point on appeal. However as the primary judge’s characterisation of the Provisos is germane to other issues, I set out that part of his Honour’s reasons on the s 125 issue dealing with their characterisation:

they are qualifications to the internal requirements for the allocation, amongst the organs and agents of the company, of authority to exercise the company's powers.

** Brick and Pipe Industries Ltd v Occidental Life Nominees Pty Ltd [1992] 2 VR 279.

58 In dealing with the second argument, the primary judge accepted (at [32]) that, by virtue of his appointment as Administrator, the appellant acquired, under s 222(4) and s 4(2)(a) of the ALR Act, the powers in relation to a Land Council's property conferred by s 41. However, in his Honour’s view (at [33]) the powers enjoyed by the Administrator under s 41 were no more than powers to do or suffer, in relation to the Land Council's property, any act or thing that the Land Council could lawfully do or suffer if it were a natural person. As a natural person holding shares in a company formed under the Corporations Act had, in relation to those shares, the rights conferred by the company’s constitution, then if the constitution contained a restriction on one of the rights attaching to those shares that restriction would be effective as a part of the bundle of shareholders’ rights, unless contrary to law.

59 Insofar as the Proviso to cl 14.4 was concerned his Honour was of the view (at [34]) that it was a permissible “further requirement” for the purposes of s 136(3) of the Corporations Act and was not incompatible with s 41 of the ALR Act. This was because the Proviso was a part of the bundle of rights which constituted the property that is the share, and therefore it affected what a natural person, and consequently a Land Council under s 41, might lawfully do as a shareholder. It was “not a restriction superimposed on a species of property defined aliunde”.

60 The same reasoning applied, subject to one qualification, in relation to the Provisos in cll 6.1(d) and (e). The qualification was that because the Corporations Act did not purport to prescribe any procedure for increasing or reducing the number of directors or appointing or removing a director of a proprietary company such as DPL, the Provisos in cll 6.1(d) and (e) were part of the definition of the voting rights attaching to the shares. Accordingly under s 41 of the ALR Act the voting rights of a Land Council (and its Administrator) holding such share(s) was affected by the relevant Proviso: primary judgment at [35].

61 Further, in his Honour’s view (at [36]) the appointment of an Administrator was not an obstacle to the Provisos operating according to their terms, and therefore permitting decisions by the shareholders (or the sole shareholder) of DPL on the stated subjects only with the approval of a resolution of members of the Land Council. The fact that the Administrator acquired all the functions and powers of the Land Council upon appointment did not mean that he or she acquired a power conferred on the members of the Land Council. Rather, in his Honour’s view, although the Provisos spoke of “the Council passing a resolution”, those words did not, in context, identify the exercise of a function or power of the Council, acquired by the Administrator. The phrase was, like “the company by resolution” or “the company in general meeting”, “a form of words used by convention to identify one of the organs of the relevant body, namely the members in general meeting”. The fact that “the Provisos juxtaposed the concepts of the Council passing a resolution and the company passing a resolution, strongly suggest[ed] uniformity of meaning”. Accordingly his Honour concluded:

“37 In my view, the Provisos upon their proper construction require that a decision by the shareholders (or sole shareholder) of Darkinjung on any of the subjects identified in clauses 6.1(d), 6.1(e) and 14.4 be conditional on the passing, by a majority of 66% of the members present and voting at a meeting of members of the Land Council, of a resolution in materially similar terms, either prior to the resolution of the shareholders (or sole shareholder) or within one month after the passing of that resolution. The Provisos, so construed, are not inconsistent with the ALR Act because they form part of the definition of the voting rights of the shareholders of Darkinjung.”

62 The result was that (at [38]), subject to the arguments about impropriety and repugnancy, the appellants’ 22 May decisions were subject to the Provisos, and, therefore, were conditional on the passing of resolutions in materially similar terms by the requisite majority of members of the Land Council within the timeframe specified in the Provisos and were inoperative and ineffective unless that condition was satisfied.

63 His Honour rejected (at [39]) an argument that on this construction the Proviso amounted to an invalid alienation of the voting rights attached to shares in DPL.

64 The appellant’s third argument was that the Provisos were repugnant to s 77 of the ALR Act which provides:

“Subject to this Act, a decision supported by a majority of votes cast at a meeting of the Council at which a quorum is present is the decision of the Council.”

65 The primary judge accepted (at [42]) that the Provisos were invalid to the extent that they were inconsistent with s 77. However he concluded (at [43] – [44]) that:

“…s 77 does not wholly extinguish the Provisos, as a matter of construction. To the extent that they impose the additional requirement of a resolution by the members of the Land Council, as a condition for an effective decision of the Darkinjung shareholders/shareholder, the Provisos are not inconsistent with s 77. The inconsistency arises only with respect to the requisite majority for the resolution to be carried.

44… It is sufficient for present purposes to hold (and I do hold) that s 77 does not extinguish the Provisos, so as to permit Mr Hillig to exercise the Land Council's powers as Darkinjung's shareholder in disregard of them.”

66 The primary judge noted (at [45]) for the purpose of dealing with the appellant’s improper purpose argument, that it was common ground that DLALC became entitled to receive approximately $42 million, payable in instalments, upon the sale of the land at North Entrance to a company in the Mirvac group and that, to date, approximately $25 million had been received in three instalments. The appellant contended (see [47]):

“…that the vast bulk, if not all, of the money to be received from the sale of the land was to be transferred to the Trust. He complains that the effect of these arrangements is to take the Land Council's money outside the statutory controls applicable to Aboriginal Land Councils under the ALR Act, controls that include requirements for the banking of funds in specific bank accounts, auditing and reporting requirements, and other supervisory requirements.”

67 Although the appellant did not accuse those who established and implemented the scheme of dishonesty or moral turpitude, he did contend that the scheme was established for an improper purpose, because it was designed to defeat or hinder the administration of aboriginal property under the ALR Act and the activities of an Administrator appointed under that Act in recovering funds: primary judgment (at [48]).

68 His Honour referred (at [50] – [56]) to various senior counsels’ opinions which he concluded (at [51]) “provide[d] grounds for concern as to whether the Trust was validly constituted, and … substantial concern as to whether the Land Council's funds were validly transferred to it and are being validly disbursed, bearing in mind the requirements of the ALR Act.” However he concluded (at [57]) that it was not necessary to decide whether the Trust was unlawful or whether the scheme was designed and implemented for an improper purpose or unlawfully. He accepted (at [58]) the respondents’ submission that the appellant had not established that any improper purposes underlying the development and implementation of the scheme affected the validity or enforceability of the Provisos. He was also of the view (at [60]) that it was not appropriate to make factual findings about the allegation of improper purpose in what were essentially interlocutory proceedings, but that resolution of such issues should be determined in the Commercial List proceedings which had been commenced, to which I refer in greater detail below.

69 In the result, the primary judge concluded (at [66]) that the respondents had made out their case. On 19 June 2006 he made declarations to the effect that the appellant’s actions of 22 May 2006 were inoperative and ineffective, that DPL’s constitution had not been amended or repealed, that the second to sixth respondents continued to be DPL’s directors and that the seventh respondent continued to be DPL’s solicitor. He ordered that the appellant be restrained from holding himself out or purporting to act as a director of DPL in reliance upon any of the 22 May resolutions. He ordered the appellant to pay the costs of the “Interlocutory Processes” he had determined.

The Commercial List proceedings

70 The Commercial List proceedings to which the primary judge referred were heard by Barrett J: Darkinjung Pty Ltd v Darkinjung Local Aboriginal Land Council; Hillig v Darkinjung Pty Ltd; Darkinjung v Warner [2006] NSWSC 1008; (2006) 203 FLR 394. His Honour (at [11]) explained that the proceedings were:

“(a) 5634/05 (commenced by summons filed on 28 October 2005) in which DPL, as plaintiff, seeks against DLALC, the Enterprise Companies, CattleCo and the New South Wales Aboriginal Land Council (“NSWALC”) declaratory relief as to the validity of payments made by DLALC to DPL …;

(b) 2842/06 (commenced on 19 May 2006) in which Mr Hillig, as administrator of DLALC, the sole member of DPL, seeks, by reference to Corporations Act provisions concerning oppression, unfair prejudice and the like, winding up of DPL and either repeal of DPL’s constitution or its modification “by removal of provisions entrenching control of the incumbent directors”, together with declaratory relief to the effect that the trust of which DPL is supposedly the trustee is wholly or partially void and that the payments made by DLALC to DPL were void; and

Corporations Act

71 Barrett J relevantly held:

(a) that as the appellant and NSWALC contended, the transfers of funds from DLALC to DPL “were actuated by the improper purpose of removing the moneys in question from the ambit of decision-making within the statutory confines of DLALC and to place them instead within the decision-making structure based on DPL and the Trust, being a decision-making structure not presided over by members of DLALC”: (at [153]);

(b) that, even though the transfers of funds were duly sanctioned by resolutions passed at meetings of DLALC, it was beyond the statutory authority and capacity of DLALC for it to make the four transfers to DPL and that the decisions to transfer were made for an improper and extraneous purpose: (at [220]);

72 It is pertinent to note parts of Barrett J’s reasoning to these conclusions.

73 First, in considering the nature of DLALC his Honour (at [35]) considered the important aspect of the statutory scheme created by the ALR Act was that:

“…Unless a particular matter is either placed by the Act within the province of one of the three officers or delegated in accordance with s 82, that matter may only be dealt with by the council itself at a meeting. The central role played by such meetings in the affairs of a Local Aboriginal Land Council is emphasised by s 73 which requires that an ordinary meeting of the council be held at least once in every three months and that annual meetings also be held.”

74 Secondly, his Honour emphasised (at [97]) that although s 41 of the ALR Act said “a council may do or suffer in relation to its ‘property’ (which, by force of s 21 of the Interpretation Act 1987, includes money) ‘any act or thing that it could lawfully do or suffer if it were a natural person’”, that provision was qualified by the words “Subject to this Act …” and thus “[i]ts role as facilitating what the Act otherwise allows is thus made clear”.

75 Thirdly (at [102] – [103]) Barrett J emphasised that as a statutory corporation, while DLALC might exercise the powers conferred by the ALR Act, including the s 41 power, as well as the power derived from s 50 of the Interpretation Act, “any such power may not be exercised otherwise than as a means of pursuing the s.51 objects and performing the s.52 functions”.

76 Fourthly, his Honour accepted (at [142]) a submission that Local Aboriginal Land Councils were “single-organ corporations”:

“… This is because such a council has only one deliberating and decision-making body, being the members assembled at a meeting convened and conducted in accordance with the ALR Act. Delegates and agents may act for the corporation, but every delegate or agent will derive his or her authority to do so from a decision made by members in the way I have described.”

77 His Honour’s analysis of the ALR Act and the Aboriginal Land Rights Regulation is also germane. After setting out and/or referring to a number of provisions in the ALR Act dealing with the DLALC’s functions and powers, and noting that DLALC was a “statutory corporation” within the meaning of the s 50(1) of the Interpretation Act (judgment at [36] – [44]), his Honour said:

“45 The statutory structure is thus such that the objects of a Local Aboriginal Land Council are those described in s.51 of the ALR Act; that the functions described in s.52 are to be performed by the Local Aboriginal Land Council; and that powers gathered from a number of provisions of the Act (and from the Interpretation Act) are made available to the council. The ALR Act also imposes duties and responsibilities upon a Local Aboriginal Land Council. Provisions not so far mentioned create a system of public oversight, supervision and accountability within which a council must operate.”

78 His Honour examined the provisions relating to the oversight, supervision and accountability of a Land Council (at [46] – [51]), the terms of the Trust (at [52] – [57]) then briefly considered DPL’s constitution. He referred (at [59]) to the clauses containing the Provisos as “unusual provisions calculated to make certain actions and decisions within or in relation to DPL ineffective unless approved or confirm [sic, confirmed] in a certain way by members of DLALC.” Apart from commenting that the clauses were “of particular relevance to the claim for a winding up order in respect of DPL made by Mr Hillig for DLALC” and referring to Austin J’s decision, he did not further consider them.

79 In considering an argument the appellant advanced “that the four transfers of funds by DLALC to DPL were inconsistent with what are sometimes termed principles of ‘narrow ultra vires’ [and were] … beyond the statutorily authorised scope of activities of DLALC” (see [68]), his Honour considered (at [68] ff) the nature of statutory corporations. Critically his Honour noted (at [70]) that the principle that “corporations created by or pursuant to statute possess only the powers expressed or implied in the constating instruments” was well recognised and (at [71]) had been recognised as applying to a Local Aboriginal Land Council such as DLALC by Campbell J in Sanpine Pty Ltd v Koompahtoo Local Aboriginal Land Council [2005] NSWSC 365. He concluded:

In all cases where a corporation owes its existence to a statute, it is open to the corporation to do only those things that the statute contemplates are to be done by it

80 Next, after considering (at [73] – [94]) an argument advanced by DPL that in considering the ultra vires argument great weight had to be placed on the statement of objects in s 51 of the ALR Act, his Honour said:

96 I have no doubt that its objects limit the functions of a Local Aboriginal Land Council. Such a council may not lawfully perform a s.52 function in furtherance of some object beyond those specified in s.51. But I am also of the opinion that the functions of a Local Aboriginal Land Council do not include functions not specified in s.52 that may nevertheless be considered conducive to the attainment of the s.51 objects. On the view I take of the statute as a whole, a Local Aboriginal Land Council is authorised to perform the s.52 functions, provided that in so doing it acts within the s.51 objects; and it likewise has authority to pursue the attainment of the s.51 objects, provided that in doing so it does not perform functions beyond the s.52 functions.

97 Provisions conferring powers on a Local Aboriginal Land Council do not allow it to operate beyond the scope of its objects and functions. It was faintly suggested on behalf of DPL (although not pleaded) that s.41 of the ALR Act alone justified the transfers of funds by DLALC to DPL. That section says that a council may do or suffer in relation to its ‘property’ (which, by force of s.21 of the Interpretation Act, includes money) ‘any act or thing that it could lawfully do or suffer if it were a natural person’. A natural person can lawfully squander his or her money at will. But that does not mean that, by virtue of s.41, a Local Aboriginal Land Council may deal with its money or other property in ways that are not conducive to the attainment of its objects and the performance of its functions. Section 41, after all, begins with the words, ‘Subject to this Act …’. Its role as facilitating what the Act otherwise allows is thus made clear.
…

102 Again, therefore, the need to construe the statute as a whole is emphasised. As Barwick CJ pointed out in the Kathleen Investments case (at p.128), there is a difference between a statutory corporation’s functions and authority and its powers or capacity. While the powers or capacity may be broad, they can be exercised only within the confines of the functions and authority conferred by the statute. The general concept – and the one reflected in the ALR Act – is that statutory corporations are created for purposes and are given powers calculated to enable them to perform their statutory functions in pursuit of those purposes.

103 In the present case, the authority of a Local Aboriginal Land Council is the authority to perform the s.52 functions in pursuit of the s.51 objects or, to put it the other way, to pursue the s.51 objects by performing the s.52 functions. Sections 51 and 52 must be read together to discover the scope of corporate authority. In exercise of that authority – that is, in performing the s.52 functions in pursuit of the s.51 objects or pursuing the s.51 objects by performing the s.52 functions – a Local Aboriginal Land Council may exercise the powers conferred by the ALR Act, including the s.41 power, as well at the power derived from s.50 of the Interpretation Act. But any such power may not be exercised otherwise than as a means of pursuing the s.51 objects and performing the s.52 functions in the ways I have described.

104 What I have just said may be re-cast in the form of three negative propositions: first, a Local Aboriginal Land Council must not do anything that lies beyond the scope of the s.51 objects; second, a Local Aboriginal Land Council must not do anything that does not involve the performance of a s.52 function; and, third, a Local Aboriginal Land Council must not exercise any of the powers conferred by the ALR Act (and s.50 of the Interpretation Act) except in doing things that are within the scope of both the s.51 objects and the s.52 functions. The ‘must’ in each of these propositions is intended to indicate a limit upon authority and capacity.” (emphasis added)

81 He concluded (at [106]) that:

“… DLALC, by making the four payments to DPL, put it out of its power to control and direct the future disposition of the moneys transferred into the ownership of DPL. It is not suggested that DPL contracted with DLALC at the time of receipt that DPL would apply the moneys received in particular ways or would deal with them only as DLALC requested or directed. Any such contract may, in any event, have involved an impermissible fettering of the discretions of DPL as trustee. Nor did the terms of the Trust require DPL, as trustee, to obey any instructions of DLALC, a non-beneficiary whose members were also non-beneficiaries. Once received by DPL, the moneys came under the sole control of DPL and it was DPL alone who could determine what was to be done with them, subject always to the constraints and duties to which it was subject as a trustee (and, as to income, to having regard to any recommendation of DLALC).”

82 He identified (at [107]) the question to be determined by reference to the s 51 objects and the s 52 functions as being “whether DLALC acted within the scope of its statutory authority in transferring money to the trustee of a purpose trust having purposes corresponding, either wholly or in certain respects, with the statutory functions of DLALC”.

83 DLALC contended the transfers were an exercise of one or more of its s 52(1)(g)(ii), s 52(1)(k) and/or s 52(1)(m) functions. His Honour rejected that submission as to s 52(1)(k) and s 52(1)(m), holding (at [110] – [111]) that there was no clear and direct connection between any of the payments made by DLALC to DPL and the subjects of those functions.

84 He also rejected the argument that the transfer invoked the s 52(1)(g)(ii) function, concluding (at [117]):

“… that DLALC, in transferring funds to DPL, did not apply any part of those funds in or towards the performance of any of its own functions. It made those funds available to DPL so that DPL might, according to DPL’s own decisions, deploy the funds in the furtherance of the purposes for which DPL was permitted to act. Decisions that caused funds to be applied by DPL towards those objects were decisions of DPL alone. And, given its duties as a trustee, it was in no position to accept fetters upon its discretion to make decisions as to the application of trust funds.”

85 Accordingly his Honour held (at [118]) that because in parting with its money, DLALC relinquished both ownership of the money and the power to control its application by so doing, it could not be said to be exercising any of the functions upon which it purported to rely.

86 Barrett J then considered (at [120] ff) the argument that the transfer of funds to DPL was inconsistent with the scheme of the ALR Act and accordingly unauthorised, an argument which focussed on DLALC’s duties and responsibilities and the public policy to which the ALR Act gives effect. He examined authorities dealing with the purported relinquishment of statutory functions by statutory corporations which he concluded proceeded on the basis of three main principles:

87 In his Honour’s view (at [131]), the principles reflected in the statutory relinquishment line of cases applied to DLALC because of its public character as “a body committed to promote the welfare and interests of a section of the public or, as s 51 puts it, to ‘improve, protect and foster the best interests of’ that section of the public”. Accordingly (at [132]) only DLALC could discharge its duties and responsibilities, subject only to the limited power to delegate created by s 82. The consequence was that:

“132 … Any arrangement which causes land council property to be vested in another person for application in accordance with future decisions of that person – albeit in ways that may in whole or in part correspond with the land council’s s 52 functions and be consistent with its s 51 objects – entails an impermissible abdication of statutory responsibility, an impermissible shifting of statutory decision-making, an impermissible side-stepping of statutory controls and therefore a subversion of the statutory intention.”

88 His Honour accepted (at [135]), accordingly, that “the effect of the trust structure and the transfers of funds by DLALC to DPL for deployment within the trust structure were an impermissible abandonment by DLALC of its statutory duties and responsibilities with respect to a large part of its property”. In his view, “DLALC did not purport to delegate any of its own functions… [r]ather, its objective was to put the property in question entirely out of its ownership and beyond its reach and to subject the property to a regime which, while in some respects contemplating applications of funds in ways corresponding with those open to DLALC under the ALR Act, involved decision-making and control otherwise than by DLALC”. The transfers were “against the policy of the ALR Act because of DLALC’s abdicat[ion] of control and supervision of matters which that Act require[d] to be controlled and supervised by it”. His Honour noted (at [137]) that the question whether DPL was “controlled” by DLALC was debated before him, but considered it was not relevant to the matters before him. He did observe, however, that even if DPL was so “controlled”, the effect of the transfers of DLALC’s funds was that “[t]he funds [were] no longer subject to the wider supervisory regime created by the ALR Act.”

89 Accordingly his Honour concluded (at [138]) that attempted evasion of the statutory scheme was an additional ground for holding that the four transfers of funds by DLALC to DPL were not authorised by law.

90 Barrett J next considered (at [139] ff) the argument based on “broad ultra vires” because of an abuse of power, an argument which depended on “the proposition that powers lawfully available were used for purposes other than those for which they were conferred, and that the purposes actually pursued were therefore impermissible purposes”. He held (at [153]) that, “the transfers of funds were actuated by the improper purpose of removing the moneys in question from the ambit of decision-making within the statutory confines of DLALC and to place them instead within the decision-making structure based on DPL and the Trust, being a decision-making structure not presided over by members of DLALC.”

91 Finally, for present purposes, Barrett J rejected (at [165]) an argument that because the transfer of funds to the Trust involved subversion of the statutory scheme, the Trust must be regarded as illegal. In his view DLALC’s action in setting up the Trust did not involve subversion of the statutory scheme. Rather, the action that attracted criticism was the transfer of substantial funds in relation to which DLALC was thereby disabled from performing its statutory duties and responsibilities. Accordingly the question whether the Trust was valid was to be judged against the ordinary criteria applicable to charitable trusts, regardless of the provisions of the ALR Act. He concluded (see [194] – [217], [220]) that “the Trust [was] a charitable trust (in the sense that at least part of the ‘Sole Purpose’ [was] charitable) but that, to the extent that trust moneys were lent by DPL, as trustee, to CattleCo and the Enterprise Companies (and, in the case of CattleCo, outlaid as subscription moneys for shares), the expenditure was neither made in furtherance of any aspect of the charitable purpose nor made in a form that the Trust Deed permitted the trustee to make”.

92 In his 3 October reasons, Barrett J invited the parties to make further submissions as to the relief which was warranted in relation to the claims in the light of his reasons. The matter came back before him on 3 November: see Darkinjung Pty Ltd v Darkinjung Local Aboriginal Land Council; Hillig v Darkinjung Pty Ltd [2006] NSWSC 1217.

93 On 12 December 2006 DLALC renewed its application that DPL be wound up relying on a special resolution that it be wound up by the Court: s 461(1)(a), Corporations Act. It appears tolerably clear from his Honour’s judgment that that special resolution was “passed” by the appellant, exercising his DLALC functions and, in turn, DLALC’s power as sole member of DPL: Hillig v Darkinjung Pty Ltd [2006] NSWSC 1371 (at [24] – [25], [36]) (the “winding-up judgment”). His Honour concluded (at [36]) that a ground for winding up had been established and, in any event, that “with the whole of DPL’s funds and assets held by it upon trust for DLALC, there has been, in a real sense, a removal of DPL’s substratum of such a kind that, having regard to that wider context, winding up should be considered just and equitable”.

94 On that day he also made orders disposing of all the matters dealt with in his 3 October 2006 reasons, 16 November 2006 reasons and his reasons of that day, relevantly as follows:

2. Declare that the following payments made by Darkinjung Local Aboriginal Land Council to Darkinjung Pty Limited:

(a) on 15 July 2004, the sum of $19,582,713.36;

(b) on 27 October 2004, the sum of $69,100.00;

(c) on 7 July 2005, the sum of $5,453,374.25; and

(d) on 7 July 2005, the sum of $651,907.40,

were beyond the power of Darkinjung Local Aboriginal Land Council and that those funds were received by Darkinjung Pty Limited and were and are held by it upon trust for Darkinjung Local Aboriginal Land Council .
3. Declare that the whole of the funds and assets of Darkinjung Pty Limited are held by it upon trust for Darkinjung Local Aboriginal Land Council.
4. Declare that Darkinjung Pty Limited is not entitled to indemnity from the assets of the Darkinjung Local Aboriginal Land Council Trust for the amount of any liability of Darkinjung Pty Limited under a deed of indemnity dated 19 May 2006 between Darkinjung Pty Limited and Mr Warner and Mr Sanderson, the persons supposedly appointed voluntary administrators of Darkinjung Housing Pty Limited, Darkinjung Funeral Fund Pty Limited and Darkinjung Projects Pty Limited.
5. Declare that Darkinjung Pty Limited is liable to pay to Darkinjung Local Aboriginal Land Council as equitable compensation the sum obtained by [his Honour then set out the method for calculating this sum] …
6. Order that Darkinjung Pty Limited do forthwith assign, transfer and convey to Darkinjung Local Aboriginal Land Council and cause to be vested in Darkinjung Local Aboriginal Land Council the whole of the funds and assets of Darkinjung Pty Limited (including, but not limited to, the land in folio identifier 301/555497) save and except for a sum of $430,000 and that Darkinjung Pty Limited pay that sum of $430,000 into court.
7. Order that the moneys paid into court pursuant to order 6

(a) be invested in accordance with rule 41.5 of the Uniform Civil Procedure Rules 2005; and

(b) remain in court to abide the determination of the amount, if any, which is fairly to be allowed to Darkinjung Pty Limited for its expenses of acting as trustee of the trust referred to in Declaration 3, in respect of the prosecution of proceedings number 5634 of 2005 and in respect of its conduct of the defence of these proceedings; and

(c) upon completion and certification of that determination,

(i) be paid out to Darkinjung Pty Limited to the extent of the sum to which Darkinjung Pty Limited is entitled as a result of the determination; and

(ii) be paid out to Darkinjung Local Aboriginal Land Council as to the remainder, together with interest actually earned.
8. Order that further consideration be reserved of the costs of these proceedings and of amount, if any, which is fairly to be allowed to Darkinjung Pty Limited for its expenses of acting as trustee of the trust referred to in Declaration 3, in respect of the prosecution of proceedings number 5634 of 2005 and in respect of the conduct of the defence of these proceedings….”

95 In Hillig v Darkinjung Pty Ltd [2007] NSWSC 683 (at [20]) White J accepted Barrett J’s analysis of Local Aboriginal Land Councils “as ‘single-organ corporations’”. In White J’s view, that conclusion followed from Divisions 4, 5 and 6 of Pt 5 of the ALR Act. His Honour added (at [24]):

“Any analogy between voting members of a Local Aboriginal Land Council and shareholders in a company is inaccurate and misleading. Voting members who exercise their voting rights at meetings of a Local Aboriginal Land Council make the decisions of the Council…”

Issues on Appeal

96 There were numerous of grounds of appeal. However the issues requiring resolution are sufficiently identified, in my view, by the appellant’s contention that the primary judge erred in failing to hold that the effect of the conferral of all DLALC’s functions on the appellant was that, assuming the Provisos to be valid, the resolution they required could be treated as effected by the appellant’s resolutions. In other words as the appellant exercised all the functions of the DLALC, he could perform any function conferred on that body.

Submissions

97 Mr Murr submitted that:

(b) meetings of DLALC could not exercise any of those functions, powers or authorities or perform any of those duties during the period of the appointment of an administrator;

(c) DLALC’s powers under s 41 of the ALR Act include all the powers that a natural person would have in relation to DLALC’s share in DPL;

(d) accordingly, during the period of his appointment, the appellant had all DLALC’s powers in relation to its share in DPL and meetings of the members of DLALC did not have any of those powers; and

(e) the corollary was that during the period of the administrator's appointment meetings of the Land Council did not have the power to pass resolutions purporting to exercise DLALC’s powers in relation to its share in DPL, or any part of those powers.

98 Secondly, Mr Murr contended that unless DPL's constitution was construed so that either:

(b) The provisos were taken to be complied with by a properly-made decision of the administrator for the Council,

then:

(c) The Provisos would prevent DPL from exercising the powers concerned, including the powers to amend its constitution, although there was both statutory and common law authority that it must be able to do so;

(d) The Provisos would prevent the appellant from exercising DLALC’s power in respect of its property, as set out in s 41 of the ALR Act; and

(e) The provisos would confer or purport to confer on DLALC powers in respect of its property that according to s 222(4) of the ALR were vested in the appellant during the term of his appointment, to the exclusion of DLALC.

99 Thirdly, Mr Murr argued that the primary judge erred first in concluding that it was not incompatible with s 41 to allow the “further requirement" (the 66% resolutions) required by the Provisos to operate, because they were part of the bundle of rights that constituted the property that was DLALC’s share in DPL and, secondly in concluding that the Provisos did not confer the power to pass the "resolution in materially similar terms" on DLALC, but on the members in general meeting as the designated organ of DLALC.

100 As to the first point Mr Murr submitted that the “further requirement" to which the primary judge referred was not one that required concurrence of a third party or the occurrence of an external event, but, rather, one that required additional action by DLALC, and hence one that DLALC, by its own actions, was capable of fulfilling. Accordingly he argued the ability to satisfy the requirement, and by doing so to make its vote on the relevant matters effective, was a power that DPL’s constitution gave to DLALC while it held shares in the company and was also part of the “bundle of rights that constitute the property that is the share”. He also contended that unless the construction for which the appellant contended was accepted, the Provisos had the effect that DLALC was prevented from exercising the powers that the Provisos gave it.

101 As to the second point Mr Murr argued that Local Aboriginal Land Councils are single organ bodies incorporated under s 50 of the ALR Act and that the organ was the Part 5, Division 4 meeting, which operated by majority vote, as a direct democracy: see s 77. Next he pointed out that in each Proviso the power was expressed as something that DPL might do, conditional upon the “the Council” passing a similar resolution and that “The Council” was defined in cl 1.1 of the Dictionary as “Darkinjung Local Aboriginal Land Council”. Accordingly, even accepting the primary judge’s construction of the expression, “the Council passing a resolution” as meaning “the members in general meeting, as the designated organ of the Council, passing a resolution”, he argued that the relevant action was still the action of DLALC and was the exercise of a power in relation to DLALC’s share in DPL.

102 Next he contended that as, during the period of an administrator's appointment, a meeting of members could not exercise DLALC’s powers in relation to its share in DPL and could not pass a resolution of DLALC purporting to do so, any decision of such a meeting purporting to exercise powers under the Provisos would not be a resolution of DLALC, and would have no more legal force than a statement of the personal opinion of the majority of those persons present. Finally he submitted that a decision of an administrator appointed to exercise all of the functions of a Land Council to the exclusion of the Council was a decision of the Council. He contended that even though an administrator could not be a member of the Land Council (s 225(c)) so that a decision an administrator made was not a resolution of or by the members of the Land Council, it was nevertheless an exercise of DLALC’s powers by virtue of his appointment so to act.

103 Mr Murr also submitted that the provisos were void, invalid or ineffective because they attempted to impose on a Land Council decision making which was different from that provided in the ALR Act, would prevent an Administrator from exercising the powers of a Land Council in respect of the Land Council's property and purported to confer on the Council by the organ of a members’ meeting a power that the Council as a statutory corporation was incapable of receiving.

104 The respondents made no submissions on the substantive issues in the appeal, each having filed a submitting appearance.

Consideration

105 Resolution of the appellant’s argument turns on the nature of a Local Aboriginal Land Council, the functions it is empowered to exercise and the extent to which the appellant as administrator is entitled to exercise its functions. There has been detailed consideration of the nature of Local Aboriginal Land Councils, including in the decisions in this case of Barrett J and White J, as well, of course, of the primary judge. However there is a measure of tension between the primary judge’s decision and those of Barrett J and White J on one of the critical points, the organic nature of a Local Aboriginal Land Council, to which I will come.

106 It is convenient, in the first instance to set out the following propositions which can be extracted from Barrett J and White J’s decisions:

(a) a Local Aboriginal Land Council is a single-organ corporation; it has only one decision-making body, being the members assembled at a meeting convened in accordance with the ALR Act: Barrett J (at [142]); White J (at [20]);
(b) unless a particular matter is either placed by the ALR Act within the province of one of the three officers or delegated in accordance with s 82, that matter may only be dealt with by the Local Aboriginal Land Council itself at a meeting: Barrett J (at [35]);

Sanpine Pty Ltd v Koompahtoo Local Aboriginal Land Council

(d) the functions described in s 52 are to be performed by the Local Aboriginal Land Council; the powers gathered from a number of provisions of the Act (and from the Interpretation Act) are made available to it: Barrett J (at [45]);

(e) a Local Aboriginal Land Council is authorised to perform the s 52 functions, provided that in so doing it acts within the s 51 objects; it likewise has authority to pursue the attainment of the s 51 objects, provided that in doing so it does not perform functions beyond the s 52 functions: Barrett J (at [96]);
(f) section 41 of the ALR Act does not enable a Local Aboriginal Land Council to deal with its money or other property in ways that are not conducive to the attainment of its objects and the performance of its functions: Barrett J (at [97], [103]);
(g) a Local Aboriginal Land Council must not do anything that lies beyond the scope of the s 51 objects; second, a Local Aboriginal Land Council must not do anything that does not involve the performance of a s 52 function; and, third, a Local Aboriginal Land Council must not exercise any of the powers conferred by the ALR Act (and s 50 of the Interpretation Act) except in doing things that are within the scope of both the s 51 objects and the s 52 functions: Barrett J (at [104]);
(h) a statutory corporation such as DLALC may not abdicate or evade its statutory duties and responsibilities, even if the means by which it purports to do so otherwise appear to lie within the scope of its objects, functions and powers; accordingly only DLALC could discharge its duties and responsibilities, subject only to the limited power to delegate created by s 82: Barrett J (at [129], [132])

107 It is also pertinent to refer to Campbell J’s analysis of the ALR Act in Sanpine Pty Ltd v Koompahtoo Local Aboriginal Land Council (at [332]):

ALR Act

Interpretation Act

…

347 One of the statutory means by which responsible administration of a LALC is enforced, to achieve the broad public objectives of the ALR Act 1983, is by there being provision for an appointment of an administrator to the affairs of an LALC. I see no behaviour of a type which equity would regard as unconscionable in the administrator, once appointed, insisting that those proper statutory controls be observed, and asserting legal rights on the basis that those statutory controls are not ones which can be departed from.”

Sanpine

Sanpine Pty Ltd v Koompahtoo Local Aboriginal Land Council

Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd

108 It is consistent with these propositions that one of the functions assigned to the appellant by virtue of his appointment was the decision-making function hitherto exercised by the DLALC. The primary judge accepted that, but held that that the members of DLALC had a residual function, not one of the bundle of functions conferred on the appellant by his instrument of appointment, to vote as “one of the organs of the relevant body, namely the members in general meeting”.

109 In my view, with respect, his Honour erred in so finding. Although it might be accepted that a corporation has legal personality apart from its members because it may own property and have legal rights and duties (New South Wales Aboriginal Land Council v Jones (1998) 43 NSWLR 300 (at 305) per Handley JA), that is not the model of the Local Aboriginal Land Council created by the ALR Act. As Barrett J and White J have demonstrated, a Local Aboriginal Land Council is a single-organ corporation.

110 One of the functions of a Local Aboriginal Land Council is to acquire land and to use, manage, control, hold or dispose of, or otherwise deal with, land vested in or acquired by the Land Council: s 52(1).

111 A Local Aboriginal Land Council acquires and disposes of property in accordance with Part 2 of the ALR Act. Significantly, s 40D, which is found in Part 2, provides that a Local Aboriginal Land Council may only sell, exchange, mortgage or otherwise dispose of land vested in it if, relevantly, at a meeting of the Council specifically called for the purpose (being a meeting at which a quorum was present) not less than 80 per cent of the members of the Council present and voting have determined that the land is not of cultural significance to Aborigines of the area and should be disposed of.

112 As I have earlier pointed out, pursuant to s 77, a decision supported by a majority of votes cast at a meeting of the Local Aboriginal Land Council at which a quorum is present is the decision of the Local Aboriginal Land Council. In other words, there is no decision-making organ other than the members of the Local Aboriginal Land Council. At the time the Resolutions were passed, the officers of the Local Aboriginal Land Council did not exercise a function independently of the Local Aboriginal Land Council. Rather, their function was to direct and control its affairs in accordance with the ALR Act and the resolutions and decisions of the members of the Council as expressed through Council meetings: s 65.

113 I note, parenthetically, that the structure of Local Aboriginal Land Councils was substantially altered by the 2006 Amendment Act which omitted Divisions 3 and 4 of Part 5, and substituted a structure which provides for Local Aboriginal Land Councils to have a Board (s 61), with responsibility, inter alia, to direct and control the affairs of the Council, in accordance with the ALR Act and the regulations and consistently with the community, land and business plan of the Council: s 62(a). Significant functions, including approval of dealings with land, are still, however, to be made by the voting members (s 52G(e)) and s 40D still governs disposal of land. It is unnecessary to decide the extent to which, if at all, the new structure might affect the characterisation of a Local Aboriginal Land Council as a “single-organ corporation”.

114 The members of a Local Aboriginal Land Council were not entirely divested of their functions on the appointment of an administrator. Despite the mandatory terms of s 222(4) conferring on the administrator the functions of the Land Council “to the exclusion of the Council”, s 230 precludes an administrator from disposing or otherwise dealing with land vested in or acquired by the Local Aboriginal Land Council “without the consent of the Council, as decided at a meeting)”. It is not necessary to explore the apparent tension between the two provisions. It is sufficient to note, in my view, that the limited carve-out of functions retained by a Local Aboriginal Land Council after an administrator’s appointment, reinforces the proposition that the appellant otherwise exercised any function of the Local Aboriginal Land Council.

115 The consequence of DLALC having only one decision-making body (the members in a duly constituted meeting) is that investing the appellant as administrator with DLALC’s functions conferred on him the function of making all decisions in lieu of the members, subject to s 230. However the function the appellant sought to exercise by passing the resolutions was not caught by s 230.

116 Accordingly, assuming for present purposes that the Provisos were valid, a decision by the appellant to take one of the steps contemplated by cll 6.1(d) and (e) and 14.4 carried with it the necessary approval by the Land Council as required by the Provisos. The appellant took those steps by passing the Resolutions.

117 This conclusion is sufficient to dispose of the appeal. It is not necessary to determine whether the Provisos were valid.

Conclusion

118 The consequence is that the Resolutions were effective and the primary judge’s orders and declarations should be set aside. However this does not mean that the Court should make the declarations the appellant seeks. As these reasons reveal time has moved on. DPL has been wound up and a liquidator appointed. The power to grant declaratory relief is discretionary. The relief the appellant seeks no longer relates to a “real question”: see In re F (Mental Patient: Sterilisation) v West Berkshire Health Authority [1991] UKHL 1; [1990] 2 AC 1 (at 82) cited with approval by Gleeson CJ, Gaudron, McHugh, Gummow, Hayne and Callinan JJ in Bass v Permanent Trustee Co Ltd [1999] HCA 9; (1999) 198 CLR 334 (at [47]). The effect of Barrett J’s decisions has removed the substratum of the controversy, such as it was in June 2006.

119 I propose that the appeal be resolved by allowing the appeal, setting aside Austin J’s orders and declarations, and dismissing the interlocutory processes filed by the first-sixth respondents on 29 May 2006.

120 As indicated at the conclusion of the hearing of the appeal, the Court should reserve the question of the costs of the proceedings before Austin J and of the appeal. It should give directions as to how to deal with costs when judgment is delivered.

**********

23/06/2008 - Amendment of solicitor's details - Paragraph(s) Cover sheet

Citations

Hillig v Darkinjung Pty Ltd [2008] NSWCA 75

Most Recent Citation

Cases Citing This Decision

18

Saint, Johnson, Ex parte - Re Macks [2000] HCATrans 245

Darkinjung Local Aboriginal Land Council v Darkinjung Pty Ltd (in liq) [2010] NSWCA 351

Cases Cited

17

Statutory Material Cited

4

Hillig v Darkinjung Pty Ltd [2006] NSWSC 594

Bonan v Hadgkiss [2007] FCAFC 113

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CITATION:	Hillig v Darkinjung Pty Ltd & Ors [2008] NSWCA 75 This decision has been amended. Please see the end of the judgment for a list of the amendments.
HEARING DATE(S):	9 May 2007
JUDGMENT DATE:	29 April 2008
JUDGMENT OF:	Beazley JA at 1; Giles JA at 2; McColl JA at 11
DECISION:	1. Appeal allowed. 2. Orders and declarations made by Austin J on 19 June 2006 set aside. 3. Interlocutory processes filed by the first to sixth respondents on 29 May 2006 dismissed. 4. Costs reserved.
CATCHWORDS:	ABORIGINALS — Aboriginal land councils — powers and functions — appointment of administrator to exercise all the functions of Local Aboriginal Land Council — whether members of Local Aboriginal Land Council retained voting function to exercise resolution-making power conferred by provisos to clauses in constitution of company in which Local Aboriginal Land Council held the sole share - STATUTORY INTERPRETATION — characterisation of Local Aboriginal Land Council constituted under Aboriginal Land Rights Act 1983 — authority and capacity as a statutory corporation — statutory functions, duties and responsibilities — role of officers and members.
LEGISLATION CITED:	Aboriginal Land Rights Act 1983 Aboriginal Land Rights Amendment Act 2006 Interpretation Act 1987 Corporations Act 2001 (Cth)
CATEGORY:	Principal judgment
CASES CITED:	Bass v Permanent Trustee Co Ltd [1999] HCA 9; (1999) 198 CLR 334 Bonan v Hadgkiss [2007] FCAFC 113; (2007) 160 FCR 29 Commissioner for Railways (NSW) v Cavanough [1935] HCA 45; (1935) 53 CLR 220 Darkinjung Pty Ltd v Darkinjung Local Aboriginal Land Council; Hillig v Darkinjung Pty Ltd; Darkinjung v Warner [2006] NSWSC 1008; (2006) 203 FLR 394 Darkinjung Pty Ltd v Darkinjung Local Aboriginal Land Council; Hillig v Darkinjung Pty Ltd [2006] NSWSC 1217 Hadkinson v Hadkinson [1952] P 285 Harrington v Rich [2008] FCAFC 61 Hillig v Darkinjung Pty Ltd [2006] NSWSC 1371 Hillig v Darkinjung Pty Ltd [2006] NSWSC 594; (2006) 201 FLR 148 Hillig v Darkinjung Pty Ltd [2007] NSWSC 683 In re F (Mental Patient: Sterilisation) v West Berkshire Health Authority [1991] UKHL 1; [1990] 2 AC 1 Isaacs v Robertson [1985] AC 97 Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61; (2007) 82 ALJR 345 New South Wales Aboriginal Land Council v Jones (1998) 43 NSWLR 300 Sanpine Pty Ltd v Koompahtoo Local Aboriginal Land Council [2006] NSWCA 291 Sanpine Pty Ltd v Koompahtoo Local Aboriginal Land Council [2005] NSWSC 365
PARTIES:	Peter Hillig in his capacity as Administrator of Darkinjung Local Aboriginal Land Council - Appellant Darkinjung Pty Ltd - First Respondent Jeffrey John Bradford - Second Respondent David Pross - Third Respondent Greg Flanders - Fourth Respondent George Alexander Watts - Fifth Respondent Michael Stuart Jones - Sixth Respondent Ian Cunliffe - Seventh Respondent
FILE NUMBER(S):	CA 40489 of 2006; 40386 of 2006
COUNSEL:	Mr D H Murr SC with Mr D A Smallbone - Appellant Mr S D Epstein SC - Second to Seventh Respondents
SOLICITORS:	Patrick Woods & Co - Appellant Tony Simpson & Co - First Respondent - submitting appearance Norton White Melbourne - Second to Seventh Respondents - submitting appearances
LOWER COURT JURISDICTION:	Supreme Court - Equity Division
LOWER COURT FILE NUMBER(S):	SC 2842 of 2006
LOWER COURT JUDICIAL OFFICER:	Austin J
LOWER COURT DATE OF DECISION:	15 June 2006
LOWER COURT MEDIUM NEUTRAL CITATION:	[2006] NSWSC 594