Keane CJ, Lander and Foster JJ
In this matter, the Court rejected the application of the Registrar of Aboriginal and Torres Strait Islander Corporations (‘The Registrar’) for a costs order against the individual directors of the Dunghutti Elders Council (Aboriginal Corporation) RNTBC (‘the directors’), and ordered that there be no orders as to cost in relation to the appeal and various applications made throughout the appeal proceedings.
This matter concerns an appeal brought by the Dunghutti Elders Council (Aboriginal Corporation) RNTBC (‘the Corporation’) against the Court’s decision to dismiss the Corporation’s application for a ruling that a notice given by the Registrar requesting the Corporation to show cause why a special administrator should not be appointed under the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (Cth) (‘the CATSI Act’) was invalid, and restraining the Registrar from making a determination that the appellant be put under special administration under the CATSI Act.
When the appeal was dismissed, the Registrar sought a cost order against the Corporation’s directors contending that they had failed in their duties under the Corporation’s constitution and under the CATSI Act by pursuing the appeal. The Registrar claimed that the directors pursued the appeal to protect their own interests by preventing the appointment of a special administrator and to ensure the ongoing receipt of substantial amounts in remuneration. The Registrar also sought the cost order against the directors themselves as it considered the preservation of the Corporation’s assets as a function and aim of its office.
The Court considered evidence that in the financial year ending 30 June 2010, the directors received $155,673 in remuneration, $98,699 for directors’ travel, and $24,000 in gifts, which totalled 25% of the Corporation’s expenses; and in financial year ending 30 June 2011, the directors received $352,544 in remuneration, $121,974 for directors’ travel, and $26,000 in gifts, which totalled 37% of the Corporation’s expenses for that year. The Court also considered correspondence from the Corporation’s accountant and auditor confirming that it had been advised in relation to its finances; and minutes from a directors’ meeting where legal advice was discussed in relation to proceeding with the appeal.
The Court considered the Corporation’s constitution, and in particular the clauses relating to directors remuneration, which provided that only employees can receive remuneration and that a majority of directors must not be employees. The Court also considered the CATSI Act and in particular the Registrar’s functions and aims under section 658-1 and 658-5, the directors’ duties in Division 265, and consequences for breaching those duties in Chapter 8.
Ultimately, the Court held that the merits of the financial and legal advice received by the Corporation need not be tested, as the Court had no reason to consider that the Corporation acted otherwise than in accordance with the legal and accounting advice that they had received. In addition, while the Court found that it did have the jurisdiction to make a costs order against the directors, the Court was not satisfied on the balance of probabilities that the directors acted in pursuit of their own interests, and dismissed the Registrar’s application.
The Court noted that the more appropriate course in this matter would have been for an order to be made against the Corporation, which is now under special administration, and for the Corporation to properly investigate and take necessary action against the directors for the loss and damage, as well as the cost of pursuing the appeal.