Registrar of Aboriginal Corporations v Murnkurni Women's Aboriginal Corporation

[1995] FCA 538

CATCHWORDS

PRACTICE AND PROCEDURE - judgments and orders - setting aside - order made in absence of party - order winding up Aboriginal Association - whether arguable Association solvent - whether other matters arguable - whether order should be set aside.

ABORIGINES - Aboriginal Association - winding up - order made in absence of representation of body - whether order should be set aside.

Federal Court Rules O35 r7(2)(a)
Aboriginal and Torres Strait Islander Commission Act 1989, s20
The Aboriginal Councils and Associations Act 1976, s62A, s56

Simpson v Alexander (1926) 26 SR (NSW) 296
Rosing v Ben Shemesh [1960] VR 173
Evans v Bartlam [1937] AC 473
Watson v Anderson (1976) 13 SASR 329
Fairclough v Strathmont Haulage Pty Ltd (1981) 28 SASR 456
Adams v Kennick Trading (International) Ltd (1986) 4 NSWLR 503
Davies v Pagett (1986) 70 ALR 793
George Ward Steel Pty Ltd v Kizkot Pty Ltd (1989) 15 ACLR 464
Bank of Australasia v Hall (1907) 4 CLR 1514
Sandell v Porter (1966) 115 CLR 666

THE REGISTRAR OF ABORIGINAL CORPORATIONS v MURNKURNI WOMEN'S ABORIGINAL CORPORATION
NO WAG 3035 OF 1994

MURNKURNI WOMEN'S ABORIGINAL CORPORATION (IN LIQ) v THE REGISTRAR OF ABORIGINAL CORPORATIONS
NO WAG 23 OF 1995

R D NICHOLSON J
PERTH
28 JULY 1995

IN THE FEDERAL COURT OF AUSTRALIA   )

WESTERN AUSTRALIA DISTRICT REGISTRY )

GENERAL DIVISION                   )    NO WAG 3035 of 1994

B E T W E E N:              THE REGISTRAR OF ABORIGINAL CORPORATIONS

Applicant

and

MURNKURNI WOMEN'S ABORIGINAL CORPORATION

Respondent

NO WAG 23 of 1995

B E T W E E N:              MURNKURNI WOMEN'S ABORIGINAL CORPORATION (IN LIQ)

Appellant

and

THE REGISTRAR OF ABORIGINAL CORPORATIONS

Respondent

MINUTE OF ORDER

JUDGE MAKING ORDER:     R D NICHOLSON J

DATE OF ORDER:         28 JULY 1995

WHERE MADE:            PERTH

THE COURT ORDERS THAT:

NO WAG 3035 OF 1994:

1. Order 1 made herein by R D Nicholson J on 14 February 1995 be set aside.

1. Both parties and Mr Robson have liberty to apply in respect of paragraph 2 of the order made herein by R D Nicholson J on 14 February 1995.

1. The applicant file written submissions on the issue of the costs of the notice of motion herein dated 29 March 1995 and order 3 made herein by R D Nicholson J on 14 February 1995 within 3 days hereof.

1. The respondent file written submissions in respect of the costs orders referred to in paragraph 3 hereof within 2 days thereafter.

1. The notice of motion herein dated 29 March 1995 be otherwise dismissed.

NO WAG 23 OF 1995:

1. The notice of motion herein dated 29 March 1995 be dismissed.

1. The appellant have leave to discontinue its appeal.

1. The respondents file written submissions in respect of the cost consequences of paragraphs 1 and 2 hereof within 3 days.

1. The appellant file written submissions in response to the submissions of the respondent within 2 days thereafter.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA   )

WESTERN AUSTRALIA DISTRICT REGISTRY )

GENERAL DIVISION                   )    NO WAG 3035 of 1994

B E T W E E N:              THE REGISTRAR OF ABORIGINAL CORPORATIONS

Applicant

and

MURNKURNI WOMEN'S ABORIGINAL CORPORATION

Respondent

NO WAG 23 of 1995

B E T W E E N:              MURNKURNI WOMEN'S ABORIGINAL CORPORATION (IN LIQ)

Appellant

and

THE REGISTRAR OF ABORIGINAL CORPORATIONS

Respondent

CORAM:R D NICHOLSON J

DATE:28 JULY 1995

PLACE:PERTH

REASONS FOR JUDGMENT
R D NICHOLSON J:

There are two applications before the Court.  The first, which is in the original proceeding, is an application to have a winding up order set aside under O35 r7(2)(a) of the Rules of the Federal Court ("FCR").  The rule provides:

"7(2)The Court, where it is not exercising appellate or related jurisdiction under Division 2 of Part III of the Act, may if it thinks fit vary or set aside a judgment or order after the order has been entered where:

(a)the order has been made in the absence
of a party, whether or not the absent party is in default and whether or not the absent party had notice of the motion or the order;..."

The second application is for a stay of the order made by the Court on 14 February 1995 in the same proceeding pending the hearing of an appeal to the Full Court in respect of that order.  It is accepted on behalf of the applicant that, although there are different tests applicable to each application, the facts and the evidence should be treated as applicable to both and that, if the applicant cannot succeed in the application under FCR O35 r7(2)(a), it will not succeed on the stay application.

Winding up order

The applications arise from the following circumstances. On 27 October 1994 the Registrar of Aboriginal Corporations ("the Registrar") applied to have Murnkurni Women's Aboriginal Corporation ("Murnkurni") wound up. That application was made on the authority of s62A(b) of the Aboriginal Councils and Associations Act 1976 ("the Associations Act") which provides that the Registrar may petition the court that an incorporated Aboriginal Association be wound-up if "the Registrar is of the opinion that the winding up would be in the public interest or in the interests of the members of the Association". The grounds upon which the order was sought were those provided for in s63(2)(d) and (h) of the Associations Act which respectively refer to the circumstance where the Association is unable to pay its debts and where it is "just and equitable" that it be wound up.  Orders for substituted service were made on 23 December 1994 and service was effected on 14 January 1995.  Although there is in the evidence some conflict as to the date of service, it was accepted for Murnkurni that service had taken place appropriately. 

The application came on for hearing on 14 February 1995.  There was no appearance on behalf of Murnkurni on that occasion.  At that hearing the Court ordered that Murnkurni be wound up under the provisions of the Corporations Law; Mr S F Robson be appointed liquidator of Murnkurni; and the applicant's costs be taxed and reimbursed out of the property of Murnkurni. 

The notices of motion presently before the Court were filed on 29 March 1995. 

Factors relevant to discretion

There is some conflict between the parties concerning the manner in which the Court should approach the exercise of its discretion pursuant to FCR O35 r7(2)(a).  For Murnkurni it is contended that the question which requires an answer is whether, in all the circumstances of the case, the winding-up order should be set aside.  It is said that involves, in particular, consideration of any delay; whether any prejudice could be cured by costs; and, most importantly, whether there is an arguable defence.  For Murnkurni it is contended that these matters should be approached in much the same way as the Court would approach the issue of setting aside a default judgment. 

The submissions for Murnkurni are supported by reference to a number of authorities.  In Simpson v Alexander (1926) 26 SR (NSW) 296 at 301-2, it was said by Street CJ that in considering whether a defendant who seeks to be let in to defend, discloses a defence upon the merits, the court or a judge is not to try the issues of fact arising upon the alleged defence and that all that is required on an application of that kind is that the defendant should swear to facts which, if established at the trial, will afford a defence. It is only in exceptional cases that it is necessary for the court to go beyond the evidence put forward by the defendant. In Rosing v Ben Shemesh [1960] VR 173 at 176, on an appeal from a refusal to set aside a judgment obtained in the absence of a defendant, it was said by the Full Court of South Australia that it was sufficient for the defendant to show a prima facie defence on affidavit: Evans v Bartlam [1937] AC 473 at 489 and 480. In Watson v Anderson (1976) 13 SASR 329 at 341, it was said by the Full Court of South Australia in respect of an application to set aside judgment obtained in default of appearance, that a defendant must go beyond an assertion that there is a good defence and demonstrate "a very compelling reason" for the failure of the defendant to appear in the action and, further, that the defendant has a plausible defence either in law or in fact. That is "the court should have before it materials which enable it to say how it came about that the defendant found himself [or herself] bound by a judgment regularly obtained; that the defendant genuinely desires to be allowed to come in and present his [or her] case; and that issues are raised in such form as to require serious consideration of the defence which he [or she] would put forward". (See likewise Fairclough v Strathmont Haulage Pty Ltd (1981) 28 SASR 456 at 457)

In Adams v Kennick Trading (International) Ltd (1986) 4 NSWLR 503 at 507, it was said that the only purpose served by the party having the benefit of the judgment filing affidavits is to establish that the so called defence sought to be put up on the applicant's affidavit is not bona fide.  In Davies v Pagett (1986) 70 ALR 793, the Full Court of the Federal Court said in respect of O31 r14 of the Rules of Supreme Court (NT) providing for the setting aside of a judgment obtained by default:

"Since the decision of the House of Lords in Evans v Bartlam (supra), the settled course of authority in England and in this country has emphasised, as fundamental to the exercise of the judicial discretion to set aside a default judgment, the need for a defendant to show a prima facie defence on the merits.  In the language of Lord Wright, in the passage cited by the learned judge, this is "the primary consideration".

It is true, as Lord Atkin said in Evans v Bartlam (at 480), that it is inappropriate to lay down rigid rules to govern the exercise of the discretion. On the other hand, speaking generally, the cases show that a defendant who has an apparently good defence should not be refused the opportunity of defending, even though a lengthy interval of time has elapsed, provided that no irreparable prejudice is thereby done to the plaintiff (see Atwood v Chichester (1878) 3 QBD 722;  Rosing v Ben Shemesh [1960] VR 173; National Mutual Life Association of Australasia Ltd v Oasis Developments Pty Ltd [1983] 2 Qd R 441 at 449)."

Counsel for the Registrar does not quarrel with these statements of the law in application of the Evans v Bartlam (supra) approach.  However, he contends that the relevant approach is that taken by Hodgson J in George Ward Steel Pty Ltd v Kizkot Pty Ltd (1989) 15 ACLR 464. In that case application had been made to set aside a winding up order pursuant to the Rules of the Supreme Court of New South Wales Pt40 r9(3) which is in the same terms as FCR O31 r7(2)(a).  At 465 Hodgson J said:

"In my view, if an order winding up a company is made in the absence of the defendant company, and an application is brought promptly by the company, with notice being given to the liquidator, to the plaintiff and to any creditor who appeared at the hearing; and if the evidence shows an explanation for the non-appearance at the hearing and indicates solvency of the company; and if there is consent to setting aside, or at least non-opposition; and if the liquidator indicates that nothing in his investigations to date shows a reason for the company to be stopped from trading, then the court will normally set aside the order."

Although Hodgson J regarded the evidence of solvency as not as satisfactory as he would like, he considered it was appropriate to make the order sought by consent.

For the Registrar it is contended that the onus therefore lies on the applicant to establish solvency.  For Murnkurni it is contended that the test propounded by Hodgson J in Kizkot (supra) is to be distinguished because there he was addressing a position where consent had been given to the setting aside of the winding up order.  In my opinion, while the consent was relevant to his resolution of the issue before him, the dicta previously referred to was not so confined and addressed the approach which he considered appropriate to matters arising under the equivalent of FCR O35 r7(2)(a).

It may not be that the dicta of Hodgson J in Kizkot (supra) and the principles relied upon for Murnkurni are necessarily in conflict.  All that Hodgson J required was evidence which "indicates" solvency.  He did not say that solvency was to be established as a fact.  Certainly he must have accepted there should be evidence which indicates solvency in the sense of showing it to be arguable that the company was solvent.  In my opinion the effect of the authorities is to require this Court to consider whether there is an arguable defence which in turn requires the Court to consider whether solvency is arguable.

Murkurni's evidence

The affidavit evidence relied upon in support of Murnkurni's application comprises three affidavits of the Chairperson of Murnkurni, Ms Schulz; an affidavit of a former employee of Murnkurni, Ms Carter; and an affidavit of an ex-committee member of Murnkurni, Ms Logan.  The affidavit of the second deponent addresses steps taken to promptly bring the applications.  The affidavit of the third deponent is principally in response to matters arising from an affidavit by a Mr L'Verty upon which the case for the Registrar seeks to rely.  Accordingly, it is not necessary to go to this affidavit unless it is appropriate to turn to affidavits in the case for the Registrar.

Explanation for non-appearance

Turning to the first affidavit of the Chairperson, there is evidence that, following service of the papers for the winding up application upon her on 14 January 1995, she telephoned Ms Carter who had provided assistance to Murnkurni in the past.  She visited Ms Carter and asked to discuss the papers with her but because the latter had visitors, she was required to return some days later.

At this time a representative of the Aboriginal Legal Service ("the ALS") visited Norseman and the Chairperson met with him, showing him the papers with which she had been served and generally instructing him.  He requested her to collate some more information but added that this matter was not in his area and that it would be better to see another named person from the ALS. 

Because the Chairperson had not met the other person she again discussed the matter with Ms Carter who proposed that she should consult a firm of solicitors in Kalgoorlie, which she then did.  She requested the firm to act, expressing the hope that the ALS would pay the fees.  She instructed the firm to send the papers to the ALS which they did on or about 6 February 1995.  In the letter forwarding the papers it was stated by the solicitors that the Chairperson's "clear instructions" to the firm was that the application be opposed.

In the period between 6 and 14 February no affidavit was taken from the Chairperson.  She knew that the matter was listed before the Court on 14 February 1995.  No one from the ALS telephoned her on that day.  The following day she telephoned the ALS and spoke to the second named person and was advised that the winding up order had been made.  She sent letters to the ALS on 28 February and 2 March 1995 instructing it to make application to have the winding up order set aside.  No such steps have been taken by the ALS.  As a consequence, the Chairperson and Ms Carter took matters into their own hands and took steps resulting in the filing of the applications presently under consideration.

In my opinion these facts constitute a satisfactory explanation of delay and of non-appearance.  The case for the Registrar does not contest to the contrary.

Solvency of Murnkurni

In her affidavit the Chairperson states that she believes the two main reasons why the Registrar sought the winding up of Murnkurni was because it could not pay its debts and because it had not kept proper books and records. 

On the question of solvency it is apparent that Murnkurni owns the Murnkurni Hall in Norseman.  The Chairperson relies upon a statement of assets and liabilities of Murnkurni prepared and signed by her on 5 May 1995.  The position disclosed by that statement is as follows:

Murnkurni Hall  $30,000.00

Other Assets                $15,603.95

__________

Sub Total$45,603.95

Unsecured Creditors         $10,124.21

__________

Total Nett Assets           $35,479.74

==========

The estimated realisable value of the Hall is stated to be $50,000.  The other assets include $1,240.00 cash at bank and plant and equipment.

The unsecured creditors are:

1.  Shire Rates       =     $2,557.63 (admitted)
     2.  Water Authority    =     $540.08 (admitted)
     3.  Telecom in respect
        of an account in the
        name of Murnkurni  =     $701.85 (admitted)
     4.  Telecom in respect
        of an account in |he

name of the Department

of Social Security =     $6,324.65 (disputed)

Of the amount due to creditors of $10,124.21, $3,799.56 is admitted.

In respect of the Telecom account relating to the Department of Social Security (the "DSS") the evidence in the affidavit of the Chairperson is that Murnkurni allowed the DSS to have a phone installed to assist it in helping local Aboriginal people who would visit offices of the DSS at Murnkurni Hall to assist them with Social Security problems.  No rent was charged for use of the Hall because the service was regarded by Murnkurni as of value to local Aboriginal people.  It is apparent that Telecom billed DSS care of Murnkurni for that service.  On 21 February 1994 the ALS made a claim on the DSS in respect of the telephone account of DSS.

The sources of income of Murnkurni are principally two-fold.  Members are required to pay membership fees but the return from these is small.  The principal source of funding is from the Aboriginal and Torres Strait Islander Commission ("ATSIC"), the Aboriginal Affairs Planning Authority ("AAPA"), the Lotteries Commission and one or two smaller agencies.  The certificate of title for Murnkurni Hall has lodged against it a caveat by ATSIC.  However, the statement of assets and liabilities prepared by the Chairperson does not refer to the interest of ATSIC protected by that caveat.

The nature of ATSIC's interest is therefore unexplained by the evidence tendered on behalf of Murnkurni.

Murnkurni's access to books and records

Turning to the evidence on the question of the difficulties which Murnkurni contends is faced in relation to its books and records, the evidence of the Chairperson runs as follows: Murnkurni was incorporated on 15 March 1990; the Chairperson was an original Executive Member and she and her predecessor as Chairperson ("the first Chairperson") were very conscious
of the need to keep proper books and records; as neither were trained bookkeepers, they requested assistance from ATSIC which made available the services of a Mr A Smith.  He travelled to Murnkurni Hall once a week for the purpose of completing the books and records.  Mr Smith's employment with ATSIC came to an end in December 1992.  Murnkurni then sought assistance from the Eastern Goldfields Aboriginal Corporation Resource Agency ("EGACRA") which appointed two field officers with responsibility for assisting Murnkurni to maintain its books and records.  However, the Chairperson's evidence is that they visited Murnkurni Hall only a couple of times a year so that the books were not maintained on a regular basis. 

Around this time the Chairperson, on instructions from the first Chairperson, handed the books and records to one of the field officers.  These included invoices and receipts.  He removed them to Kalgoorlie and, despite repeated requests from the Chairperson and other members of Murnkurni to EGACRA to have the books and records returned, they were not returned.  On 17 December 1993 the Chairperson wrote on behalf of Murnkurni to EGACRA requesting their return.  So concerned had the Chairperson been about the inability of Murnkurni to obtain possession of its books and records that she, together with another Executive Committee Member, had written on 21 April 1993 to the Australian Federal Police requesting them to investigate the conduct of EGACRA in relation to those records.

The evidence continues that the Chairperson (who had assumed office around April 1993) and Ms Carter realised that a fresh set of books would need to be created.  They contacted a field officer of ATSIC who obtained for them copies of financial statements said to be all that remained of Murnkurni's books and records.  The Chairperson then purchased at her own expense bookkeeping stationery.

The Chairperson's evidence is that the significance of the
inability of Murnkurni to obtain possession of its books and records was that it was unable to respond to inquiries from ATSIC concerning the application of an allocation of $20,000, with the result that the Committee of Murnkurni was unable to demonstrate the qualification of Murnkurni for further grant allocations.  In the eyes of Murnkurni, outside funding to it has "dried up" because of the action taken by EGACRA in relation to its books and records.  Furthermore, in the letter of complaint to the Australian Federal Police, it was asserted on behalf of Murnkurni that EGACRA had written to the Lotteries Commission advising it that all future funding for Murnkurni had to be deposited in EGACRA accounts and that ATSIC may not be providing any more funds to Murnkurni.  That assertion is unexplained in the evidence brought in support of the present applications.

In the absence of funding from grant allocations, Murnkurni sought to raise funds in other ways.  Membership fees have already been referred to.  In addition, local groups are permitted to use the Murnkurni Hall for a fee.  It has also raised funds by selling clothing, craftworks and other items. 
In addition, Murnkurni has endeavoured to keep up its services to local people.  The Hall has been made available to the DSS to assist people with social security problems and has been used as a Hall for art and craft sessions for local women and other community service organisations.  Murnkurni views itself as an unsophisticated organisation wishing to continue to provide simple services in a simple way and to have a fresh opportunity so that it can demonstrate its leadership and management skills.

Need to have regard to affidavits of other party

As has appeared there are aspects of the evidence relied upon on behalf of Murnkurni which are unexplained.  In my opinion, this is a case where the applications cannot be resolved
solely by reference to the evidence adduced for the applicant respondent.  Within the principles enunciated in the cases relied upon for Murnkurni, it becomes appropriate to turn to evidence adduced on behalf of the respondent (applicant) in order to establish that the arguability of the case is bona fide.  It is apparent that without an understanding of the unexplained matters, including in particular the interest of ATSIC, the bona fide arguability of Murnkurni's case cannot be properly found. 

Registrar's evidence

The evidence relied upon for the Registrar is as follows: an affidavit sworn by the Registrar on 24 October 1994; an affidavit of Mr D R Spencer, Chartered Accountant, who has had the care and conduct of Murnkurni's liquidation since the appointment of the liquidator; and an affidavit of Mr D J L'Verty, Acting Manager Coordination Branch, WA State Office of ATSIC, sworn 21 July 1995.  Objections were made to certain paragraphs of these affidavits and these must be addressed.

Objections to evidence for Registrar

In relation to the Bouhafs affidavit, objection is taken principally to a report ("the Berresford report) of a Chartered Accountant, Mr P Berresford annexed as an exhibit to the affidavit. Examination of that report shows that it was prepared following a request from the Registrar, made pursuant to s60 of the Associations Act, to carry out an investigation into Murnkurni. Section 60(1) of the Associations Act requires that any person so reporting draw attention "to any irregularity in the operations or financial affairs of the Association disclosed by that examination".  In the report Mr Berresford identifies what he describes as a considerable number of breaches of the Associations Act and the rules of Murnkurni and says that these have largely resulted from the Governing Committee's total ignorance of reporting requirements and their responsibilities contained within the Associations Act and Murnkurni's Constitution.  He says that from discussions with the Chairperson and the previous year's auditor it appeared that little or no records were held before January 1993 and, if they did exist, Murnkurni was not aware of their whereabouts.  After examining the financial position of Murnkurni, Mr Berresford concluded that "without the sale of the Hall, or continued funding support from State and Commonwealth Agencies, it is clear the Association is unable to meet its liabilities as and when they fall due".

It is to the admission of this evidence as evidence of insolvency to which objection on behalf of Murnkurni is directed. It is not directed to the admission of the Berresford report on the basis that the Registrar has been satisfied of the condition precedent to the filing of a petition in the Court pursuant to s62A(b) of the Associations Act, namely, that the winding up order would be in the public interest or in the interests of the members of the Association. In my opinion, the way in which the Berresford report is tendered, it cannot be conclusive evidence of insolvency. It is a report containing an expression of opinion by a person appointed to inquire pursuant to s60 of the Associations Act.  If the exhibit is admitted the Court cannot be precluded by the expression of that expert opinion from itself considering the legal question whether or not it is arguable that Murnkurni is solvent.

In this respect it is relevant to have regard to the provisions of the Evidence Act 1995 (Cth) which have substantially changed the evidentiary rules relating to the admission of documents and to hearsay evidence. Section 51 of that act provides that the principles and rules of the common law which relate to the means of proving the contents of documents are abolished. Section 48(1)(b)(i) further provides that a party may adduce evidence of the contents of a document in question by tendering the document in question or by any one or by tendering a document that is or purports to be a copy of the document in question. That provision, however, only facilitates the admission of the Berresford report. Section 75 of the same act provides that, in an interlocutory proceeding, the hearsay rule does not apply to evidence if the party who adduces it also adduces evidence of its source. In the Berresford report the writer relies upon information he received from discussions with the Chairperson following a visit to the office of Murnkurni. In the statement of liabilities specific reliance is placed upon the advice of the Chairperson. In my opinion s75 has been complied with.

Accordingly, I consider par5 of the Bouhafs affidavit is admissible together with the Berresford report subject to the Court not being bound by the conclusion of the report on the legal question of the existence of insolvency. 

Paragraphs 9, 10, 11, 13, 14 and 16, containing statements of reliance upon the Berresford report, are unobjectionable on the ground of comment given that they evidence the reliance by the Registrar on the report sought pursuant to s60 of the Associations Act.  For the reasons given, they are not objectionable on the grounds of hearsay.

Turning to the Spencer affidavit, par9 is objected to on the ground that it expresses reliance on certain information in the Berresford report and is irrelevant.  The relevance is explained by reference to par8 which shows that Murnkurni had been unable to provide books and records for reasons given in relation to the Bouhafs affidavit.  Paragraph 9 is not objectionable as hearsay because the source is identified.  Paragraph 10, making reference to a letter received by the liquidator from Murnkurni, is within the bounds of relevance given the contents of par11 but the weight to be ascribed to the evidence falls to be determined in context because the letter is not produced.

In relation to the L'Verty affidavit, par9 to 12, which are descriptive of the usual practice adopted by ATSIC in relation to grants, objections are made on the grounds of relevance.  In my opinion it cannot be said that when there is evidence that Murnkurni received a grant or grants from ATSIC the procedures of ATSIC in relation to its grants as a matter of general practice is irrelevant.  The evidence of compliance by Murnkurni with general or usual practice may be relevant to assessment of the public interest under the Associations Act. 
The second sentence in paragraph 15 is relied upon to show that the statements in the letter were made rather than as an assertion as to the truth of the contents of the letter "DJL "2"".

In relation to par17, (the last sentence of which it is agreed is not to be in evidence) I allow the objection that the deponent does not adequately state his means of knowledge with respect to the matters deposed therein and I reach that view even with the consideration of par22 and DJL 7.

Paragraph 18 raises the principal issue decided in relation to the Bouhafs affidavit.  The audit report annexed and referred to in the paragraph is prepared pursuant to the requirements of the Aboriginal and Torres Strait Islander Commission Act 1989 (Cth) ("the ATSIC Act") so that, for the reasons previously given, it is appropriate that this deponent, having the capacities in relation to ATSIC which he does, should depose as to the audit report.  I would allow the objection to the fourth and subsequent sentences in the paragraph as constituting comment. 

Paragraph 19, which deposes that on advice from a section of ATSIC a matter of unaccounted grant funds was referred to the Australian Federal Police on 11 February 1993, is objected to only on the grounds of relevance.  In my opinion, where the public interest is a consideration that objection is not made out.  Furthermore, the reference in the paragraph to the policy position of ATSIC that until the reference to the Federal Police was resolved, only grants for essential services would be made, is relevant to the issue of solvency and to the assertion on behalf of Murnkurni that the absence of its books and records accounted for the cessation of grant allocations.  For the same reasons, the objection on grounds of relevance to par20 is disallowed.

In par20 the first sentence is objectionable for failing to disclose the source of information, and therefore does not fall within the exception to the hearsay rule in s75 of the Evidence Act.  The balance of the paragraph, which relates to instructions from the Australian Federal Police to ATSIC that EGACRA were to hold Murnkurni's records in its possession until a certain date, is relevant to the issue of whether the records were withheld from Murnkurni to its detriment in relation to funding. 

Paragraph 24 refers to and annexes a statement by the deponent to the Australian Federal Police.  It is objected to on the grounds of relevance, hearsay and comment and further that the deponent has not sworn that the contents are true and correct.  The annexed statement is clearly made in the course of the duties of the deponent and concludes with a declaration as to its truth.  In my opinion none of these objections can be allowed.

In par25 the deponent attests to attending a meeting between Murnkurni, EGACRA and ATSIC and annexes a copy of a file note made on 17 June 1993 to record the business of that meeting, which file note is signed by the deponent.  Objection is made to the paragraph and the annexure on the ground that the deponent has not sworn as to any independent recollection and the document itself is largely hearsay and too vague and is largely irrelevant.  The deponent has sworn he attended the meeting.  He has attested the record.  The subject of the
meeting relates to a grant of $20,000 by ATSIC to Murnkurni. Other matters referred to in par25 are patently within the independent recollection of the deponent. He otherwise relies upon the record of the meeting. The subject of the meeting is relevant. The hearsay component of the document cannot be an objection in the light of s75 of the Evidence Act.  To the extent that the document is vague it will lack weight.  I would not allow the objection.

Paragraphs 28 and 29 contain references to the involvement of the Australian Federal Police and objections on the ground of relevance are not allowed for reasons previously given.  However, portions of both paragraphs are hearsay evidence in relation to which no evidence of source is given.  The first sentence of each paragraph should be excluded on that basis and the words "as a result" in the second sentence in par29 should consequently be excluded.  The absence of the particular identification of the person acting on behalf of the Australian Federal Police in giving the knowledge means that the source of knowledge has not been identified: the source has only been identified institutionally and that is an inadequate identification of source.

In par30 the deponent testifies as to knowledge of ATSIC that the Registrar had commissioned the Berresford report. The paragraph is objected to on the grounds of relevance. In my opinion, in the context where it is maintained on behalf of Murnkurni that grant monies were withheld by ATSIC and other bodies because its books and records could not be made available, it is relevant that ATSIC knew that the Registrar was conducting an examination pursuant to s60 of the Associations Act of those books and records.

Paragraph 31 fails to state the source of knowledge of the deponent of the completion and updating of the Berresford report and is unacceptable hearsay.

The last sentence of par32 is excised by agreement and the letters referred to in the paragraph are admitted on the basis they were sent but not as to the truth of their contents.

In paragraph 33 it is deposed that the Registrar advised ATSIC of the intention to proceed to wind up Murnkurni.  The paragraph is objected to on the grounds of relevance.  In my opinion the state of knowledge of ATSIC in relation to the affairs of Murnkurni is relevant to the contention in the case for Murnkurni that the diminution or cessation of grants to it from ATSIC and other bodies is to be accounted for solely by its inability to obtain access to its books and records.  The paragraph is relevant.

It is conceded that pars14 and 35 are objectionable and should not be read into evidence.

In light of those rulings it is now necessary to turn to the evidence in the affidavits tendered for the Registrar to examine what further evidence there is going to the matters unexplained by the evidence for Murnkurni, namely, the ATSIC caveat over Murnkurni's land and whether the cessation of grants to Murnkurni was occasioned by its inability to obtain access to the books and records.

ATSIC grants

In the Berresford report it is stated that the assets of Murnkurni included the Hall which was purchased on 15 July 1991 for $30,000.

In the Spencer affidavit it is deposed that on 5 April 1995, ATSIC wrote to the liquidator to advise that a notice ("the Notice") dated 24 October 1994, given pursuant to s20 of the ATSIC Act, had been served on the Chairperson and that the notice stated that the terms and conditions of a grant in the amount of $30,187 had not been complied with and accordingly Murnkurni was liable to repay the amount of the grant to ATSIC. The Notice relies upon breach of grant conditions in two respects. The first is failure to expend monies in accordance with an approved budget. The second is failure to comply with a requirement that three written representative quotations be obtained and public tenders invited in respect of an expenditure not greater than $30,000. Section 20 relevantly provides:

"20(1)The Commission may give written notice to a person or body to whom a grant has been made under this Act stating that the Commission is satisfied that the person or body has failed to fulfil a term or condition of the grant.

1. A person or body who is given notice under subsection (1) is liable to pay to the Commission an amount equal to:

(a)the amount of the grant; or

(b)so much of the grant as the Commission specifies in the notice."

In the L'Verty affidavit it is deposed that:

"6.In the 1990-91 financial year a total of $41,620.00 in grants was released to Murnkurni.  These funds were granted in the following amounts under the ATSIC programs indicated:

Aboriginal Communities

Development Program                   $30,000.00

Aboriginal Communities

Development Program              $10,000.00

Communities Development

Support$ 1,620.00

1. In the 1991-92 financial year a total of $22,000.00 in grants was released to Murnkurni.  These funds were granted in the following amounts under the ATSIC programs indicated:

Community Infrastructure         $20,000.00

Communities Development

Support$ 2,000.00

1. No grants have been offered to Murnkurni since 1991-92 financial year."

Each of these grants was made subject to conditions that all funds be spent in accordance with the budget provided by Murnkurni in its application and all funds accounted for by providing regular financial statements. 

The grant of $30,000 in the 1990-91 financial year was released to Murnkurni for the purpose of part payment on the cost of Murnkurni Hall.  The grant of $20,000 in the 1991-92 financial year was for the purpose of upgrading Murnkurni Hall and to employ a part time coordinator.

For Murnkurni it is contended that the liability of it to repay ATSIC in accordance with the Notice is open to argument.  It is contended that if this were the hearing of ATSIC's petition to wind up Murnkurni ATSIC would not have made itself out as a valid petitioning creditor.  Support for this contention was sought by comparison of an acceptance of grant offer annexed to the L'Verty affidavit and the Notice.  It is apparent, however, from the evidence of the grants made by ATSIC to Murnkurni as previously set out, that the former relates to one of the grants made in the 1991-92 financial year and the latter (the Notice) relates to two of the grants in the 1990-91 financial year.  There is no uncertainty about the Notice; it is not contended that it does not comply in its terms with the ATSIC Act; it clearly identifies the grant monies to which it is making reference and it refers to the letter of offer and the letter of acceptance in the 1990-91 year.  In my opinion, this contention on behalf Murnkurni is not made out and the effect of the Notice under the ATSIC Act, if properly served, would irrefutably be to create a liability in Murnkurni to pay to ATSIC from 24 October 1994 the amount specified in the Notice, namely, $30,187.00.

On the question of service, the L'Verty affidavit deposes the Notice, was addressed to Murnkurni "care of Maureen Young, Public Officer whose official address is" (and then followed the address of Murnkurni Hall).  Neither the L'Verty nor Spencer affidavits exhibit an affidavit of service.  The L'Verty affidavit also deposes that ATSIC had written to Murnkurni's liquidator and the copy of that letter stated service had been effected on Ms Young, who was recorded at the time of service as Public Officer, and on Ms Logan and the Chairperson.

Access to books and records

In the L'Verty affidavit the deponent said that he met with EGACRA to seek information as to the location of Murnkurni's financial records.  He was told by the officer with whom he conferred (Mr P Cockerell) that EGACRA had not been requested by Murnkurni to return the records.  The deponent sighted the records which he said consisted of a cheque book and some bank statements.  He further deposed that the Australian Federal Police had instructed ATSIC to advise EGACRA to hold the records until 9 June 1993, which ATSIC had done.  At a meeting on 16 June 1993, Mr Cockerell, on behalf of EGACRA, had shown Murnkurni those of its records it was holding.  On 10 December 1993 L'Verty on behalf of ATSIC wrote to the Chairperson confirming EGACRA held Murnkurni's records which had been provided to it in August or September 1992. 

In the Spencer affidavit, the problems which ATSIC considered arose in relation to books and records were (by derivation from the Berresford report) stated as being the following:

"(a)there was no register of members maintained in accordance with s58 of the Associations Act;

(b)no records exist to indicate that any annual general meetings were held;

(c)no minutes or other information is available to indicate elections or appointments of auditors;

(d)no records are available to indicate that Murnkurni maintained a minute book;

(e)proper accounts and records of transactions were not kept;

(f)income and expenditure statements and balance sheets were not prepared or audited (other than for 1992 with such accounts being heavily qualified for lack of supporting documentation);

(g)accounting records were not kept in such a manner that would enable true and fair accounts to be prepared;

(h)a new public officer was appointed in March 1993 but no formal notice was served on the Registrar in accordance with s57(1) of the Associations Act;

(i)although Murnkurni's rules specify the form for countersigning documents, it appears that official documents were not correctly executed;

.......

(k)there are no audited financial accounts available for the financial years ending 30 June 1990, 1991 and 1993; and".

In the Spencer affidavit it is also deposed that ATSIC lodged the caveat against the Murnkurni Hall land to secure its claim under the Notice.  The existence of the caveat is admitted by Murnkurni.

Murnkurni evidence in reply

The two remaining affidavits of the Chairperson were given in reply to the affidavits of L'Verty and Spencer respectively.

In the former, the Chairperson deposes that the ATSIC grant of $30,000 was used for the purchase of Murnkurni Hall and some equipment.  She further deposes that renovations to Murnkurni Hall were done with the ATSIC grant of $20,000.  She disputes that either grant was misapplied.  Her evidence is that at the time she prepared the Report, she was unaware of the Notice.

In the former and the latter affidavits the Chairperson denied she had been served with the Notice.  She deposes that Ms Young ceased to be Public Officer in 1993 and was not the Public Officer at the time of service of the Notice.
Additionally, the Chairperson deposes that the alleged breaches of grant conditions relied upon in the Notice would be contested by Murnkurni.  Furthermore, references in the L'Verty affidavit to misappropriation of the $20,000 grant are said by the Chairperson to have left Murnkurni "confused".

In the Chairperson's affidavits in reply she deposes to further evidence concerning access to the books and records.  She states that EGACRA through Mr Cockerell informed her he had nothing of Murnkurni's to give or show her.  However, a visit from a Ms Logan had resulted in some correspondence being sent to Murnkurni but not any bank statements or cheque books.  Mr Cockerall was said by her to have told her on 16 June 1993 he did not have any of Murnkurni's books.

Arguable matters

Having considered the evidence as admitted, I am of the opinion that the question whether Murnkurni was insolvent at the time the order was made in the absence of that party was open to argument and that there are other matters which are arguable.

Turning to the question of the solvency of Murnkurni, there are four aspects in particular which I find to be arguable.

In the first place there are issues which arise in relation to the service of the Notice. There is no evidence of service (par35 of the L'Verty affidavit having been conceded to objection). The Notice itself is addressed to Murnkurni, care of a public officer at the official address. However, there is evidence in the affidavit in the reply of the Chairperson that the public officer to whom it was addressed had ceased to hold office. That evidence is given in response to par35 of the L'Verty affidavit but has not itself been objected to in the affidavit in reply. The liability for the ATSIC repayment can arise only upon Notice being properly given pursuant to s20 of the ATSIC Act.  These matters have not been argued and are open to argument on behalf of Murnkurni. 

Secondly, the breaches upon which the Notice is grounded are contested.

Thirdly, and perhaps most significantly, even if the Notice is to be understood as having been duly served, it is arguable that it does not give rise to a position of insolvency.

The question of whether a person is able to pay debts as they become due from his or her own monies is not a question of whether the debtor would be able, if time were given, to pay the debts out of his or her assets, but rather whether he or she is presently able to do so with monies actually available: Bank of Australasia v Hall (1907) 4 CLR 1514 at 1528 cited in Re Pacific Projects (supra) at 546.  However, in Sandell v Porter (1966) 115 CLR 666, Barwick CJ at 670 stated that the "monies that are available" are not limited to cash resources immediately available, but also extend to monies which the debtor can procure by a realisation by sale or by mortgage or pledge of his or her assets within a relatively short time - relative to the nature and amount of the debts and to the circumstances, including the nature of the business, of the debtor. Barwick CJ emphasised that the conclusion of insolvency ought to be clear from a consideration of the debtor's financial position in its entirety and generally speaking ought not to be drawn simply from evidence of a temporary lack of liquidity.

The report prepared by the Chairperson dated 5 May 1995 shows that Murnkurni is not able to pay the ATSIC debt with monies actually available.  However, the only evidence of the realisable value of the real estate on which the Hall is situated is the report of the Chairperson dated 5 May 1995 which places on that property an estimated realisable value of $50,000.  There is no further evidence by which to judge what
Murnkurni could procure by realisation of that property and no evidence of the time within which realisation may be possible.

Fourthly, liability in respect of the Telecom account in the name of DSS is clearly open to argument.

Turning to the question of access to the books and records of Murnkurni, it is not necessary to canvas the evidence in detail.  It is clear that there is a conflict in evidence between Murnkurni's understanding of its rights of access to such books and records and that of officers of ATSIC and EGACRA.  The conflict makes the issue arguable on behalf of Murnkurni. 

Conclusion

It was contended for Murnkurni that there were many other courses of action open to the Registrar short of applying for its winding up. However, the policy considerations activating the Registrar's decision to apply pursuant to s62A(b) of the Associations Act is not before the Court for review and it is not therefore necessary to consider those alternatives or the affect on the members of Murnkurni.  The present applications are to be approached in accordance with the tests which have previously been referred to. 

For the reasons given I consider that both the solvency and other aspects are arguable and that, accordingly, the application to set aside the order pursuant to FCR O35 r7(2)(a) should be granted.  Whether it is necessary to grant the other application in these circumstances and the issue of costs will be open to further submissions from counsel.

I certify that this and the preceding 25 pages are a true copy of the Reasons for Judgment of his Honour Justice R D Nicholson.

Associate:

Date:

APPEARANCES

Counsel for the Applicant:        Mr P Hannan

Solicitors for the Applicant:     Mony de Kerloy

Counsel for the Respondent:           Mr K Martin

Solicitors for the Respondent:     Australian Government Solicitor

Date of Hearing:                  26 June 1995

Date of Judgment:                 28 July 1995