Morgan and Administrator of the Munjuwa Health, Housing and Aboriginal Corporation

[2006] AATA 203

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2006] AATA 203

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No  A2004/266

GENERAL ADMINISTRATIVE DIVISION		)
Re		KEITH MORGAN

Applicant

And ADMINISTRATOR OF THE MUNJUWA HEALTH, HOUSING AND ABORIGINAL CORPORATION

Respondent

DECISION

Tribunal  Mr J.W. Constance, Senior Member

Date 3 March 2006

Place Canberra

Decision The decision of the Respondent made on 13 May 2003 to cancel the contract of employment between the Applicant and the Munjuwa Health, Housing & Community Aboriginal Corporation is affirmed.

..............................................

J.W. Constance, Senior Member

CATCHWORDS

ABORIGINAL CORPORATIONS – Cancellation of contract of employment – Appointment of statutory administrator – Powers of administrator to cancel or vary contract – Whether “correct and preferable decision” made

Aboriginal Councils and Associations Act 1976(Cth) s 76.

Drake v Minister for Immigration and Ethnic Affairs (1979) 24 ALR  577

Re De Brett Investments Pty Ltd and Australian Fisheries Management Authority (2004) 82 ALD 163

Freeman v Secretary, Department of Social Security (1988) 19 FCR 34

Surinakova v Minister for  Immigration, Local Government  andEthnic Affairs (1991) 33 FCR 87

REASONS FOR DECISION

3 March 2006  Mr J.W. Constance, Senior Member

INTRODUCTION

1.      When Mr Morgan entered an employment contract with the Munjuwa Health, Housing and Community Aboriginal Corporation in January 2003 it was said to be for a term of 5 years. The contract ended much earlier than expected when, in May 2003, it was cancelled by Mr Sheville, acting in his role of Administrator of the Corporation. Mr Morgan has sought a review of this decision to cancel his contract.

2.      For the reasons which follow I have decided that the decision of the Administrator should be affirmed.

FACTS

3.      I am satisfied as to the following facts on the balance of probabilities.

4.      Mr Morgan has many years of experience working in the field of Aboriginal health, particularly in South-Eastern New South Wales. He holds a Diploma in Aboriginal Health and Community Development and a Masters Degree in Indigenous Health. He commenced employment with the Corporation as a Health Worker in 1999 or 2000. Subsequently he held the positions of Health Coordinator and Coordinator. Until 12 May 2003 his employment was continued under a number of written contracts. At various stages Mr Morgan also acted as a committee member and Chairman of the Board of the Corporation.

5.      On 23 January 2003 Mr Morgan entered the last of his employment contracts with the Corporation. The contract stated the employment period was from 23 January 2003 until 23 January 2008.[1]

[1] Ex. R10, document S5.

6.      The contract provided that if funding for Mr Morgan’s position was withdrawn by  “NSW Health or any other funding body and Self-Generating funds are no longer apparent” the contract could be cancelled.[2]  Clause 7(4) provided that Mr Morgan was required to give 2 weeks notice of his intention to resign from the position. Clause 7 also provided for termination of the contract by the Corporation giving 2 weeks notice on breach of the contract by Mr Morgan.

[2] Cl. 7(2).

7.      The preceding findings are based on the documents referred to and on the evidence of Mr Morgan. The findings set out in paragraphs 8 to 20 inclusive are based on the documents referred to and on the evidence of Mr Sheville.  

8.      Mr Sheville, as the Administrator of the Corporation, is the respondent in these proceedings. He was appointed on 23 March by the Registrar of Aboriginal Corporations under the Aboriginal Councils and Associations Act 1976 (Cth).[3] On appointment Mr Sheville became responsible for the conduct of the affairs of the Corporation and assumed the functions and duties of the Public Officer.[4]

[3] Ex. R10, document S11.

[4] Aboriginal Councils and Associations Act 1976 (Cth) s 75.

9.      At the time of Mr Sheville’s appointment the Corporation had 4 employees, including Mr Morgan. The other employees held the positions of Health and Aged Care Worker, Receptionist and Bookkeeper.

10.     Upon appointment, Mr Sheville set about ascertaining the financial status of the Corporation. By the beginning of April 2003 he had established that the Corporation had significant debts including council rates, PAYG and GST tax liabilities and other creditors. It had current liabilities which exceeded its current assets by approximately $180,000.[5] The current assets were largely made up of funds held in various bank accounts.

[5] Ex. R4, para. 19.

11.     On 8 April 2003 Mr Sheville suspended Mr Morgan’s contract.[6] The effect was that Mr Morgan was not required to perform his duties and was not paid wages. Clearly this constituted a variation of Mr Morgan’s contract and was apparently done in exercise of Mr Sheville’s powers as Administrator under section 76 of the Act.

[6] Ex. R10, document T6.

12.     A Balance Sheet and Profit and Loss Statement prepared by Mr Sheville indicate that as at 30 April 2003 the Corporation had Total Current Assets of $24,723.38 and Total Current Liabilities of $275,968.52.[7] Total Non-Current Assets (largely residential property) were approximately $1.605 million. The Profit and Loss Statement disclosed a Net Loss of $140,238.21.

[7] Ex. R10, document S43.

13.     It appears from the Profit & Loss Statement that the Health Worker Grants received totalled $58,369.36 and that total expenditure on Health Workers (mainly consisting of Mr Morgan’s salary, telephone, allowances and superannuation) totalled $65,238.98. Some of the funds received for the provision of health services had been spent for purposes for which they were not intended.[8]

[8] Ex. R4, para. 22.

14.     Mr Sheville’s assessment of the Corporation’s financial position at this time was that:

·the Corporation was in breach of its funding agreements with those agencies providing funding for Mr Morgan’s contract, namely, the NSW Department of Health and the NSW Department of Ageing, Disabilities and Homecare; [9]

·on a working capital basis the Corporation was insolvent and at the time of Mr Sheville’s appointment was trading while insolvent;[10] and

·it was unlikely that further funding would be forthcoming from the various Government agencies with which the Corporation dealt.[11]

[9] Transcript  p. 186.

[10] Transcript p. 208.

[11] Ex.  R4, para. 23.

15.     I accept the evidence of Mr Sheville as to the financial position of the Corporation. He gave his evidence in a straightforward manner and he is an experienced accountant and administrator. Whilst Mr Sheville’s opinions as to the appropriate course of action were challenged by counsel for Mr Morgan, his evidence as to the financial situation was not. Further, Mr Morgan properly admitted that he was unaware of the full extent of the Corporation’s financial difficulties and that his requests for additional information from the Corporation’s bookkeeper were not met.

16.     By letter of 6 May 2003[12] the NSW Department of Health refused Mr Sheville’s request for $40,000 to assist with payment of creditors.

[12] Ex. R10, document S36.

17.     On 7 May 2003 Mr Sheville received written advice from his own firm that on termination of his contract Mr Morgan would become an unsecured creditor and would “need to lodge a proof of debt for payment to the 2008 date.” [13]

[13] Ex. R10, document T8.

18.     The Minutes of a Meeting of the Advisory Committee (set up to advise Mr Sheville) of 1 May 2003[14] record the following:

“Agreed: We would seek legal advice the best way to terminate Keith’s [Mr Morgan’s] employment given that there are no funds to pay his employment. Preferred option is redundancy.

If Health and HACC [Home and Community Care Funding] to continue we want to readvertise positions.”

[14] Ex. R10, document S32.

Mr Sheville was present at this meeting.

19.     On 12 May 2003 Mr Sheville terminated Mr Morgan’s contract of employment on the ground that the Corporation had no funds available to reinstate him.[15] It is this decision which Mr Morgan seeks to have reviewed in these proceedings.

[15] Ex.R10, document. T2.

20.     In his oral evidence Mr Sheville said that he and members of his staff had a number of discussions with Mr Morgan in the period between his appointment as Administrator and the cancellation of Mr Morgan’s contract. These discussions were about the impact of the potential cancellation on health services and on Mr Morgan’s financial situation.[16] Mr Morgan agreed that these conversations took place[17] and I accept Mr Sheville’s evidence in this regard.

[16] Transcript p. 184.

[17] Transcript pp.137-8.

STATUTORY BACKGROUND

21.     The provision of the Act under which Mr Sheville terminated Mr Morgan’s contract provides:

76  Administrator may cancel or vary contracts of employment

(1)The Administrator may cancel or vary (either unconditionally or subject to such conditions as the Administrator thinks just) any contract or agreement between the corporation and any other person that relates to employment of any person by the corporation.

(2)Before cancelling or varying a contract, the Administrator must:

(a)give such persons as the Administrator thinks appropriate (having regard to the principles of natural justice) a reasonable opportunity to make representations to the Administrator either orally or in writing; and

(b)give due regard to any representations so made.

THE ISSUES

22.     The following issues arise for determination.

1)What is the correct and preferable decision on the basis of the facts and statutory provision set out above?

2)Has subsection 76(2) of the Act been complied with?

MR MORGAN’S ARGUMENTS

23.     Mr Morgan argued on a number of grounds that the correct and preferable decision as at 12 May 2003 was that the contract not be terminated. These grounds can be summarised as follows:

1)prior to the termination Mr Sheville had received advice that Mr Morgan would have a substantial claim for damages on termination of the contract and as a result the Corporation would incur a large debt;

2)the termination of the contract was for reasons other than the financial state of the Corporation;

3)the Corporation had $23,000 cash available as at 12 May 2003 and could have used these funds to pay Mr Morgan’s ongoing wages, at least until the end of the financial year;

4)funds from the sale of one of the Corporation’s properties could have been used to pay creditors thus alleviating its financial problems;

5)there was sufficient funding from grants to continue to pay Mr Morgan’s wages;

6)that any concern as to insolvent trading was ill-founded as the liability arising from the employment contract was established “on and from 23 January 2003”; [18] and

7)taking all of the above into account the correct and preferable decision was not to cancel the contract but to wait at least until 1 July 2003 (a period of only 7 weeks) to see if further funding became available.

[18] Applicant’s Outline of Submissions.

24.     I cannot accept any of the above as a reason to decide that the correct and preferable decision on 12 May 2003 was that the contract not be cancelled. The advice referred to was an advice prepared by staff within Mr Sheville’s own firm[19] and is not binding on the Tribunal. Whilst I take into account the existence of such advice I must make a decision based on my own judgement and not on that of others. I do not accept that the advice is correct. It is yet to be determined in another forum whether it is or is not.

[19] Ex. R10, document T8.

25.     The evidence before me does not establish that the cancellation of Mr Morgan’s contract has caused the Corporation to incur a large debt. I have been told by Mr Morgan that he has a claim before a NSW civil court for damages for breach of contract. I am of the view that the only relevant consideration in this regard is that the cancellation of the contract may put the Corporation at some risk of a successful claim by Mr Morgan. In view of the provisions of section 76 which provide the Administrator with the power to cancel a contract, I regard the risk as minimal.

26.     Mr Morgan relied on the Minutes of the Meeting of 1 May 2003 as evidence of a wish by Mr Sheville to advertise Mr Morgan’s position even if further funding became available. This argument misconceives the role of the Tribunal on review. The Tribunal stands in the shoes of the original decision maker. This review by the Tribunal is not an appeal from Mr Sheville’s decision in the sense that the Tribunal needs to be convinced that there was an error in Mr Sheville’s reasoning. It is irrelevant to the Tribunal’s decision whether or not Mr Sheville took into account factors other than the financial position of the Corporation.

27.     Counsel for Mr Sheville pointed to evidence which he says shows that Mr Morgan failed to properly carry out his duties as a Councillor and Chairman of the Corporation. I make no findings in this regard as I am of the view that Mr Morgan’s performance in these roles is irrelevant to the decision as to whether his contract of employment should be cancelled. There is no evidence to suggest that Mr Morgan failed to properly carry out his duties under his employment contract.

28.     I do not agree that the availability of $23,000 cash in the Corporation’s bank accounts on 13 May 2003 is a factor to be taken into account. These funds must be considered in the light of the total current liabilities of $275,000 and the fact that the grant funds available for health care had already been fully expended. In my view it would not be proper to use funds which had been received for other purposes to pay Mr Morgan’s wages at a time when the Corporation had a very substantial shortfall in the funds immediately available to pay its current liabilities.

29.     I also take the view that the likely availability at some future time of funds from the sale of one or more of the Corporation’s properties is not a valid reason to decide that Mr Morgan’s contract should not be cancelled. On 13 May 2003 it was not known when these funds would become available and it was not clear (and still is not clear), that they could properly be used to pay Mr Morgan. In fact the evidence of Mr Sheville suggests that these funds would not be available for this purpose.

30.     I agree with counsel for Mr Morgan that part of the $23,000 cash in the bank may have included the last instalment of the health grant. However, I also take into account that the health grants for the whole financial year had already been expended and that the Health account needed to reimburse other accounts for funds taken to fund Mr Morgan’s activities as Coordinator.

31.     The continuation of Mr Morgan’s employment on a paid basis by using funds from any available source does raise concerns as to possible insolvent trading. Even though the initial liability arose from the contract of 23 January 2003, a decision to incur ongoing wages and associated costs gives rise to a new liability from week to week which may in turn give rise to allegations of insolvent trading.

WHAT IS THE CORRECT AND PREFERABLE DECISION?

32.“The question for the determination of the Tribunal is not whether the decision which the decision-maker made was the correct of preferable one on the material before him. The question for the determination of the Tribunal is whether the decision was the correct or preferable one on the material before the Tribunal.”

---- Drake v Minister for Immigration and Ethnic Affairs (1979) 24 ALR 577 at 589.

33.     In discussing this role the Tribunal has said:

“The tribunal may conclude that there is only one decision that is correct on the facts it has found on the evidence and according to the law that it must apply. It then makes its decision accordingly. In other circumstances, it may conclude that more than one decision may correctly be made. If that is so, the role of the tribunal is to determine which decision is the preferable decision and so the correct and preferable decision.”

--- Re De Brett Investments Pty Ltd and Australian Fisheries Management Authority (2004) 82 ALD 163 at 194.

34. On the basis of the power in section 76 of the Act and on the facts of this matter I cannot conclude that there is only one decision which is correct. Rather, on the facts before me, either a decision to cancel the contract or alternatively a decision not to do so could be correctly made. It is therefore necessary to determine the preferable decision in all the circumstances.

35.     The next matter for the Tribunal to determine is the date at which a decision should be made. If a continuing obligation or entitlement is the subject of a decision under review, it is clear that the Tribunal will consider the facts as at the date it makes a decision. However this is not such an application. Rather, it is an application for a review of a decision to cancel an entitlement, in which case the Tribunal looks at the facts at the time the decision to cancel was made: Freeman v Secretary, Department of Social Security (1988) 19 FCR 34. In the present application, if the decision was made on the facts as they exist now, the Corporation’s present financial situation would have been affected by the very decision under review.

36.     Although the facts to be considered on this application are those that existed at the time Mr Morgan’s contract was cancelled, subsequent events may be considered to show that the probabilities of various outcomes were proper matters to take into account in making the decision: Surinakova v Minister for  Immigration, Local Government  and Ethnic Affairs (1991) 33 FCR 87.

37.     There is some merit in the argument put by Mr Morgan that as at 12 May 2003 the correct and preferable decision was that his contract not be terminated on the basis that it was better to adopt a “wait-and-see” attitude, at least until 1 July 2003. At that time it would be known whether further funding was available. I take into account that if Mr Morgan continued to be suspended during this interim period only minimal expense would be incurred.

38.     Notwithstanding the factors referred to in the preceding paragraph, I am of the view that other considerations lead to the conclusion that the correct and preferable decision is that the contract be cancelled and, that as a result, the decision of Mr Sheville to this effect should be affirmed. The matters I have taken into account are set out in the following 4 paragraphs.

39.     I accept Mr Sheville’s evidence that on the basis of the situation as it existed on 13 May 2003 it was unlikely that the Corporation would receive further funding from any of the sources available. Therefore, this would have prevented it from meeting its obligations to Mr Morgan under the contract from 1 July 2003 onwards. This finding is supported by the fact that no further funding was available by the beginning of July 2003.

40.     I also take into account that the Corporation’s current liabilities far exceeded its current assets and that consequently it was unable to meet its debts in full as and when they fell due. It would not be responsible business management to continue to incur costs such as superannuation whilst the Corporation remained in the financial situation in which it was at the time.

41. I have had regard to the terms of Mr Morgan’s contract and the provisions allowing for termination. Whilst the contract is expressed to be for a period of 5 years it was clearly within the contemplation of the parties that it may be ended before that period expired. In light of the power given to the Administrator by section 76 of the Act, the provisions of the contract itself have little weight when considered in the context of the Corporation’s poor financial situation.

42.     Whilst Mr Morgan could have remained “suspended” until it was known whether further funding was to be received, it is preferable that both he and the Corporation have certainty in their relationship once the extent of the Corporation’s financial difficulties became known.  Notwithstanding, it was open to the Corporation to negotiate a new contract with Mr Morgan once it knew it was able to fund his position.

HAS SUBSECTION 76(2) OF THE ACT BEEN COMPLIED WITH?

43.     I am satisfied on the basis of the evidence of Mr Morgan and Mr Sheville as to the discussions between them and between Mr Morgan and members of Mr Sheville’s staff, that Mr Morgan was given a reasonable opportunity to make representations concerning the proposed cancellation of his contract as required by subsection 76(2) of the Act. I have given due regard to those representations in the preceding paragraphs of these Reasons.

DECISION

44.     The decision of the Respondent made on 13 May 2003 to cancel the contract of employment between the Applicant and the Munjuwa Health, Housing & Community Aboriginal Corporation is affirmed.

I certify that the 44 preceding paragraphs are a true copy of the reasons for the decision herein of Mr J.W. Constance, Senior Member.

Signed:         .....................................................................................
  Joe Meagher, Associate

Date/s of Hearing  29 & 30 November 2005, 10 & 16 February 2006. 
Date of Decision  3 March 2006
Counsel for the Applicant       David Richards 
Solicitor for the Applicant       Slater and Gordon 
Counsel for the Respondent   Chris Erskine 
Solicitor for the Respondent   Clayton Utz