Macedonian Orthodox Community Church St Petka Incorporated v His Eminence Petar the Diocesan Bishop Of the Macedonian Orthodox Diocese Of Australia And New Zealand

[2013] HCATrans 28

[2013] HCATrans 028

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S155 of 2013

B e t w e e n -

MACEDONIAN ORTHODOX COMMUNITY CHURCH ST PETKA INCORPORATED

First Applicant

and

HIS EMINENCE PETAR THE DIOCESAN BISHOP OF THE MACEDONIAN ORTHODOX DIOCESE OF AUSTRALIA AND NEW ZEALAND

First Respondent

VR FATHER MITKO MITREV

Second Respondent

ATTORNEY GENERAL FOR THE STATE OF NEW SOUTH WALES

Third Respondent

LAMBE MITRESKI

Fourth Respondent

PERO DAMCEVSKI

Fifth Respondent

BORIS MINOVSKI

Sixth Respondent

EFTIM EFTIMOV

Seventh Respondent

MILE MARCEVSKI

Eighth Respondent

NAUM DESPOTOSKI

Ninth Respondent

Application for special leave to appeal

KIEFEL J
GAGELER J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 14 FEBRUARY 2014, AT 11.01 AM

Copyright in the High Court of Australia

____________________

MR B.W. WALKER, SC:   May it please the Court, I appear with my learned friend, MR G. NG, for the applicant. (instructed by McConnell Jaffray Lawyers).

MR T.B.R. PARKER, SC:   May it please the Court, I appear with my learned friend, MR L.T. LIVINGSTON, for the first and second respondents. (instructed by Sachs Gerace Lawyers).

MR M.A. IZZO:   May it please the Court, I appear with my learned friend, MS P.F. O’DEA, for the third respondent. (instructed by Crown Solicitor (NSW))

KIEFEL J:   Yes, Mr Walker.

MR WALKER:   Your Honours, could I take you to page 34 of the application book to go straight to the 1992 version of the wording at the heart of the case - your Honours will have read, not only in the various reasons below but also in our written submissions, reference to the 1984 version, but for the reasons we have put in our written submissions it suffices for us to focus on the 1992 version - to draw to attention these elements, at the risk of repetition of matters already emphasised in our written submissions.

One sees at the definition of “former association”, for the purposes of this rather important legislation, giving incorporation and its characteristics to unincorporated associations, that is, groups or clubs, one sees that there is a reference in the definition to including:

any or all the members of the former association as members.

In other words, the phrase “any or all” includes subgroups; indeed, it would include individuals so long as they are as members.  That is not central.  What is central is contained on page 34, about line 50, the critical expression “the assets of a former association”.  One sees that the magic, if I can call it that, of this statute and, indeed, of statutes enacted in other jurisdictions to similar effect is to work the vesting of what the New South Wales statute calls the assets of a former association by dint of the statute alone upon the fact of incorporation.

It is subclause (2) which commences at the foot of page 34 and goes to the top of 35 which is right at the heart of the issue.  It is really only one issue which we seek to raise by the two draft grounds of appeal which are really two sides of one coin.  In subclause (2), the magic of statutory vesting having occurred, the following is stipulated about those assets and I stress these are assets which are described as the assets of a former association.

They are vested such that thereafter there is a statutory obligation not to deal with them, contrary to the provisions of any trust affecting the assets and immediately these are expressions which give rise to questions which have been addressed but, in our submission, imperfectly answered in the reasons below concerning property, trust and the nature of unincorporated association.

GAGELER J:   You need to deal with the definition of “asset”, do you not?

MR WALKER:   Yes.  An asset is a very important provision because it means any legal or equitable estate or interest.

GAGELER J:   Not the thing, it is the ‑ ‑ ‑

MR WALKER:   No, quite.  Your Honour is right, it is a definition that has the word “means”, not “includes”.  That is not, in our submission, of any great moment for the following reasons, and our argument does not involve talking about ownership of things.  After all, to say that one holds all interests in such and such a chalice is to say also, as a matter of non‑legal English, that you own the thing. 

KIEFEL J:   Do you say that the unincorporated - the association prior to incorporation had an interest higher than a right to use the property under the deed of trust. 

MR WALKER:   No, I do not and in our submission there are fundamental errors committed which have led to some, in our submission, absurdities in the reasoning against us below.  Can I explain as follows:  the nature of the law, both statutory as to real property, common law as to chattels and equity in relation to trust, before corporation, was that the terms of the trust binding the legal owners, which were not of course the unincorporated association - one could not have had the unincorporated association marching around as if it were an entity - the nature of those arrangements raised immediately the question whether what those trustees held on trust fall within the definition of “the assets of a former association”. 

Now the first thing to be said is that these are provisions, that is statutory provisions, which talk about purpose, that is, the ongoing, enduring, statutory reflection of prior trusts, focused upon purposes.  That is important because, as your Honours know, this is a statute that is not available for associations carrying on for profit activities or the ownership of members in their own right. 

By dint of exclusion and elimination one is left with either the whole or by far the most of the field endeavour to be carried on by incorporated associations being valid purpose activities, charities and certainly this is a charity.  Thus, fundamentally, there was raised the question, what was the nature of the asset which those former natural person trustees held for the purpose of permitting the association to use, et cetera, et cetera, et cetera, as Justice Kiefel has noted.

The first thing is that it would be completely fallacious to suggest that it was a bare legal title or only a legal interest as if somewhere else there was a beneficial interest.  This is to mistake what is elementary about a valid purpose trust with no beneficiaries, no cestui que trust.  The whole of the interests, all interests are held by the trustee bound by the trust and that, in our submission, meant that provisions such as, both in 1984 and 1992 - your Honours will be impressed by the fact that 1992 was offered by the Parliament as a clarification - those provisions focused on the question as to whether in a case such as the present one could say that the, take the church, held by the trustees, not for themselves beneficially but without any split between legal and beneficial titles, subject to a valid purpose trust because charitable, where that purpose is expressed as giving solely to my client, solely to the predecessor, I should say of my client, the use of the premises ‑ ‑ ‑

KIEFEL J:   But, I think, as the Court of Appeal said at paragraph 160, the association was “simply identified as a vehicle” for the ascertainment of the charitable trust purposes.

MR WALKER:   The association, unincorporated or incorporated will only ever be a vehicle – could not be anything else.  It is a fiction.

KIEFEL J:   True.

MR WALKER:   That was never, in our submission, an argument or a form of reasoning which would downgrade the association from the position it has as the sole - and we are happy with the word “vehicle” or “means” by which this property could be put to the use ultimately of worshippers and adherence of the Macedonian Orthodox Church.

KIEFEL J:   Do you say that the approach of the Court of Appeal means that in the case of a charitable trust there can never be a vesting of property under this provision?

MR WALKER:   In our submission, the errors which we would identify in paragraphs 158, 163, 166 combined, leave as quite unanswered puzzles as to what their Honours were proceeding to treat as having happened, both when the original trusts were created and, second, when the statute had any effect and, in our submission, the difficulty with the reasoning below is that not only insufficient attention but really an erroneous position was taken in relation to the centrally important proposition that in a charity, the trustee does not hold merely the legal title with the beneficial title elsewhere, the trustee holds the property for the purposes.

Then one asks in a statute which contemplated a statutory simulacrum of that trust obligation, given force of legislation, by using the form of expression, “provisions as to the purposes for which the assets may or are required to be applied”, one asks how is that meant to fit or how was that intended to fit with the very general expression, “the assets of a former association” and there, in our submission, error crept in.  Literally there could not be assets of former association if one is talking about the ownership by an impossible entity.  No one would ever construe the statute as if that was a possibility.

GAGELER J:   So the impossible entity.

MR WALKER:   An unincorporated association is not an entity.  It is a group of people of shifting membership from time to time.

KIEFEL J:   Well, it could be the assets held by the members then, could it not?

MR WALKER:   Then the second possibility, logically, always is that they are assets owned by all the members, not any or all, but all the members.

KIEFEL J:   But you would say “assets” extends to assets held for or on behalf of the association.

MR WALKER:   Quite, and your Honour anticipates me and it is to be recalled that “on behalf of” is an expression which is found and, in our submission, this is not a question of committing the absurdity.  The solecism - and we know that this was law reform following a report - of supposing that there was any beneficiary of a valid charitable trust.  So, “for or on behalf of” could never be interpreted as meaning as cestui que trust as beneficiary.  It could only mean, look at the association, we know this statute has to do with not for profits which will mostly, if not always, be charitable aims ‑ ‑ ‑

KIEFEL J:   But does not that raise the question of whether or not the provision of clause 2 was intended to operate to vest property in the case of a charitable trust?

MR WALKER:   It does raise that question and that is a very, very important question.  Until this case, I do not think it had ever been supposed that it was meaningless to incorporate an unincorporated charitable association.

KIEFEL J:   By the way, the property in question has been transferred to the incorporated association.

MR WALKER:    Yes, in fact it has so whether ‑ ‑ ‑

KIEFEL J:   Holds as trustee.

MR WALKER:   That is there has been a conveyance so whether pursuant to the Act or, if one likes, as trustee de son tort, obviously the trust obligations, such as they are, would continue.

KIEFEL J:   So what is the practical outcome that you are seeking?

MR WALKER:   The practical outcome has to do with the ridding of the governance and control of the association and the property vested in it of trust law and the substitution which is evident on the face of the statue of a very detailed regime for the governance of associations in accordance with relevantly three matters:  first, the Act.  Now that is significant because that gives roles to the Attorney‑General and the Supreme Court and supervises what I might call minimum standards of integrity and democracy of governance.

KIEFEL J:   Does not one of the respondents, I think perhaps the second respondent, assert that you are being somewhat inconsistent because the association has asserted itself as the trustee in the past?

MR WALKER:   The first respondents do that, your Honours.  That is a point without substance.  During the course of litigation where our contest about this critical cardinal point was made early we had to deal with the matter as it was.  There is no blowing hot and cold here.  The Court of Appeal has, with respect, dealt with that matter in a way that this was vehemently argued as being a ground why certain arguments were not available in the Court of Appeal and that was rejected and obviously so.  One must live with the findings and holdings during interlocutory stages of litigation as they unfold. 

We do not take a risk by either failing to seek or failing to obtain leave to appeal at an early stage in complex litigation.  Everyone takes a risk of there being a threshold point wrongly decided.  The second respondent does, however, I think, your Honours, take the point that our argument would somehow lead to a weakened regime of supervision in the general chancery jurisdiction with respect to charity and my point is that the statute does no such thing and there is no reason to believe there would be any weakening at all.

So that is the first of the matters of government of the assets, we say vested pursuant to the statute.  The second obviously is the constitution of the association.  Now, the critical difference there, which has been pointed out I think by everybody and all judges, is that the constitution has variation possibilities.  True, they are to a degree controlled by the Act, but they are also within the constitution itself and that may affect questions of purpose. 

But the third matter - and this is the matter that, in our submission, has been insufficiently attended to in the judgments below is the provisions of clause 2(2).   The third matter is that in relation to purposes there may not be dealing contrary to provisions as to the purposes for which the assets are or may be required to be applied.  The association after incorporation cannot, by altering its constitution, change the fact that this property is to be applied only for the purpose of allowing the association to use it for, et cetera, et cetera. 

That, in our submission, is an entirely satisfying analysis of the way in which these provisions, which obviously have never been looked at by this Court and which have their analogues elsewhere, these provisions work an outcome on its face intended to be more simple than trust law, on its face intended to be explicitly set out in the statute without trust law, as it were, brought in by the side wind of (a) wrong doctrine concerning the nature of the assets held by the trustees before incorporation and (b) the reference to “trust” in 2(2).

The reference to “trust” in 2(2), far from leaving the whole of trust law unaltered in its operation to affect those assets which happened to exist before incorporation, because it would not affect those later except by an extraordinary interference with the capacity of the association to exercise its powers to acquire property, is indicated by the specificity with which the provisions concerning purposes which are continued - if Parliament was intending that trusts would remain unimpaired, as the Court of Appeal itself acknowledged, one might expect that wording of a kind that has been used in other jurisdictions that made that policy choice would be used.

Now, one of the possibilities that is raised by Justice Macfarlan as if it were a test of and an answer to our submission was to suppose that the unincorporated association had been the trustee of a private trust for a beneficiary.  It breaks down at the outset.  What is his Honour talking about?  A group of people shifting with the membership of the unincorporated association, a group of people, perhaps changing week by week being all themselves trustees of a private trust – even if it is theoretically possible it is simply not real as a way to test any matter of statutory interpretation for the incorporation of not for profits.

GAGELER J:   But, Mr Walker, you drew our attention to the definition of “former association” which does not need all of the members.

MR WALKER:   Quite so, quite so, but you would not hold as trust for a private individual as a member of an unincorporated association.  You might be the executor and trustee of your mother’s estate but that would not make that an asset of the former association.  It has to be as member.  But his Honour’s reasoning about this proceeds on the basis that we are submitting that that trust would be abolished. 

In the unlikely event, almost impossible to imagine, of such an example ever arising and if there really was as a member one or more or all

of the members of a former association holding as trust for a beneficiary for a cestui que trust then that would be evidently the purpose, that is, the benefit of that beneficiary or cestui que trust would be the purpose.  The provisions showing that would be the purpose for which that asset was required to be applied.

Furthermore, it would only be the legal title as trustee that would be transferred because the cestui que trust or beneficiary had an interest which was not the interest of the former association, let alone of the member or members who were trustees.  For those reasons that example goes nowhere and, indeed, highlights the fact that this is a case where the court failed at the outset to appreciate that with a valid purpose trust being a charity there are no beneficiaries, no cestui que trust, and that the whole of the interest was available, as Parliament plainly intended it to be, vested in the incorporated association with the purposes kept inviolate by 2(2).  If it please your Honours.

KIEFEL J:   We do not need to trouble the respondents.

We are not convinced that the construction for which the applicant contends would have sufficient prospects of success to warrant the grant of special leave.  Special leave is refused with costs.

The Court will now adjourn to reconstitute.

AT 11.22 AM THE MATTER WAS CONCLUDED