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Australian Indigenous Law Reporter |
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New South Wales Supreme Court (Barrett J)
3 October 2006
Aboriginal land council constituted under state law — functions and powers of Aboriginal Land councils constituted under the Aboriginal Land Rights Act 1983 (NSW) — corporate to transfer funds to a trust — whether transfers were inconsistent with the scheme of the Aboriginal Land Rights Act 1983 (NSW) — whether transfers were for improper purposes — whether the transfers were a corporate act in the absence of a proper corporate decision — whether trust created by a local Aboriginal land council is a charitable trust — validity of decision to appoint administrators
Darkinjung Local Aboriginal Land Council (‘DLALC’) is a land council constituted under s 50 of the Aboriginal Land Rights Act 1983 (NSW) (‘ALR Act’). In 2002, DLALC sold land, yielding $42m. It transferred $25m of this money to a registered company, Darkinjung Pty Ltd (‘DPL’), a trust established by DLALC. In purported execution of the trust, DPL expended part of the money received in funding five companies. DLALC is the sole shareholder of each of these companies, except for one, CattleCo, of which 25 per cent is owned by an unrelated primary production entity. On 2 May 2006, an administrator of DLALC was appointed by the Aboriginal Services Minister. Around 13 May 2006, three of the companies funded by DPL appointed administrators under Pt 5.3A of the Corporations Act.
DLALC’s administrator attacked the transfer of funds by DLALC to DPL on the following grounds: that DLALC, as a creature of the ALR Act, had no power to transfer funds to DPL; that each transfer was inconsistent with the scheme of the ALR Act and must be deemed unauthorised; that the transfers were made for improper purposes; and that any transfer of funds was not a corporate act because DLALC never made a decision to transfer the funds.
1. The statement of objects of a local Aboriginal land council in s 51 of the ALR Act is only one of several factors to be taken into account in determining the scope of the council’s permitted activities. Also relevant is the statement of functions in s 51 of the ALR Act, as well as provisions about powers and the expenditure of money: [95].
2. Under the ALR Act, a local Aboriginal land council may only perform s 52 functions in furtherance of a s 51 object. Additionally, the council may only pursue a s 51 object providing it does not exceed its s 52 functions: [96]. Establishing a trust fund dedicated to the welfare of Aboriginal persons in DLALC’s area and other persons who are members of DLALC was within DLALC’s s 51 objects: [108].
3. However, s 52(1)(m) creates a function of promoting the protection of Aboriginal culture and the heritage of Aboriginal persons in DLALC’s area. Transferring funds to DPL was beyond that function, since the funds, at DPL’s discretion, need not have been applied exclusively for Aboriginal culture, heritage or persons: [110].
4. Similarly, s 52(1)(k) creates a function of protecting the interests of Aboriginal people in its area in relation to the acquisition, management, use, control and disposal of land. The transfers were beyond this function since there was no guarantee the transferred funds would be applied for that purpose: [111].
5. Section 52(1)(g)(ii) probably allows the acquisition, establishment and operation of enterprises wholly owned, controlled and managed by the local Aboriginal land council. The council could give financial assistance to such an enterprise: [114]. However, the transfer of funds by DLALC to DPL was merely a transfer of funds; it was not a step in the acquisition, establishment or operation of any of the enterprises which DPL funded: [114]–[116].
6. Notwithstanding the intentions of the decision-makers, the effect of the transfers of funds by DLALC to DPL were to put those funds beyond the controls and decision-making regimes to which Parliament intended they should be subject. Therefore, the transfers were an impermissible delegation by DLALC of its statutory duties and the transfers were not authorised by law: [135].
7. If the Charitable Trusts Act had applied, then the application of trust property to any non-charitable purposes would not have been allowed, with the consequence that the trust was valid to the extent of the charitable objects: [184]–[185], following Dareton Local Aboriginal Land Council v Wentworth Council (1995) 89 LGERA 120. However, the Charitable Trusts Act 1993 has no application, since establishing a profit-making undertaking would not be charitable.
8. The court may declare that the decisions of appointing administrators were invalid even though the directors of the companies currently under administration are not parties: [237]. This is because the directors will not face criminal sanctions and are not bound by any findings in the present proceedings: [237].
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107. The question to be addressed by reference to the s.51 objects and the s.52 functions is therefore whether DLALC acted within the scope of its statutory authority in transferring money to the trustee of a purpose trust having purposes corresponding, either wholly or in certain respects, with the statutory functions of DLALC.
108. It may be said at once that augmenting of a trust fund dedicated to the welfare of Aboriginal persons within DLALC’s area and other persons who are members of DLALC was something that fell within DLALC’s s.51 objects. Those objects do not distinguish among means of acting to improve, protect and foster the best interests of such persons. But, as I have said, pursuit of the s.51 objects may only be undertaken by means of performance of the s.52 functions. It is therefore necessary to identify which of the s.52 functions were performed by means of DLALC’s payments to DPL.
109. It is the contention of DPL that the payments were made to it by DLALC in exercise of one or more of the s.52(1)(g)(ii) function, the s.52 (1)(k) function and the s.52(1)(m) function. I shall consider these in reverse order.
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110. The question posed by s.52(1)(m) is whether each transfer of funds by DLALC to DPL entailed performance by DLALC of a function of promoting the protection of Aboriginal culture and the heritage of Aboriginal persons in DLALC’s area. I can see no basis on which an affirmative answer can be given to that question. In the hands of DPL as trustee of the Trust, the funds received from DLALC might, at DPL’s discretion, have been applied in various ways. They might possibly have been applied in promoting the protection of Aboriginal culture and the heritage of Aboriginal persons in DLALC’s area (although, in saying that, I do not mean to state a conclusion as to the charitable character of any such purpose). They might have been applied in other ways, depending entirely on decisions made by DPL. While it is possible to argue that funds applicable for the advancement and benefit of a particular person are properly applied if subjected to new trusts beneficial to that person (see, for example, Pilkington v Inland Revenue Commissioners [1964] AC 612), any such conclusion would be available here only if the trusts concerned were such that trust moneys had to be applied, without the exercise of any discretion, in ways exclusively directed towards the promotion and protection of Aboriginal culture and the heritage of Aboriginal persons in DLALC’s area. Only then would it be possible to characterise the payment of the funds to the trustee as an exercise of the function of DLALC concerned with those particular matters. We are not concerned here with broad concepts such as advancement and benefit. The statutory function pays attention to particularly defined matters of protection and promotion, so that it is necessary to see some clear and direct connection between the decision to act in performance of the function and an identifiable consequence in terms of such matters. There was no such clear and direct connection between any of the payments by DLALC and DPL and any identified matter concerning Aboriginal culture and heritage.
111. Reliance is next placed on s.52(1)(k) and DLALC’s function of protecting the interests of Aboriginal people in its area in relation to the acquisition, management, use, control and disposal of land. Again, there was no clear and direct connection between any of the payments made by DLALC to DPL and anything involving the protection of the relevant interests. There was, as in the case just discussed, nothing at all to ensure that the transferred moneys would be applied for any such purpose. The conclusion must be the same as in relation to s.52(1)(m).
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118. I do not accept that the making of the several payments by DLALC involved expenditure by DLALC in the performance of any of the functions referred to in ss.52(1)(m), 52(1)(k) and 52(1)(g)(ii). Regardless of the expectations that DLALC may have had as to how DPL would act, the reality was that, in parting with its money, it relinquished both ownership of the money and the power to control its application. In doing so, it could in no way be said to be exercising any of the functions mentioned. I consider irrelevant to this part of the inquiry the question whether the purposes towards which DPL purportedly expended funds received from DLALC were valid charitable purposes.
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120. The second basis of attack on the actions of DLALC in transferring funds to DPL is that those actions were inconsistent with the scheme of the ALR Act and must for that reason be taken to have been unauthorised. The focus here is not upon the specific objects, functions and powers of DLALC as a statutory corporation. It is, rather, on DLALC’s duties and responsibilities and the public policy to which the ALR Act gives effect.
121. The transfers by DLALC put at the disposal of DPL as trustee more than $25 million of money that, in the hands of DLALC, was required to be dealt with in accordance with the ALR Act. The intention, obviously enough, was that DPL, by executing the trusts of the Trust Deed and applying the funds towards the purposes set out in the Trust Deed, would achieve results generally of a kind that DLALC could have achieved by making applications of the funds itself. It was intended that DPL, as trustee, would, in that respect, replace DLALC…
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129. The (related) cases proceed on the basis of three main principles. First, it is recognised that a grant of incorporation by Parliament carries with it not only rights and privileges but also duties and responsibilities. Second, the duties and responsibilities, as well as existing for the benefit of the section of the population directly affected, are of a public or quasi-public nature. Third, the corporation may not act to abdicate or evade its statutory duties and responsibilities, even if the means by which it purports to do so otherwise appear to lie within the scope of its objects, functions and powers.
130. Some of the corporations involved in the cases I have mentioned were public authorities. Others were in the nature of private or profit-making concerns enjoying concessions granted by the legislature. A local Aboriginal land council constituted under the ALR Act seems to me to lie somewhere between the two, although the analogy with a public authority is the more pronounced. An analysis of the nature of a local Aboriginal land council was undertaken by Handley JA (in a judgment in which Powell JA concurred) in New South Wales Aboriginal Land Council v Jones (1998) 43 NSWLR 300. Although that analysis was made before the amendments effected by the Act of 2001, the essential features remain. I quote from the judgment of Handley JA at p.310:
An evident purpose of the 1983 Act is to provide for a measure of self-determination and self-government by Aboriginals living within the area of a Local Aboriginal Land Council or Regional Aboriginal Land Council, particularly in relation to the management and use of ‘their land’. The Act, including its recitals, contemplates that members of a Local Aboriginal Land Council will, to a greater or lesser extent, reside on or otherwise make use of ‘their land’.
In my opinion the 1983 Act established a system of local government for Aboriginals who reside in a Local Aboriginal Land Council area (s 7(2)(a)) or a Regional Aboriginal Land Council area (1514, 15) although land vested in a Local Aboriginal Land Council is not withdrawn from the jurisdiction of councils established under the Local Government Act 1993. Aboriginal residents constitute the primary membership of a Local Aboriginal Land Council, although they may admit to their ranks Aboriginals living outside their area who have an association with it who, after application, have been accepted as members by a meeting of the Local Aboriginal Land Council (s 7(2)(b)). It would appear almost self-evident that land councils are local government bodies in the Northern Territory, Western Australia and Queensland, in areas where Aboriginals form a significant part of the population, and there may be no other form of local government.
This system of local self-government is, of course, based on race, but this is only an acknowledgment of the obvious purpose and effect of the 1983 Act. It reflects the tribal or clan structure of Aboriginal communities and the communal nature of their land ownership. The system has parallels with those which apply to the Maori in New Zealand and indigenous Fijians in Fiji. This view does not depend on, but is strengthened by, the parallel provisions in the 1983 and 1993 Acts. The system established by the 1983 Act is a democratic one, as an examination of its provisions demonstrates.
131. A local Aboriginal land council must thus be regarded as part of ‘a system of local government’ for not only its members but also other Aboriginal persons who reside in its area. The council’s activities are centred mainly on land and the connection between land and the Aboriginal persons concerned. Those activities are to be carried on by means of the democratic processes provided for in the ALR Act. It follows, in my view, that a local Aboriginal land council is a body committed to promote the welfare and interests of a section of the public or, as s.51 puts it, to ‘improve, protect and foster the best interests of’ that section of the public. Because of this public character, the principles against divestment and abandonment of statutory duties and responsibilities apply.
132. Pursuit of the s.51 objects by performance of the s.52 functions (or performance of the s.52 functions in pursuit of the s.51 objects) is not merely a right, power or capacity of DLALC. It is also a duty and responsibility of DLALC. The duty and the responsibility are to be discharged by DLALC itself, subject only to the limited power to delegate created by s.82. The statutory intention is that application of land council funds in the performance of s.52 functions and the furtherance of s.51 objects is something to be decided in accordance with the ALR Act, with those funds being held in the ways the ALR Act allows and requires until so applied. Any arrangement which causes land council property to be vested in another person for application in accordance with future decisions of that person – albeit in ways that may in whole or in part correspond with the land council’s s.52 functions and be consistent with its s.51 objects – entails an impermissible abdication of statutory responsibility, an impermissible shifting of statutory decision-making, an impermissible side-stepping of statutory controls and therefore a subversion of the statutory intention.
133. Important aspects of the statutory scheme governing local Aboriginal land councils were identified in submissions made on behalf of Mr Hillig and NSWALC. First, there is a principle of member control, with members’ wishes being expressed through resolutions passed at duly convened meetings. Second, there are principles of accountability reflected in provisions about appointment and removal of office-bearers, availability of council records for inspection by members at such times as the council directs and provisions with respect to the frequency of meetings. Third, there are principles regarding the safeguarding and application of funds reflected in provisions requiring payment of all moneys into an account with a bank or other recognised deposit-taking institution and regulating the ways in which moneys may be expended. The model rules (which apply to DLALC) include restrictions on the signing of cheques and a requirement that all bills and accounts be presented to the council for approval or ratification, with full details of all approvals and ratifications being recorded in the minutes of the relevant meeting.
134. Fourth, there is the very important point that local Aboriginal land councils operate under a system of official scrutiny. I need not refer in detail to the provisions in Part 10 of the ALR Act concerning oversight by the Aboriginal Land Councils Pecuniary Interest Tribunal; the provisions in Part 11 as to the power of the Minister to appoint investigators and administrators and the powers of investigators and administrators so appointed; or the powers of the Registrar appointed under the ALR Act to issue compliance directions under Part 12. These provisions have already been noticed and are an important part of the statutory scheme.
135. I accept the submission that the effect of the trust structure and the transfers of funds by DLALC to DPL for deployment within the trust structure were an impermissible abandonment by DLALC of its statutory duties and responsibilities with respect to a large part of its property. The transfers put that property beyond the controls and decision-making regimes to which Parliament intended that it should be subject. There was no attempt by DPL, in argument, to rely on the power of delegation under s.82. Nor could there be. DLALC did not purport to delegate any of its own functions. Rather, its objective was to put the property in question entirely out of its ownership and beyond its reach and to subject the property to a regime which, while in some respects contemplating applications of funds in ways corresponding with those open to DLALC under the ALR Act, involved decision-making and control otherwise than by DLALC.
136. Reverting to the language of the case law, we see, in the four transfers of funds by DLALC to DPL for deployment within the trust structure, action which, viewed objectively, overturned the relations which the ALR Act had arranged between DLALC and both its own community and the community at large; action which, viewed objectively, involved DLALC’s relieving itself of the burden imposed on it by the ALR Act and divesting itself of its statutory powers and duties; and action which, viewed objectively, was against the policy of the ALR Act because of DLALC’s abdicating control and supervision of matters which that Act requires to be controlled and supervised by it. Above all, we see action which, viewed objectively, removed from a particular regime of statutory control and oversight property that Parliament has directed be subject to that control and oversight.
137. The question whether DPL is ‘controlled’ by DLALC was debated before me. That question is not relevant to this part of the case. Even if DPL is so ‘controlled’, the effect of the transfers of DLALC’s funds to it is that the decision-making organ of DLALC, being a meeting of its members, can no longer determine how those funds in DPL’s hands are applied or how they are conserved. The funds are no longer subject to the wider supervisory regime created by the ALR Act.
138. Attempted evasion of the statutory scheme is an additional ground for holding that the four transfers of funds by DLALC to DPL were not authorised by law. In stating this conclusion, I must emphasise that it has nothing to do with intention or purpose.
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URL: http://www.austlii.edu.au/au/journals/AUIndigLawRpr/2006/70.html