Sandy v Yindjibarndi Aboriginal Corporation RNTBC [No 2]
[2016] WASC 75
•9 MARCH 2016
SANDY -v- YINDJIBARNDI ABORIGINAL CORPORATION RNTBC [No 2] [2016] WASC 75
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2016] WASC 75 | |
| Case No: | CIV:3048/2015 | 22 & 23 FEBRUARY 2016 | |
| Coram: | LE MIERE J | 9/03/16 | |
| 30 | Judgment Part: | 1 of 1 | |
| Result: | Plaintiff has standing to bring this action First defendant has no directors | ||
| A | |||
| PDF Version |
| Parties: | JOHN SANDY YINDJIBARNDI ABORIGINAL CORPORATION RNTBC ANGUS MACK JILL TUCKER LYN CHEEDY LYNETTE PHILLIPS MIDDLETON CHEEDY PANSY CHEEDY (also known as SAMBO) ROSEMARY WOODLEY RUSSEL SANDY SONIA WILSON STANLEY WARRIE TOOTSIE DANIELS |
Catchwords: | Standing Other interests Turns on own facts Corporations (Aboriginal and Torres Strait Islander) Act 2006 (Cth) Terms of appointment Extension of time Statutory interpretation Directors' meeting Procedure Reasonable notice Exercise of power for improper purpose Turns on own facts Appointment of receiver Just or convenient Reasonable or satisfactory alternative Special administration Application adjourned |
Legislation: | Broadcasting Services Act 1992 (Cth), s 122 Corporations (Aboriginal and Torres Strait Islander) Act 2006 (Cth), s 29-20, s 60-5, s 66-1, s 176-15, s 246-5, s 246-15, s 246-20, s 246-25, s 246-35, s 249-5, s 249-10, s 265-5, s 487-1, s 487-5, s 487-10, s 499-5, s 576-15, s 700-1 Corporations (Aboriginal and Torres Strait Islander) Bill 2006 Corporations Act 2001 (Cth), s 181 Supreme Court Act 1935 (WA), s 25(9) |
Case References: | Adams v Yindjibarndi Aboriginal Corporation RNTBC [2014] WASC 467 Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 27; (2009) 239 CLR 27 Ashrafinia v Ashrafinia [2012] NSWSC 500 Certain Lloyds Underwriters v Cross [2012] HCA 56; (2012) 248 CLR 378 Cordiant Communications (Australia) Pty Ltd v The Communications Group Holdings Pty Ltd [2005] NSWSC 1005; (2005) 55 ACSR 185 Howard Smith Ltd v Ampol Petroleum Ltd [1974] AC 821 John Pfeiffer Pty Ltd v Rogerson [2000] HCA 36; (2000) 203 CLR 503 Monis v The Queen [2013] HCA 4; (2013) 249 CLR 92 Ngurli Ltd v McCann [1953] HCA 39; (1953) 90 CLR 425 Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 455 Re Avonwood Homes Pty Ltd [2000] VSC 216 Re Keneally as administrator of Australia Blue Mountain International Cultural & Tourist Group Pty Ltd (admin appointed) [2015] NSWSC 937; (2015) 107 ACSR 172 Re Sidex Australia Pty Ltd (Receiver and Manager Appointed); Sipad Holdings DDPO v Popovic (1995) 18 ACSR 436 Sliteris v Ljubic [2014] NSWSC 1632 Smolarek v Liwszyc [2006] WASCA 50; (2006) 32 WAR 129 Toole v Flexi Hire Pty Ltd (1991) 6 ACSR 455 Whitehouse v Carlton Hotel Pty Ltd [1987] HCA 11; (1987) 162 CLR 285 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CIVIL
- Plaintiff
AND
YINDJIBARNDI ABORIGINAL CORPORATION RNTBC
First Defendant
ANGUS MACK
First-named Second Defendant
JILL TUCKER
Second-named Second Defendant
LYN CHEEDY
Third-named Second Defendant
LYNETTE PHILLIPS
Fourth-named Second Defendant
MIDDLETON CHEEDY
Fifth-named Second Defendant
PANSY CHEEDY (also known as SAMBO)
Sixth-named Second Defendant
ROSEMARY WOODLEY
Seventh-named Second Defendant
RUSSEL SANDY
Eighth-named Second Defendant
SONIA WILSON
Ninth-named Second Defendant
STANLEY WARRIE
Tenth-named Second Defendant
TOOTSIE DANIELS
Eleventh-named Second Defendant
Catchwords:
Standing - Other interests - Turns on own facts
Corporations (Aboriginal and Torres Strait Islander) Act 2006 (Cth) - Terms of appointment - Extension of time - Statutory interpretation
Directors' meeting - Procedure - Reasonable notice - Exercise of power for improper purpose - Turns on own facts
Appointment of receiver - Just or convenient - Reasonable or satisfactory alternative - Special administration - Application adjourned
Legislation:
Broadcasting Services Act 1992 (Cth), s 122
Corporations (Aboriginal and Torres Strait Islander) Act 2006 (Cth), s 29-20, s 60-5, s 66-1, s 176-15, s 246-5, s 246-15, s 246-20, s 246-25, s 246-35, s 249-5, s 249-10, s 265-5, s 487-1, s 487-5, s 487-10, s 499-5, s 576-15, s 700-1
Corporations (Aboriginal and Torres Strait Islander) Bill 2006
Corporations Act 2001 (Cth), s 181
Supreme Court Act 1935 (WA), s 25(9)
Result:
Plaintiff has standing to bring this action
First defendant has no directors
Category: A
Representation:
Counsel:
Plaintiff : Mr M L Bennett & Ms T J C Elder
First Defendant : Mr J R Ludlow
First-named Second Defendant : Mr J R Ludlow
Second-named Second Defendant : No appearance
Third-named Second Defendant : Mr J R Ludlow
Fourth-named Second Defendant : Mr J R Ludlow
Fifth-named Second Defendant : Mr J R Ludlow
Sixth-named Second Defendant : Mr J R Ludlow
Seventh-named Second Defendant : Mr J R Ludlow
Eighth-named Second Defendant : Mr J R Ludlow
Ninth-named Second Defendant : Mr J R Ludlow
Tenth-named Second Defendant : Mr J R Ludlow
Eleventh-named Second Defendant : Mr J R Ludlow
Solicitors:
Plaintiff : Bennett + Co
First Defendant : HWL Ebsworth Lawyers
First-named Second Defendant : HWL Ebsworth Lawyers
Second-named Second Defendant : No appearance
Third-named Second Defendant : HWL Ebsworth Lawyers
Fourth-named Second Defendant : HWL Ebsworth Lawyers
Fifth-named Second Defendant : HWL Ebsworth Lawyers
Sixth-named Second Defendant : HWL Ebsworth Lawyers
Seventh-named Second Defendant : HWL Ebsworth Lawyers
Eighth-named Second Defendant : HWL Ebsworth Lawyers
Ninth-named Second Defendant : HWL Ebsworth Lawyers
Tenth-named Second Defendant : HWL Ebsworth Lawyers
Eleventh-named Second Defendant : HWL Ebsworth Lawyers
Case(s) referred to in judgment(s):
Adams v Yindjibarndi Aboriginal Corporation RNTBC [2014] WASC 467
Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 27; (2009) 239 CLR 27
Ashrafinia v Ashrafinia [2012] NSWSC 500
Certain Lloyds Underwriters v Cross [2012] HCA 56; (2012) 248 CLR 378
Cordiant Communications (Australia) Pty Ltd v The Communications Group Holdings Pty Ltd [2005] NSWSC 1005; (2005) 55 ACSR 185
Howard Smith Ltd v Ampol Petroleum Ltd [1974] AC 821
John Pfeiffer Pty Ltd v Rogerson [2000] HCA 36; (2000) 203 CLR 503
Monis v The Queen [2013] HCA 4; (2013) 249 CLR 92
Ngurli Ltd v McCann [1953] HCA 39; (1953) 90 CLR 425
Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 455
Re Avonwood Homes Pty Ltd [2000] VSC 216
Re Keneally as administrator of Australia Blue Mountain International Cultural & Tourist Group Pty Ltd (admin appointed) [2015] NSWSC 937; (2015) 107 ACSR 172
Re Sidex Australia Pty Ltd (Receiver and Manager Appointed); Sipad Holdings DDPO v Popovic (1995) 18 ACSR 436
Sliteris v Ljubic [2014] NSWSC 1632
Smolarek v Liwszyc [2006] WASCA 50; (2006) 32 WAR 129
Toole v Flexi Hire Pty Ltd (1991) 6 ACSR 455
Whitehouse v Carlton Hotel Pty Ltd [1987] HCA 11; (1987) 162 CLR 285
1 LE MIERE J: The first defendant, Yindjibarndi Aboriginal Corporation RNTBC (YAC), is an Aboriginal and Torres Strait Islander Corporation registered pursuant to the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (Cth) (CATSI Act). YAC is the legal owner of native title rights and interests which it holds on trust for the Yindjibarndi people. YAC is governed by the YAC Rule Book, which incorporates its constitution. The appointment and term of office of directors are central issues in this case. Rule 5.5 provides that directors are appointed at the annual general meeting for a term of one year and are eligible to be re-elected.
2 The second defendants were appointed directors by resolutions passed at the 2013 annual general meeting held on 10 September 2014. There is a long running dispute between members of YAC who support, or are supported by, the second defendants, other than Jill Tucker, and members who also belong to the Wirlu Murra Yindjibarndi Aboriginal Corporation (WMYAC). The plaintiff, Mr Sandy, is a member of YAC and WMYAC.
3 The second defendants were appointed as directors on 10 September 2014 for a term of one year. Their term of appointment expired on 10 September 2015, unless it was extended. Section 246-25(4) of the CATSI Act provides that if the terms of appointment of all of the directors of a corporation expire so that there are no directors appointed at a particular time, the terms are extended until the next general meeting occurring after the expiry of the term of the director whose appointment was last to expire. Therefore, the terms of appointment of all of the directors were extended to the next general meeting. The next general meeting was the annual general meeting for the years 2014 and 2015 which was held on 30 November 2015. A motion to appoint people as directors was put but not passed. The plaintiff says that s 246-25(4) extended the terms of the second defendants to the next general meeting after the expiry of their terms and hence they ceased to be directors on 30 November 2015, that is the date of the first general meeting occurring after the expiry of their terms on 10 September 2015. YAC and the second defendants other than Ms Tucker say that s 246-25(4) should be construed to permit the extension of the terms of appointment more than once and hence the terms of the directors appointed at the annual general meeting held on 10 September 2014 were extended to 30 November 2015 and then again from 30 November 2015 until the next general meeting is held.
4 The plaintiff read affidavits sworn by Ms Tucker on 16 March 2015, 20 January 2016 and 29 January 2016. Ms Tucker is a member of WMYAC as well as a member and director of YAC. She was asked by Michael Woodley, the CEO of YAC, and Mr George Irving, the inhouse counsel for YAC, to leave meetings of YAC directors on the ground that she had a conflict of interest. Ms Tucker did not appear at the hearing of this originating summons. For convenience, I will sometimes refer to the first defendant, YAC, and the second defendants other than Ms Tucker, as the defendants.
5 A meeting, or purported meeting, of directors was held on 16 December 2015. At the meeting resolutions were passed that:
(1) the applications of 46 people named in a table (the Table) contained in the minutes of the meeting be accepted for membership of YAC; and
(2) notice be given as soon as practicable of a special general meeting to be held on 1 February 2016 to consider business including:
(a) the appointment of directors;
(b) amending Rule 4.12 and schedule 2 of YAC's Rule Book to provide that proxies may only be given to and held by members of YAC; and
(c) the directors authorise George Irving (YAC inhouse counsel) to provide the suitable wording for the notice and leave it to his discretion regarding any information necessary to be included or attached with the notice plus any other business he and the YAC CEO deem necessary to be addressed at the meeting.
- I will sometimes refer to the 46 people named in the Table as the New Members.
6 The plaintiff says that the meeting held on 16 December 2015 was not validly convened for two reasons. First, it was not called by a director as required by Rule 5.16. Secondly, reasonable notice was not given to one of the directors, Ms Tucker, as required by Rule 5.16. Furthermore, the plaintiff says that the resolution to the effect that the directors accept the applications of the New Members for membership was put and passed for an improper purpose. The improper purpose is said to be to accept the New Members for the principal purpose of influencing the outcome of the motions to be passed at a general meeting on 1 February 2016 and in particular the election of directors who support the CEO and the directors other than Ms Tucker.
Defendants' case
7 The defendants submit that this matter gives rise to four issues. The first is that Mr Sandy brings his summons in his capacity as a director of, and on behalf of, WMYAC and not in his capacity as a member of YAC and therefore he does not have standing to seek the relief claimed in the originating summons. Secondly, whether YAC has any directors at the present time turns on the proper construction of s 246-25(4) of the CATSI Act. Thirdly, whether the 16 December 2015 meeting was validly convened is a question of fact and turns on whether Lyn Cheedy, the chair of YAC, called the meeting and whether reasonable notice of the meeting was given to Ms Tucker. The fourth issue is whether the plaintiff's allegation of 'branch stacking' to influence the outcome of a general meeting to be held in February 2016 is established by the evidence.
Findings
8 For the reasons which follow I find:
(1) The plaintiff has standing to seek the relief claimed in the originating summons.
(2) On the proper construction of s 246-25(4) of the CATSI Act the second defendants' terms of appointment expired at the end of the general meeting on 30 November 2015 notwithstanding that at that meeting no directors were appointed.
(3) The directors' meeting held on 16 December 2015 was called by a director, Lyn Cheedy.
(4) Reasonable notice of the directors' meeting held on 16 December 2015 was not given to Ms Tucker.
(5) The failure to give reasonable notice of the meeting to Ms Tucker invalidated the meeting.
(6) The resolution at the directors' meeting to accept the applications of the New Members named in the Table for membership of YAC was passed for an improper purpose and is invalid.
9 As a consequence of those findings the current board of YAC, being the second defendants, are not validly appointed and YAC has no validly appointed directors. I will now set out my reasons for those findings.
Standing
10 The plaintiff commenced this proceeding by originating summons in his own name. He is a member of YAC. The defendants accept that as a member of YAC he has standing to seek the relief he seeks in this proceeding. However, the defendants say that in support of a motion for committal of YAC for contempt of court dated 16 February 2016 the plaintiff submitted:
The Originating Motion in this action, whilst brought in Mr Sandy's name, is effectively brought by Mr Sandy in his capacity as a director of WMYAC and on behalf of the WMYAC.
- The defendants say that Mr Sandy brings this proceeding in his capacity as a director of, and on behalf of, WMYAC and in that capacity does not have standing to bring this proceeding or seek the relief which he seeks in this proceeding.
11 The plaintiff commenced this proceeding by originating summons in his name. He does not purport to bring the proceeding in his capacity as a director of, or on behalf of, WMYAC. The motion for contempt was brought in his own name. In the course of submissions in his motion for contempt the plaintiff said that he brought the motion 'effectively' in his capacity as a director of WMYAC and on behalf of the WMYAC. People involved in conflicts often purport to speak or act on behalf of others. The plaintiff may have been motivated to bring this proceeding by his perception of the interests of WMYAC, of which he is a director. The plaintiff may believe that WMYAC, or its members, support his action. However, whilst he may believe that he is 'effectively' pursuing the motion in the interests of and on behalf of WMYAC, he has commenced and pursued this proceeding in his own name. In his affidavit in support of his application he states that he is a member of YAC. He does not say that he has commenced this action as a representative proceeding on behalf of the members of WMYAC. The action has not been brought as a representative action. The plaintiff does not claim to have standing because he is a member of WMYAC. He claims standing as a member of YAC. The plaintiff has standing to seek the relief he seeks in this proceeding.
Expiry of directors' terms
12 Whether the second defendants' terms of appointment expired at the general meeting held on 30 November 2015 or continue until at least the next general meeting turns on the interpretation of s 246-25(4) of the CATSI Act.
Statutory interpretation
13 In Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 455 the High Court was called upon to interpret the term 'the Australian content of programmes' in s 122 of the Broadcasting Services Act 1992 (Cth), which provided for the Australian Broadcasting Authority to make programme standards relevant to broadcasting in Australia. In approaching construction of that broad term, the plurality (McHugh, Gummow, Kirby & Hayne JJ) said:
The duty of a court is to give the words of a statutory provision the meaning that the legislature is taken to have intended them to have. Ordinarily, that meaning (the legal meaning) will correspond with the grammatical meaning of the provision. But not always. The context of the words, the consequences of a literal or grammatical construction, the purpose of the statute or the cannons of construction may require the words of a legislative provision to be read in a way that does not correspond with the literal or grammatical meaning (footnote omitted) [78].
- In recent years the High Court has emphasised the primacy of the text in determining statutory meaning. In Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 27; (2009) 239 CLR 27 the plurality (Hayne, Heydon, Crennan and Kiefel JJ) said:
This court has stated on many occasions that the task of statutory construction must begin with a consideration of the text itself. Historical considerations and extrinsic materials cannot be relied on to displace the clear meaning of the text. The language which has actually been employed in the text of legislation is the surest guide to legislative intention. The meaning of the text may require consideration of the context, which includes the general purpose and policy of a provision, in particular the mischief it is seeking to remedy (footnotes omitted) [47].
14 Section 246-25(4) provides:
If the terms of appointment of all of the directors of an Aboriginal and Torres Strait Islander Corporation expire so that there are no directors appointed at a particular time, the terms are extended until the next general meeting occurring after the expiry of the term of the director whose appointment was last to expire.
- The provision applies if the 'terms of appointment' of all of the directors expire so that there are no directors at a particular time and extends 'the terms' until the next general meeting occurring after the expiry of 'the term' of the director whose appointment was last to expire. Section 246-25(1) and (2) both refer to a director being appointed for a period. Section 249-1(c) provides that a person ceases to be a director if the term of the person's appointment as a director expires. The 'terms' that are extended until the next general meeting by s 246-25(4) are the terms of appointment. The 'terms of appointment' are the terms for which the directors were appointed, not the terms for which they were appointed as extended by s 246-25(4).
15 The language which has actually been employed in the text of s 246-25(4) or the grammatical meaning of the provision is that the 'terms' that are extended are the terms for which the directors were appointed under s 246-15 or s 246-20 or by the provision of the corporation's constitution which replaces those provisions of the CATSI Act in accordance with s 60-5. That interpretation is confirmed by the context and purpose of s 246-25(4).
16 Before considering the context and purpose of s 246-25(4) I will address the submission made by the defendants concerning the meaning of the word 'extend'. The defendants submit that in s 246-25(4) the word 'extend' includes further extend and therefore s 246-25(4) should be construed to permit the extension of terms of appointment more than once. Counsel for the defendants submitted that that interpretation is supported by s 700-1 which provides that 'extend' in relation to a period:
(a) includes further extend; and
(b) has a meaning affected by s 694-50.
17 I do not accept that argument. The definition of 'extend' does not aid in the construction of s 246-25(4). Section 246-25(4) does not confer a power to extend a period. By s 246-25(4) a term of appointment is by operation of the statutory provision extended to the happening of a specified event - the next general meeting.
Context and purpose
18 In Certain Lloyds Underwriters v Cross [2012] HCA 56; (2012) 248 CLR 378 French CJ and Hayne J said at [24] that the context and purpose of a provision are important to its proper construction because, as the plurality said in Project Blue Sky, 'the primary object of statutory construction is to construe the relevant provision so that it is consistent with the language and purpose of all the provisions of the statute'. Their Honours also said:
Determination of the purpose of a statute or of particular provisions in a statute may be based upon an express statement of purpose in the statute itself, inference from its text and structure and, where appropriate, reference to extrinsic materials. The purpose of a statute resides in its text and structure [25].
19 Sometimes it is difficult, if not impossible, to define the purpose of a statutory provision. It sometimes happens that the purpose cannot be defined more precisely than by reference to its immediate function. The purpose thus ascertained does not aid in the construction of the statutory provision as it is a purpose derived from the text itself: Monis v The Queen [2013] HCA 4; (2013) 249 CLR 92 [20] (French CJ).
20 The defendants submit that the purpose of s 246-25(4) is to ensure that a corporation has directors if the terms of those directors have otherwise expired, including by expiry of an extension of the terms. Counsel for the defendants submitted that this purpose is consistent with the broader purposes of the Act, stated in its preamble, as a special measure for the advancement and protection of Aboriginal peoples and Torres Strait Islanders. Counsel also referred to the objects which include 'to provide for the incorporation, operation and regulation of those bodies that it is appropriate for this Act to cover' and to 'provide for the incorporation, operation and regulation of bodies that are incorporated for the purpose of becoming a registered native title body corporate'.
21 Chapter 6, which includes s 246-25(4), deals with internal governance aspects of directors, including their appointment and cessation. Some of these internal governance rules are replaceable, allowing for flexibility in corporate design. Other internal governance rules relating to directors are substantive provisions of the Act. The statement that the Act is a special measure for the advancement and protection of Aboriginal peoples and Torres Strait Islanders and that its objects include to provide for the operation and regulation of those corporations does not aid in the construction of s 246-25(4). The construction advanced by the defendants does not promote the purpose of being a special measure for the advancement and protection of Aboriginal peoples and Torres Strait Islanders or of providing for the operation and regulation of the corporations more than the construction advanced by the plaintiff. Each of the competing constructions provides for the operation and regulation of the corporations, but in a different way.
22 Chapter 6 deals with 'officers'. Part 6-2 deals with the appointment, remuneration and cessation of appointment of directors. Division 246, which contains s 246-1 to s 246-35, provides for 'appointment of directors'.
23 Section 246-5(3) provides that a majority of directors must be members. Section 246-5(4) provides that a majority of directors must not be employees. Section 246-5(5) provides that a person who is performing a chief executive officer function may be a director but cannot chair the directors' meetings. These provisions support the control of the corporation by its members.
24 Section 246-15 provides that a corporation may appoint a person as a director by resolution passed in general meeting. This is a replaceable rule so corporations can chose other means by which directors are appointed subject to the internal governance rules requirement of s 29-20 and s 66-1. Section 246-20(1) provides that directors may appoint a person as a director. Section 246-20(2) allows this to occur even when the total number of directors does not achieve a quorum. This provision assists workability by avoiding the situation, for example, where a number of directors have ceased to be directors leaving the remaining directors unable to call a general meeting to appoint new directors. This is a replaceable rule. Section 246-20(3) provides that if a person is appointed a director by the other directors the corporation must confirm the appointment by resolution at the corporation's next AGM. If the appointment is not confirmed the person ceases to be a director of the corporation at the end of the AGM.
25 Section 246-25 sets out the rules relating to the term of appointment of directors. Section 246-25(1) ensures that founding directors who are appointed for only one year remain as directors until the AGM after their term expires. This is a replaceable rule. Section 246-25(2) provides that directors are not appointed for more than two year terms. This is not a replaceable rule. The revised explanatory memorandum says that this provision supports active member participation. Section 246-25(3) provides for reappointment of directors. This is a replaceable rule.
26 Section 246-25(4) is the provision being considered. I have set out the text earlier. The revised explanatory memorandum says that the provision reduces the consequence if the appointments of all directors have expired before a general meeting can be held to appoint others.
27 Division 249 provides for the resignation, retirement or removal of directors. Section 249-1 provides, amongst other things, that a person ceases to be a director if the term of the person's appointment as a director expires. Section 249-5 provides that a director may resign. Section 249-10 provides that a corporation may by a resolution in general meeting remove a director from office despite anything in the corporation's constitution, or an agreement between the corporation and the director, or an agreement between any or all of the members of the corporation and the director. Section 249-15 provides that the directors may remove a director from office if, but only if, the director fails without reasonable excuse to attend three or more consecutive directors' meetings.
28 The provisions of ch 6, particularly s 246-5(3), s 246-5(4), s 246-5(5), s 246-25(2), s 249-10 and s 249-15, which are all non-replaceable rules, support the control of a corporation by its members. Section 246-25(2) and s 249-10 support a limit on the period for which a person may remain a director without the support of the members. Section 249-15 restrains the power of directors to control the corporation by removing other directors from office.
29 The function, and apparent purpose, of s 246-25(4) is to assist workability by reducing the consequence if the appointments of all directors have expired before a general meeting can be held to appoint others. That is consistent with the natural and ordinary meaning of s 246-25(4) that the term to which a director was appointed by resolution at a general meeting is extended in the circumstances to the next general meeting. That purpose is not advanced by interpreting s 246-25(4) to mean that the term should be extended beyond the next general meeting if no directors are appointed at the next general meeting. That latter construction of s 246-25(4) is inconsistent with the purposes of limiting the term of directors, of restraining the power of directors to control the corporation by removing other directors and of promoting the control of the corporation by its members.
Second defendants have ceased to be directors
30 The second defendants were appointed for a one year term on 10 September 2014. The term of their appointments expired on 10 September 2015. The effect of s 246-25(4) is to extend the term of their appointment to the next general meeting. That general meeting occurred on 30 November 2015. The second defendants ceased to be directors at the expiry of that general meeting.
31 The purported meeting of directors held on 16 December 2015 and the resolutions passed at that meeting are invalid because the person who called the meeting and the persons who attended the meeting ceased to be directors on 30 November 2015. It is therefore strictly unnecessary to consider the remaining issues in this case. However, as they were argued I will set out my findings in relation to those issues.
Directors' meeting was convened by Lyn Cheedy
32 The notice calling the meeting is addressed 'to all YAC board of directors'. It states that the meeting is to take place on 16 December 2015 at Yandina Building starting at 10.00 am and contains an agenda. The notice finishes with 'regards Lyn Cheedy, YAC Chairperson'. The words 'Lyn Cheedy' are typed, not signed. The defendants' case that the meeting was called by Ms Cheedy depends on the evidence of Ms Cheedy and YAC's CEO, Michael Woodley.
33 The evidence of Ms Cheedy and Mr Woodley was adduced by the defendants in a most unsatisfactory way. Directions were given for the evidence to be put on by affidavit. In response to those directions the defendants filed affidavits by Mr Woodley and Mr Davies, its General Manager (Cultural, Heritage and Religion). The only relevant evidence in Mr Davies' affidavit concerns the practice typically followed by himself and Mr Woodley in relation to the calling of a directors' meeting. Mr Woodley swore an affidavit on 5 February 2016 in which he described the process typically followed in calling a directors' meeting. He said that the process for calling directors' meetings thus described is the process that was followed leading up to the directors' meeting which was held on 16 December 2015. He said that after consultation with Lyn Cheedy, and acting on Lyn Cheedy's instructions, he prepared the notice.
34 The plaintiff's solicitors gave notice that they objected to the admissibility of Mr Woodley's affidavit. Counsel for the defendants conceded that the relevant paragraphs of the affidavit were inadmissible and sought leave to lead oral evidence from Mr Woodley. I directed that the defendants give notice to the plaintiff's solicitors of the evidence that the defendants intended to adduce orally from Mr Woodley. The defendants' solicitors gave to the plaintiff's solicitors notice of the substance of the evidence that it was proposed would be adduced from Mr Woodley. The substance of the evidence to be adduced is relevantly:
(a) Save in one respect (see subpar (d) below) he does not recall the specific discussion that took place about calling the directors meeting of 16 December 2015.
…
(d) On this particular occasion, Mr Woodley called Lyn Cheedy on the telephone and did not speak with her face-to-face. That is the only specific feature of this particular occasion Mr Woodley can recall.
- The remainder of the substance of evidence concerned what the chairperson and Mr Woodley normally do.
35 Mr Woodley gave oral evidence the following day. Mr Woodley said that he recalled calling Ms Cheedy, and gave evidence of the content of that conversation. Mr Woodley said that he then drafted the agenda and sent a draft to Mr Irving and Mr Davies for their comments. In cross-examination Mr Woodley said that after he had received comments from Mr Irving and Mr Davies he telephone Ms Cheedy and gave evidence of the contents of that conversation.
36 When it was put to him in cross-examination that his affidavit contained very little of the evidence he had given orally Mr Woodley said:
I thought that being here would give the opportunity to further elaborate on the point that I have raised in the affidavit.
- When it was put to him that he had not given instructions to the defendants' solicitors the previous evening that he had had two telephone conversations with Ms Cheedy he said:
Well, I don't know why I didn't say that yesterday.
When it was put to him that he had a chance the previous evening to detail his present recollection he responded:
Well, first and foremost, it was a long day. Then you have to some sort of appreciation of what I deal with on a day to day basis.
When he was later asked why his recollection of his discussions with Ms Cheedy was not included in the defendants' solicitors letter setting out his recollection he said:
Well, that's because I can't give you a definite commitment in terms of the conversation that I had with the chairperson.
38 The defendants did not file or serve an affidavit from Ms Cheedy in accordance with the pretrial directions. On the eve of the trial, the defendants produced an affidavit sworn by Ms Cheedy on 18 February 2016. In that affidavit Ms Cheedy swore that on or about 7 December 2015 she and Mr Woodley talked about calling a directors' meeting, she did not remember what Mr Woodley said to her exactly but he said words to the effect that there were some things that needed to be dealt with by the directors and asked her whether they could get a directors' meeting going so that the directors could discuss them. She swore that she did not remember her exact words to Mr Woodley but she replied with words to the effect that if it needed to be dealt with at a director level they should go ahead and have a directors' meeting. Ms Cheedy said that when they discussed calling a directors' meeting Mr Woodley normally suggests a date and asks her if she wants him to organise notifying the other directors of the meeting and she usually replies to say the date is okay and agrees to him organising to notify the other directors. She normally asks him to book the venue and that is what happened when they discussed calling a directors' meeting for 16 December 2015.
39 The plaintiff objected to the relevant evidence in Ms Cheedy's affidavit. The defendants did not press the admission of that evidence and instead sought leave to lead oral evidence from Ms Cheedy. In accordance with my direction the defendants' solicitors gave to the plaintiff's solicitors written notice of the evidence intended to be adduced from Ms Cheedy. Ms Cheedy gave oral evidence. Ms Cheedy's evidence about the discussion with Mr Woodley about calling a directors' meeting is different from the evidence in her affidavit and more comprehensive than the evidence in the notice to the plaintiff's solicitors. In her oral evidence Ms Cheedy said that she has a specific recollection of the discussions with Mr Woodley about calling the meeting. She recalled some of what they discussed. She said that she asked Mr Woodley to arrange the calling of a meeting with Mr Davies and to draw up an agenda. Ms Cheedy said that Mr Woodley called her a second time, in effect to confirm the agenda and the calling of the meeting. I accept Ms Cheedy's oral evidence notwithstanding that her oral evidence considerably added to the statements in her affidavit.
40 The notice of meeting stated, in effect, that it was called by Ms Cheedy. A meeting is called by a person if that person authorises or requests a second person to draft the notice and send it out in the name of the first person. The evidence of Ms Cheedy satisfies me that that is what occurred on this occasion. The meeting was called by Ms Cheedy.
Reasonable notice
41 The notice of meeting gives notice of a meeting to be held at 10.00 am on 16 December 2015 at Yaandina building, Roebourne. At 7.21 am on Friday, 11 December 2015 Mr Davies sent an email to directors and others but not Ms Tucker, stating:
A YAC directors meeting is scheduled for next Wednesday 16/12/15 to be held at the Yaandina office commencing at 10.00 am.
- The email attached a copy of the notice of meeting. At 4.25 pm that same day Mr Davies sent a text message to nine YAC directors and six other recipients notifying them of the scheduled 16 December directors' meeting. He did not send a text message to Ms Tucker. Mr Davies explanation is that in, or about, November 2015 he replaced his mobile telephone and as a result he lost Ms Tucker's mobile telephone number and was not able to text Ms Tucker the details of the 16 December meeting as he had done on several previous occasions. On the same day, Friday, 11 December, Mr Davies sent a copy of the notice by post to Ms Tucker's address at 5 Mile Community, Roebourne. Mr Davies posted the letter at Karratha. It is common ground that mail addressed to 5 Mile Community is not delivered to 5 Mile Community. It is retained at the Roebourne Post Office for collection by the addressee. Ms Tucker did not receive the letter, or know that it had been sent, before the meeting on 16 December and did not attend the meeting.
42 Rule 5.16 of the YAC Rule Book provides that a director can call a meeting by giving reasonable notice to all the other directors. Thus, the question is whether notice posted to Ms Tucker in the circumstances I have outlined is reasonable notice.
43 Provisions in the Corporations Act 2011 (Cth) and its predecessors and in United Kingdom companies legislation providing that a directors' meeting may be called by a director giving reasonable notice to other directors have been considered in many authorities. Those authorities are helpful in considering what is reasonable notice under YAC Rule 5.16. In determining what is reasonable notice the relevant factors include the nature of the company and the nature of the business to be transacted: Re Keneally as administrator of Australia Blue Mountain International Cultural & Tourist Group Pty Ltd (admin appointed) [2015] NSWSC 937; (2015) 107 ACSR 172 [57] (Black J). The usual practice of the directors is an important factor: Toole v Flexi Hire Pty Ltd (1991) 6 ACSR 455 (461) (Demack J). A shorter period of notice will be reasonable where the circumstances require a decision to be made urgently: Ashrafinia v Ashrafinia [2012] NSWSC 500; Sliteris v Ljubic [2014] NSWSC 1632 [24] (Black J).
44 I find that reasonable notice was not given to Ms Tucker. Ms Cheedy said that the usual practice was to give seven days' notice of a board meeting. Ms Tucker would have received at most two days' notice if she had collected the letter from the Roebourne Post Office as soon as it was received at the post office. Ms Cheedy entrusted or delegated to Mr Davies the task of giving notice of the meeting to the directors. Mr Davies knew that mail in Roebourne is not delivered to 5 Mile Creek and Ms Cheedy would have to go into the Roebourne Post Office to collect the mail. There was no urgency about the directors' meeting. The agenda listed five items. None of them were urgent. There is no reason why seven days' notice of the meeting could not have been given to all of the directors.
Effect of inadequate notice
45 The failure to give reasonable notice of the directors' meeting is an irregularity. However, the defendants say that it should be characterised as a procedural and not substantive irregularity and can be rectified by the operation of s 576-15 of the CATSI Act. Section 576-15(2) provides:
A proceeding under this Act is not invalidated because of any procedural irregularity unless the Court:
(a) is of the opinion that the irregularity has caused or may cause substantial injustice that cannot be remedied by any order of the Court; and
(b) by order declares the proceeding to be invalid.
46 In Re Sidex Australia Pty Ltd (Receiver and Manager Appointed); Sipad Holdings DDPO v Popovic (1995) 18 ACSR 436, 449 Lehane J suggested that a procedural irregularity may arise where the parties have attempted to do something which the Act permits but have failed to do it effectively because of a procedural failure or a omission but not where the parties have tried to do something which the Act does not authorise. The Court of Appeal took the same approach in Smolarek v Liwszyc [2006] WASCA 50; (2006) 32 WAR 129 [59]. In Cordiant Communications (Australia) Pty Ltd v The Communications Group Holdings Pty Ltd [2005] NSWSC 1005; (2005) 55 ACSR 185 Palmer J addressed the issue of what is a substantive irregularity as distinct from a procedural irregularity. His Honour referred to the cases concerning the distinction between a substantive law or rule and a procedural law or rule and in particular dicta from the joint judgment in John Pfeiffer Pty Ltd v Rogerson [2000] HCA 36; (2000) 203 CLR 503, 543 - 544 and continued:
In the light of this observation and of the decisions in Industrial Equity, ANZ Nominees, Scallion and Link Agricultural I think that the following general propositions may be formulated for the purposes of the application of Corporations Act s 1322:
- What is a 'procedural irregularity' will be ascertained by first determining what is 'the thing to be done' which the procedure is to regulate;
- If there is an irregularity which changes the substance of 'the thing to be done', the irregularity will be substantive;
- If the irregularity merely departs from the prescribed manner in which the thing is to be done without changing the substance of the thing, the irregularity is procedural [103].
- The application of such a proposition in any particular case will depend upon the starting point, that is defining 'the thing to be done'. Different answers to the question will be found depending upon how broadly or narrowly one defines 'the thing to be done'. In this case, if one defines 'the thing to be done' as holding a directors' meeting, one could say that an irregularity which denies a director reasonable notice of the meeting and causes the director not to attend the meeting has not changed the substance of the thing to be done; a meeting has still been held - what has occurred is merely an irregularity in the procedure for calling the meeting. On the other hand, if one defines the thing to be done more narrowly, for example giving reasonable notice to all the directors, then to not give reasonable notice to one director changes the substance of the thing to be done so that the irregularity is substantive and not procedural.
47 Rule 5.11 provides that the business of the corporation is to be managed by, or under the direction of, directors and the directors may exercise all of the powers of the corporation except any that the CATSI Act or the Rule Book requires the corporation to exercise in general meeting. There is a meaningful distinction between substantive restrictions on the directors' powers, for example not to exercise the powers of the corporation that the CATSI Act or Rule Book requires the corporation to exercise in general meeting, and procedural restrictions or requirements on the exercise of the directors' powers. In my opinion the procedure for giving notice of a board meeting is a procedural restriction. The failure to give reasonable notice to Ms Tucker is a procedural irregularity.
48 Section 176-15 provides that a proceeding under this Act, which includes a board of directors' meeting, is not invalidated because of any procedural irregularity unless the court is of the opinion that the irregularity has caused or may cause substantial injustice that cannot be remedied by any order of the court and by order declares the proceeding to be invalid. I am of the opinion that the irregularity has caused or may cause substantial injustice that cannot be remedied by any order of the court. The failure to give reasonable notice to Ms Tucker caused her not to attend the meeting. Rule 5.20 provides that decisions of the directors shall be made in accordance with r 14 and r 15. Rule 14 provides for the decision-making process in matters that do not affect native title rights or interests. Rule 14.1 provides that matters shall be decided by the directors by consensus. Consensus is defined by r 22 to mean:
General agreement among the members present as to a particular matter whereby differing points of view, if any, have been considered and reconciled and any decision is generally agreed upon in accordance with law and custom. For the avoidance of doubt, a decision made by consensus in accordance with law and custom, does not necessarily require that the decision be agreed upon unanimously.
- The rule requiring decision-making by consensus was considered by Kenneth Martin J in Adams v Yindjibarndi Aboriginal Corporation RNTBC [2014] WASC 467. His Honour observed that there is an evident lack of clarity from the definition over what might actually ever constitute a consensus. The lack of clarity comes from at least two sources. One is the explicit statement in the last sentence, that there does not need to be unanimity. Second is the elliptical reference in the definition to differences being considered and reconciled and any decision generally agreed upon 'in accordance with law and customs'. 'Law and customs' is also defined in the Rule Book to mean:
The body of traditions, laws, customs and beliefs recognised and held in common by the common law holders, and includes those traditions, laws, customs and beliefs exercised in relation to a particular area of land and waters, traditionally accessed resources, and persons.
Kenneth Martin J said that in the content of 'law and custom' so defined is porous. His Honour said:
In a general sense, one can see a generalised wisdom in seeking, where possible, a consensus for the decisions of corporate boards. It is often said that the best board chairs always do strive to govern by a broad based consensus, rather than by formally demanding divisions by director votes upon every issue.
No sensible person would want to deprecate such a wholesome notion of consensus in a general sense. Seeking consensus in directors board meetings, in terms of evaluating the merits or demerits of proposals for factions by the board of directors of a corporation is one thing.
But attempting to apply the notion of 'consensus' in the very different context of a general meeting of some 200 assembled meeting voters, and with some members exercising proxy votes, or there being other persons attending who act as proxies, presents as a totally different proposition in terms of workability [94] - [96].
Resolutions made for improper purpose
50 The plaintiff says that the resolutions passed at the meeting on 16 December 2015 to accept the New Members as members was made for the improper purpose of creating a majority of members to appoint the second defendants other than Ms Tucker as directors.
51 The directors of YAC are in a fiduciary relationship with it and may not exercise their powers for any purpose foreign to those powers. Section 265-5 of the CATSI Act provides that a director must exercise his or her powers and discharge his or her duties in good faith in the best interests of the corporation and for a proper purpose. Section 265-5 mirrors the good faith and proper purpose obligations in s 181 of the Corporations Act. Neither the CATSI Act nor the Corporations Act contain any definition of 'proper purpose'. However, there is substantial case law which makes use of the 'proper purpose' standard.
52 In Howard Smith Ltd v Ampol Petroleum Ltd [1974] AC 821, directors caused shares to be issued at a time when the company was embroiled in a hostile takeover bid by Ampol. The directors did not want Ampol to buy the shares as Howard Smith had bettered the terms for takeover by offering employment to the directors even in the future. The directors issued shares to Howard Smith which blocked Ampol's takeover bid and facilitated that of Howard Smith. The Privy Council held that although the directors had acted honestly and had power to make the allotment, to alter a majority shareholding was to interfere with that element of the company's constitution which was separate from and set against the directors' powers and, accordingly, it was unconstitutional for the directors to use their fiduciary powers over the shares in the company for the purpose of destroying an existing majority or creating a new majority; and that, since the directors' primary object for the allotment of shares was to alter the majority shareholding, the directors had improperly exercised their powers and the allotment was invalid.
53 In Whitehouse v Carlton Hotel Pty Ltd [1987] HCA 11; (1987) 162 CLR 285, a director admitted issuing shares in an attempt to influence control. The court accepted that the director had been motivated by a desire to do what he believed to be in the best interests of the corporation. The majority in the High Court held that:
[W]hat was conferred upon Mr Whitehouse was the power to allot shares … and the cases clearly establish that a purpose of manipulating the voting power of shareholders is, at least ordinarily, foreign to such a power (292).
- As to Mr Whitehouse's assertion that he acted in what he honestly believed was in the best interests of the company, the court held:
[I]t is simply not to the point that Mr Whitehouse believed that it was in the overall interests of the company that the voting power attaching to the shares held by his former wife be diluted so as to ensure that the control of the company in the period after his death would be in the hands of those whom he favoured. That belief was an explanation of, or reason for the allotment for the impermissible purpose. It did not constitute a competing permissible purpose (293).
The onus, of course, lies on the plaintiffs to prove that [the director] used the power for an ulterior purpose; that is to say to prove, in the words of the present Chief Justice in Mills v Mills: 'The substantial object the accomplishment of which formed the real ground' (445).
- However, the impermissible purpose need not be the dominant purpose. It is sufficient if it is causative. In Whitehouse v Carlton Hotel Pty Ltd, Mason, Deanne and Dawson JJ said:
As a matter of logic and principle, the preferable view would seem to be that, regardless of whether the impermissible purpose was the dominant one or but one of a number of significantly contributing causes, the allotment will be invalidated if the impermissible purpose was causative in the sense that, but for its presence, 'the power would not have been exercised' (294).
56 As I have said, the plaintiff says that the directors passed the resolutions to accept the New Members as members and to call a general meeting to appoint directors. This was for the improper purpose of creating a new majority to appoint the second defendants other than Ms Tucker, or those who supported them, as directors. The plaintiff relies in part on the circumstances leading to the meeting on 16 December 2015. At an extraordinary general meeting of YAC on 10 November 2014 motions were put to remove the incumbent directors other than Ms Tucker and appoint in their place persons who are members of WMYAC. The motions were supported by a majority but not the required special majority and so were lost. On 30 November 2015 at an annual general meeting for the years 2014 and 2015 a motion was put that the incumbent directors other than Ms Tucker be appointed as directors. There were 156 votes in favour and 100 votes against (60.9% in favour). The motion was declared not passed by the requisite special majority. This was followed by a second motion that 12 persons who were members of WMYAC be appointed. There were 98 votes in favour and 156 votes against (38.6% in favour). The motion was declared not passed. I observe that 46 New Members would be a significant addition to the YAC membership although the addition of the New Members to the majority block voting on 30 November 2015 would not be sufficient to achieve a 75% majority unless some of the minority voters changed sides or failed to vote.
57 One hundred fifty four Yindjibarndi people who support WMYAC have applied for membership of YAC since 2012. Of those, 61 applications have been rejected and 81 have not yet been dealt with by the board of directors. Twelve applications have been approved and they are among the New Members of YAC approved at the 16 December 2015 meeting. The plaintiff gave uncontradicted evidence that based on how their family members voted at the 2014/2015 YAC AGM those people may now support the CEO Mr Woodley and the incumbent directors other than Ms Tucker. A mediation involving an anthropologist and four Yindjibarndi elders was conducted on 4 August 2014 before Justice Chaney in Karratha to consider and determine 125 outstanding YAC membership applications. The outcome of the mediation was that each of the applicants was classified as yes, no or undecided.
58 The 16 December 2015 meeting appears to have been arranged more hastily than usual. Only five days' notice was given to directors, other than Ms Tucker, when usually seven days' notice is given. There were 11 items of business. Items 1 and 2 were recording attendances and apologies. Item 3 was approving the previous minutes. Item 4 was business arising out of the minutes and consisted principally of noting the resignation of certain YAC members. Item 6 was the presentation by KPMG of financial accounts from 1 July 2015 to 16 December 2015. The minutes record simply that KPMG presented the accounts and the directors resolved to agree and authorise expenditure in accordance with the accounts. Item 9 was an update on legal actions and matters. There were no resolutions passed in relation to that item. Item 10 is a discussion of proposed membership changes at the Ngarluma Yindjibarndi Foundation Ltd (NYFL) whereby NYFL may request YAC to assist them with identifying the Yindjibarndi members. The minutes record simply that it was resolved that the YAC directors agree to assist NYFL to identify the Yindjibarndi members if requested by NYFL to do so. Item 11 was general business. There was no general business. The three substantive items were items 5, 7 and 8. Item 5 was the replacement of YAC director Charmaine Adams. The minutes record that a resolution to appoint Kevin Guinness to the casual director position was passed. Item 7 is the item concerning YAC membership. The minutes record:
i. The YAC directors considered the 40 undecided membership applications which was the outcome of the Deed of Settlement and detailed in the YAC resolution dated 11 August 2014 (resolution attached to these minutes).
ii. The YAC directors considered the member applications presented and listed in the spreadsheet (spreadsheet attached to these minutes).
iii. Acting upon, and taking into account, points i and ii above, the YAC directors decided to accept the people listed below as YAC members based upon clauses 3.1 and 3.2 of the YAC Rule Book including their knowledge of that person's genealogy - see spreadsheet for further details).
- The 'people listed below' are the New Members set out in the Table.
59 Mr Sandy's unchallenged evidence is that the New Members are persons within the Yindjibarndi community supportive of Mr Woodley and some of the purported directors of YAC. Thus, notwithstanding that membership applications that have been pending for some time, and were the subject of the mediation in August 2014, were not resolved at the directors' meeting, the directors resolved to accept the membership applications of the New Members.
60 The only directors who gave evidence were Lyn Cheedy and Middleton Cheedy. Lyn Cheedy said that Mr Woodley telephoned her with a view to calling a directors' meeting. Ms Cheedy gave the following evidence about that telephone conversation:
Q: He said 'We need to get the directors in to chat about some matters - some legal matters?'
A: Yes. Some legal matters and some other issues.
Q: See you had just had the annual general meeting on 30 November.
A: Yes.
…
Q. And, once again, that meeting had the problem of no-one within the organisation being able to get 75% of the vote?
A: Yes.
Q: So another long meeting - there have been two long meetings inclusive because of the voting split in the community?
A: Yes.
Q: Did he mention that that was an issue that you needed to address?
A: I think - yes. I think one of those things was …
Q: Did he say that what he wanted to do was to call a special general meeting to - so everyone could vote on the directors and they could be - clear their way forward?
A: Yes, he did.
…
Q: Before calling a meeting you would need to go through and check the membership?
A: I think we've done that. Yes. Well, the membership had been deferred from August 2014 after a mediation with Chaney J in Karratha.
Q: Yes. That was in August 2014. We're now over a year later and nothing had been done about membership for over a year.
A: Nothing had been done over a year because of - we have had Supreme Court actions in the court.
- Later, Ms Cheedy was cross-examined about the purpose of the meeting on 16 December:
Q: Really, the purpose of the meeting on the 16th was to go along with Mr Woodley's suggestion that you call a special general meeting of the members to be held in the early part of 2016, to vote again on just a few issue of the board, to break the deadlock that had been dividing the community. Isn't that right?
A: It wasn't his suggestion. If spoken to - it's a decision that has been made by all of the board that sits on there.
Q: Yes, well, it was proposed by him, wasn't it?
A: Yes. Yes, it's proposed.
Q: And the idea of adding members - new members, was to ensure that you could break the deadlock of nobody having - neither camp having 75% of the votes. That was the purpose of the meeting, wasn't it?
A: And there was some other issues, I think that - yes. Yes. Stop outsiders being proxy holders.
Ms Cheedy rejected the proposition put to her that the 46 membership applications who were accepted were thought by her to support her and the board. She said 'It's not because we accept people to get over the line for something'.
61 Middleton Cheedy was not involved in calling the meeting of 16 December 2015. He attended the meeting and gave evidence of what occurred at the meeting. His cross-examination concluded as follows:
Q: Really, it was the case that you went along to this meeting on 16 December 2015 to add more members to try and break the deadlock that had caused all the problems in the last two general meetings, wasn't it; you were adding people as members. If they applied, you were going to add them?
A: Yes, that was the trouble, because we were sick of this fighting.
62 Counsel for the defendants submitted that Middleton Cheedy's evidence should not be taken at face value for cultural reasons. I observed Mr Cheedy carefully whilst he was giving his evidence. He was not intimidated by the court process. He did not concur gratuitously, that is assent to every proposition put to him even when he did not agree. When he did not agree with a proposition put to him he said so. His answer to the last question in cross-examination, which I have set out above, was not a case of gratuitous concurrence or a result of intimidation. It was his evidence freely given and I accept it.
63 I find that the directors passed the membership resolution and the special general meeting resolution for the purpose of convening a special general meeting early in the new year and adding new members who they believed would support the incumbent directors other than Ms Tucker in voting to appoint the incumbent directors other than Ms Tucker as directors at the special general meeting. I make that finding on the whole of the evidence but having special regard to the following. First, at the instigation of Mr Woodley, Ms Cheedy called the meeting to address the problem of no-one within the corporation having been able to get 75% of the vote at the two previous general meetings and to call a special general meeting to clear their way forward. Secondly, the principal business at the meeting was appointing new members and convening a special general meeting. Thirdly, the directors' meeting was convened more hastily than usual when there was no urgency other than resolving the appointment of directors. Fourthly, the directors approved only the applications of the New Members, who are believed to be supporters of Mr Woodley and the incumbent directors, and did not consider the other membership applications that had been outstanding since at least 2014. Fifthly, Middleton Cheedy, whose evidence I accept, conceded that the directors went along to the directors' meeting to add more members to try and break the deadlock that had caused all the problems in the last two general meetings. Sixthly, apart from Lyn Cheedy and Middleton Cheedy none of the other directors who attended the meeting gave evidence. The unexplained failure by the defendants to call the other directors as witnesses leads to the inference that the uncalled evidence would not have assisted the defendants' case.
Appointment of receiver
64 I have found that the second defendants' appointments as directors have ceased and hence YAC currently has no directors. The plaintiff submitted that in those circumstances the court should appoint a receiver over the property of YAC with such powers as the court considers appropriate. The plaintiff submitted that those powers should include the power to call a general meeting and to admit and remove persons as members of the corporation.
65 Supreme Court Act 1935 (WA) s 25(9) empowers the court to appoint a receiver in all cases in which it shall appear to the court to be just or convenient to do so and any such order may be made either unconditionally or upon such terms and conditions as the court think just. The words 'just or convenient' mean where it is practicable and the interests of justice require it. The court's discretionary power to appoint a receiver is construed broadly and it must be exercised with a view to all the circumstances of the case. Before the court exercises the power to appoint a receiver it should be persuaded that there is no reasonable or satisfactory alternative: Re Avonwood Homes Pty Ltd [2000] VSC 216 [8] (Mandie J).
66 Chapter 11 of the CATSI Act provides for corporations to be placed under special administration and a special administrator appointed. Section 487-1 empowers the Registrar to put a corporation under special administration. The grounds for determining that a corporation is to be under special administration are set out in s 487-5. At least two of those grounds potentially apply to YAC. One is that disputes between the corporation's members or the corporation's members and the corporation's officers are interfering with the proper conduct of the corporation's affairs. Another is that the appointment of the special administrator is otherwise required in the interests of the members of the corporation or in the public interest. Both of those grounds potentially apply in circumstances, as here, where disputes between the corporation's members have resulted in a deadlock at general meetings which has prevented the appointment of directors and the appointment of directors has ceased so that the corporation currently has no directors. The revised explanatory memorandum to the Corporations (Aboriginal and Torres Strait Islander) Bill 2006 stated that the term 'special' is used to distinguish administration under the CATSI Act from administration under the Corporations Act and also relates to the application of the CATSI Act as a special measure for the advancement and protection of Aboriginal people and Torres Strait Islanders. The revised explanatory memorandum said that placing a corporation under special administration, appointing a special administrator and conducting a special administration will be informed by the objects and aims of the CATSI Act as opposed to an administration under the Corporations Act which is principally driven by the interests of creditors and the certainty of commercial transactions. Section 487-10 allows the corporation to show cause why the corporation should not be placed under special administration. However, s 487-10(2) allows the show cause notice procedure to be dispensed with in urgent circumstances, one or more of which potentially apply in this case.
67 Section 499-5 sets out the powers of a special administrator. Those powers are wide enough to permit the special administrator to call a general meeting of members. Furthermore, the special administrator may admit a person as a member of the corporation or remove a person as a member of a corporation. Such a power would permit a special administrator to resolve the membership of the corporation before a general meeting. Section 508-5 provides for the election of directors to assume control of the corporation's affairs immediately after the corporation ceases to be under special administration.
68 It is not appropriate for the court to exercise the power to appoint a receiver at this time. The Parliament has made provision in the CATSI Act for dealing with corporations that have become dysfunctional because of disputes between members or, as here, where the corporation has ceased to have directors and is unable to appoint new directors. The methods for dealing with such a situation that have been made available by the Parliament should not be disregarded and the court should not use it powers to appoint a receiver when the method of dealing with the situation provided for by the CATSI Act is available. For that reason I am not persuaded that it is just and convenient to appoint a receiver.
69 The plaintiff should give notice to the Registrar of Aboriginal and Torres Strait Islander Corporations by delivering to the Registrar a copy of these reasons for decision and the orders that are made to give effect to them. I will not dismiss the application for a receiver. I will adjourn the plaintiff's application for the appointment of a receiver so as to enable notice to be given to the Registrar and to give the Registrar a reasonable opportunity to determine whether to appoint a special administrator or to take some other action to deal with the circumstance that YAC has no directors.
Conclusion
70 There should be declarations to the effect that the second defendants have ceased to be directors of YAC, that the purported directors' meeting held on 16 December 2015 was not a valid meeting and that the resolutions purportedly carried at the meeting held on 16 December 2015 are invalid and of no effect. The plaintiff should deliver a copy of these reasons for decision and a copy of the orders to give effect to them to the Registrar. The plaintiff's application for a receiver should be adjourned to give the Registrar an opportunity to consider whether to appoint a special administrator or take some other action in relation to YAC.
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