McCullagh v Northern Midlands Council, Knowles and Jennings
[2024] TASSC 66
•18 November 2024
[2024] TASSC 66
COURT: SUPREME COURT OF TASMANIA
CITATION: McCullagh v Northern Midlands Council, Knowles and Jennings
[2024] TASSC 66
PARTIES: | McCULLAGH, Andrew Paul Bryan |
| v | |
| NORTHERN MIDLANDS COUNCIL | |
| KNOWLES, Mary Carmel | |
| JENNINGS, Desmond Perce David | |
FILE NO: | 683/2024 |
DELIVERED ON: | 18 November 2024 |
DELIVERED AT: | Hobart |
HEARING DATE: | 7 November 2024 |
JUDGMENT OF: | Marshall AJ |
CATCHWORDS:
Administrative law – Prerogative writs and orders – Mandamus – Discretion of court and matters precluding relief – Illegality or public policy – Respondent used public funds to support defamation litigation – Seeking damages for defamation intrinsically personal matter - No legislative authority for local government council to use its funds to pay for private litigation of councillors – Litigation would not have been initiated if had to be privately funded.
Aust Dig Administrative Law [1224]
Cases:
Auckland Harbour Board v The King [1924] AC318
Pape v Commission of Taxation [2009] HCA 23
Scott v Jess (1984) 3 FCR 263
Legislation:
Local Government Act 1993, s 20, s 77(1A)
Supreme Court Rules 2000, r 627(1)(b), r 623(1), r 806
REPRESENTATION:
Counsel:
Applicant:
C Gunson SC, K Slack
Respondents:
Solicitors:
D Zeeman
Applicant:
Dobson Mitchell Allport
Respondents:
Butler McIntyre & Butler
Judgment Number:
[2024] TASSC 66
Number of paragraphs:
52
Serial No 66/2024
File No 683/2024
ANDREW PAUL BRYAN McCULLAGH v NORTHERN MIDLANDS COUNCIL, MARY CARMEL KNOWLES and DESMOND PERCE DAVID JENNINGS
REASONS FOR JUDGMENT MARSHALL AJ
18 November 2024
On 7 November 2024, the Court announced its orders in this matter and said it would publish its reasons for so doing at a later date. These are those reasons.
On 7 March 2024, the applicant, Mr Andrew McCullagh, applied to the Court for an order to show cause why relief in the nature of certiorari, prohibition and mandamus and/or declarations and injunctions should not be granted in respect of the conduct of the Northern Midlands Council by agreeing to pay for, and paying, legal costs incurred in defamation proceedings against Mr McCullagh in the Court by the second and third respondents, Ms Knowles and Mr Jennings.
By his application, the applicant sought to quash any decision made by the first respondent to use its funds for the personal benefit of the second and third respondents in those defamation proceedings.
The order to show cause sought by the applicant was made by Associate Justice Daly on 22
May 2024. It was in materially identical terms to the relief sought in the application.
Background
At the election held for the first respondent in October 2018, the second respondent was elected as Mayor. At the October 2022 election, the second respondent was again elected as Mayor for a four year term. Eight other councillors were also elected for a four year term. Amongst them was the applicant.
During 2019 and 2020, the applicant (who was not then a councillor) emailed the second and third respondents. Some of those emails led to separate defamation proceedings being instituted against the applicant by the second respondent and the third respondent, who was, at all material times, the General Manager of the first respondent and an employee of the first respondent.
The legal costs associated with the two defamation proceedings have been funded until 19 August 2024 by the first respondent. The applicant is concerned that public monies belonging to the first respondent have been diverted to the personal benefit of the second and third respondents.
On 12 June 2024, the second and third respondents filed a joint notice of submission. On 23 July 2024, the first respondent filed a notice of submission. On 30 July 2024, the Attorney-General for the State of Tasmania filed a notice of submission.
On 24 September 2024, the second and third respondents applied for leave to withdraw their notice of submission. They did so after sighting the draft final orders sought by the applicant. The second and third respondent opposed the making of some of those orders, but did not oppose the making of others of them. The first respondent has not sought to withdraw its notice of submission and has not sought to be heard to oppose any of the draft orders sought by the applicant.
In support of his application to withdraw his notice of submission, the third respondent said that he approached the first respondent to assist him in defamation proceedings against the applicant,
which the third respondent wished to commence because he believed that the applicant had defamed him in the course of him doing his job as General Manger of the first respondent. He said that after his request to the first respondent, a meeting was arranged by the first respondent to be convened on 26 October 2020 to address his position regarding the applicant. The first respondent's solicitor, who was also the solicitor for the second respondent, was invited to address the meeting to give details to the first respondent of the third respondent's proposed defamation proceeding. It is unclear whether he did address the meeting but nothing turns on that.
The third respondent said that he was subsequently advised by the first respondent that it had resolved to fund defamation proceedings by him and the second respondent against the applicant, providing that any costs recovered from the applicant would be paid to the first respondent in reduction of fees paid on behalf of the second and third respondents, and that any damages which might be awarded against the applicant would be paid to the first respondent to help offset the payment of legal fees by the first respondent.
The third respondent admitted that the amount of costs billed to him by his solicitors in relation to his defamation proceedings was in excess of $10,000 with unbilled fees at almost $5,000 as at 14 May 2024.
The third respondent claimed in an affidavit, sworn on 18 September 2024, that the decision of the first respondent to fund his defamation proceeding was made without any involvement from him. That is despite saying earlier in the same affidavit that he approached the first respondent to assist him in his proposed defamation proceedings. He also said that he did not wish to oppose an order that the decision to fund his defamation proceeding be quashed. However, he wished to withdraw his notice of submission to argue against the making of orders that he repay the first respondent monies received from it and paid to his solicitors in respect of his defamation proceeding. He also initially opposed any order seeking to stay and/or have dismissed his defamation proceeding in the event that no such repayment was made. He also opposed ancillary orders sought by the applicant regarding costs and the consequences of his failure to pay any costs order.
Also, in that same affidavit, the third respondent said, "My defamation action against [the applicant] had nothing to do with any dealings between me and [the applicant] in my private life and I felt that [the first respondent] had an obligation to protect me in the matter which I carried out my work with Council."
A similar affidavit was sworn by the second respondent on 18 September 2024. In that affidavit, the second respondent said she complained to the first respondent about the applicant's "publications" regarding her and told the first respondent that she wished to commence a defamation proceeding against the applicant.
The second respondent then said that she asked the first respondent to fund that proceeding, given that the applicant's attacks on her were solely related to her position as Mayor, and that she believed the first respondent should be protecting her in her role as Mayor. Further in that affidavit, she stated that her solicitors had billed her in excess of $15,500 in fees, and just over $3,000 in unbilled fees were owing as at 14 May 2024.
Like the third respondent, the second respondent claimed that she did not contemplate that an order would be sought by the applicant to make her repay the legal fees she had incurred. She said that the defamation action had nothing to do with her private life and that she was concerned that the first respondent was obliged to support her in the manner in which she "carried out her office" as Mayor.
On 28 October 2024, the second and third respondents were granted leave by Associate Justice Daly to withdraw their notice of submission to enable them to oppose some of the relief sought by the applicant. On 4 November 2024, the second and third respondents filed affidavits sworn on 30 October 2024 in which they said that the first respondent had ceased to fund their defamation actions as at 19 August 2024.
Hearing of the matter on 7 November 2024
On 7 November 2024, the Court heard submissions from the applicant in support of the making of the orders contained in proposed draft orders. The Court also had before it affidavit evidence of the second and third respondents in opposition to the making of some of the orders.
On 7 November 2024, after hearing submissions on behalf of the active parties, the Court announced the orders that it would make in relation to the matter and indicated that it would give reasons as soon as reasonably practicable thereafter. Those orders appear at the end of these reasons for judgment.
Proposed final orders 1 to 3
These orders were not opposed. However, the Court must be satisfied that it is appropriate that they are made and that it has power to do so. For the following reasons, I agree that it is appropriate to make those orders and also that the Court has power to make them.
The resolution at the October 2020 meeting of the first respondent, relevant to this proceeding, was made in the following terms:
"(A) That:
(i)Council support the Mayor and General Manger in serving a writ to Andrew McCullagh, seeking damages by both Council and Mary Knowles and Mr Des Jennings for defamation; and
(ii)Agreements to be drawn up prior to the commencement of proceedings between: the Northern Midlands Council and Mr Jennings and the Northern Midlands Council and Mayor Mary Knowles providing for the reimbursement of costs incurred by Council for any award of compensatory damages received.
(B) In relation to this matter:
(i)Considered whether any discussion, decision, report or document is kept confidential or released to the public; and
(ii)Determine not to release the decision, report and/or document to the public."
The above resolution was made after the first respondent went into a closed session. The first respondent resolved to record that meeting but to destroy the recording after the preparation of the Minutes.
The first respondent then resolved to require the second and third respondents to acknowledge to the effect that they would repay the legal costs incurred by the first respondent, in full, from any damages or costs received by them in the litigation. The acknowledgement included acceptance of the fact that the second and third respondents had requested that the first respondent agree to pay their legal costs and that it had agreed to do so.
In November 2020, the defamation proceedings were commenced in this Court. Two separate writs have been issued with the second and third respondents as plaintiffs, and the applicant as sole defendant in both matters.
In early 2023, the second and third respondents entered into costs agreements with their solicitors. The first respondent was not a party to those agreements.
As a consequence of the above, it can be seen that the respondent resolved to use public funds under its control, as a local government body, to support litigation against the applicant, who himself has now become a member of the first respondent. There is no authority in the Local Government Act 1993, or elsewhere, for a local government council to use its funds to support private litigation of councillors or council staff.
Although the defamation actions arose from what the second and third respondents perceive to be a conflict in relation to council matters between them and the applicant, the issuing of a writ seeking damages for defamation is intrinsically a matter personal to the person suing.
Section 20 of the Local Government Act sets out the functions and powers of local councils. It provides as follows:
"(1) In addition to any functions of a council in this or any other Act, council has the following functions:
(a)to provide for the health, safety and welfare of the community;
(b)to represent and promote the interests of the community;
(c)to provide for the peace, order and good government of the municipal area."
Nothing in s 20 authorises local government councils to fund private litigation by councillors or council employees, even if that litigation has its genesis in the role of the person as a councillor or council employee. No other section of the Local Government Act, or any other Act, provides a local government council with that power. Councils are required to act in the public interest. They have no business being litigation funders for councillors or employees, especially in circumstances where the defendant to the defamation litigation becomes a member of the first respondent during the currency of that litigation. It is somewhat analogous to the prohibition in registered industrial organisations, under federal industrial law, from using the funds and resources of the organisation to promote the candidature of one set of candidates in a union election to the detriment of another set of candidates. In such a case, that expenditure is unauthorised. See Scott v Jess (1984) 3 FCR 263 at 269-272 per Evatt and Northrop JJ, and at 287-289 per Gray J. The same approach applies to this case.
The funds of local government councils are for the public purpose of the benefit of ratepayers, and not for the personal benefit of councillors or employees. Grants and benefits may be paid under s 77 of the Local Government Act, but those grants and benefits do not include grants and benefits to councillors or employees of council. The type of grants comprehended by s 77 may be discerned from s 77(1A) where mention is made of in-kind assistance, reduced fees, rates and charges and the like.
The resolution of the first respondent to fund the legal costs of the second and third respondents in defamation proceedings against the applicant, is void and of no effect. It was an unlawful resolution made without any legal authority. It is akin to the Executive withdrawing funds from consolidated revenue, without legal authority; see Pape v Commission of Taxation [2009] HCA 23 at [58]-[59], (2009) 238 CLR 1.
At [58] in Pape, French CJ said:
"The principle that the Executive draws money from Consolidated Revenue only upon statutory authority, is central to the idea of responsible government."
At [59] his Honour went on to refer to the well known opinion of the Privy Council in Auckland Harbour Board v The King [1924] AC318, whereby Viscount Haldane said:
"For it has been a principle of the British constitution now for more than two centuries that no money can be taken out of Consolidated Revenue into which the revenues of the State have been paid, excepting under a distinct authorisation from parliament itself. The days are long gone by in which the Crown, or its servants, apart from parliament could give such an authorisation or ratifying an improper payment. Any payment out of Consolidated Revenue made without Parliamentary authority is simply illegal and ultra vires, and may be recovered by the Government if it can, as here, be traced."
Accordingly, it is appropriate to make an order largely in the terms of reposed final Order 1. Rule 627(1)(b) of the Supreme Court Rules 2000 gives the power to make an order of that kind. The order made is as follows:
"It is declared that the resolution of the Northern Midlands Council made on 26 October 2020, to fund or agree to pay for the legal costs and disbursements of the second and third respondents in relation to defamation proceedings commenced by each of them against the applicant, being Supreme Court of Tasmania proceedings
2647 of 2020 and 2646 of 2020, was invalid, unlawful and of no effect."
It follows that it was appropriate to also make the related order suggested in draft final order 2 that the resolution is quashed. The Court is empowered to do so under r 627(1)(a) and r 623(1) of the Supreme Court Rules. The second order made by the Court was as follows: "That the resolution is quashed."
The Court also made Order 3, which is ancillary to Orders 1 and 2 and facilitates the measurement of the unauthorised payments. That order was as follows:
"On or before 21 November 2024, the first respondent cause to be made, filed and served by its Corporate Services Manager an affidavit deposing to the sum paid by the first respondent for legal costs and disbursements of the proceedings referred to in Order 1, initiated by the second and third respondents."
Proposed final Orders 4 and 5
These proposed orders sought that the second and third respondents respectively pay to the first respondent an amount of legal costs and disbursements equal to that paid by the first respondent in respect of the defamation proceedings as incurred by them and measured in Order 3.
The second and third respondents opposed those orders. They alleged that the impugned resolution of the first respondent was made without any input from them after they had left the meeting at which the resolution was carried. However, affidavits filed on behalf of the second and third respondents, as referred to earlier in these reasons, show that the genesis of the resolution was a request by those respondents to have the first respondent assist them to launch defamation proceedings against the applicant. Otherwise, as they have admitted in cross-examination before Associate Justice Daly on 28 October 2024, they would not have been able to afford to bring the proceedings.
The third respondent gave affidavit evidence that he approached the first respondent, seeking assistance to initiate the defamation proceeding against the applicant. The second applicant gave affidavit evidence that she told the first respondent that she wished to commence the defamation proceedings against the applicant and that she asked the first respondent to fund the proceeding. The second and third respondents were required by the first respondent to make an acknowledgement to the effect that they would repay the legal costs incurred by the first respondent, from any damages or costs received by them from the applicant. In that requested acknowledgement, each applicant was required to make a declaration. The second and third respondents made declarations, which included the following sentence:
"I have requested that Northern Midlands Council…agree to pay the legal costs, which the Northern Midlands Council has agreed to do."
The second and third respondents did not participate in the meeting that led to the impugned resolution being made. However, they encouraged the first respondent to take that step and approached it, requesting that it do so. Also, they have acknowledged that they did make a request in those terms. They approached the respondent about funding their litigation. Absent that approach, the impugned resolution would, in all likelihood, not have been debated, let alone made. The second and third respondents achieved, by the resolution, what they wished for by raising the issue with the first respondent.
Payment being ordered from the second and third respondents to the first respondent, would restore it financially to the position it was in prior to the making of the payments. The situation is analogous to the observation made by Viscount Haldane in Auckland Harbour Board that funds spent without authorisation, may be recovered if they can be traced. There is no issue of tracing unlawful payments in this case. That, indeed, is the effect of proposed final Orders 4 and 5. The second and third respondents encouraged unlawful behaviour by the first respondent. They benefited from that unlawful behaviour by launching litigation that would not have been initiated had they been required to pay for it themselves. Having urged the first respondent to engage in unlawful behaviour, it is only fair and just that they rectify the unlawful situation that resulted from their request that the first respondent illegally expend funds for their benefit. The second respondent, as a Mayor of a council, and the third respondent, as an employee of high standing in a local government authority, should have known better. They should have understood that payment out of council funds for private purposes of councillors and council staff, is illegal and arguably corrupt conduct.
The Court is empowered to make orders in the nature of proposed Orders 4 and 5 under r 627(1)(a), r 623(1) and r 806 of the Supreme Court Rules, and also under the inherent power of the Court to make orders ancillary to Orders 1 and 2. Accordingly, the Court did order as follows, Order 4:
"That on or before 27 May 2025, the second respondent pay to the first respondent the sum of legal costs and disbursements paid by the first respondent in respect of Supreme Court proceeding 2647 of 2020, as set out in the affidavit referred to in Order 3."
In relation to the third respondent, Order 5 was made as follows:
"That on or before 31 January 2025, the third respondent pay to the first respondent the sum of legal costs and disbursements paid by the first respondent in respect of Supreme Court proceeding 2646 of 2020, as set out in the affidavit referred to in
Order 3."
Proposed Final Order 6
The applicant sought proposed Order 6 to give effect to Orders 4 and 5, and which was designed to assist in their enforcement. No good reason has been advanced by the second and third respondents not to make an order which imposes an obligation on the first respondent to which no objection is taken by the first respondent.
That the Court ordered, as Order 6:
"That the first respondent cause to be made, filed and served an affidavit by its Corporate Services Manager, deposing to:
(a)the amount, if any, paid by the second respondent in accordance with Order 4 by 12 May 2025; and
(b)the amount, if any, paid by the third respondent in accordance with
Order 5 by 31 January 2025."
Proposed Final Order 7
The applicant sought a costs order as proposed Order 7 in respect of this proceeding as against the second and third respondents.
As the second and third respondents initiated the idea that the first respondent fund their defamation proceedings, and having acknowledged to the first respondent that they required it to fund those proceedings, it is appropriate that they pay the applicant's costs of this proceeding. But for their inappropriate requests to the first respondent to act illegally, the illegal payments would never have been made.
As not unsophisticated people engaged in local government, each of them should have been aware that the expenditure that they were requesting was made not to assist the ratepayers of the local government area, but to assist them personally in taking private legal action against the applicant. The expenditure was always for a private rather than a public purpose, despite the fact that the second and third respondents sought to relate it to what was occurring in council matters. However, the fact remains that taking defamation action against another citizen is a private matter. It is not action taken in the interests of the council, and it is clearly not authorised by the council. So much should have been clear to the second and third respondents had they given the matter any serious thought. After the applicant became a fellow councillor, the second respondent, at least, should have realised that she was using the funds of the council for private purposes against a fellow councillor.
This is where the analogy to Scott v Jess (supra) is relevant, given the continuation of the proceedings after the applicant became a member of the first respondent as a councillor.
Accordingly, the Court made an order in relation to costs as follows:
"That each of the second and third respondents pay the appellant's costs of and incidental to these proceedings, including counsels' fees to be taxed in default of agreement."
Proposed Final Orders 8 and 9
Originally the applicant proposed a reasonably short timetable for the payment of money by the second and third respondents to the first respondent in respect of the unlawful payments by the first respondent regarding the second and third respondents' defamation proceedings. However, given that the Court has permitted the second respondent to make payment by 12 May 2025, and the third respondent to make payment by 31 January 2025, it decided to make orders in the following form to recognise that the later payments than originally sought by the applicant had been ordered, and also to prevent any further action being taken in the defamation proceedings, which would not have been commenced but for the unlawful action of the first respondent. Accordingly, the Court made Orders 8 and 9 as follows:
Order 8 was:
"That if the second respondent fails to comply with Order 4 or Order 7, the applicant has liberty to apply to have the Supreme Court of Tasmania proceeding 2647 of 2020 dismissed."
Order 9 was made as follows:
"That if the third respondent fails to comply with Order 5 or Order 7, the applicant has liberty to apply to have the Supreme Court of Tasmania proceeding 2646 of 2020 dismissed."
Order 10
The Court also made an additional order to give effect to its intention that no further action be taken in litigation commenced as a result of the unlawful act of the first respondent, taken at the urging of the second and third respondents. Accordingly, the Court ordered, as Order 10:
"That each of the proceedings 2646 of 2020 and 2647 of 2020 is immediately stayed."
Order 11
The Court will also order, for completeness, that the parties referred to at the hearing as respondents, be formally named as such given the withdrawal of the notice of submission by the second and third respondents. For the sake of comity, it was expeditious to refer to counsel at the hearing as counsel for the second and third respondents. For this reason, Order 11 will be added as follows:
"That Northern Midlands Council be formally named as the first respondent in this proceeding; and that Mary Carmel Knowles be formally named as the second respondent in this proceeding; and that Desmond Perce David Jennings be formally named as the third respondent in this proceeding." Disposition
For completeness, the Court sets out below in one place, the actual orders made by it on 7 November 2024.
The orders are as follows:
1THAT it is declared that the resolution of the first respondent, made on 26 October 2020 to fund or agree to pay for the legal costs and disbursements of the second and third respondents in relation to defamation proceedings, commenced by each of them against the applicant, being Supreme Court proceedings 2647 of 2020 and 2646 of 2020, are invalid and of no effect.
2THAT the resolution is quashed.
3THAT on or before 21 November 2024, the first respondent cause to be made, filed and served by its Corporate Services Manager, an affidavit deposing to the sum paid by the first respondent for legal costs and disbursements of the proceedings referred to in Order 1 initiated by the second and third respondents.
4THAT on or before 7 May 2025, the second respondent pay to the first respondent the sum of legal costs and disbursements paid by the first respondent in respect of Supreme Court proceeding 2647 of 2020, as set out in the affidavit referred to in Order 3.
5THAT on or before 31 January 2025, the third respondent pay to the first respondent the sum of legal costs and disbursements paid by the first respondent in respect of Supreme Court proceeding 2646 of 2020, as set out in the affidavit referred to in Order 3.
6THAT the first respondent cause to be made, filed and served an affidavit by its Corporate Services Manager deposing to:
(a) the amount, if any, paid by the second respondent in accordance with Order 4 by 12 May 2025; and
(b) the amount, if any, paid by the third respondent in accordance with Order 5, by 31 January 2025.
7THAT each of the second and third respondents pay the applicant's costs of and incidental to these proceedings, including counsels' fees, to be taxed in default of agreement.
8THAT if the second respondent fails to comply with Order 4 or Order 7, the applicant has liberty to apply to have the Supreme Court of Tasmania proceeding 2647 of 2020 dismissed.
9THAT if the third respondent fails to comply with Order 5 or Order 7, the applicant has liberty to apply to have the Supreme Court proceeding 2646 of 2020 dismissed.
10THAT each of the proceedings 2646 of 2020 and 2647 of 2020 is immediately stayed.
11THAT Northern Midlands Council be formally named as the first respondent in this proceeding; and that Mary Carmel Knowles be formally named as the second respondent in this proceeding; and that Desmond Perce David Jennings be formally named as the third respondent in this proceeding.
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