The Australian Nonprofit Sector Legal Almanac...
Transcript of The Australian Nonprofit Sector Legal Almanac...
The Australian Nonprofit Sector
Legal Almanac 2009
MARCH 2010
EditEd by MylEs McGrEGor-lowndEs
The Australian Centre for Philanthropy and Nonprofit StudiesQueensland University of Technology
Brisbane, Australia
workinG PaPEr no. cPns 49
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tablE of contEnts
1.0 introduction ix
2.0 casEs by catEGory 12.1 Discrimination 1
2.1.1 DeversvKindilanSociety[2009]FCA1392(FederalCourtofAustralia,27November2009,MarshallJ). 1
2.1.2 CampagnolovBenallaandDistrictFootballClubInc[2009]VSC228(11June2009) 3
2.1.3 O’KeefevSappho’sPartyInc[2009]SAEOT50(EqualOpportunityTribunalofSouthAustralia,24April2009) 5
2.1.4 GeddesvAustralianLaborParty(VictorianBranch)(Anti-Discrimination)[2009]VCAT409(12March2009) 6
2.2 EmploymentandWorkplaceRelations 7
2.2.1 BaileyvPeakhurstBowling&RecreationClubLtd[2009]NSWDC284(NSWDistrictCourt,LevySCDCJ,3November2009) 7
2.2.2 TurnervVictorianArtsCentreTrust[2009]VSCA224(2October2009) 8
2.2.3 GutnickvBondiMizrachiSynagogue[2009]NSWSC257(31March2009) 10
2.3 InsolvencyandWindingUp 11
2.3.1 Whittingham,InthematterofTheSpanishClubLtd[2009]FCA1158(FederalCourtofAustralia,19October2009) 11
2.3.2 CorreavSpanishClubLtdandOrs[2009]NSWSC1225(SupremeCourtofNewSouthWales,30September2009) 12
2.3.3 JohnsonvCommissionerofConsumerAffairs[2009]NTSC4(27February2009) 13
2.4 MembershipandOffice 15
2.4.1 DairyFarmersMilkCo-operativevCo-operativesCouncil[2009]NSWSC862(27August2009) 15
2.4.2 InthematterofDairyFarmersMilkCo-operativeLtd[2009]NSWSC627(3July2009) 16
2.4.3 CumminsvAustralianJockeyClubLimited[2009]NSWSC254(6April2009) 17
2.4.4 Plenty&AnorvSeventhDayAdventistChurchofPortPirie[2009]SASC10(19January2009) 18
2.4.5 KovacicvAustralianKartingAssociation(QLD)Inc[2008]QSC344(22December2008) 19
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2.5 Negligence 21
2.5.1 MatthewChaina&OrsvThePresbyterianChurch(NSW)PropertyTrust&Ors(No3)[2009]NSWSC1243(SupremeCourtofNewSouthWales,23November2009) 21
2.5.2 TheQuadriplegicCentreBoardofManagementvMcMurtrie[2009]WASCA173(WesternAustralianCourtOfAppeal,13October2009) 22
2.5.3 RootyHillRSLClubLtdvKarimi[2009]NSWCA2(30January2009) 23
2.6 NonprofitStructureandGovernance 24
2.6.1 GouldvMosmanReturnedServicemen’sClubLtd[2009]FCA1592(FederalCourtofAustralia,LindgrenJ,15December2009) 24
2.6.2 AndrewsvQueenslandRacingLtd[2009]QSC338(23October2009) 25
2.6.3 DykyjvLoganAndDistrictServicesClubInc[2009]QSC108(SupremeCourtOfQueensland,DeJerseyCJ,11May2009) 27
2.6.4 IslamicCouncilffSouthAustraliaInc&OrsvAustralianFederationofIslamicCouncilsInc[2009]NSWSC211(SupremeCourtofNewSouthWales,16February2009) 28
2.6.5LaivTiao(No2)[2009]WASC22(12February2009) 31
2.6.6 SzencorpPtyLtdvCleanEnergyCouncilLimited[2009]FCA40(2February2009) 33
2.7 Taxation 34
2.7.1 CommissionerofTaxationvAID/WATCHIncorporated[2009]FCAFC128(FederalCourtofAustralia,FullCourt,Kenny,StoneandPerramJJ,23September2009) 34
2.7.2 CommissionerofTaxationvBargwannaandBargwannaasTrusteesoftheKalosMetronCharitableTrust[2009]FCA620(FederalCourtofAustralia,EdmondsJ,12June2009) 36
2.7.3 HeinPerschevFinanzamtLudenscheid[2009]EUECJC-318/07(CourtOfJusticeOfTheEuropeanCommunities,GrandChamber,27January2009) 38
2.8 Trusts 40
2.8.1 CunliffevAttorney-General(NSW)[2009]NSWSC1450(SupremeCourtofNewSouthWales,NicholasJ,21December2009) 40
2.8.2 NSWMasonicYouthPropertyTrustVA-G(NSW)[2009]NSWSC1301(SupremeCourtofNSW,19November2009,HallJ) 41
2.8.3 ThePublicTrusteeofQueenslandasExecutoroftheEstateofBrianEdmundMonckton,alsoknownas,BryantEdwardMonckton,DeceasedvAttorney-General(QLD)[2009]QSC353(SupremeCourtOfQueensland,ALyonsJ,7October2009) 44
2.8.4 MitreskivHisEminenceMetropolitanPetarTheDiocesanBishopofTheMacedonianOrthodoxDioceseOfAustraliaAndNewZealand[2009]NSWCA319(NewSouthWalesCourtofAppeal,10September2009) 46
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2.8.5 ThePublicTrusteeofQueenslandasExecutoroftheEstateofMaryAgnesBall,DeceasedvStateOfQueenslandAndOS[2009]QSC174SupremeCourtofQueensland–ByrneSJA–3July2009 47
2.8.6 NSWMasonicYouthPropertyTrust&ANORvHerMajesty’sAttorney-GeneralinandfortheStateOfNSW&ANOR[2009]NSWSC181(24March2009) 48
2.8.7 MetropolitanPetarvMitreski[2009]NSWSC106(SupremeCourtofNewSouthWales,4March2009) 49
2.8.8 TheEstateofDulcieEdnaRand(Deceased)[2009]NSWSC48(SupremeCourtofNewSouthWales,16February2009) 50
2.9 Miscellaneous 51
2.9.1 ACCCvAustralianKartingAssociation(NSW)Inc[2009]FCA1255(FederalCourtofAustralia,BennettJ,6November2009) 51
2.9.2 CaroonaCoalActionGroupIncvCoalMinesAustraliaPtyLtdandMinisterforMineralResources[2009]NSWLEC165(LandandEnvironmentCourtNSW,PrestonCJ,24September2009) 53
2.9.3 BurrellPlaceCommunityActionGroupIncorporatedvGriffithCityCouncil[2009]NSWLEC120(LandandEnvironmentCourtNSW,LloydJ,29July2009) 55
2.9.4 CalvovSweeney[2009]NSWSC719(29July2009) 56
2.9.5 LiberalPartyofAustraliaandAustralianElectoralCommission[2009]AATA551(AdministrativeAppealsTribunal,23July2009) 59
2.9.6 O’HaraVSims[2009]QCA186(QueenslandCourtofAppeal,Keane,MuirandFraserJJA,10July2009) 60
2.9.7 AustralianBarterCurrencyExchangePtyLtdvUnitingChurchNSWTrustAssociationLimited[2009]NSWSC607(2July2009) 62
2.9.8 WhiteCityTennisClubLtdvJohnAlexander’sClubsPtyLtdandAnor[2009]NSWCA114(3June2009) 63
2.9.9 AyanvIslamicCo-ordinatingCouncilofVictoriaPtyLtd&Ors[2009]VSC119(3April2009) 65
2.9.10TheArchitects(Aust)PtyLtdt/asArchitectsAustraliavBethanyBrisbaneInternationalChurchInc[2009]QDC56(DistrictCourtofQueensland,11March2009) 66
2.9.11Griffiths&OrsvJohnFairfaxPublications&Anor[2009]NSWSC100(3March2009) 68
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3.0 statE and tErritory lEGislation 693.1 Commonwealth 69
3.2 NewSouthWales 70
3.3 Victoria 71
3.4 Queensland 74
3.5 WesternAustralia 75
3.6 SouthAustralia 76
3.7 Tasmania 77
3.8 NorthernTerritory 77
3.9 AustralianCapitalTerritory 78
4.0 ato uPdatEs 81
5.0 sPEcial issuEs for 2009 855.1 PrivateAncillaryFunds 85
5.2 NationalRentalAffordabilityScheme 86
5.3 MoneyLaundering 90
5.4 WorkplaceHealthandSafety 91
5.5 ChangestotheWorkplaceRelationsRegime 92
5.6 CompaniesLimitedbyGuarantee 94
5.7 RighttoInformationandInformationPrivacy 97
5.8 DisclosureofExpenditureonPoliticalCampaigning 101
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6.0 what doEs 2010 hold? 1076.1 CouncilofAustralianGovernments(COAG) 107
6.2 TreasuryReviewofFinancialReportingforUnlistedCompanies2007 108
6.3 DisclosureRegimesforCharitiesandNot-For-ProfitOrganisations—SenateEconomicsCommitteeJune2008 108
6.4 Co-operativesNationalLaw 109
6.5 Australia’sFutureTaxSystem(theHenryReview) 109
6.6 NationalCompact 110
6.7 Counter-TerrorismFinancing 110
6.8 TheProductivityCommission’sResearchStudyoftheContributionoftheNot-For-ProfitSector 110
6.9 DisabilityCareandSupport 120
7.0 Glossary 121
8.0 inforMation on contributinG orGanisations 125
TheAustralianCentreforPhilanthropyandNonprofitStudies 125
PilchConnect 125
TheAustralianCharityLawyersAssociation 127
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1.0 introduction 1Thisisthesecondyearthatwehavesummarisedannualdevelopmentsinthelawfornonprofitstaff,boardsandvolunteers.Wewereencouragedbytheinterestshowninlastyear’spublicationandtheusemadeofthedigitalcopyonourwebsite,sohereisthealmanacfortheJan2009–Dec2009period.ThisyearwearedelightedthatthenewlyformedAustralianCharityLawAssociationandPilchConnect(Victoria)agreedtocontributeandpromotethepublicationaswell.ThesetwoorganisationsarebeginningtofillthevoidofprofessionallegaldevelopmentandassistancetosmallnonprofitorganisationsthathascharacterisedAustraliafortoomanyyears.
Cases
Foranumberofyears,ProfessorMylesMcGregor-Lowndes,RhondaRichards,FrancesHannah,LindaLavarchandAnneOverellhavecompiledonetotwopagesummariesofcasesinvolvingnonprofitorganisationsandpublishedthemonTheAustralianCentreforPhilanthropyandNonprofitStudiesDevelopingYourOrganisation(DYO)wiki.1YoucanbealertedofnewcasesummariesastheyarepostedtotheDYOwikibysubscribingtotheRSSfeedwhichisfoundonthefrontpageofthewikispaceortheACPNStwitterservice.2
Anumberofothercasessummarisedinthisworkingpaperareworkingtheirwaythroughtheappealsprocessandcareshouldbetakenwiththeirapplication.
Legislation
Theyear2009sawfederallegislativereformwithamendmentstoPrescribedPrivateFunds–nowPrivateAncillaryFunds.Theregulationoftrusteecompanieswhoareresponsibleforasignificantproportionofchartiabletrustswasalsoreformedandbroughtunderasinglefederallicensingandreportingregime.Therearealsoproposalsforamendmentstotheregimeapplyingtocompanieslimitedbyguaranteeandcooperatives.SignificantincorporatedassociationandfundraisingreformsworkedtheirwayfurtheralonginVictoria,NewSouthWalesandWesternAustralia.Acommonthemeinincorporatedassociationreformistieredorproportionalreportingreforms.
SpecialthanksmustgotoClaireJones(Prolegis)andSueWoodward(PilchConnect)forprovidinglegislativeupdatesforNewSouthWalesandVictoria,respectively.
Special Issues for 2009
Anumberofspecialistlegalpractitionershavecontributedsuccinctsummariesofsignificantlegalissuesfacingnonpofitorganisationsthisyear.Thiscollectionofsummariesservesasareadyfirstreferencetosomeofthemoresignificantlegaltransactionsandissuesthatcontemporarynonprofitorganisationsarefacing.ThankstoJohnEmerson(Freehills),BrendanLeighton,TimLongwillandHeatherWatson(McCulloughRoberston–Lawyers),MarkFowler,MatthewTurnourandNathanReich(NeumanTurnourLawyers)andNathanMacDonald(PilchConnect)forcheerfulcontributionsofoutstandingqualitywithinthetightdeadlines.
1 https://wiki.qut.edu.au/display/CPNS/Legal+Case+Notes
2 http://twitter.com/CPNSinsides
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Australian Taxation Office (ATO)
In2009,theATOreleaseditsviewsontheWordInvestmentandtheVictorianWomen’sLawyersAssociationcasesandpreparedmaterialfollowingthelegislationestablishingPrivateAncillaryFunds(formerlyPrivatePrescribedFunds).TheATOalsosucceededintheBargwannacase(seecase2.7.2,below)andtheAidwatchCase(seecase2.7.1,below).Appealsmaybepending.
ThehighlyregardedATOnonprofitupdatesservenonprofitorganisationswellinprovidingtimelyalertstotheATO’scomplianceactivities,changesintaxationlawandprocedure,aswellasnewandrevisedATOpublications.ThemoresignificantupdatesarenotedinthispublicationandcanbereadilyaccessedthroughtheATOwebsite.
TheATOwebsite3forthenonprofitsectorcontinuestoimprovedramaticallyinitsclarity,usefulnessanddepthofcontent.TheAustralianCentreforPhilanthropyandNonprofitStudies(ACPNS)nowprovidesastreamed24/7onlinevideotutorialonfindingyourwayaroundtheATOwebmaterials.Thistutorialisavailableathttps://wiki.qut.edu.au/display/CPNS/ATO+Nonprofit+Website+Tour.
What does 2010 hold?
Thefinalsectionmovesfromlookingintherearviewmirrortopeeringoutthefrontwindscreentodiscernthereformagenda.Anunprecedentednumberoffederalinquiriesarebeingconsideredduring2010whichhavethepotentialtoshapethelegislativeandregulatoryagendaforthenextdecadeandbeyond.
Download
ThispublicationisalsoavailablefordownloadinPDFformatatwww.bus.qut.edu.au/research/cpns/publications
3 www.ato.gov.au/nonprofit/
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2.0 casEs by catEGory 2Casesinthissectionarepresentedaccordingtoalphabeticalcategoryandinreversechronologicalorder.
Anycaseswhichdonotfitthewithinacategoryarepresentedinthe‘Miscellaneous’categorywhichappearsattheendofthissection.
2.1 discriMination2.1.1 DEVERS V KINDILAN SOCIETY [2009] FCA 1392 (FEDERAL
COURT OF AUSTRALIA, 27 NOVEMBER 2009, MARSHALL J )
Theplaintiff,JaneDevers,wasahearing-impairedemployeeoftheKindilanSociety,whichtradesasFocus.FocusisanonprofitorganisationandaregisteredcharityinVictoria,andprovidesresidentialcarefordisabledpeopleintheMorningtonPeninsularegion.MsDeversworkedasadisabilitysupportworkeratoneoftheresidentialpremises(referredtoasaCommunityResidentialUnitorCRU)whichwasoperatedbyFocusinMornington.ThisCRUisnolongerinoperation.
SheallegedthatFocusdiscriminatedagainstherinheremploymentbyreasonofherdisabilityfromSeptember2003toOctober2008,incontraventionofsections5,6and15oftheDisability Discrimination Act 1992(Cth)(theAct).
DeversalsoreliedontheCharter of Human Rights and Responsibilities Act2006(Vic)andtheConvention on the Rights of Persons with Disabilities,aninternationalconventiontowhichAustraliaisaparty.Neitherofthesedocumentswasrelevanttothiscase.TheActisaCommonwealthActanditsinterpretationisnotaffectedbytheVictorianCharter of Human Rights and ResponsibilitiesAct 2006,astateAct.NorwastheinternationalcharterrelevantsincealthoughAustraliaisaparty,ratificationofaninternationaltreatydoesnotautomaticallyimportanyrightsorobligationsintodomesticlaw(seeMinister for Immigration and Ethnic Affairs v Teoh(1994)183CLR273at286–7andNulyarimma v Thompson(1999)96FCR153at[20]).Thisprincipleappliedinthiscase.
Devers,whosedeafnessisprofound,hadcommencedworkonavolunteerbasisinAugust2003,afterrepresentationsbyanotherorganisation,SensWide,anemploymentserviceforpeoplewithhearingandsightdisabilities.Thisvolunteerworklaterprogressedtocasualwork,startingwithfortnightlyshiftsfromSeptember2003.
DeversallegedthatherworkwasimpededbyalackofservicesandequipmentprovidedbyFocus,inparticularatelephonetypewriter(TTY),qualifiedAustraliansignlanguage(Auslan)interpretersforstaffmeetingsandtrainingsessions,andwarninglightstoassistwithansweringthedoor.
Section15oftheActmakesitunlawfultoengageinconductwhichconstitutesdiscriminationonthegroundofdisabilityinthecontextofemployment.Theunlawfulnessisencapsulatedinthewords‘ontheground’ofthedisabilityinquestion.Suchdiscriminationmaybeeitherdirectorindirect.
TheActdoesnotprovidethatanemployerisobligedtosupplyaidstodisabledemployees,butanemployermustprovide‘reasonableaccommodations’.Inhiringordismissinganemployee,anemployermustalsoassesswhetherthedisabledemployeecancarryoutthe‘inherentrequirements’ofthejob,andwhetheradditional‘servicesorfacilities’wouldassistthedisabledemployeetomeettheparticular‘inherentrequirements’oftheemployment(section15(4)(a)).Discriminationisnotunlawfulifprovidingadditionalservicesorfacilitieswouldbe‘anunjustifiablehardshipontheemployer’(section15(4)(b)).
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JusticeMarshalldeterminedtheissuestobeasfollows:
1. WhetherFocusengagedindirectdiscriminationagainstDevers;
2.WhetherFocusengagedinindirectdiscriminationagainstDevers;and
3. IfdiscriminationagainstDeversoccurredwithinthemeaningofsections5or6oftheAct,whetherthisdiscriminationwascontrarytosection15(1)or(2)oftheAct,andthusunlawful.
Astodirectdiscrimination,Deversallegedvariousinstanceswhichamountedtodenyingheraccesstoopportunitiesforpromotion,trainingandotherbenefitsundersection15(2)(a),(b),(c)and(d)oftheAct.Thesewere:
1. Notallowinghertoattenddoctors’appointmentswithresidentsonherown;
2.NotgivingheraccesstothesparekeyandaccesscodetotheCRU;
3.Notallocatingherso-called‘sleep-over’shifts;
4.Notallocatinghersufficienthoursontherosterofshifts;and
5.Denyinghertraininganddevelopmentopportunities,particularlybynotprovidinganAuslaninterpreter.
Directdiscriminationisdefinedinsection15(1)oftheActasoccurringwherethe‘discriminatortreatsorproposestotreattheaggrievedpersonlessfavourablythan…apersonwithoutadisability.’Thishasbeenheldtoinvolveanobjectiveassessmentandcomparison‘incircumstancesthatarethesameorarenotmateriallydifferent’:Purvis v New South Wales(2003)217CLR92.
JusticeMarshallobservedthatthecorrectcomparatorinthiscasewasanemployeeofFocus,inasimilarrole,withoutDevers’sdisability,butwhoalsohasherattributes.Incarefullyconsideringeachallegeddirectdiscrimination,JusticeMarshallfoundnosuchdiscriminationusingthecomparatortest.Inparticular:
1. Nootherstaffmemberswerepermittedtoattenddoctors’appointmentsontheirownwithaclient.
2.AllstaffhadknowledgeoftheaccesscodetotheCRUasitwasnotasecret–ratheritwasthefirstfourdigitsoftheCRUphonenumber.Inaddition,whenDeversaskedspecificallyforthecodein2008,itwasgiventoheratthattime.
3.Devershadalwaysindicatedthatshedidnotwantsleep-overshifts,andJusticeMarshallcouldfindnoevidencethatthishadchangedin2008asallegedbyDevers.
4.TheevidencedidnotpointtoanyreductioninDevers’sworkinghoursbetween2003and2008–rathertherostersproducedinevidencepointedtosimilarhoursallocatedineachyear.
5.Allstaffhadaccesstothetrainingrosterforeachyear,andknewthattrainingsessionshadtobeappliedforontheappropriateforms.Theissueofinterpreterswasanimportantone,andwasfurtherconsideredbyJusticeMarshallinthecontextofindirectdiscrimination.Inthecaseofdirectdiscrimination,Devershadnotindicatedthatshewasnotapplyingfororattendingtrainingbecauseofthelackofinterpreters.
JusticeMarshallthereforefoundthattherewasnodirectdiscriminationagainstDeversinheremploymentwithFocus.
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Astoindirectdiscriminationundersection6oftheAct,theissuesinthiscaserevolvedaroundthenon-provisionofTTYequipment,AuslaninterpreterswhereneededandflashinglightstoenableDeverstoanswerthedoortotheCRU.Toestablishindirectdiscrimination,Devershadtoshowthat:
1. Focusimposedarequirementorconditiononher
i. Withwhichasubstantiallyhigherproportionofpersonswithoutherdisability(abasegroup)areabletocomply,and
ii. WithwhichDeversisnotabletocomply,sothat
iii.Therequirementorconditionisthereforenotreasonablehavingregardtoallthecircumstances.
Whetherarequirementorconditionhasbeenimposedisaquestionoffact.Itcanbeimplicitintheactionstaken.JusticeMarshallconsideredeachallegationofindirectdiscriminationinturn.
DeverswasnotprovidedwithaTTYuntilJuly2008,somefiveyearsafterheremploymentcommenced.DeversallegedthatshehadrepeatedlyaskedforaTTY,andhadultimatelyprovidedoneormoreofherownmachines.However,JusticeMarshallfoundthatontheevidenceDevershadnotaskedforaTTYatvarioustimeswhenshecouldhavedoneso,suchaswhenshewasaskedwhatFocuscoulddotoassisther.
Ontheissueofflashinglights,JusticeMarshallfoundthatontheevidencetherewasnorequestforsuchlights,thoughtheywereultimatelyinstalledattherequestofthefatheroftworesidentswhowerealsoprofoundlydeaf.
OntheissueoftrainingsessionsandthelackofAuslaninterpreters,theevidencewasthatinformalinterpreterswereprovidedfortrainingsessionsandstaffmeetings,butnotonalloccasions.Insomecases,staffmeetingshadnointerpreterpresent,andDeverscouldonlyaccessthematerialcoveredbyconsultingtheminutesofthemeeting.However,thesewerefreelyavailabletoallstaff.Inaddition,forsometrainingsessions,writtenmaterialwasallthatDevershadavailabletoherastherewasnointerpreter.However,thisappliedtoallstaffmembersequally.
ItwasnotunreasonableforFocustoavoidtheprovisionofinterpretersbecausethiswasacostlyexercise(amountingtosome$20,000peryearforthebenefitofonecasualemployee),andinthecontextofDevers’shoursofworkandearnings,itwasnotreasonabletoexpectsuchacosttobebornebyanonprofitorganisationwithalimitedbudget.
JusticeMarshallfoundthattherewasnoindirectdiscriminationagainstDevers,sinceinthelightofallthecircumstances,theallegationsdidnotsupportthecontentionthatDevershadbeendiscriminatedagainst,orhadsufferedanyparticulardetriment.
Therefore,therewasneitherdirectnorindirectdiscriminationagainstDeversinthecontextofheremployment.Therebeingnodiscriminationfound,therewasnoneedtoconsideranyillegality.Theapplicationwasdismissedwithcosts.
Thecasemaybefoundat:www.austlii.edu.au/au/cases/cth/FCA/2009/1392.html
2.1.2 CAMPAGNOLO V BENALLA AND DISTRICT FOOTBALL CLUB INC [2009] VSC 228 (11 JUNE 2009) FILE NO: 5329 OF 2009
ThisappealhaditsorigininthedecisionofaseniormemberoftheVictorianCivilandAdministrativeTribunalon9February2009,tostrikeoutacomplaintbyMrCampagnoloagainsttheBenallaandDistrictFootballLeagueInc.(theLeague).An
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attempttoseekleavetoappealthisdecisionwasdeniedbyAssociateJudgeDalyoftheVictorianSupremeCourt.Eventually,thisrefusaltoallowleavetoappealcamebeforeJusticeHanseninthesamecourt.
Essentially,MrCampagnoloclaimedhehadexperienceddiscriminationonaccountofhisbisexualityinthathehadbeendismissedfromhispositionassportstrainerattheBonnieDoonFootballClubInc.(BonnieDoon),oneoffiveclubsintheLeague.Althoughemployedtheresince1997andopenabouthissexuality,publicitysurroundinghisinvolvementinasexualdiscriminationmatterwithagovernmentdepartmentinFebruary2007,broughthissexualstatusintothepublicarena.Subsequently,on10April2007,thePresidentofBonnieDoonexpressedreservationsaboutcontinuingtoemployhimandgavehimnotice.AccordingtoMrCampagnolo,thisallegeddirectdiscriminationasdetailedinsections7and8oftheEqual Opportunity Act 1995 (Victoria)(theAct) wouldimpactadverselyontheprovisionofservicestohimundersection42(1)(c),particularlyhisfreeadmissionto,aswellastravelexpensesforclubgames.ThematterwascompoundedbyphysicalthreatsfromBonnieDoon’sSeniorCoach.InMrCampagnolo’sopinion,thisvictimisationwasmotivatedbyhisremarkstotheHerald Sunconcerningthediscriminatorytreatment.
MrCampagnoloincludedtheLeagueinhissightsasa‘governingbody’undersection60oftheActwhichstatedthat,‘Agoverningbodyofaclubmustnotdiscriminateagainstamemberoftheclub’.Hemaintainedthat,althoughthePresident/SecretaryoftheLeaguewasawareofhispredicament,theLeaguewasremissinaddressingthesituation outlinedin sections11(b)and65(b)oftheAct.Therefore,heassumedcomplicitywithBonnieDoon,arguingthattheLeaguewasvicariouslyliablebyreasonofsection102oftheActfortheclub’sdecision,throughitsfailuretoputinplacemechanismstoensurethesesectionswerenotcontravened.
Beforelookingattheissuesraised,JusticeHansendeterminedwhethertheLeague’sendeavourtostrikeoutthecomplaintshouldhavebeenbroughtundersection109oftheEqual Opportunity Act 1995,ratherthansection75oftheVictorian Civil and Administrative Tribunal Act 1998.HedecidedthatthelatteroptionwasappropriatebecausethecomplaintwasalreadybeforetheVictorianCivilandAdministrativeTribunalatthetimeinquestion.
WhilstJusticeHansenagreedthatsection4(1)oftheActregardedbisexualityasasubsetofsexualorientation,anattributethatshouldnotattractdiscrimination,therewasnoindicationofanydiscriminationinvolvingtheservicesmentioned.WithrespecttoMrCampagnolo’snotionthathewasamemberofaclubofwhichtheLeaguewasagoverningbody,BonnieDoonisaclubforthepurposesofsection4(1).However,therewasnoevidencetosupportMrCampagnolo’smembershipofBonnieDoon,letaloneitsumbrellabody.HisHonouralsorejectedthenotionthattheterm,‘governingbody’,referredtotheprovisionofoverarchingdirection,viewingtheconceptasdenotingamorepedestriancommitteeofmanagementforBonnieDoon.Consequently,MrCampagnolo’sattempttorelyonsection60provedunsuccessful.EstablishingvicariousliabilityontheLeague’spartwasnotpossible.
HiseffortstoarguethattheLeaguediscriminatedagainsthimbyfailingtouseitsavailablepowersinrelationto‘unbecomingconduct’weresimilarlyfruitless.Underclause22ofitsRulesandRegulations,theLeaguehadtherighttoinvestigateanysuchbehaviourwhichbroughtthegame’sreputationintodisrepute.Fromtheinvestigativestage,aseriousmatterwouldmovetotheLeagueTribunalfordetermination.Clause22(a)alsoallowsdetailsofanyallegationstobeprovidedtotheBoard.Sincenoaction
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wasinstigatedagainstBonnieDoon,MrCampagnoloassertedthathehadbeentreatedlessfavourablythanapersonwithouthissexualorientationinthesamecircumstances,thussatisfyingsection11(b)oftheActaswellassection65(b)specificallypertainingtoexclusionfromsport.JusticeHansenconcludedthisargumentwasuntenablebecausetheLeaguedidnotdiscriminateagainstMrCampagnolointermsofhissexualitytoterminatehispositionassportstraineratBonnieDoon.Further,theLeague’sinactionunderclause22(a)didnotconstitutelessfavourabletreatmentasanypreliminarystepstakenbytheLeaguewouldhavebeenadvancedthroughtheotherjudicialmechanismsinplacewithanunpredictableoutcome.
Theappealwasdismissed.
Thiscasemaybeviewedat:www.austlii.edu.au/au/cases/vic/VSC/2009/228.html
2.1.3 O’KEEFE V SAPPHO’S PARTY INC [2009] SAEOT 50 (EQUAL OPPORTUNITY TRIBUNAL OF SOUTH AUSTRALIA, 24 APRIL 2009)
Sappho’sPartyInc(theAssociation)wasanincorporatedassociationestablishedtoholdapartyintheAdelaideHillsinJanuary2006,forlesbianfeministsraisedasfemale.Althoughthepartywasdesignedtobeaprivatefunction,theorganizerswereconcernedtoprovideinsurancecoverfortheattendees.Incorporationwasthevehiclechosentoeffectpublicliabilityinsuranceforwhatwasreferredto,inparagraph28ofthejudgment,asa‘notforprofitcommunityevent’.
Thecomplainant,MsO’Keefe,receivedaflyeradvertisingthepartyfromherpartner,KatrinaFox.MsO’Keefehadbeenbornmalein1955buthadoptedforgenderreassignmentsurgeryasanadult.Afterbeinginvolvedinalesbianrelationshipsince1993,shehadlegallymarriedMsFoxinEnglandin1998withtheaidofhermalebirthcertificate.ThecouplesettledinAustraliain2001.Sheexplainedherbackgroundwhenshesentawayforticketsforthembothtotheparty.However,thepartyorganizerswereunsympatheticandrefusedtoallowMsO’Keefetoattend.Asaresult,on11December2005,shecontactedtheSouthAustralianCommissionerofEqualOpportunitytolodgeacomplaintonthebasisshehadbeendiscriminatedagainstbecauseofhertranssexuality.Onceconciliationeffortsfailed,themattercamebeforetheEqualOpportunityTribunal.
Threeissuesarose.ThefirstentaileddeterminingwhethertherewasunlawfuldiscriminationagainstMsO’KeefeintheofferofentertainmentservicesbytheAssociationanditsfailuretosupplythemassetoutundersections39(1)(a),(b)and(c)respectivelyoftheEqual Opportunity Act 1984 (SA)(theAct).ShouldsuchunlawfuldiscriminationundertheActbeevidentwithrespecttotheAdelaideHillsparty,itwasthennecessarytoexamineifitwaspermissibleundersection47becauseitwasameasuredesignedtoensurethatpersonsofonesexhadequalopportunitieswithpersonsoftheothersex.Finally,theunlawfuldiscrimination,ifestablished,hadtobeclearlyrelatedtoMsO’Keefe’stranssexuality.
Attheoutset,HisHonourJudgeBarrettandtheothertwomembersoftheEqualOpportunityTribunalwerefacedwithtryingtodecidewhetherthepartywasaprivateorapublicaffair.DespitetheincorporationoftheAssociation,thechoiceofacommercialvenueforthepartyandtheimpositionofentryfees,HisHonourandoneothertribunalmemberMsJasinskioptedfortheformer.Therefore,regardlessofthesexualdiscriminationMsO’Keefesuffered,themajoritydecisiondeterminedthattherequirementoftheofferofgoodsandservicesundersection39(1)oftheActwasnotmet.ThegatheringwasprivateandtherewasnobreachoftheActsinceitdidnotcoverprivateevents.
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Strictlyspeaking,therewasnoneedtocanvasstheotherissues.Nevertheless,theywereaddressed.Section47oftheActwasfoundtobeinapplicableinthisparticularsituationastherewerenoopportunitiesavailabletomen,anddeniedtowomen,whichweremademoreequalbythisevent.However,MsO’Keefewasnotdisentitledfromclaimingunlawfuldiscriminationrelatedtohertranssexuality,despitetherespondent’sargumentthatherlegalstatusinAustraliawasasamalesinceshecouldproducenogenderreassignmentcertificate.Tobetranssexual,accordingtosection5oftheAct,‘Apersonofonesexassumescharacteristicsoftheothersex.’Nevertheless,sincetheActwasfoundnottoapply,thecomplaintwasdismissed.
MrShetliffe,thedissentingmemberoftheTribunal,agreedwiththemajorityaboutthelackofrelevanceofsection47aswellasMsO’Keefe’sexperiencingunlawfuldiscriminationbecauseofhertranssexuality.However,hedecideddifferentlyasregardstheapplicabilityofsection39(1).Essentially,hemaintainedthataprivatefunctioncanstillbecaughtbytheActwheretheprocessofselectingprospectiveattendeesfromthewiderpublicisdiscriminatory.Here,hebelievedthiswasthecaseastheflyersweredistributedAustralia-wideaswellasinternationally.Inhisview,thiscoupledwiththetargetingofalllesbiansraisedasfemale,meantthatthedistributionprocesswassufficientlypublictosatisfysection39(1)oftheAct.Thereforeinhis(dissenting)opinion,MsO’KeefehadindeedbeenunlawfullydiscriminatedagainstbySappho’sParty.
Thiscasemaybeviewedat:www.austlii.edu.au/au/cases/sa/SAEOT/2009/50.html
2.1.4 GEDDES V AUSTRALIAN LABOR PARTY (VICTORIAN BRANCH) (ANTI-DISCRIMINATION) [2009] VCAT 409 (12 MARCH 2009) VCAT REFERENCE NO: A239/2008
MervGeddes,alongstandingmemberoftheAustralianLaborParty,complainedundertheEqual Opportunity Act 1995 (Victoria)abouthistreatmentbytheVictorianbranchoftheparty.Inparticular,heallegedhehadexperienceddiscriminationonthebasisofpoliticalbelieforactivity.ThecomplaintwaslodgedagainsttheunincorporatedassociationfollowingdisciplinarymeasurestakenagainstMrGeddesin2006whenhehandedout‘HowtoVote’cardsforarivalcandidateintheVictorianseatofMorwellinastateelection.AsaresultofhisactionswhichclearlycontravenedtheVictorianbranch’srules,MrGeddeswasexpelled fromthepartyforfiveyears.Forhispart,MrGeddesmaintainedhewasnotaccordednaturaljusticebecausehewasnotalignedwiththedominantfactioninhisbranch.
Inreturn,theVictorianbranchoftheAustralianLaborPartyproceededagainsthimundersection75oftheVictorian Civil and Administrative Tribunal Act 1998 inanattempttostrikeouttheaction.Sections42and60oftheEqual Opportunity Act 1995 (Victoria)(theAct)wereidentifiedaspotentiallegitimatesourcesofgrievanceandsubsequentlyeliminated.
HerHonour,JudgeHarbison,dealtfirstwithMrGeddes’sassertionsundersection60oftheActthathisexpulsionfromtheVictorianbranchhaddeniedhimmembershipofaclubor,alternatively,causedhimtosuffer‘anyotherdetriment’.Insection4,thedefinitionalsectionoftheAct,a‘club’isregardedas,‘Asocial,recreational,sportingorcommunityserviceclub,oracommunityserviceorganisationoccupyinganyCrownlandorreceivingdirectorindirectfinancialhelpfromstateorlocalgovernment’.Eventakingaccountofelectoralassistancemeasures,JudgeHarbisonwashard-pressedtoviewapoliticalpartyasacommunityserviceorganisationwithaltruismatitscore.Shesawtheomissionoftheword,‘political’,asintentional.Inreality,heranalysiswasunnecessaryasMrGeddeshadfailedtotaketherequisitestepsformembershipofthepartyintheyearinquestion.
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Next,sheexaminedhisallegationsofdiscriminationrelatingtotheprovisionofgoodsandservicesasdiscussedinsection42.Here,MrGeddeswasunabletotiehiscriticismsintotherelevantsection,merelyre-iteratinghewasrefusednaturaljustice.Despiteprecedentsuggestingtheexpression,‘services’,shouldbedefinedbroadly,HerHonourwasunwillingtointerpreteithermembershipofapoliticalorganisationortheinvokingofadisciplinaryprocedureasaserviceoutlinedintheAct.Neithercouldbecategorizedasbeingavailabletoornecessarilyconferringabenefitonthegeneralpublic.Fromherperspective,nofurtherenquirywouldenhancehisargument.
AlthoughJudgeHarbisonwasreluctanttoaccedetotheVictorianbranchoftheALP’srequestsinceevidenceremainedunheard,shestruckouttheapplicationasfruitless.BecauseMrGeddes’smotivationcentredonrevisitingissues,suchasthefailuretoaccordhimnaturaljustice,whichwerenotstrictlyanti-discriminatory,itwasanabuseofthelegislativeregimetoproceedundertheequalopportunitylegislation.
Thiscasemaybeviewedat:www.austlii.edu.au/au/cases/vic/VCAT/2009/409.html
Implications of Discrimination Cases
Theprecedingcasesdemonstratethatnotalldiscriminatorybehaviourisunlawful.Unlawfuldiscriminatorybehaviouristhatbehaviourwhichisprescribedundertheanti-discriminationlegislationofeithertheCommonwealthortheStatesandTerritories.Anti-discriminationlawinAustraliaisbasedontheinternationalhumanrightsconventionsandtreatieswhichhavebeenratifiedbyAustralia.Federallytherearefivemainanti-discriminationpiecesoflegislation,namely,Age Discrimination Act 2004; Disability Discrimination Act 1992; Sex Discrimination Act 1984 and the Racial Discrimination Act 1975. EachoftheseActssetoutprohibitedareasofdiscrimination,identifyingtypesofdiscriminationandthegroundsuponwhichanindividualcanbringanactionandareasthatareexemptedfromtheoperationofthelegislation.Also,eachStateandTerritoryhasenactedanti-discriminationlegislationsettingoutareasofunlawfuldiscriminationandgroundsuponwhichacomplaintcanbemade,aswellasaprocessbywhichacomplaintcanbemade.Anti-discriminationlegislationisnowwidelyusedtoseekredresswhenanindividualconsiderstheyhavenotbeentreatedwithdignityandrespectorthattheirself-worthhasbeenviolated.Manyorganisationshaveinplaceanti-discriminationpoliciesandcodesofconductaddressingsituationsthatmightgiverisetodirectorindirectunlawfuldiscrimination.
2.2 EMPloyMEnt and workPlacE rElations
2.2.1 BAILEY V PEAKHURST BOWLING & RECREATION CLUB LTD [2009] NSWDC 284 (NSW DISTRICT COURT, LEVY SC DCJ, 3 NOVEMBER 2009)
TheplaintiffCarolAnneBaileywasemployedasacasualbarstewardbythedefendant,thePeakhurstBowling&RecreationClubLtd,acompanylimitedbyguarantee.MsBaileyworkedfortheClubduring1998and1999;thenfromMay2000workedanaverageof30hoursperweek,untilmid-2006,whenshehadtoceaseworkduetohealthreasons.Atthetimeofthehearingshewas52yearsold.
Inmid-2004,MrTonyRiley,apatronandadirectoroftheClub,whoalsocontractedservicestotheClub,wasappointedclubchairman.InthispositionheimmediatelybecameMsBailey’ssupervisor.
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MsBaileygaveevidencethatfromthetimeMrRileywasappointedchairmanhesubjectedhertoaconcertedcampaignofworkplaceharassment,intimidationandbullying.Thiscampaignconsistedof:constantthreatsthatshewouldloseherjob;useofextremelyvulgarlanguagetoMsBaileyandinfrontofher;pressureonhertobendorbreaktheliquorlicensingrulesregardingserviceofalcohol,gamingandaccountingforsales;pressuringhertoresignherunionmembership;changingherworkclassificationsothatshelostpayandseniority;falselyallegingtherewasa$2000shortfallinthecashfloatandimplyingshewasresponsible.Therewerealsoinstancesofunderpaymentofwages.Thiscampaignoccurredoveratwoyearperiod(diarieskeptbyMsBaileycorroboratedherevidence).AsaresultofthistreatmentMsBailey’spsychologicalhealthsufferedandshewasreferredtoapsychologistforcounsellingandtreatment.
MedicalevidenceacceptedbythecourtdescribedMsBaileyashavingaseriousandchronicgeneralisedanxietydisorderwithpanicandagoraphobiatogetherwithapost-traumaticstressdisorderanddepression.TheprognosisisthatMsBaileyisunlikelytorecoverfullyandgivenherageitisunlikelyshewilleverreturntopaidemployment.
DuringthecourseofthehearingthedefendantClubadmittedliability.MrRileydidnotgiveevidence.TheClubconcededitowedMsBaileyadutyofcarethatrequiredittoprovideasafeplaceandsafesystemofwork,andthatithadbreachedthisdutyofcare.Further,theClubconcededthatasaconsequenceofitsbreachofdutyofcaretoMsBaileyshesufferedapsychologicalinjurythatresultedinapsychiatricdisorder.
ThecourtawardedMsBailey$507,550intotaldamageswhichincluded$334,305forfuturelossofearningcapacityand$36,773forfuturelossofsuperannuation.
Thiscasecanbeviewedat:www.austlii.edu.au/au/cases/nsw/NSWDC/2009/284.html
Implications of this case
Thiscasereinforcesthepointthatthecourtswillnotcountenancebullyingandharassmentofemployees.Thechairman’spersistentabusivebehaviourtowardstheplaintiffcombinedwiththeClub’slackofsupportforitsemployeecombinedtoenablethecourttofindaseriouscaseofbullying.Asanemployer,theClubhasadutyofcaretoprovideasafeplaceofemploymentandasafesystemofwork.Itbreachedthatdutybyallowingthebullyingtohappenandtocontinue.ThecaseonceagainhighlightstheneedfororganisationstounderstandtheirdutyofcaretowardsemployeesandensuretheyhavecomprehensiveHRpoliciesandpracticesinplace.Italsohighlightstheneedtohaveanearlyandeffectivecomplaintandinterventionprocessinplace,especiallywhereanemployeefeelstheyarebeingbullied,intimidatedorharassed.
2.2.2 TURNER V VICTORIAN ARTS CENTRE TRUST [2009] VSCA 224 (2 OCTOBER 2009) NO 3848 OF 2008
FromAugust1985until25January2001,MsAdrienneTurnerwasemployedbytheVictorianArtsCentreTrust(theArtsCentre).Shemaintainedthatfrom20October1999,onwards,shewasbulliedinherroleasSeniorAccountManager/TicketManagerbytheArtsCentre’sTicketingServicesManager,MrDominicHolden,aswellasbeingsubjectedtopsychosocialstressors.Withrespecttotheformerallegation,shereferredtoinstanceswhereMrHoldenuntruthfullyaccusedherofmisconduct,ofbehavingviolentlytowards
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himandofenjoyingunnecessarybreaksfromherworkroutine.MsTurnercontendedhisemailstoherwereaggressiveinnature.Inaddition,shepointedoutthatbeingsurroundedbyfellowworkerswhowerealsoadverselyaffectedbyMrHolden’sactionswasalsostressful.Theimpositionofanimpractical,mandatorychangeinamealbreaktimewasmentionedasanexampleoftheunilateralnatureofhisdecision-making.
MsTurnerallegedthatasaresultofMrHolden’sbehaviour,herhealthseriouslydeteriorated.NegligenceonthepartoftheArtsCentrewascitedasacausalfactorinherpsychiatricconditionwhichincludedmajordepressive,anxietyandpanicdisorders.Inparticular,shecriticisedtheArtsCentreforfailingtoprovideherandhercolleagueswithasafeenvironmentinwhichtoworkaswellasanawarenessoftheappropriateproceduresshouldbullyingoccur.ShealsoclaimedtheArtsCentrewasderelictinitsdutytodirectandmonitortheactivitiesofMrHoldenandhisoffsider,JennyLacey,astoappropriatecounsellingtocorrectherperceivedworkdeficiencies.Thecomplaintextendedtoalllevelsofmanagementfortheirinadequateresponsetoherconcerns,andtheirfailuretorecognisethatstrategiestodealwithbullyingandvictimisationneededtobeinstigated.Eventually,MsTurnertookactioninnegligenceandbreachofcontractintheVictorianCountyCourtseekingdamagesforthepsychiatricdistressshehadsuffered.However,thatapplicationfailed.
MsTurnerapproachedtheCourtofAppealtohavetheCountyCourtjudgmentsetasideandthematterretried.Thefirstgroundofappealrelatedtoabreachofthecollateralevidencerulebythetrialjudge.ThisinvolvedevidencegivenconcerningtheresignationofanArtsCentrestaffmember,MsAnnO’Hanlon,whowas,accordingtoMsTurner,anothercasualtyofMrHolden’sbullying.TheArtsCentreledotherevidenceimplyingthatMsO’Hanlon’sdeparturewaslinkedtoafraudulentclaimforovertimeexposedbyMrHolden.TheCourtofAppealdecidedthatthisevidencewasnotcollateralandwasadmissible,sothetrialjudgehadmadethecorrectdecisiontoallowit,althoughbasedincorrectlyonthebiasexceptiontothecollateralevidencerule.SpecificcommentwasmadethatMsTurner’slegalcounselfailedtodirectthejurynottoallowtheevidencetoreflectadverselyonMsO’Hanlon.
Next,thematterofwhetherthetrialjudgeshouldhavedischargedthejurywasconsidered.DuringMsTurner’scross-examination,astatementwasmadethathercomplaintofbullyingtotheArtsCentrewasinvestigatedandfoundtobe‘notsubstantiated’.Whilethiscommentwasheldtobeprejudicial,HisHonour‘sdecisiontodirectthejurytoignoreitratherthandischargingthejurywasregardedbytheCourtofAppealasasatisfactoryresolution,particularlysincesixdaysofthetrialhadalreadyelapsed.
MsTurner’sfinalobjectioncentredaroundwhetherthetrialjudgeshouldhavepermittedtheevidenceofMrJimBailey,ahumanresourcesexpert,tobeheard.ThejudgesoftheCourtofAppealbackedthetrialjudge’sdecisiontoexcludehisevidenceasMrBaileylackedanyspecialistqualificationsthatwouldenablehimtobeconsideredanexpertinhisfield.Well-reasonedconclusionscouldbearrivedatbylaypeople,suchasthejury,withouthisinputasthematterwasonewithinthegraspoftheireverydayexperience.
Theappealwasdismissedasnoneofthegroundsraisedonappealweremadeout.
Thiscasemaybeviewedat:www.austlii.edu.au/au/cases/vic/VSCA/2009/224.html
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Implications of this case
Theplaintiffwasnotsuccessfulinherclaimfordamagesforbreachofdutyofcarebyheremployerfornotprovidingasafeplaceofemployment.However,itisatimelyreminderthatorganisationsareinthesamepositionasallotheremployersandneedtoensurethatemployeesarenotexposedtoanunnecessaryriskofinjury.Employershaveawellestablisheddutyofcaretoemployeestoprovideasafeworkplace.Complaintsaboutbeingbulliedresultinginpsychologicaldistressarebecomingmorecommon.Employersshouldbeawareoftheirpotentialliabilityforpsychologicalrelatedillnessesthataredirectlyrelatedtotheconditionsoftheworklaceandputinplaceeffectivegrievanceprocedureswhichcanbeaccessedataveryearlystage.
2.2.3 GUTNICK V BONDI MIZRACHI SYNAGOGUE [2009] NSWSC 257 (31 MARCH 2009) FILE NUMBER: 2047/09
Since1987,RabbiMosheGutnickhasbeentheRabbiattheBondiMizrachiSynagogue(theSynagogue),apart-timepositionwhichhemaintainsis‘hazaka’ortenuredforlife.TheSynagogueisacompanylimitedbyguaranteewhosecongregationalmembersconstituteitscompanymembership.
At8p.m.onthedayoftheCourthearing,anextraordinarygeneralmeetingofthesegeneralmembershadbeenconvenedtoconsiderpassingresolutionsconcerningtheSynagogue’sfinancialsituationaswellasterminatingtheRabbi’semploymentonthegroundsofredundancy.RabbiGutnick’sresponsewastoseekaninterlocutoryinjunctiontopreventthelatterresolutionbeingvotedonorgiveneffectto.Further,hesoughttoensuretheofficersoftheSynagoguewouldnotbeabletotakealternativeactiontoendhisemployment.If,however,theSynagoguewaswillingtoplacethematterfordeterminationbeforeaDinTorah,anOrthodoxJewishcourtwhosejudgesdispenserabbiniclaw,RabbiGutnickwouldacceptitsdecisionregardingwhetherterminationofhisemploymentwasjustified.Moreparticularly,hewasadamanthiscontractwiththeSynagoguestipulatedanarbitrationprocesscalledzablawherebytheSynagogueandtwoarbitratorshadtherighttoselectasuitablyqualifiedthirdarbitrator.AlthoughtheSynagoguewaspreparedtoagreetoaDinTorah,therewasconcernthatafindinginRabbiGutnick’sfavourwouldhaveseriousconsequencesfinancially.
JusticeWhitedeterminedthatwhether‘hazaka’wasanexpressorimpliedtermoftheRabbi’scontractwasaseriousquestiontobetried.Contingentonthis,anotherseriousquestiontoresolvewasthetypeofremedytobeawarded–specificperformanceoraninjunctiontopreservethestatus quo untilJewishlawwasapplied.Withrespectto‘hazaka’,RabbiGutnick’soriginal1987contractspecificallyexcluded‘hazaka’.Oncethiscontractexpiredin1990,nofreshcontractwasenteredinto.RabbiGutnickclaimedtobegranted‘hazaka’atthe1990generalmeetingasaprerequisitetohisagreeingtoremaininhisrole.Later,inthemid-nineties,anunsignedmemorandumtothateffectwasdrawnup.Thismemorandumwasdistributedin2004byaBoardmemberasacopyoftheRabbi’scontract.FromtheRabbi’sperspective,itformedthebasisforthecontinuedperformanceofhisdutiesfrom11April2004.HisHonourdoubtedthat‘hazaka’wasanexpresstermofthecontractsincenoapprovalfromthegeneralmemberswasevidenced,asrequiredbyarticle87oftheArticlesofAssociation.However,RabbiGutnickarguedthatunderJewishlaw,intheabsenceofexpressexclusionof‘hazaka’,itwasimpliedintoacontract.GiventheadoptionofnewArticlesofAssociationon
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28April1997,itwasmootwhen‘hazaka’becameanimpliedterm.Nevertheless,JusticeWhitesuggesteditwasfrom2004becauseoftheBoard’stacitacceptanceofRabbiGutnick’spointofview.Hefoundthiswasthecasedespitethenewarticle12.3.4whichdealtwitheventsresultingintermination.
If‘hazaka’wasshowntobepartoftheemploymentcontract,thejudgebelievedspecificperformanceoftheRabbi’sdutieswouldbeorderedbytheCourt,asenforcingtheobligationsofecclesiasticalofficesisanexceptiontothegeneralprinciplethatcontractsforpersonalservicesarenotspecificallyenforceable.HisHonourwasnotconvincedthatdamageswouldproveasuitableremedyforthistypeof religiousdispute.Onthebalanceofconvenience,hebelievedthemattershouldbedealtwithbyaJewishtribunalwithanintrinsicunderstandingofJewishlaw.HisHonouralsopointedoutthenoticeconveningthemeetingwasdefectiveaccordingtoarticle6.3.5oftheConstitutionsincememberswerenotadequatelyinformedoftheargumentsunderlyingtherabbi’sproposedredundancy,anothermatterrelevanttothebalanceofconvenience.Bygrantinganinjunctiontomaintainthestatus quo,eventhoughthiswasnotthereliefsought,HisHonourwasconfidentthatbothparties’attitudeswouldensurethematterwasconcludedspeedilyviaaDinTorah.
Thiscasemaybeviewedat:www.austlii.edu.au/au/cases/nsw/supreme_ct/2009/257.html
Implications of this case
Althoughthiscasehasparticularcharacteristicsbecauseitarisesfromemploymentofsomeonetoperformareligiousoffice,thedisputecameaboutinitiallybecausetheboardwastryingtoaddressthedesperatefinancialsituationofthesynagogue.
WhileitispossiblethatdwindlingattendancesatsynagogueledtotheargumentthattheRabbiwasredundant,particularlywhenthesynagoguewasthreatenedwithinsolvency,thelackofcleardocumentationofhisemploymentcontractcouldmakeitmoredifficultfortheboardtosupportthecaseforredundancy.(Thiswaspossiblycompoundedbyminuteswhichwereunclearandthememorandumwhichwasnotsignedorapproved.)Thecaseunderlinestheimportanceofmaintaininguptodateemploymentcontractsforemployees,includingdisputeresolutionprocedures.( Insomecasesitwillbeappropriateforthesetorefertoorincorporateanindustrialinstrumentlikeanawardoracollectiveagreement.)Itisimportantforallpartiestoknowtheirrightsandobligations–somethingwhichwillbecomeevenmoreimportantinacrisis.
2.3 insolVEncy and windinG uP
2.3.1 WHITTINGHAM, IN THE MATTER OF THE SPANISH CLUB LTD [2009] FCA 1158 (FEDERAL COURT OF AUSTRALIA, 19 OCTOBER 2009) FILE NUMBER: NSD 1080/2009
On9November1972,theSpanishClubLtd(thecompany)wasincorporatedasanonprofitcompanylimitedbyguarantee.Manyyearslater,on17November2008,MrWhittinghamofPKFCharteredAccountantswasappointedtoadministerthecompanyundersection436AoftheCorporations Act 2001 (Cth)(theAct’)).Subsequently,on27February2009,thecompany’screditorsdecidedthatadeedofcompanyarrangement(DOCA)shouldbeenteredinto.Thishappenedon16March2009andMrWhittinghamwasdulyappointedadministratorofthescheme.
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Inthisrole,hewascompelledbyClause12.1oftheDOCAtoconveneacompanyannualgeneralmeeting,whichhearrangedtotakeplaceatSydney’sStarCityCasinoon13November2009.Astipulationofsection249(1)oftheActisthatatleasttwentyonedays’noticemustbegivenofsuchameeting.Toachievethis,underClause17ofthecompany’sArticlesofAssociation,servicewasdeemedtobeeffectedthedayafterthenoticewasposted.Thereforethiscouldoccurnolaterthan21October2009.Asimilarresultwasarrivedatbyapplyingsection29oftheActs Interpretation Act 1901(Cth).
However,clause34(a)ofthecompany’sArticlesofAssociationstatedthatthenominationsforelectiontocommitteepositionsmustbereceivedbytheSecretarytwentyonedaysbeforetheannualgeneralmeeting.AccordingtotheAustralianElectoralCommission,whichwasdesignatedinClause12.2oftheDOCAtoconducttheelection,thefinaldatefornominatingwasthe23October2009.Obviously,allowingtheprescribedtimefornominationswouldcontravenethenoticerequirements.ThesituationwasfurthercomplicatedbyMrWhittingham’sneedtocomplywithClause12.1oftheDOCAbecause,asadministrator,hewasboundtodosoundersection444GoftheAct.
WhenthemattercamebeforeJusticeLindgrenintheFederalCourt,hepointedoutthatsection447DoftheActpermittedanadministratortoapproachtheCourtforadvice.Therewasscopeundersection447AoftheActfortheCourttomakeanappropriateorder.Inthiscase,HisHonourdecidedtoshortenthenominationperiod.Notificationofthecommitteeelectionwastobeprovidedonorbefore2Octoberwith12noonon19October2009,setastheclosingdateforthenominations.
Thiscasemaybeviewedat:www.austlii.edu.au/au/cases/cth/FCA/2009/1158.html
Implications of this case
VoluntaryadministrationisgovernedbyPart5.3AoftheCorporations Act 2001(Cth).Theobjectiveofvoluntaryadministrationistoallowacompanythemaximumchanceofcontinuinginexistence,orifthatprovestobeimpossible,toprovideabetterreturntocreditorsandmembersthananimmediatewindingup.Voluntaryadministrationismeanttoencouragecompaniestouseacheaper,moreflexibleprocessinordertodealwiththeirinsolvencywithoutanycourtinvolvement.Theappointmentoftheadministratorgivesrisetoamoratoriumondebtsofthecompany,andallowstheadministratortoreviewoptionstoputbeforeameetingofthecompany’screditors.Thecreditorshavetheultimatesanctioninthismethodofexternaladministration.
Inthiscase,thecreditorsofthecompanyvotedtobeboundbyadeedofcompanyarrangement,buttechnicaldifficultiesarose.Thisisanexampleoftheoperationofsection447A(1)whichallowsthecourttomakeanyorderitseesfittopromotetheoperationofPart5.3AoftheAct.AlthoughPart5.3AoftheActishighlytechnicalinnature,andseemsprescriptive,section447A(1)hasbeenliberallyinterpretedbythecourtstogiveflexibilitytoadministratorstoachievethepolicypurposesofvoluntaryadministration.Thiscaseshowsthatsuchflexibilitycanassisttheadministratortomovetheadministrationforwardtotheultimatebenefitofthecompanyandthecreditors.
2.3.2 CORREA V SPANISH CLUB LTD AND ORS [2009] NSWSC 1225 (SUPREME COURT OF NEW SOUTH WALES, 30 SEPTEMBER 2009) FILE NO: 4777/09
AftertheSpanishClubLtd,aclubregisteredunderthe Registered Clubs Act1976(NSW)(thestateAct),becameinsolvent,KennethWhittinghamwasappointedadministratorofthedeedofcompanyarrangementthatwassubsequentlydrawnup.Althoughthechiefcreditor,AustralianUnity,wasowedapproximately$3.67millionofthe$4milliondebt
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outstanding,theClub’sassetsexceeded$10million.On1July2009,G&JDrivasPtyLtdenteredintoacontractwiththeadministratortopurchase86and88LiverpoolStreet,Sydney,for$9.25million.Accordingtothedeedofcompanyarrangement,theformerpropertywasdescribedinClause1.1(14)asnon-corewhilstthelatterwasdefinedinClause1.1(7)ascoreproperty.
Undersection41J(3)ofthestateAct,thesaleofcorepropertyrequiredtheapprovalofamajorityofordinarymembersoftheClubobtainedatageneralmeeting.Themeetingwasheldon31July2009,butthemembersrejectedtheproposedsaletoDrivas.Regulation19(1)(h)oftheRegistered Clubs Regulation 2009 (NSW)alloweddisposalofcorepropertywithapprovaloftheNewSouthWalesDirector-GeneralofCommunities,sotheadministratoraskedfortheDirector-General’sassistance.SincetheCorporations Act 2001 (Cth)prevailedoverstatelegislation,theadvicewasthattheadministratorwasnotboundbytherequirementsofsection41J(3)ofthestateAct.
However,section444A(5)oftheCorporations Act 2001 (Cth)qualifiestheadministrator’sbroadpowerofsaleunderadeedofarrangement‘exceptsofarasitprovidesotherwise’.Here,thedeedspecificallyreferredtotheneedtocomplywiththestateAct.DeloresCorrea,amemberoftheClub,soughtapermanentinjunctiontohalttheintendedsale.JusticeBreretonintheSupremeCourtofNewSouthWalesagreedthattherewerestronggroundsforherstance.HepointedoutthattherequirementsofthestateActwereincorporatedintoclauses5.1and5.2ofthedeedofarrangement–indicatinganintentiontoprotecttheinterestsofclubmembersaswellasthoseofcreditors.Otherwise,whyincludetheclausesatall?Further,hedidnotviewtheDirector-General’sremarksunderregulation19(1)(h)assignifyingapprovaltosellthepropertyinquestion.Toproceedcouldharmtheinterestsofmemberswhowereeagertoseetheclubreturntoprofitability.
Onthesubjectofwhomthebalanceofconveniencefavoured,HisHonourcouldseenoprejudicetoeitherparty,particularlyastheClub’sassetsweremorethansufficienttocoveritsdebts.Therefore,becauseDeloresCorrea’scaseonbehalfofthememberswassostrong,apermanentinjunctionwasgranted,leavingopenthepossibilityofthecontract’sbeingavoidedinthefuture.
Thiscasemaybeviewedat:www.austlii.edu.au/au/cases/nsw/NSWSC/2009/1225.html
Implications of this case
Thiscaseisanillustrationofthepossibleconflictswhichcanarisebetweenstateandfederallegislation.Constitutionally,federallegislationwillprevailoverstatelegislationinmanycircumstances.However,inthiscase,provisionsofastateActwereincorporatedintothedeedofcompanyarrangementmadeunderafederalAct.Adeedofcompanyarrangementisbindingontheadministratoraswellasthecreditorsandmembers,andHisHonourdecidedthatintheparticularcircumstancesofthecase,thismeantthattheadministratorhadtocomplywiththestateAct’sprovisions.
2.3.3 JOHNSON V COMMISSIONER OF CONSUMER AFFAIRS [2009] NTSC 4 (27 FEBRUARY 2009) FILE NO: 90 OF 2006 (20619538)
Usingthepowerprovidedbysection65oftheAssociations Act (2003) (NT)(theAct),theCommissionerofConsumerAffairs(theCommissioner)dissolved theBlonksMotorcycleClubIncorporated(theAssociation)on12July2006.ThedissolutionwasgazettedaftertheAssociation’soperationsbecamedormantanditwasunclearwhetheritsobjects
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werebeingpursued.MrJohnson,thepublicofficeroftheAssociationattherelevanttime,deniedthelattercriticisms.Asaninterestedpersonundersection71(1)oftheAct,hesoughttoprovethat,whentheAssociationwasdissolved,itwasinfactcarryingoutitsobjectsoroperation.Bysodoing,hecouldbegrantedanorderdeclaringtheCommissioner’sactionvoid.
Originallyincorporatedon7April1986,theAssociation’sobjectivesrevolvedaroundtherestorationofBritishandAmericanmotorcyclesandtheirsafeuseintouringandsportingpursuits.BoththeAssociation’sConstitutionanditsRuleswerefiledwiththeappropriatebody.AftertheAssociationwasincorporated,on12May1989,itpurchasedahouseatHowardSpringstouseasaclubhouse.TheCommissioner’sevidencerevealeditfunctionedastheAssociation’sclubhouseuntil1993whentheHell’sAngelsMotorcycleClub(Hell’sAngels)setupaDarwinchapterandeffectivelytookcontrol.Infact,thissignificantAssociationassetwasgiftedtoAngelInvestments(NT)PtyLtd,abusinessentitycontrolledbyHell’sAngels,on27July2001.
ExaminationoftheAssociation’sfinancialaffairsinsubsequentyearsrevealedproblems.Unqualified,auditedfinancialstatementsweresubmittedbytheAssociationforthe2001/2002financialyear.Nonewerelodgedforthefollowingfinancialyear.Theequivalent2003/2004statementswerequalified.TherewasnoindicationthatthesereportshadbeenplacedbeforetheAssociation’sAnnualGeneralMeetingorthatanymembersoftheManagementCommitteehadsignedoffonthem.Nolodgementwasmadefortheyearended30June2005.On1March2006,althoughtheCommissionerrequestedthattheAssociationproduceitsbooks,noresponsewasforthcoming.
Bythistime,MrJohnsonwastheAssociation’snotifiedpublicofficer,despitethefacthismembershipoftheAssociationclearlyendedin1993.AnewConstitutionforthemotorcycleclubwasadoptedon13June2006,buttheCommissionerlaterruleditwasnon-compliantwiththecurrentlegislation.TheargumentthatAssociationrecordshadbeendestroyedinafirewasrejectedasacredibleexplanationfortheunderlyinglackofdocumentationofmeetingsandotherrelevantdata.
Therefore,JudgeSouthwooddeterminedthatmostoftheoriginalAssociationmemberswerenowmembersofHell’sAngels.AnyconnectionwiththeearlierBlonksMotorcycleClubIncorporatedwaslimitedtouseofitsformerpropertyandaccesstoitsbankaccountsasrequiredbyHell’sAngels’members.TheAssociation’sformerassetswerebeingappliedtoHell’sAngels’pursuits.MerepossessionofpersonalpropertysuchasalawnmowerandwatertankswasnotsufficienttoprovetheAssociationoperational.Becauseofthesefactorsandtheabsenceofstrictadherencetotheacceptedproceduralguidelinesforassociations,HisHonourdeclaredtheAssociationdefunctatthetimeofitsdissolution.Inhisview,itwasinactiveby12July2006.
Thiscasemaybeviewedat:www.austlii.edu.au/au/cases/nt/NTSC/2009/4.html
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2.4 MEMbErshiP and officE
2.4.1 DAIRY FARMERS MILK CO-OPERATIVE V CO-OPERATIVES COUNCIL [2009] NSWSC 862 (27 AUGUST 2009) FILE NUMBER: 11129/09
TheDairyFarmersMilkCo-operative(DFMC)operatedasaco-operativeofdairyfarmerswithinacontractualframework.Until2008,whenitwastakenoverbyNationalFoodsLtd,milksuppliedwasdespatchedtoAustralianCo-operativeFoodsLtd(ACFL)forprocessing.Asaresultofthetakeover,theco-operativebecameacorporationundertheCorporations Act 2001 (Cth).WhenACFL’sschemeofarrangementwithitsmemberswasapprovedon18November2008,DFMC’sshareholdingwas20%whichwasexpectedtoberealisedanddistributedamongstitsmembers.Outoftheresulting$91,589,000,aspecialdividendof$1.6897persharewasdeclaredon10December2008,andannouncedattheDFMCannualgeneralmeeting.ThisspecialdividendwasonlyavailabletocurrentDFMCmembers.
Thirty-oneformerDFMCmemberswhohadcancelledtheirmembershipbetween31March2008,and31October2008,werewaitingonpaymentfortheirsharecapitalwhentheschemeofarrangementwaseffected.On28Novembertheircapitalwasrepaidwithoutinterest,butmorepromptlythanwasusual.Althoughtheyhadnoentitlementtopartakeinthespecialdividendbecausetheywerenolongermemberswhenthespecialdividendwasannounced,on9December2008thesepastmembersrequestedtheCo-operativesCounciltorestoretheirmembershipsothattheycouldaccessthespecialdividend.Theirapplicationreliedonsection129oftheCo-operatives Act 1992 (NSW)(theAct)whichpermittedanordertoreinstatemembershiptogetherwithitsentitlementsifitscancellationhadoccurredunreasonably.On5FebruarytheCo-operativesCouncilorderedthattheseshareholdershavetheirmembershipreinstatedfromtherelevantterminationdatestomakethemeligibleforthespecialdividend.Twentyfourhoursafterthepaymenthadtakenplace,theirmembershipwastobecancelledagain.Unhappywiththedecision,theDFMCappealedaswasitsrightundersection419oftheAct.
ActingJusticeBrysonfoundthat,asthethirty-onemembershadbecomeinactivethroughfailingtosupplytherequisiteamountofmilkwithintherequiredtimeframesetoutinsection64(1)oftheAct,theirmembershipwaslegitimatelycancelledundersection127.Further,hedeterminedthatthepowergrantedbysection129(1)shouldbeinterpretedwidelytopermitthealterationofmembers’rightswithrespecttothecancellationoftheirmembership.Ananalysisofsection 129clearlyindicatedtheCo-operativesCouncilwaschargedwiththisresponsibilitywhilsttheCo-operativesBoardhadnopowerinthisregard.Thatsaid,HisHonourcouldnotfaulttheCo-operativesBoard’shandlingoftheoriginalmembershipcancellationsnoritsprematurereturnofshareholders’capital.
Next,ActingJusticeBrysonconsideredingreaterdetailwhethertheCo-operativesCouncil’sorderwaswithinitspower.HepointedouttheDFMC’scorrespondencewiththeformermemberswasnotmisleadingalthoughtherewasnoattempttobeproactiveandoutlinethecircumstancesinwhichtheirmembershipcouldberevived.DespitethelawfulnessoftheDFMC’sbehaviour,theCo-operativesCouncil’sdecisionastotheunreasonablenessofthecancellationofthethirty-onemembershipswasvalid.Tosupport
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hiscontention,HisHonourcitedthereferenceintwooftheDFMC’sletterstotheaffectedmembersbeing‘entitled’,anexpressionwhichsuggestednofurtheractiononthepartofthememberswasnecessary.HealsocriticizedtheDFMC’sfailuretoacquaintthesememberswiththeirrightsandresponsibilitiesundertheactivemembershiprule.Inhisopinion,oncetheCo-operativesCouncilresolvedthatthecancellationofthethirty-onemembershipswasunreasonable,itwaswithinitsmandatetoreinstatetheirmembershipsassetoutinsection129(3)oftheAct.Therefore,theappealbytheDFMCwasdismissed.
Thiscasemaybeviewedat:www.austlii.edu.au/au/cases/nsw/NSWSC/2009/862.html
2.4.2 IN THE MATTER OF DAIRY FARMERS MILK CO-OPERATIVE LTD [2009] NSWSC 627 (3 JULY 2009) FILE NUMBER: 2929/09
AfterDairyFarmersMilkCo-operativeLtd(DFMC)solditstwentypercentshareholdinginAustralianCo-operativeFoodsLtd(ACF),itneededtoapportionthenetproceedsofthesaleamongstitsmembers.Theinitialstepwastoannounceaspecialdividendof$1.6879pershareatthe2008AnnualGeneralMeeting,tobepaidtoDFMCmembersbyDecemberofthatyear.Some$56.9millionwasinvolved.Next,paymenthadtobeeffectedforthecompulsorysharecancellationasthesalewasbroughtaboutviaatransferofDFMC’ssharestoNationalFoodsLtdinexchangeforcash.Itwasdeterminedtopay$1.00pershareforeachofmember’ssevenoutoftensharestobecancelled.AfurthercomplicationconcernedwhetherformermembersoftheDFMCwhoappliedsuccessfullytotheCo-operativesCouncilforreinstatementundersection129oftheActtotakeadvantageofthedividend,wereeligibleforthispaymentaswell.Acourt-approvedschemeofarrangementwasrequired.
DFMCsoughtapprovalintheNewSouthWalesSupremeCourtforaschemearrangedwithitsmembersundersection344(1)oftheCo-operatives Act 1992 (NSW)(theAct).Accordingtosection344(1)(b),suchapprovalmayonlybegrantedifmembershavepassedaspecialresolutionbymeansofaspecialpostalballot.AftertheCourtnominated3July2009,asthedateforhearingDFMC’sapplication,therequiredballotofactivememberswascarriedoutinJune.Noanomalieswerereportedinthewaytheballotwasconducted.Aspecialresolutionforthepurposesofaspecialpostalballotofco-operativemembersneedsathreequartersmajorityassetoutinsection189(1)(c)oftheAct.Topasssucharesolution,thespecifiedmajoritymustcastaformalvoteinlinewithsection190(2).Here,97.6%oftheformalvotes supportedtheschemeunderdiscussion.JusticeAustinwassatisfiedthatalltheproceduralrequirementsrelatingtotheballothadbeenmet.
HisHonouralsoexploredtheissueofhowtheadditionalpaymentimpactedonDFMC’scapitalposition.HeagreedwiththeDFMCBoardthat,althoughtheschemeofarrangementresultedinareductioninDFMC’scapital,itwasnotdesignedtofloutsection299(1)inPart11Division2oftheActwhichdealswithpurchasingsharesinaco-operative.RetainedearningsshouldbesufficienttocontinuetheoperationofitsMilkSupplyAgreementwithACFwhilstDFMC’sbalancesheetshouldbenefitfromtheremovalofthepossibilityofnegativenetassets.
Therefore,heagreedthattheCourtshouldapprovetheschemeofarrangement.Althoughinactivememberswouldbenefitunderthescheme,providedtheirshareshadnotalreadybeenpaidout,reinstatedmemberswouldnotsincetheyhadbeenpaidpreviously.Nevertheless,allmemberswouldbesubjecttothescheme’sstipulations.
Thiscasemaybeviewedat:www.austlii.edu.au/au/cases/nsw/NSWSC/2009/627.html
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2.4.3 CUMMINS V AUSTRALIAN JOCKEY CLUB LIMITED [2009] NSWSC 254 (6 APRIL 2009) FILE NUMBER: 2144/09
Establishedin2008asacompanylimitedbyguarantee,theAustralianJockeyClubLimited(theAJC)leasestheRandwickRacecourseinSydney.InMarch2009,SarahCummins,alongwithothermembersoftheAJC,attemptedtorequisitionageneralmeetingtodiscussthereplacementoftheAJC’sincumbentdirectorsduetodissatisfactionwiththeirperformance.Aspartoftheprocess,hergroupproducedaproxyformtobeusedintheeventaconcernedmembercouldnotattendandwishedtoappointaproxy.Themeetingwasdulyscheduledfor9April2009.However,theproxyformswerepreparedaheadoftimeandblankswereleftinwhich‘thebearer’wasauthorisedtoinsertthetimeandplaceofthemeeting.
WhentheAJCsentoutitsnoticecallingthemeetingwithaccompanyingvotinginformationaround11MarchitstatedthatonlytheformofproxyprovidedbytheAJCwasvalid.Bythisstage,manymembershadalreadyhandedtheiralternativeproxyformstooneofMsCummins’sgroup.Subsequently,justpriorto18MarchafterinterventionbyComputershareInvestorServicesPtyLtd,acompanyemployedbytheAJCtoassistwiththelogisticsofthemeeting,theseproxieswerereturnedwithinstructionstodepositthemsignedwitheithertheAJCorComputershare.
Despitethisaction,legaldiscourseviatheirrespectivesolicitorscontinuedbetweentheAJCandMrOsburg,arepresentativefromMsCummins’sfaction.CorrespondencefromtheAJC’slegalrepresentativeson27Marchand31Marchcitingaseniorcounsel’sopinion,wasambiguousastowhatconstitutedavalidproxyvote.ThisculminatedinMsCumminscommencinglegalproceedingson31Marchtohavethetwoformsofproxydeclaredtobevalid.Meanwhile,by2Aprilthedaybeforethereturnofheroriginatingprocess,theAJCadmittedthatanyissuesrelatingtotheproxieswerepurelyacademic.Nonehadbeenforwardedinvalidlyandnodisputeovertheactualproxieshadarisen.
Therefore,whenthematterreachedtheSupremeCourton3AprilMsCumminssoughtleavetodiscontinuetheaction.Inaddition,sheappliedforanorderthattheAJCpayhercosts.ThisapplicationwasstrenuouslyobjectedtobytheAJCwhomaintainedthatthecustomarypositionastocostsshouldhold.Accordingtoregulations42.19(1)and(2)oftheNewSouthWalesUniform Civil Procedure Rules 2005whichdealrespectivelywithdiscontinuanceofproceedingsandtheassociatedcosts,anycostsincurredbytheAJCwithrespecttothediscontinuedmatterwouldusuallybebornebyMsCummins.
However,JusticeBarrettupheldbothofMsCummins’srequestsonthebasisthat,sincetheAJChadfailedtoprovidetimelyguidanceastothevalidityofthealternativeproxies,forcingMsCumminstoseekadvicefromthecourt,theAJCshouldbeliableforhercosts.
Thiscasemaybeviewedat:www.austlii.edu.au/au/cases/nsw/NSWSC/2009/254.html
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2.4.4 PLENTY & ANOR V SEVENTH DAY ADVENTIST CHURCH OF PORT PIRIE [2009] SASC 10 (19 JANUARY 2009)
GrahamandDeeannePlentyoriginallyattendedtheSeventhDayAdventistChurchinPortPirie(theChurch)duringthelate1950sbeforetheymovedtoWesternAustralia.OntheirreturntoSouthAustraliainthe1970s,theybecameactivemembersofthecongregationaftertheirnameswereplacedonthePortPirieChurch’sroll.Duringthistime,therewasanongoingdisputebetweenthePlentysandfellowchurchmembersinvolvingwhattheformerperceivedastheirregularelectionofpeopletoChurchpositions.ThisdisagreementculminatedinMrandMrsPlenty’sbeingdisfellowshipped,thatis,expelledfrommembershipoftheChurch,on1December1979.AlthoughtheyreactedinJune1982,byinstigatingproceedingsclaimingadenialofnaturaljustice,thematterdidn’treachcourtuntil2002.On10March2003,judgmenttothiseffectwasgivenintheSouthAustralianSupremeCourtalongwithadeclarationbyJusticeDugganthattheChurch’sactionswerenullandvoid.TheChurchrefutedthisdeclarationviaacross-appeal.
Subsequently,thePlentysamendedtheirstatementofclaimtoseekdamagesinbothcontractandtort.InNovember2006,JusticeDuggandeniedboththeseremedies:thefirst,onthebasisthatnocontractexistedbetweentheChurchandthePlentys;thesecond,onthegroundsofafailuretodemonstratetheexistenceofadutyofcare.Onappeal,MrandMrsPlentyre-addressedthesecontractualandtortiousissuesaswellastheconsequencesofthedenialofnaturaljustice.Themattersofthelossofproprietaryrightsandthedamagetotheirreputationswerealsoraised.
IntheSouthAustralianFullCourt,theleadingjudgmentbyJusticeGraydealtfirstwiththePlentys’claimthattheyweredeniednaturaljustice.Moreparticularly,theirexposuretobiaswasexamined,astheChurchmembersnotonlysetintrainthedisfellowshippingprocess,butalsodeterminedwhetheritsimplementationwasnecessary.HisHonourcommentedthat,asmembershipofsuchaChurchwouldberelativelysmall,itwouldbeunavoidablethatmemberswouldbeforcedintopotentiallyconflictingroles,asituationpermittedbytheChurchrules.Noevidenceofmalicewasfoundtobeapparent.
Next,JusticeGray’sattentionfocusedonwhethertheChurchmanual,producedintheUnitedStatesofAmerica,gaverisetocontractualrightsandobligationsamongstitsmembers.Hedidn’tbelievesoasitwasastandardAmericanpublicationwithastrongreligiousflavour.Legalproceedingswereonlyincorporatedasadefaultoption.Commentingonthetrialjudge’sexaminationofwhetherdamageswereavailableforthedistressthedisfellowshippingcausedMrandMrsPlenty,JusticeGrayalsodeclinedtofindanyresultantinconvenience,citingthethreedecadestakentohavethematterconcluded.
Turningtothequestionofwhetherdamageswerepayableundertortlaw,HisHonouragreedwiththetrialjudge’sview,basedlargelyontheevidenceofDrBlakemore,apsychiatristcalledbytheChurch,thatitwasnotreasonablyforeseeablethatarecognizablepsychiatricconditionmightdevelopasaresultofbeingdisfellowshipped.Similarly,JusticeGrayrejectedthenotionthatheartconditionssufferedbybothMrandMrsPlentywereattributabletotheirtreatmentbythePortPiriecongregation.Therefore,nodamageswereawardedintortasnodutyofcarehadbeenbreachedwithrespecttothem.
Withrespecttotheirpurportedlossofproprietaryrights,thePlentyswerestillabletoutiliseChurchfacilitiesdespitetheirnamesbeingremovedfromtheroll.However,astherelationshipbetweentheChurchanditsmembershadneverbeencontractualinnature,noproprietaryrightshadeverbeenpossessedbythePlentys.SinceMrandMrsPlentywerenothighlyregardedbythecongregationpriortothedisfellowshipping,JusticeGrayfailedtofinditcauseddamagetotheirreputations.
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Finally,HisHonourconsideredthedeclarationforeshadowedbyJusticeDugganin2003.Itwasnotuntilthe23October2007,thatthisdeclarationcametofruition.Bythen,neitherMrnorMrsPlentyhadhadanyinvolvementwiththeChurchforover25years.TheChurcharguedthattheprotractedwayinwhichthePlentyshadpursuedthemattersuggestedtheirlackofinterestinthedeclarationwhichwouldnot,inthefinalanalysis,restoretheirChurchmembership.Fromapurelylegalperspective,thesituationwasfurthercomplicatedbyconfusionastowhetherthedecision,relatingasitdidtonaturaljustice,wasvoidorvoidable.Therefore,JusticeGrayallowedthecross-appeal,settingasidethedeclaration.Hisfellowjudgesconcurredwithhissentiments.
Thiscasemaybeviewedat:www.austlii.edu.au/au/cases/sa/SASC/2009/10.html
Implications of this case
Theprincipalpointinthiscaseisthatthechurchisanunincorporatedassociation,asopposedtooneincorporatedunderstateassociationsincorporationlegislationorthecorporationslegislation.Theunincorporatedassociationisnottraditionallyregardedasalegalentitywithrightsandobligations.Ineffect,unincorporatedassociationsdonotexistinlaw.Therefore,damagesforbreachofanunincorporatedassociation’srulescannotgiverisetodamagesintheabsenceofacontract.Ofcourse,thishasmeantthatthereisnobasisforamembertobringanactionagainstanassociationunlesssomeproprietaryrightcanbeshown.Inshowingatrueproprietaryright,theexistentialproblemofwhetheranunincorporatedassociationis‘real’inanylegalsenseisanobstacle.Anunincorporatedassociation,whichisnotalegalentityundercommonlaw,cannotholdpropertyinitsownname.Therefore,amembercouldnotparticipateintherightsattachedtothatproperty,andsotherecouldneverbeaproprietaryrightdemonstrated.Therebeingnoproprietaryrightsinvolved,thenthereisnocauseofactionincontract.However,thetestforshowingaproprietaryrightisratherflexibleinAustralia.Itiswhetheramemberderivesatangibleorintangiblebenefitfrombeingamemberoftheassociationinquestion.Tangiblebenefitscanincludetherighttouseandenjoyanassociation’ssocialfacilities,playingfieldsorequipment.Intangiblebenefitsmightapplytoanassociationwhichhasnoactualfacilitiesorequipment,suchasabookclubconductedinmembers’homes,oranenvironmentalgroupwhichconductsallitsactivities‘on-site’atcontestedareas.Benefitswhicharemerelycollateral,however,maynotbesufficient.
2.4.5 KOVACIC V AUSTRALIAN KARTING ASSOCIATION (QLD) INC [2008] QSC 344 (22 DECEMBER 2008) FILE NO: BS 8505 OF 2008
FifteenyearoldJamesKovacic,aproficientgo-kartcompetitorfromNewSouthWales,wasbarredfromenteringkartingcompetitionsinQueenslandafterthelocalarmoftheAustralianKartingAssociationIncorporated(theAKA)passedaresolutiontothateffecton27October2007.
AlthoughhehadheldalicencetocompetesinceJanuary2002,hisexclusionstemmedfromhisfather’sinvolvementinanumberofunpleasant,sport-relatedincidentswhichincludedintimidatorybehaviour.Forhispart,amongstotheraccusations,ValentinoKovacic allegedtheQueenslandofficialswereopentobriberyandexhibitedbias.ThevolumeoflitigiousmaterialfromMrKovaciccausedtheAKA(Qld)’sprosecutor,MrLane,torefusetodealwithmattersconcerningMrKovacicinthefuture.Assupportfortheprosecutor,theAKA(Qld)decidedtodenyJamesentrytotheQueenslandkartingraces.ThiswaspassedbyresolutionatameetingoftheAKA(Qld),interms‘Thattheclubsof
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QldsupporttheAKA(Qld)ProsecutorinthattheywillrefusetoaccepttheraceentryofJamesKovacic’.OnlywhenJamesnominatedtoenteraraceinRockhamptonthefollowingJuneandwasrefused,didherealisethathehadbeenexcludedonanongoingbasis.
IntheQueenslandSupremeCourt,MrKovacicmaintainedonJames’sbehalfthattheAKA(Qld)didnotpossesstheauthoritytoimplementsuchanactionindefinitelystatewide.Further,proceduralfairnesshadnotbeenobservedinthatnoticerequirementswereignored.Finally,hedeclaredthedecisiontobesounreasonablethatitcouldnotbeallowedtocontinue.AKA(Qld)arguedthatthedecisionwasnottakenatadisciplinarytribunal;itwasaquasi-executivedecisionandnaturaljusticedidnotapply;andthatorganisersofcompetitionshadtherighttoexcludeanyone.
WhilstJusticeWilsonrecognisedMrKovacic’srighttoraisetheseissues,shefailedtofindanymeritinhisarguments.AttheheartofherdecisionwasthefactthatthematterwasnotjusticiablemerelybecausetheAKA(Qld)wasincorporated.HerHonourstatedthatcourtsdonotliketointerfereintheinternalmattersofvoluntaryassociationswithoutgoodreason(forexamplebreachofaproprietaryorcontractualrightofamember).Incorporationunderanactdidnotmatchtheperceivedpublicimportanceoflegislationgoverningtradeunionsorpoliticalparties,forexample.Byexploringtheavenuesopenunderprecedent,shefoundtherewasnoevidenceofbreachofcontractnorofinfringementofaproprietaryright.Finally,HerHonourconsideredwhetherJames’slivelihoodorreputationwasaffectedbytheAKA(Qld)’sdecision.SincehewasstilllicensedatanationallevelandracedmainlyinNewSouthWales,thechiefeffectwasthelossoftheabilitytocompeteinasingleQueenslandevent.Internationally,hisgo-kartingwasunaffected.AsforMrKovacic’sclaimthatJameshadlostsponsorshipdealsworthcollectivelyabout$200,000becauseoftheAKA(Qld)’sresolution,HerHonourdeclaredittobeunfounded.Therefore,shedismissedMrKovacic’scase.
Thiscasemaybeviewedat:www.austlii.edu.au/au/cases/qld/QSC/2008/344.html
Implications of this case
Thiscaseisimportantforitsdiscussionaboutthepolicyofthelawandcourtsinrespectofinterferenceintheaffairsofavoluntaryorganisation.Thedecisionreaffirmsthelongheldpositionthatinorderforacourttobeabletoprovidereliefatlaworinequitytheapplicanthastoestablishthattherehaseitherbeenabreachofcontractoraninterferencewithaproprietaryrightorinterestorsomeone’slivelihoodorreputationisatstake.Theplaintiffwasnotamemberoftheorganizationwhichplacedthebanonhimanditwasheldthatthisfactdidnotprecludehimfromseekingdeclaratoryrelieffromthecourt.Thecourthasaverywidejurisdictiontograntdeclaratoryrelief.Thecaseturnedonthefactsnotonalackofstandingtobringanactionoronthattheactioncouldn’tbebrought.
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2.5 nEGliGEncE
2.5.1 MATTHEW CHAINA & ORS V THE PRESBYTERIAN CHURCH (NSW) PROPERTY TRUST & ORS (NO 3 ) [2009] NSWSC 1243 (SUPREME COURT OF NEW SOUTH WALES, 23 NOVEMBER 2009) FILE NO: 20472/2002
FollowingthedrowningoftheirsonataschoolcampinOctober1999,MrandMrsChainalaunchednegligenceactionsbothasparentsandasthedirectorsandonlyshareholdersoffamilycompanies.Asdiscussedinanearlierlegalcasenote(Chaina & Ors v the Presbyterian Church (NSW) Property Trust & Ors[2008]NSWSC290),theyinsistedthenervousshocksufferedasaresultoftheirson’sdeathadverselyaffectedtheirabilitytooperatetheirbusinessandtriggeredalossofprofits.Since,byOctober1999,theywereintheprocessofdevelopingacollectionofdomesticcleaningproductstobemarketedaswellasplanningtore-launchanindustrialproductrange,claimsforpastandfutureeconomiclossweremade.
Ofparticularimportanceforassessingthequalitiesattributedtothecleaningproductsweretherelevantformulae.However,whileMrandMrsChainamaintainedtheformulaeexisted,theywereloathtodivulgethem,despiteacourtorderrequiringthemto.FollowingtherevelationinAugust2009,thatMrChainadidnotpossesstheacademicqualificationsheprofessedtohave,thecouplesoughttohaveexperttestimonyadmittedastothesuperiorqualitiesoftheirproducts.SolicitorsfortheChainasassertedthatfailuretopresentsuchtestimonywouldseriouslyharmtheircase,particularlyasMrChaina’spreviousevidencewouldnowbediscredited.
Foritspart,thePresbyterianChurch(NSW)challengedthisassumptionasitscasehadbeenresearchedandresourcedaroundMrChaina’searlierstatementsofhispersonalknowledgeofandinvolvementinthedevelopmentoftheproducts.ReferringtoMrandMrsChaina’sdelayingtacticsoverthecourseofthelitigation,theChurchcontendeditwastoolateforthemtobeallowedtoaltertheirevidentiaryfoundations,pointingoutthatsection56(1)oftheCivil Procedure Act 2005 (NSW)advocated‘Ajust,quickandcheapresolutionoftherealissuesinproceedings’.TheChurchalsoarguedthatthespecialistadviceofthepreferredexpertswouldbeoflimitedassistancesincesomeoftheoriginalingredientsinthe1999formulaewerenolongeravailable,makingexactreplicationofthecleaningproductsimpossible.
AlthoughJusticeHoebenintheNewSouthWalesSupremeCourtwassympathetictotheChurch’sarguments,particularlywithrespecttotheprotracteddelays,unnecessarycostsanduncertaincasemanagement,andrecognisedthatawardingcostswasnotadequaterecompensefortheinconveniencecaused,HisHonourfeltinthisinstancethattheclaimneededtobearguedproperly.Iftheapplicationtoadmitthenewtestimonywasrejected,MrandMrsChaina’scasemightwellcollapse.Sincecasepreparationwasongoingandnohearingdatehadbeenset,mindfulofacting,‘Inaccordancewiththedictatesofjustice’,assetoutinsection58(1)oftheCivil Procedure Act 2005 (NSW),JusticeHoebengrantedtheChainas’application.
Thiscasemaybeviewedat:www.austlii.edu.au/au/cases/nsw/NSWSC/2009/1243.html
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2.5.2 THE QUADRIPLEGIC CENTRE BOARD OF MANAGEMENT V MCMURTRIE [2009] WASCA 173 (WESTERN AUSTRALIAN COURT OF APPEAL, 13 OCTOBER 2009) FILE NO: CACV 120 OF 2008
IntheWesternAustralianDistrictCourt,$510,840wasawardedindamagesfornegligencetoMsMcMurtrie,anurse’sassistant,forabackinjurysustainedwhileturningapatient,MrR.J.,inhisbedattheQuadriplegicCentreon24May2001.Sheallegedthatafterswearingather,MrR.J.struckouttowardsherfacewhileshewasbendingoverhim.Toavoidhisblow,shelurchedbackwardsquickly,causingdamagetoherbackasshedidso.IttranspiredthatMrR.J.hadpreviouslybeenphysicallyaggressivetowardsanotherstaffmember,MrSiharath,amatterofwhichMsMcMurtriewasunaware.Sheclaimedthat,hadsheknownpriortoherinjury,shewouldhaveapproachedMrR.J.differently.FollowingMsMcMurtrie’sexperience,aregisterednurse,MsWynne,alsocomplainedthatMrR.J.hadhitoutather.Therefore,thetrialjudgedecidedthattheQuadriplegicCentrewasnegligentbyreasonofitsfailuretonotifyMsMcMurtrieofMrR.J.’spriorviolentbehaviour,aforeseeableconsequenceofwhichwasthatshecouldbeharmed.TheQuadriplegicAssociationappealedthedecision.
ItwasarguedthatthetrialjudgehadlargelyignoredtheevidenceofMsMarshall,anothernurse’sassistant,whomaintainedthatMsMcMurtriewasstanding,notbendingover,atthetimeinquestion,anddidnotlurchbackwards.ThisargumentwasupheldbytheCourtofAppealasanerrorinlawbythetrialjudge.
Thesecondgroundofcontentioninvolvedwhether,infact,therehadbeenabreachoftheQuadriplegicAssociation’sdutyofcare.Astherespondent’semployer,theQuadriplegicAssociationowedheradutytotakereasonablecaretoavoidexposinghertounnecessaryriskofinjury.Theissueherewasthescopeofthatdutyofcare,specifically,whetheritincludedadutytowarnofthepriorincidentwithMrSiharath,andwhetherthedutyhadbeenbreached.Onceagain,theCourtofAppealfoundfortheQuadriplegicAssociation.JusticePullin,withwhomJusticeNewnesagreed,pointedoutnosuchdutyofcaretowarnwasowedtoMsMcMurtrieasshehadbeenspecificallyrequestednottolookafterMrR.J.and,therefore,wasnotamemberofthegroupassignedtolookafterhim.Intheeventthisreasoningwasflawed,thejudgespointedoutthattwominorinstancesofaggressionfromMrR.J.werenotsufficienttowarrantageneralwarningtoallnursingassistants.JusticeBussinaseparatejudgmenthighlightedthistoo,mentioningMrR.J’slimitedphysicalabilitytoinflictaninjury.Further,asheregardedbreachofdutyandcausationasinterlinked,hefounditimpossibletoacceptthetrialjudge’sconclusionthatthemereprovisionofawarningwouldhavealteredMsMcMurtrie’splight.
AllthejudgesfoundnomeritinthesuggestionthatthetrialjudgefailedtosupplyadequateunderlyingreasonsastowhyawarningshouldhavebeengivenandhislinkageofthisstateofaffairstotheQuadriplegicAssociation’sbreachofitsdutyofcare.
However,onthefourthgroundofobjection,namely,thetrialjudge’sfindingthatMsMcMurtrie’sinjurywasdirectlyattributabletothelackofawarning,themajorityoftheCourtofAppealdecidedthattherewasnoconnectionbetweenthebackinjuryandthesuggestedwarningasthedamagewasnotinflictedbyMrR.J.,butbyMsMcMurtrie’ssuddenmovementinresponsetomisreadinghisactions.Evenifadutyofcarecouldbeshowntoexist,failuretowarnofapossibleassaultwasnotcausaloftheinjury,giventhatitwasnotdirectlyassault-related.JusticeBussalsofoundthetrialjudgetohaveerredwithrespecttothematterofcausation.Hebelievedthatawarningwouldnothave
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changedMsMcMurtrie’sactionswithrespecttoMrR.J.,astoturnhimnecessitatedherbending.Anyrelevantwarninggivenwouldhavehadtofocusontheforeseeableriskofassaultwhereastheinjurywasnotcausedinthismanner.ConsiderationofMsWynne’sevidencedidn’tmakeadifferencetothefinaldecision.
Therefore,theappealwasallowedandtheearlierjudgmentsetaside.
Thiscasemaybeviewedat:www.austlii.edu.au/au/cases/wa/WASCA/2009/173.html
2.5.3 ROOTY HILL RSL CLUB LTD V KARIMI [2009] NSWCA 2 (30 JANUARY 2009) FILE NUMBERS: 40623/07; 40626/07
Asaresultofbeingassaultedatapproximately11.30p.m.onSaturday,19April2003,byadrunkenMichaelSmithinthecarparkoftheRootyHillRSLClub(theClub),TariqueKarimi,amemberoftheClub,sustainedseriousinjuries.Aftertheassault,hewascomatosefortwomonths,beingleftwithsignificantbraindamageandnorecollectionofthenight’sevents.ThisassaultwasrelatedtoanearlierincidentintheClubthateveningatabout11.10p.m.,where,withnoprovocationonhispart,TariqueKarimi,wassetuponbythesameintoxicatedattacker.SecurityguardsemployedbytheAlliedSecurityGroup(Allied)dealtwiththepreviousattackbyevictingbothmen,regardlessoffault,inlinewiththeClub’spolicy.Despitestaggereddepartures,MichaelSmithdupedAlliedbyreturningtooneoftheClub’scarparkstofurtherassaultTariqueKarimiafterMrSmith’scarhadbeenobservedleavingtheotherone.
IntheNewSouthWalesSupremeCourt,acaseinnegligencewasmadeoutagainstboththeClubandAllied,andacaseoftrespasstothepersonwasmadeoutagainstMichaelSmith.TheClubandAlliedwereconsiderednegligentfornotimplementingmeasurestoensurethetroublemakershadactuallyleftthepremises.Further,theClubwasheldtobenegligentforfailingtooverseeAllied’sstrategiesforhandlingsuchasituation.NotprovidingTariqueKarimiwithanescortoralertinghimtothedangerofwalkingunaccompaniedtohisvehiclewasregardedasnegligentonAllied’spart.
BoththeClubandAllieddisputedthefindingsintheCourtofAppeal.Theyarguedthattheirdutyofcareprimarilyinvolvedgoings-onintheclubhouseanddidnotincludeliabilityfortheassaultinthecarpark.If,inthealternative,itdid,theyhadfulfilledtheirobligationsandtheirbehaviourwasnotcausativeofMrKarimi’sinjuries.TherewasnoactualorconstructiveknowledgeofMrSmith’slateractions.Further,theClubmaintainedthatsoleresponsibilityforpatronsecurityhadbeendelegatedtoAllied,astancethecourtofAppealrejected.
Nevertheless,JusticeBellinajudgmentsupportedbyhercolleagues,upheldtheClub’sandAllied’sgroundsofappeal.Shedeterminedthattheoriginaljudgmentwasarrivedatbyareconstructionofeventsonlypossibleinhindsight.Atthetimehewasaskedtoleave,MrSmithseemedcalm.Theoriginalincidentitselfdidnotrequirebackupsecurityassistance.MrKarimiwasonlypermittedtowalktohisvehicleafterMrSmithhaddrivenoff.Also,JusticeBelldoubtedwhetherthetrialjudge’ssuggestedmeasureofasecurityguard’saccompanyingMrKarimiwouldhavewardedoffthemindless,pre-meditatedattack.Therefore,shedeclinedtofindfailuretoemploysuchaprocedureasbeingcausalofMrKarimi’sinjuries.
Thiscasemaybeviewedat:www.austlii.edu.au/au/cases/nsw/NSWCA/2009/2.html
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2.6 nonProfit structurE and GoVErnancE
2.6.1 GOULD V MOSMAN RETURNED SERVICEMEN’S CLUB LTD [2009] FCA 1592 (FEDERAL COURT OF AUSTRALIA, LINDGREN J, 15 DECEMBER 2009)
Thislitigationbeganon3June2009,andencompassedseveralhearings.Gouldsoughtreliefagainstthedefendant,MossmanReturnedServicemen’sClubLimited(theclub)fornumerousfailuresbytheexistingboardoftheclub.BothGouldandtheclubwereunrepresented.Theclubhadoriginallybeenrepresentedbyafirmofsolicitors,buthadletthisrepresentationlapsebecauseoflegalcosts.Theclubstatedthatitwouldsubmittoanyorderofthecourt,exceptastocosts.
Gouldallegedthattheboardhadengagedinvariousformsofimproperconductincluding:
• intimidationofclubmemberswhoagreedwithGould;
• entrenchingthemselvesasboardmembersthroughanalteredconstitution;
• thedeliberaterunningdownofthebusinessoftheclubsothatthelandcouldbedevelopedasshops;
• aconflictofinterestattachedtothisplanbyoneboardmemberwhoisalsoalocalcouncillor;
• failuretoallowmemberstovoteonresolutionsproposedbymembers,and
• alsomadeallegationsaboutfinancialirregularities.
Gouldoriginallysoughtanordertooverturnhissuspensionasamemberoftheclub,andinthecourseoftheproceedingstheclubagreedtoreinstatehimtomembership.ThisallowedGouldtoattendtheclub’sannualgeneralmeetingon31May2009.GouldthenamendedhisoriginatingprocesstoquestionthevalidityoftheAnnualGeneralMeeting.Atthismeeting,therehadbeenanattempttoremovethedirectors,whichfailedbecauseofaproceduralshortfallinthedaysnecessaryforsuchamotiontobepresented.Gouldthenattackedthevalidityoftheconstitutionwhichprovidedfortheprocedurewhichhadcausedthemotiontofail.Heallegedthattheconstitutionhadbeenadoptedbytheboardtoserveitsownpurposes.
Althoughtheclubisacompanylimitedbyguarantee,JusticeLindgrenpointedoutthatthesewereinternalmattersforresolutionbytheclub,ratherthanmattersforthecourtorforresolutionbyreferencetotheCorporations Act 2001(Cth).ThelatterreferencewastoGould’sattempttogather100signaturesundersection249DoftheCorporations Act,whichallowsforarequisitionofageneralmeetinguponpresentationtotheboardofthesignaturesof100memberswhoareentitledtovoteatageneralmeeting.Goulddidobtainmorethan100signaturesforhisrequisition,butagainfailedinhavingtheresolutionsacceptedbytheboardfortechnicalreasons.
Gould’sfinalapplicationwasforanorderremovingcertainnameddirectorsfromoffice,andfornewelectionstobeheld.JusticeLindgrenpointedoutthatthecourtdoesnothavethegeneralpowertoremovedirectorsortoappointdirectors.Gouldthenappliedforafurtheradjournmentuntil2010inordertoinvestigateanallegedconflictofinterestinvolvingtheboardandthelocalMosmanCouncil.
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JusticeLindgrenpointedoutthathehadgivenseveraladjournmentstoallowGouldtoconsiderandactuponguidancegiventohimbythecourt,butstatedattheprevioushearingon13November2009thatthemattercouldnotbeallowedtocontinueindefinitely,andthatthishearingon15December2009mustbetheconclusionofthematter.HisHonoursaid:
‘IhavenodoubtthatMrGouldgenuinelyholdstheviewsthattheClubismismanaged,anditmaybethatthereissubstancetohissenseofgrievance.Itmaybethat,ifhehadbeenlegallyrepresentedandcouldarticulateandsupporthiscomplaintsinproperform,thecourseofeventswouldhavebeendifferent…MrGouldhashadampleopportunity,inthelightofthenumerousadjournmentsthathavebeengrantedathisrequest,todemonstrateajusticiablecase,but,hehasnotdoneso...WhileIhavehadsympathywithMrGouldinviewofhisundoubtedsincerity,Iwillnotallowtheproceedingtobeadjournedagainincircumstancesinwhichthepastrecordclearlysuggeststhateventswillnotimprovewithtime.’
Theproceedingwasdismissed.Therewasnoorderastocosts.
Thecasemaybefoundat:www.austlii.edu.au/au/cases/cth/FCA/2009/1592.html
Implications of this case
ThiscaseinvolvedaselfrepresentedlitigantwhowasaggrievedbytheallegedactionsoftheboardoftheRSLClubbutlackedsufficientunderstandingofthelegalprocesstobeabletoarticulatehiscase.Thecourthadnoalternativebuttodismisshisproceedings.Whilstmanyfearseekinglegaladviceandengaginglegalrepresentationduetothecost,thiscasedemonstratesthatthecourtcanonlyassisttoacertainextent.Thecasealsoillustratesthatthecourtswillnotreadilyinterveneininternalmattersofanorganisation.
2.6.2 ANDREWS V QUEENSLAND RACING LTD [2009] QSC 338 (23 OCTOBER 2009) FILE NO: 9471/09
QueenslandRacingLtd,acompanylimitedbyguarantee,overseesthethoroughbredracingindustryinQueenslandasdirectedbytheRacing Act 2002 (Qld)(theAct).UnderitsConstitutiondatingfrom26April2006,therearetwoclassesofmembers:ClassAmadeupofracingclubs;andClassB,theDirectorsofthecompanyfromtimetotime.Accordingtoclause15oftheConstitution,theDirectorsaretoretireonarotationalbasis.Oneofthese,WilliamAndrews,alongwithanotherDirector,MrLambert,wasduetostepdownon17November2009atthefirstAnnualGeneralMeeting(theAGM)aftertheirinitialthreeyeartermsconclude.However,MrAndrewscomplainedtotheSupremeCourtofQueenslandofirregularitiesintheselectionprocessforhisandMrLambert’ssuccessorsanddemandedcompliancewiththeselectionrequirementsundertheConstitution.
Clause17oftheConstitutionprovidesastep-by-stepapproachtochoosingDirectors,culminatingintheirappointment,inthiscasetakingeffectattheendoftheAGMinNovember2009.Inaddition,AppendixAoftheConstitutionsetsoutfivepossibleselectioncriteriaforsuchpositions,satisfactionofatleasttwoofwhichismandatory.AnyprospectivecandidatemustalsocomplywithSection9oftheActwhichprescribesqualitiesforaneligibleindividual,includingnotbeingbankruptorinvolvedinracingmanagement.
Tofacilitatetheprocess,anindependentrecruitmentspecialist,MrMarkWilsonofNorthernRecruitment,waschosenbytheBoardon6March2009.Whenapplicationsforthepositionsclosedon29May2009,twentysixparties,includingMrAndrews,hadregisteredtheirinterest.MrAndrewsfailedtomaketheshortlistforselection.
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MrAndrews’sobjectionsrelatedmainlytothewayMrWilsoncompiledtheshortlistofonlyfourpeople.Whenapplicationsclosed,thetwoultimatelysuccessfulDirectorschosenfromtheshortlist,MrMilnerandMrStewart,wereChairmenoftheBrisbaneandToowoombaTurfClubs,respectively.Bothsubsequentlyresignedfromtheirpositions,theformeron17June2009,andthelatteron25July2009.MrAndrewscontendedthatholdingthesepositionswhenapplicationsclosedforDirectors’positionsmeanttheywerenoteligiblepersonsundertheAct.Onthispoint,JusticeWilsondecidedthat,providedtheresignationswereeffectedbeforethedaytheSelectionCommitteeconvened14September2009),theywereeligiblepersons.
Uponconsiderationoftheshortlist,HerHonouragreedwithMrAndrewsthatMrWilsonhadbeeninstructedtoputforwardonlyfournamesratherthanregardingfourastheminimumnumber.Nevertheless,therewasnoevidenceofhisbeinginfluencedbyMrBentley,theChairmanofQueenslandRacingLtd,indeterminingthefinalfouralthoughconversationsbetweenthetwonaturallycanvassedtheBoard’srequirements,suchasmemberswithfinancialacumenandracingexpertise.Notonlywashisindependencenotindoubt,butJusticeWilsonalsomaintainedtherewasnoevidencetosupportMrAndrews’sclaimofpartialityinMrWilson’sbehaviour.Inherview,questionsputtoanapplicant,MrMcGruther,concerninghisschoolingandreligiouspersuasiondidnotreflectpartialityinMrWilson’sapproach.Further,HerHonourfoundthattherewasnothingimproperintheshortlistingofMrMilnerandMrStewart,asboththecriteriaforselectioninAppendixAoftheConstitutionandforeligibilityinsection9oftheActhadbeenmet.
Despitethesefindings,shewasnotwillingtosanctionQueenslandRacingLtd’sattempttotrivializetheirregularityintheselectionprocessasamereproceduraldeviationfromtheConstitutionbymakinganorderundersection1322(4)oftheCorporations Act 2001 (Cth).InJusticeWilson’sopinion,MrAndrewswasentitledtohavetheDirectorsselectedinthemannersetdownbytheConstitution.Whathadoccurredreflectedseriouslyonthecompany’sgovernance.MrAndrews,aswellasotherpotentialshortlistedapplicants,hadsufferedconsiderableinjusticeinbeingdeniedtherighttohavetheshortlistpreparedinlinewithclause17oftheConstitution.
Therefore,JusticeWilsongrantedaninjunctionpreventingtheChairmanofQueenslandRacingLtdfromdeclaringMrMilnerandMrStewartthedulyelectedDirectorsfromtheshortlistatthescheduledAGMon17November2009.Anotherinjunctionwasissuedstipulatingthattheoriginaltwentysixapplicantsbereconsideredforthepositionsinstrictcompliancewiththeproceduresoutlinedinclause17oftheConstitution.
Thiscasemaybeviewedat:www.austlii.edu.au/au/cases/qld/QSC/2009/338.html
Implications of this case
Thecaseclearlyillustratesthatinallareasofboardmanagementattentiontodetailisrequired.InthisinstancetheConstitutionhaddetailedprovisionsinrespectoftheselectionprocessandcriteriafortheshortlistofprospectiveboardmemberswhichreinforcedStatelegislativerequirementsbuttheboardfailedtofollowtherequirementsofitsownconstitution.Theboarddelegatedtheprocesstoaprivateconsultantwithoutcriticallyassessingthatconsultant’srecommendations.
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2.6.3 DYKYJ V LOGAN AND DISTRICT SERVICES CLUB INC [2009] QSC 108 (SUPREME COURT OF QUEENSLAND, DE JERSEY CJ – 11 MAY 2009)
TheLoganandDistrictServicesClubisanincorporatedassociationpursuanttotheAssociations Incorporation Act 1981(Qld).AtitsAGMon5November2008theClubsoughttorepealandreplacetheexistingconstitution.Pursuanttoclause27oftheexistingconstitutionaspecialresolutionwasrequiredfortheconstitutiontobeamended.Pursuanttosection3(4)oftheAssociations Incorporation Actaspecialresolutionmustbepassedbyathree-quartersmajority.
Theapplicant,MrDykyj,opposedthemovetorepealandreplacetheexistingconstitution.Hegathered56proxiesfrommembers,whichheintendedtoexercisebyvotingagainstthemotion.PriortotheAGM,the56memberswhowereseekingaproxyvotecollectedtheirproxyformsinpersonfromtheClub.MrDykyjwasgiventhedulycompletedproxiesbythosemembersandsoughttolodgethem.TheywererejectedbyanemployeeoftheClubonthebasisthattheywouldonlybevalidiflodgedpersonallybythememberseekingtoallocateaproxyvote.
Themotiontorepealandreplacetheconstitutionwaspassed123to32.HadMrDykyjbeenabletoexercisethe56proxyvotesthemotionwouldhavebeendefeatedastherewouldnothavebeenathree-quartersmajority.
Thereweretwoissuesplacedbeforethecourt,firstlythevalidityoftherejectionoftheproxyvotesandsecondlythesufficiencyofthenoticeofthemeeting.
Proxy votes
InrespectofthevalidityoftheproxyvotestheChiefJusticeconsideredthetermsofclause25.2oftheconstitutionexistingpriortotheAGMwhichprovided:
‘Aproxywillbevalidif:
(a)TheMembercompletesandlodgestheproxyintheformapprovedbytheBoardwiththeSecretarynotlaterthan24hoursbeforethetimefortheholdingofthegeneralmeeting...’.
HisHonourdeterminedthatamember’srighttocastavotebyproxyisestablishedatthetimeoftheissueoftheproxyformtothememberinpersonanditwouldseemunreasonabletothenrequirethemembertovisittheclubagaininpersontolodgetheform.HisHonourheld
‘...intheabsenceofanexpressrequirementforlodgementbythememberinpersonthepossibilityoflodgementbyanagenthasnotbeenexcluded.’
Furtherclause25.3oftheconstitutionprovided‘anyissueofvalidityofaproxywillbedeterminedbytheChairpersonofthemeetingactingontheadviceoftheReturningOfficer’.TherewasnorulingbytheChairpersononthevalidityoftheproxiesandtherewasnoevidencethatthestaffmemberwhorejectedtheproxieswasactingwiththeauthorityoftheboardorthattheboardmadeanyrulingastothevalidityoftheproxieshavingbeendeliveredbythemembersthroughtheiragent.HisHonourconcludedthattheproxieswerewronglyrejected.
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Notice of the meeting
WithrespecttothequestionofthesufficiencyofnoticeofthemeetingHisHonourconsideredsection3(2)oftheAssociations Incorporation Actandexaminedthenoticerequirementsforaspecialresolution:thatis,theneedtogivepriorwrittennoticeofthedate,timeandplaceofthegeneralmeetingatwhichthespecialresolutionistobeproposed,togetherwiththetermsoftheproposedspecialresolution,toeachmemberoftheassociation.Thenoticegiveninthiscasestatedthattheexistingconstitutionwastobereplacedinthetermsproposed,withoutgivinganydetailofthetermsproposed.
ThereforeHisHonourdeterminedthatthenoticedidnotcomplywiththeAct.
TherespondentClubthenaskedforaremedialorderundersection133(3)oftheActonthebasisinter aliaoftherebeingnoevidenceofanydetrimentorinjusticehavingoccurredtoanymemberthroughtheadoptionofthenewconstitution.
HisHonourdisagreedwiththisassertionandfoundthattherewasa‘substantialinjustice’sufferedbythosedeniedtheirvotebytherejectionoftheproxiesandthosedeniedadequateinformationabouttheproposalbecauseoftheuninformativenoticeofthemeeting.Accordinglytheprovisionsofsection133oftheActcouldnotremedytheinvalidactions.Itwasheldthatthespecialresolutionwasinvalid.CostswereorderedagainsttheClub.
Thiscasemaybeviewedat:www.sclqld.org.au/qjudgment/2009/QSC/108
Implications of this case
Sections71to73oftheAssociations Incorporations Act 1981(Qld)providefortheinterventionoftheSupremeCourt.Thegeneralpolicyofthelawisnottointerfereintheinternaldecisionsofanincorporatedassociation.However,section133oftheActgivesthecourtremedialpowerifitissatisfiednosubstantialinjusticehasormaybecausedbythecourtvalidatingtheactionsoftheassociationoramemberoftheassociation.Thiscaseshowsthatthecourtispreparedtointerfereininternaldecisionsincircumstanceswheremembersaredeniedtherighttovoteandtherighttoknowwhattheyarevotingon.
2.6.4 ISLAMIC COUNCIL OF SOUTH AUSTRALIA INC & ORS V AUSTRALIAN FEDERATION OF ISLAMIC COUNCILS INC [2009] NSWSC 211 (SUPREME COURT OF NEW SOUTH WALES, 16 FEBRUARY 2009)
TheplaintiffsinthiscaseareIslamiccouncilsinthestatesofSouthAustralia(ICSA),Queensland(ICQ)andNewSouthWales(MCNSW).Thedefendant,TheAustralianFederationofIslamicCouncilsInc(AFIC)isanumbrellabodyofIslamicassociationsinAustralia,constitutedasafederationofnineIslamicsocieties.AFICoperatesanumberofIslamiceducationalinstitutionsandhasassetsof$25million.
ThedisputeinthiscasecentredonthestatusoftheICQandMCNSW,andtheirabilitytoparticipateintheaffairsofAFIC.AFICcontendedthattheICQhadbeensuspendedfrommembershipofAFIC,andtherehadbeenpreviousproceedingsbetweenAFICandMCNSWastoitsmembershipofAFIC,whichwasineffectsuspended.Inaddition,AFIChadrefusedtocallaFederalCouncilMeetingfollowingrequestsfromtheplaintiffsandotherstodoso,sothatthemembershipissuescouldberesolved.
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AFIC’saffairsaregovernedbythreebodies:
• theFederalCongresswhichiscomprisedofmembersoftheExecutiveCommitteeandtwodelegatesfromeachstatecouncil.ThepowersoftheCongressincludeto‘adjudicateinallmattersofcontroversy’betweentheFederalCouncil,theExecutiveCommitteeandstatecouncils;
• theFederalCouncilwhichcomprisesfourmembersoftheExecutiveCommitteeandthePresidentorChairmanofeachstatecouncil.ThepowersoftheCouncilinclude‘todeterminethetime,placeandagendaofthemeetingsoftheFederalCongress’andtoactfortheCongressbetweenitsmeetings;
• theExecutiveCommitteewhichisresponsibleforthedaytodayrunningofAFICandissubjecttothe‘controlandscrutinyofboththeFederalCongressandFederalCouncil’.
TheconveningofmeetingsoftheFederalCouncilisgovernedbyclauses40to42ofitsconstitution.Inparticular,theseclausesstatethat:
• 41.SubjecttothisConstitution,aCouncilmeetingshallbecalledbytheSecretaryoftheFederationasdirectedbytheFederalExecutiveCommitteeoruponwrittenrequestsfromfour(4)ormoreStateCouncils.
• 42.NoticeofFederalCounciltogetherwithitsAgendashallbegivenbytheSecretaryoftheFederationtothemembersoftheCouncilatleast(4)weekspriortothedateofsuchmeeting.
Requestsforameetingwerereceivedfromsixstatecouncils(WesternAustralia,MCNSW,Victoria,ICSA,theNorthernTerritory,andICQ)between3November2008and18December2008.However,nomeetingwasconvenedandnoreasonwasgivenforrefusal.
Theissuesbeforethecourtwere:
• Whetherupontheproperconstructionoftheconstitutionandintheeventswhichhadhappened,therehadbeenvalidlywrittenrequestsfromfourormoreStateCouncilsforthecallingofameetingoftheFederalCouncil.This,inturn,involvedanumberofsubsidiaryissuesrelatingtotheallegedrequestsmadebysomeoftheStateCouncils;
• Ifso,whetherAFIC’sfailuretoconvenesuchameetingwasjusticiable;and
• Ifso,whetherreliefshouldnonethelessbedeclinedasamatterofdiscretion.
TherequestsforameetingfromSouthAustraliaandtheNorthernTerritorywereuncontroversial.Theotherrequestswereindispute.JusticeBreretonconsideredthattherequestfromNSWwasvalid,despitetherebeingsomedisputeastothestandingoftheMCNSWtomakesucharequestbecauseofexistingmembershipissues.Alltheserequestswerebyletter.
TherequestfromVictoriawasinanemail.Wasthisawrittenrequestwithinclause41oftheconstitution?BreretonJfoundthatitwas:
‘Thepurposeofrequiringthatnoticesandthelikebeinwritingisusuallyatleasttwofold.Oneistoensurethatthereisaformalact,sothatdoubtdoesnotattendtheintentofthepartygivingthenotice.Asecondisoftentoavoidlaterdisputationbyensuringthatthereisapermanentrecordofthenotice.Thatsaid,theconceptof‘writing’isconcernedwiththeforminwhichwordsareused,andnotthesurfaceonwhichtheyarewritten.Thefundamentaldistinctionisbetween
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thewrittenwordandthespokenword.While‘writing’oftencontemplateswritingonpaper,itisnonethelesswritingandnotspeech,ifwrittenininvisibleink.Itisnonethelesswriting,ifwrittenintheskybyanaircraftengaginginskywriting.Tomymind,itisnonethelesswriting,ifitappearsonacomputerscreen,asaresultoftheentryofdataintoacomputer.’
Therefore,theVictorianrequestwasinwriting.Thenextissuewasastowhetherthisrequestwas‘signed’.Clause41didnotexplicitlyrequireasignature,thoughotherclausesintheconstitutiondid.HisHonoursaidthat‘inanyevent,atypedname(asdistinctfromaholograph)canbeasignature,andhasbeenheldtobesoinmanycasesrelatingtotheStatuteofFrauds’.
ThefinalissuerelatingtotheVictorianemailwaswhetherinfactitwasa‘request’forameeting.HisHonourheldthatitwasnot,butrather,byitswording,anexpressionofawishorhopeforsuchameeting.Therefore,theVictorianemailwasnotavalidrequestforameetingunderclause41.
TherequestfromWesternAustraliahadpurportedlybeenwithdrawnon15December2008.Wasthisavalidrequest?HisHonourfoundthatitwas,andthismeantthatasat25November2008,AFICwasinreceiptoffourvalidrequestsforameetingfromWesternAustralia,SouthAustralia,NewSouthWalesandtheNorthernTerritory.Thepurportedwithdrawalon15DecemberdidnotaffectthebindingobligationofAFICtoholdthemeetingthatcrystallisedon25November2008.
AstotherequestfromICQ,JusticeBreretonheldthatiswasalsovalid,sothatevenifoneoftheotherrequestswasnotvalid,therewerestillfourrequestsinoperation.ThiswasdespitethepurportedsuspensionoftheQueenslandcouncilfrommembershipofAFIC.HisHonourfoundthattherewasnopowertosuspendmembershipinthisway.Therefore,therewereatleastfourvalidrequestsforameetingwithintheconstitution.
Was the failure to convene the meeting justiciable?
Courtsdonotgenerallyinterveneintheinternalaffairsofvoluntaryassociations,whetherunincorporatedorincorporated(seeCameron v Hogan[1934]HCA24).Foracourttointervenetheremustbesomeinterferencewithpropertyrightsorinterests,somebreachofcontract,orsomethreattolivelihoodorreputationinvolved.Thiscasewasnotoneofinterferencewithmembers’propertyrightsorinterests,norwasitoneofthreattolivelihoodorreputation.Thequestionwaswhethertherewasanyrightincontract.
AFICisincorporatedasanassociationinTasmania.Inthatstate,theAssociations Incorporation Act 1964doesnotimportcontractualrelationsintotherelationshipbetweenmembersandanassociation,ashappensinmostotherstates.Thequestionthenbecomesoneofconstructionoftheconstitution.Wasitintendedtocreatecontractualrelationsbetweenmembersandtheassociation?InCameron v Hogan, theHighCourtdidnotfindanysuchcontract,butallowedthattherecouldbeenforceablelegalrelationscreatedinanassociation’sconstitutioniftherewasaclearenoughintent.ThecaselawsinceCameron v Hoganhasbeenmoreinclinedtofindevidenceofcontractualintentinassociationconstitutions,butthisisbynomeansacertainty(seePlenty v Seventh Day Adventist Church of Port Pirie [2009]SASC10.
HisHonourcouldnotfindanyrealcontractualintentintheconstitutionofAFIC,particularlybecauseofitsmainlyreligiouscharacterandtheprovisionofinternaldisputeresolutionmechanisms.However,AFIChadpreviouslybeeninvolvedinanamountoflitigationinwhichithadneverclaimedtobeimmunefromthecourts’rulings.BreretonJheldthat
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itwas‘justtoolateforittodosonow’.Therefore,byconduct,therewasanintentthattheConstitutioncreatedalegallybindingandenforceablecontractbetweenAFICanditsmemberinstitutions.Thatbeingso,thematterbeforethecourtwasjusticiable.
Was relief available to the plaintiffs?
Thiswasamatterofdiscretionforthecourt.AFICarguedthatthereshouldbenoreliefbecauseoftheinternalnatureofthedispute.HisHonourwasunpersuadedandreliefwasnottobedeclinedondiscretionarygrounds.Therefore,thecourtorderedthattheFederalCouncilshouldconveneameeetingby17February2009.
Thiscasemaybeviewedat:www.austlii.edu.au/au/cases/nsw/NSWSC/2009/211.html
2.6.5 LAI V TIAO (NO 2) [2009] WASC 22 (12 FEBRUARY 2009) FILE NO: CIV 1442 OF 2005
ThiscaseinvolvesadisputeconcerningmainlyTaiwanesemigrantswhoinitiallyworshippedatatempleatthehomeofHoMingWang,areputedmasterofI-KuanTao.Arecentreligiousdevelopment,I-KuanTaodrawsonConfucianism,TaoismandChineseBuddhism.
IncreasinginterestinthereligionnecessitatedalargertempleandamenitiesandtheprovisionofthesewasoneofthereasonswhysixoftheoriginalgroupestablishedtheAustralianChineseConfucius-MenciusTaoCentreIncorporated(theAssociation)on22December1992,toraisefunds.Afterincorporation,thesesixassumedamanagerialrole,ineffect,formingaboardofdirectors.MasterWangbecamethechairman,whilstShengChinLai(Lai)tookonthevice-chairman’sposition.AsathirdsignatorywasrequiredtooperatetheCentre’saccounts,ChengChihTiao(Tiao)waschosenforthispurpose.TiaosubsequentlyactedastheAssociation’srepresentativeforbothtempleconstructioncontractswhichhesignedundersealin1995.AfterthetemplewascompletedinMarch1996,MasterWangvirtuallyresidedthereuntilhediedinDecember2001.
DiscordlaterdevelopedbetweenLaiandTiao,particularlywithrespecttowhoweretheactualmembersoftheAssociation.TherewasalsodissensionaboutwhetherMrConalO’Toole,theAssociation’ssolicitor,hadbeenvalidlyappointedandwhetherTiaohadauthoritytoenterintoacontractwithLevelHoldingson11May2004,forthesubdivisionandsaleoflandheldbytheAssociationat42WartonRoad,CanningVale,inWesternAustralia.Unlikethepreviousconstructioncontracts,noAssociationsealwasinevidenceandtheaddressgivenwasTiao’sprivateone.Underthecontract,thedesignatedlandwastobesubdividedintotenlotsbyLevelHoldingswhowouldretainfiveaspaymentforthesubdivision.TheremainderweretheAssociation’stobesoldasnecessarytofunditsactivitiesbecauseofthedirestateoftheAssociation’sfinances.NoresolutiontothiseffectwaseverplacedbeforetheAssociation’smembersalthoughtwooftheoriginalsix,SongTyanKuoandHuiPingWang,allegedlyauthorisedTiaotoactfortheAssociationinthismatterataboardmeeting.
AsLaiandtheremainingmemberoftheoriginalsix,YungSenChou,wereunawareoftheAssociation’sneedforfundsandtheproposedlandsale,LailodgedacaveatovertheAssociation’slandon6January2005.Inaddition,hesoughtdetailsofthecontractandtherelevantAssociationminutes.Bywayofresponse,on26February2005,TiaoandHuiPingWangheldameetingoftheAssociation’smemberswhoretrospectivelygaveablanketratificationtomyriaddealingscarriedoutbyanyoneactingorpurportingtobeactingonbehalfoftheAssociationsinceitsinceptionin1992.Lai,on13April2005,requestedthatTiaocallanothermeetingofAssociationmembers.Uponhisrefusal,Laigavenoticeofamembers’meetingon25May2005.However,aninjunctiontopreserve
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thestatus quo wassubsequentlygranted.On19April2005,Laisoughtandfinallyobtainedaninjunctiontopreventthesaleandfurthersubdivisionofthelandunderthecontractuntil5p.m.on13June2005.Bythen,thesubdivisionwas90%completed.AnextensionoftheinjunctionwasgrantedinJune.
ThetaskofunravellingthetruthcamebeforeJusticeJohnsonoftheWesternAustralianSupremeCourt.First,HerHonourdeterminedthattheactualfoundationmembersoftheAssociationwerethesixoriginalmemberswhowereinvolvedinitsincorporation.SheagreedwithLaithattheAssociation’sordinarymemberswerethosewhosenamesappearedontheListofContributorstakenfromthemarbleplaquecommemoratingthebuildingofthetemple.
HerfocusshiftednexttowhetherTiao’sentryintothecontractwithLevelHoldingswasauthorisedattheoutsetatboardlevelorratifiedretrospectivelybytheAssociation’smembers.ShecommentedthattheAssociationwasmanagedinanad hoc fashion.Therewerenomeetingsofanykindheldbetween1992and2005andnoregisterofmembersexistedduringthatperiod.TheAssociationblameditslackofcompliancewithitsstatutoryobligationsonthefactthatitsmemberswereunabletocomprehendtheincorporationdocumentationwhichwasinEnglish.AsHerHonourpointedout,aChinesetranslationoftherelevantmaterialwouldhavesolvedtheproblem.
Ontheevidence,itseemedapparentthatLaihadcontributedthemoneytopurchasethelandinquestion.AlthoughhehadtakenlittleactivepartinthemanagementoftheAssociationsinceadisagreementrelatingtofinanceson8April1996,JusticeJohnsonstatedthatcommoncourtesyrequiredthatLaibeinformedaboutthesubdivision.Lai’sconcernabouttheAssociation’sfinancialmismanagementwassharedbytheDepartmentofConsumerandEmploymentProtectionwhichstressedtheneedforthecleardelineationofTiao’sandtheAssociation’sfundsaswellasthenecessityforanauditofitsfinances.Tiao’sfailuretoaffixtheAssociationseal,theirregularuseofhisprivateaddressandtheautocratic,haphazardwayinwhichtheAssociation’saffairsweregenerallyconducted,convincedJusticeJohnsonthatnomemberoftheboardhadauthorisedthesigningoftheLevelHoldingscontract.ShewouldnotgivecredencetoTiao’sbeliefthattheagreementofamajorityoftheboardconstitutedvalidauthorization.Similarly,HerHonourfailedtofindanysuggestionofconsultationwiththeAssociation’smembers.
Concerningthemembers’meetingon26February2005,itwasfoundtobeinvalidlyconvenedastherehadbeennopriorboarddecisionnorarequestfromtwentymembers,therequirementslaiddownunderclause11.2.1oftheAssociation’sConstitution.Accordingtoclause11.2.3ofthisConstitution,noticeofageneralmeetingmustbeprovidedtoordinarymembersatleastfourteendaysbeforeitoccurs,animpossibletaskintheabsenceofanyrecordsofmembership,exacerbatedbywhatJusticeJohnsonfoundwasabroadermembershipthanthatrecognisedbyTiao.Aswell,insufficientinformationwaspresentedabouttheLevelHoldingscontractformemberstomakeaninformeddecision.Therefore,retrospectiveratificationofTiao’sactionswasnotpossible.Because oftheirregularitiesintheAssociation’soperation,HerHonouralsofoundthatitssolicitor,ConalO’Toole,wasnotvalidlyappointed.WithrespecttothemeetingcalledbyLaion25May2005,HerHonourdecidedthat,aslongasthetwentyfoursignatoriestothedraftnoticeofmeetingwereeitherfoundationororiginalmembers,itwasavalidrequestwithwhichTiaohadfailedtocomply.
Thewayforwardfromthejudge’sperspectivewastoholdsuchageneralmeetingatwhichanewboardofdirectorscouldbeappointed.Technically,thisshouldhavehappenedatthefirstannualgeneralmeeting,hadoneeverbeenconvened.Once
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theboardofdirectorswasinplace,memberswhosatisfiedthecriterialaiddowninclause6.2oftheConstitutionshouldbeadmitted.AfteranyappropriatechangeshadbeenmadetotheConstitution,theboardshouldthoroughlyexaminetheAssociation’sfinancialaffairsbeforetheissueoftheAssociation’ssolvencywasraisedfordiscussionwiththemembers.
Thiscasemaybeviewedat:www.austlii.edu.au/au/cases/wa/WASC/2009/22.html
Implications of this case
Thiscaseisimportantnotonlyasanobjectlessoninwhatcanhappenwhenboardsdon’tinformthemselvesabouttheirobligationsandabidebythem.Thejudgefoundthat,fromtheoutset,thechairmanoftheboardhadadominantrole,notwithstandingthataboardissupposedtomanagebyconsensusorbymajoritydecision–andallboardmembersareresponsiblefordecisions.Boardmembershavestatutoryobligationsaswellasobligationsundertheirorganisation’srulestoholdmeetings,keeprecordsandmakedocumentsavailable.Inaddition,therelevantActinthiscasemakesitanoffenceforboardmembersnottoensuretheassociationcomplieswithitsstatutoryobligations.
Nodoubtthelackofpropermeetings,lackofadministrativeandfinancialrecords,dominatingroleofthechair,andtheothermembers’ignoranceoftheirobligationscontributedtotheinternaldisputesandthepossiblecollapseoftheorganisation.
2.6.6 SZENCORP PTY LTD V CLEAN ENERGY COUNCIL LIMITED [2009] FCA 40 (2 FEBRUARY 2009) VID 534 OF 2008
TheCleanEnergyCouncilLimited(theCouncil)isanonprofit,publiccompanylimitedbyguarantee.FormedinAugust2007,bythemergeroftwokeysustainableenergyorganisations,theAustralianWindEnergyAssociation(AusWind)andtheAustralianBusinessCouncilforSustainableEnergyInc(BCSE),theCouncilisdesignedtobeaunifiedpeakbodyforthesustainableenergyindustry.Membershipreflectsbothsupplyanddemandenergytechnologies.Whilsttheformerfocusesontheproductionofsustainableenergy,thelatterconcentratesonecologicallysoundenergyreductionforcommercialanddomesticpurposes.AMemorandumofUnderstandingoutlinedtheresponsibilitiesofthenewlyestablishedcompanywhilstitsConstitutionaddressedmatterssuchasmembershipcriteria.
SzencorpPtyLtdisamemberoftheCouncil.FromhisstandpointasDeputyChairoftheCouncil,MrPeterSzental,adirectorofSzencorpPtyLtd,approachedtheFederalCourtforassistancewithrespecttoanumberofperceivedgrievancesinvolvingtheCouncil’simplementationoftheMemorandumofUnderstanding.HearguedthattheconductoftheCouncil’saffairscontravenedsection232oftheCorporations Act 2001 (Cth)(theAct)sinceitwas,‘Contrarytotheinterestsofthemembersasawholeoroppressiveto,unfairlyprejudicialto,orunfairlydiscriminatoryagainstmembersoftheCouncil.’Inparticular,hecontendedthatthesupplymembersoftheindustryhadbeenadvantagedattheexpenseofthoseinvolvedinthedemandside.Aremedyfromtheordersavailableundersection233oftheActwassought.
AlthoughJusticeGoldbergdidnotdirectlyaddressallthecomplaintsraisedbyMrSzental,hethoroughlyinvestigatedtheallegationssurroundingthefinancialmanagementoftheCouncilintheperiodfollowingthemerger.ItemergedthatMrRichardMcIndoe,theCouncil’sChair,hadrequestedanindependentaccountingreportbyStonesManagementServicesintotheCouncil’sfinancialaffairsinJanuary2008.
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However,noinformationwasreleasedtoanyboardmemberotherthantheChairmanoftheFinanceandCompliancesub-committeeuntilasupplementaryreportwasproducedinMay2008.ConcernedabouttheCouncil’ssolvencyandtheapparentlackoftransparencyinitsdealings,MrSzentalwrotetohisfellowdirectorson17JunerequestingdiscussionofthesemattersattheJune2008,meetingaswellastheappointmentofaninsolvencyexperttoinvestigatetheCouncil’struefinancialposition.
WhentheCouncil’sBoardofDirectors’meetingtookplaceon20June2008,notonlyweretheissuesnotdiscussed,but10ofthe13directorsdemandedMrSzental’sresignationastheynolongerhadfaithinhisjudgment.MrSzentalpennedanotherletterseekingaspecialmeetingoftheBoardtoconsiderhisconcerns.ThedirectorsoftheCouncildulymeton27JunebutMrSzentalwasexcludedfromthemeeting.Asaresult,thematterwasfiledintheFederalCourton11July2008.AnauditoftheCouncilbyErnst&Youngwascommissionedthesameday.LaterinJulyMrSzentalwassuppliedwiththerequestedfinancialdetails.
TheCouncilmaintainedthatSzencorpPtyLtd’sFederalCourtactionwasanabuseofprocess,anopinionnotsharedbyJusticeGoldberg,whovieweditasanattempttoensuregoodgovernance.However,hefoundnoevidencethatthesupplymembersoftheCouncilweregivenpreferentialtreatmentovertheirdemandcolleaguestothedetrimentoftheinterestsofthemembersasawhole.Withrespecttotheclaimofoppression,HisHonourstatedthatanessentialelementtobeprovenwasthatofcommercialunfairness.HeacceptedtherewassubstancetoMrSzental’sclaims,but,bythetimethesecamebeforetheCourt,manyofthematterscomplainedofhadbeenaddressed.Ofitself,theabsenceattrialofdemonstrablecommercialunfairnessdidn’tautomaticallymeanthatreliefundersection233couldnotbegranted,providedsuchcommercialunfairnessexistedatthetimetheoriginallegalactionwastaken.However,inthiscase,JusticeGoldbergsuggestedthat,notonlywasMrSzental’sdemandforanindependentaccountingassessmentimpracticable,butalsothatsucharequestdidnotfitwithinthemeaningofthesectionreliedon.Section233(j)statedthattheCourtcanmakeanorder,‘Requiringapersontodoaspecifiedact.’Forthesereasons,SzencorpPtyLtdfailedinitslitigation.
Thiscasemaybeviewedat:www.austlii.edu.au/au/cases/cth/FCA/2009/40.html
2.7 taxation
2.7.1 COMMISSIONER OF TAxATION V AID/WATCH INCORPORATED [2009] FCAFC 128 (FEDERAL COURT OF AUSTRALIA, FULL COURT, KENNY, STONE AND PERRAM JJ, 23 SEPTEMBER 2009)
AID/WATCHisanincorporatedassociationwhichresearches,monitorsandcampaignsaboutthedeliveryofoverseasaid.ItisanorganisationconcernedwithpromotingtheeffectivenessofAustralianandmultinationalaidincludinginvestmentprograms,projectsandpolicies.Itdoesnotdeliveranyaiddirectlytoanyperson,butproducesresearchreportsaboutAustralianaideffectivenessaswellasotherperformingpublicityevents(suchassendingderisory60birthdaygiftstotheWorldBanksuggestingitwastimeforthebanktoretire).Thecourtfoundsomeofitsactivities,forexample,callstoaction,somewhataggressive.
AID/WATCHsoughtexemptionfromincometaxasacharitableinstitutionpursuantto
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s50–5IncomeTaxAssessmentAct1997.TheobjectionoftheCommissionerwasthatfirstitwasaninstitutionwhichdidnotitselfdistributeaidandthuswasnotcharitableandsecond,itachieveditsobjectsthroughcampaigningwhichamountedtoapoliticalpurpose.
TheorganisationsoughtreviewoftheCommissioner’sdecisionintheAdministrativeAppealsTribunal(AAT)inthefirstinstance.ThiscaseisanappealfromtheAAT’sdecision.
The AAT decision
TheAATreviewedtheCommissioner’sdecision4andfoundthattheorganisationwasentitledtostatusasacharitableinstitution.ItdecidedthatthemajorobjectiveofAID/WATCHwasthereliefofpoverty,eventhoughthesewordswerenotmentionedspecificallyintheconstitutionaldocuments,asaidwasclearlyforthereliefofpovertyandtheorganisation’spurposewascentrallyconcernedwithaid.TheAATalsoconsideredthattherewasanelementoftheadvancementofeducationintheorganisation’sactivitywhichwasalsocharitable.ThefinalpartoftheAATdecisionwastoconsiderwhethertheactivitieswerepoliticalandthusunabletobecharitable.AsAID/WATCHdidnothavechangestothelawasamainobject,theAATdeterminedthatitwasnotdisqualifiedfromcharitablestatus.TheAATalsoremarked(para49)that:
‘Itmaybedisqualifiedifitsobjectsandactivities,althoughnotovertlypolitical,stillplaceundueemphasisonattemptstoinfluencegovernment,particularlywithrespecttoprioritiesandmethods.Theargumentagainstcharitablestatusmaybeenhancedbecauseofitsactivistapproachesandconfrontationalmethods.’
TheCommissionerappealedtotheFederalCourt
The Federal Court decision
Onappeal,theFederalCourtfoundthatAID/WATCH’spurposeswerenotcharitableasreliefofpovertyandeducationwerenotitsprimarypurpose.However,theCourtdidnotaccepttheCommissioner’sviewthateducationinvolved‘trainingorteachingthroughasystemorsyllabusinastructuredmanner,ratherthansimplyaprocessofinformingthepublic’.ItdidfindthatresearchandpublicationsproducedbyAID/WATCHdidhavethenecessaryeducationalelementandsetitapartfromthosesuchasjournalistswhomerelydisseminatedgeneralinformation.InadditiontheCourtfoundthatAID/WATCH’sactivitiesweredirectedtowardspurposeswhichwouldfallwithinrelieffrompoverty,sothatthepurposesshouldbecharacterisedascharitableinthelegalsenseunlessdisqualifiedbecauseoftheirpoliticalnature.
WheretheAppealCourtdisagreedwiththeAATwasinrespectofwhetherpoliticalpurposesdisqualifiedAID/WATCHfrombeingacharity.ItagreedbetweentheCommissionerandAID/WATCHthatAID/WATCHwasnotengagedin‘lobbying’orattemptstoinfluencethegovernmentdirectly,butratherwas‘campaignfocused’.However,theCourtofAppealstated(para37)that:
4 Seecasenoteathttps://wiki.qut.edu.au/display/CPNS/AID-WATCH+Incorporated+v
+Commissioner+of+Taxation
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‘Aid/Watch’sattempttopersuadethegovernment(howeverindirectly)toitspointofviewnecessarilyinvolvescriticismof,andanattempttobringaboutchangein,governmentactivityand,insomecases,governmentpolicy.Therecanbelittledoubtthatthisispoliticalactivityandthatbehindthisactivityisapoliticalpurpose.MoreovertheactivityisAid/Watch’smainactivityandthepoliticalpurposeisitsmainpurpose.RecognisingAid/Watch’sultimateconcerntorelievepovertydoesdiminishitspoliticalpurpose.’
Thereforepoliticalpurposeswereitsmainpurpose,ratherthanancillarytoacharitablepurposewhichwouldnothaveaffecteditsstatusintheordinarycourse.
TheargumentthatAID/WATCH’sobjectiveswerenotcontrarytogovernmentpolicybut‘toinfluencegovernmentpolicyastothenatureandextentandmeansofdeliveryofoverseasaid’(para39)werenotaccepted.Thiswasbecause‘the‘naturalandprobableconsequence’ofAid/Watch’sactivitiesisaneffectonpublicopinionandthenongovernmentopinion.’(para47)Itwasthusconsideredpolitical.
TheAppealCourtalsoaddressedanotherreferencebytheAATtosomeofAID/WATCH’sactivitiesbeingthoughttobeattheedgesofappropriateconduct,butnot‘soextremethatitlosesitscharitablequality’.TheAppealCourtthoughttheTribunalhadbeenunclearastoitsmeaningbutstated:‘IfitwasmerelyintendedtosuggestthatAid/Watchmightjeopardiseitscharitablestatusifitoperatedoutsideitsstatedobjects,thecommentisunobjectionable.Shortofthat,wedonotacceptthatthecharitablestatusofaninstitutioncandependonthemannerinwhichitimplementsitscharitablepurpose’(para40).
TheCourtofAppealunanimouslyfoundthatAID/WATCHwasnotentitledtoexemptionfromincometaxasacharitableinstitutionpursuanttos50–5IncomeTaxAssessmentAct1997.
Thiscasemaybeviewedatwww.austlii.edu.au/au/cases/cth/FCAFC/2009/128.html
Implications of this case
ThisisanimportantcasewhichiscurrentlybeingappealedtotheHighCourt.Sothecurrentreportshouldbeusedwithcaution.TheboundariesofwhereadvocacyandpoliticalactivityaretobedrawnhavebeenafieldofdisputebetweentheATOandpartsofthesectorforsometime.TheATOhasattemptedtomakeitspositionclearinaseriesofexamplesgivenonitswebsitepagesCharities–political,lobbyingandadvocacyactivitiesavailableatwww.ato.gov.au/nonprofit/content.asp?doc=/content/62779.htm.Mostcharitieswhoinvestigatetheissuearesurprisedatwhatactivitiesareallowedprovidedthatitdoesnotbecometheir‘main’purpose.
2.7.2 COMMISSIONER OF TAxATION V BARGWANNA AND BARGWANNA AS TRUSTEES OF THE KALOS METRON CHARITABLE TRUST [2009] FCA 620 (FEDERAL COURT OF AUSTRALIA, EDMONDS J, 12 JUNE 2009)
ThiswasanappealfromadecisionoftheAdministrativeAppealsTribunal(AAT),whichhadsetasidetheCommissioner’sdecisiontorefuseincometaxexemptionforMrandMrsBargwannaastrusteesfortheKalosMetronCharitableTrust(thetrustfund).
TheCommissioner’sargumentonappealwasthattheAAThaderredinconcludingthatthetrustfundwasappliedforthepurposesforwhichitwasestablishedasrequiredundersection50–60oftheIncome Tax Assessment Act 1997(Cth)( ITAA),whichstatesthat‘Afund...isnotexemptfromincometaxunlessthefundisappliedforthepurposes
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forwhichitwasestablished...’.Amainissueofthegroundsofappealwasthetesttobeappliedindeterminingwhethertheprimaryfactssatisfiedtherequirementthatthefund‘is applied’forthepurposesforwhichitwasestablished.
Themainfactsrelatingtotheappealcentredaround:
• moneyfromthetrustfundbeingplacedintheBargwannas’personaloffsetaccount,whichreducedtheirinterestontheirhomemortgagebutpaidnointeresttothefund;
• someofthefundbeingheldintheaccountant’s,MrCraik’s,trustaccount(hewasalsoMrsBargwanna’sfather):interestonthattrustaccountwasretainedbyMrCraik;andfundmoneyappearedtohavebeenusedtooffsetdebitsinhisotherclients’trustaccounts;
• anunsecuredloanbeingmadefromthetrustfundtoaprivatecompany(theloanwasstatedtobeat7%interestbutnonewaseverpaidandtheloanwasnotre-paid).
TheCommissionersubmittedthattheAATerredinlawinfindingthatthesewerenotapplicationsofthetrustfundotherwisethanforapurposeforwhichitwasestablished;itshouldhavefoundthatbecauseoftheseusesofthefundtheBargwannasfailedtosatisfytherequirementsofsection50–60.
TheCommissioneralsosubmittedthattheAATerredinlawwhenitconcludedthatapplyingthetrustfund‘substantiallyinaccordancewithitsconstituentterms’satisfiedtherequirementsofsection50–60.
TheCourtconsideredthetermsofsection50–60todeterminehowitshouldbeinterpretedandwhethertheseapplicationsofthetrustfundcomplied.TheCourtsaidthatwherelegislationconfersanexemptionuponabodyorfundifitmeetscertainrequirements,itdoesnotpromoteParliament’spurposetoconstruetheprovisioninamannerfavourabletothebodyorfundreferredto.‘[T]heprivilegedstatusofexemptionfromincometaxontheincomeofafundwhichaspirestothatstatusdemandsstrictadherencetotherequirementsthatmustbemetbeforethatstatusisconferred’(para28).TheCourtconsideredthatthetermsofsection50–60wereclear–i.e.itreferstofundsestablishedforcertainpurposes,‘andthelegislationrequiresnotmerelythattheybeestablishedattheoutsetforthesepurposes,butalsothattheirassetsbeappliedforthosepurposesfromtimetotimethereafter’(para29).Moreover,thesectionrequiresthatthefundbeappliedforthosepurposes,notthatitbesubstantially,orprincipally,appliedforthepurposes.‘Ifthelegislaturehadintendedthatsubstantiallyapplied...wassufficient,itwouldhavebeeneasyenoughtosayso.’(TheCourtcomparedittosection50–50(a)whichreferredtoobjectivesbeingpursued‘principallyinAustralia’.)(para30)
TheCourtconcludedthattheapplicationsofthetrustfundwereintentional,weresometimesforsignificantportionsofthefund,andbroughtsignificantbenefitstopersonswhowerenotobjects(beneficiaries)forwhichthetrustfundwasestablished.TheCourtfoundthattheAAThaderredinthetestitusedtodeterminewhetherthetrustfundwasappliedinaccordancewithsection50–60andthereforeallowedtheCommissioner’sappealandsetasidetheAAT’sdecision.
Thiscasemaybefoundatwww.austlii.edu.au/au/cases/cth/FCA/2009/620.html
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Implications of this case
Inordertoclaimincometaxexemptionforacharitabletrust,thecharitablepurposesmustcomplywiththeActattheoutset.Inaddition,thetrusteesmustbecarefultocomplywiththeActinthewaythefundisapplied(aswellasadministeringthefundinwaysthatadheretothetrustinstrument).TheCourtinthiscaseindicatedthatitwillreadprovisionsoflegislationstrictlywheretheyconferprivilegedstatusoncertainbodiesinreturnforadherencetocertainrequirements.
Theactionsofthetrusteesinthiscasemayhavebeeninbreachoftrustaswellasbreachingtherequirementsofsection50–60.Trusteeshaveanobligationtoapplytrustmoneysforthepurposesofthetrust,andmustnotconfusetheirownpurposeswithtrustpurposes,orusetrustfundsfornon-trustpurposes.
2.7.3 HEIN PERSCHE V FINANZAMT LUDENSCHEID [2009] EUECJ C-318/07 (COURT OF JUSTICE OF THE EUROPEAN COMMUNITIES, GRAND CHAMBER, 27 JANUARY 2009) 5
Basically,thecaserevolvedaroundadisputebetweenMrPerscheandtheFinanzamtLudenscheid,theDistrictTaxOfficeinLudenscheid,Germany.Inhis2003taxreturn,MrPerscheclaimedasanincometaxdeductionapproximately$34,285.00,forthevalueofbedlinenandbathtowelsplussomeambulatoryassistancedeviceshehadgiventotheCentroPopulardeLagoa,aPortuguesenursinghome.Sometoysforachildren’shome,incorporatedlater,wereincludedaswell.TheCentre’sreceiptoftheitemswasacknowledgedinthetaxreturn.AlsoattachedtothereturnwasadeclarationfromthedirectorofthelocalsocialsecurityofficeinFaro,Portugal,dated21March2001,assertingthattheorganisationinquestionwastax-exemptunderPortugueselawbecauseitsaimswerecharitable.
ThedeductionwasdisallowedbytheLudenscheidDistrictTaxOfficebothinitiallyandwhenMrPerschelodgedanobjection.HisattempttoappealtotheDistrictTaxCourtinMunsteralsoprovedunsuccessful.Undeterred,hetookhiscasetotheBundesfinanzhof(theFederalFinanceCourt)inMunichwhichupheldtheDistrictTaxOffice’sdecisionsincethegiftinvolvedarecipientwithnopresenceinGermanyandadonationcertificateregardedasunacceptable.Otherconcerns,however,sawthematterreferredtotheGrandChamberoftheEuropeanCourtofJustice.
Inparticular,theFederalFinanceCourtsoughtadviceonwhetherdonationsofconsumergoods,suchasthoseinquestion,byadonortoarecipientinanotherMemberStatewherethegoodsarelegallyconsideredascharitable,arecaughtbyArticle56oftheEuropeanConvention(EC)dealingwiththefreemovementofcapital.Ifso,doesthisnecessitatethatMemberStatesbetreatedequallyandthatataxbenefitdoesnotrequireacharitablerecipienttobesituatedinthedonor’sMemberState,inthisinstance,Germany.Finally,shouldequaltreatmentberequired,wheredoestheburdenofprovingtheunderlyingfactsrest.DoesDirective77/799insistonthetaxationauthoritiesintheaffectedMemberStatesliaisingwitheachothertocorroboratetheinformationorisitprocedurallyacceptableforthetaxpayerconcernedtoberesponsibleforsubstantiatingclaimsinvolvinganotherMemberState?
5 On14October2008,MrAdvocateGeneralMengozzideliveredhisopiniononthisnovelmatter(seeHeinPerschevFinanzamtLudenscheid[2008]ECJC-318/07https://wiki.qut.edu.au/display/CPNS/Hein+Persche+v+Finanzamt+Ludenscheid).Asthatwasanon-binding,advisoryassessment,thedefinitiveversionwasnotdeliveredbytheEuropeanCourtofJusticeuntil27January2009.
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Does Article 56 EC apply?
UnderArticle56(1)EC,restrictionsonthemovementofcapitalamongmemberStatesarestrictlyprohibited.Noprecisedefinitionofwhatconstitutes‘movementofcapital’isprovided.TherewasdissensionamongtheMemberStatesastowhatwascoveredbytheexpression,withGermany,Spain,FranceandIrelandinsistingthatinvestmentorfinancialassignmentwasessential,aviewsharedbytheGermanTaxOffice.Greecemaintainedthattransfersofordinaryconsumergoodsnotlinkedtopaymentfellwithintheambitoffreemovementofgoods,ratherthancapital,anargumenttheCourtrejectedinthelightoftherelevantlegislation.TheCommissionoftheEuropeanCommunitiesandtheEuropeanFreeTradeAssociationSurveillanceAuthorityarguedthatArticles56EC–58ECdidencompassgiftsinkindtocharitablebodiesoutsidethetaxpayer’sMemberState.
Toresolvetheissue,recoursewashadtootherEuropeanUnionlaw.HeadingXIinAnnex1toDirective88/361dealswithhowinheritancesandlegaciesshouldbetaxedunderthefreemovementofcapital.Nodistinctionisdrawnbetweenfinancialtransactionsandthoseinkind.Therefore,theCourtdeterminedthatmonetarygifts,aswellasgiftsinkindlikeMrPersche’stoorganisationsregardedascharitiesinotherMemberStates,weremovementsofcapitalregulatedbyArticle56EC.
Is equal treatment necessary?
Next,theCourthadtodecidewhetherlimitingtaxdeductibilityfordonationstocharitableorganisationssituatedonlyinthedonor’sMemberStatewasaviolationofArticle56EC.NotonlytheGermanTaxOffice,butalsotheGermanGovernmentalongwiththeGovernmentsofFrance,Spain,theUnitedKingdomandIrelandarguedthatunequaltreatmentwasnecessaryforefficientfiscalmonitoring.TheyalsopointedoutthatwhatisperceivedascharitablemayvaryamongthevariousMemberStates.TheCourtwassingularlyunimpressedwiththefiscalargumentonthegroundsthatcomplaintsaboutdonationstootherMemberStatesmakinginroadsintoaparticularMemberState’slevelofpublicrevenueanditsresultantcapacitytobudgetwerenottheresponsibilityoftheCourt.
WhilsttheCourtrecognisedthatwhatconstitutedcharitablestatusvariedamongstthememberStates,whereitcouldbedemonstratedthatthelegislativerequirementsinoneMemberStatewerereflectedinthoseofanotherMemberState,Article56ECprohibitedanytaxationbenefitbeingappliedsolelytoalocallysituatedorganisation.MrPersche’sPortuguesein-kinddonationwasclearlyeligibleforconsiderationasataxdeduction.
Where does the burden of proof lie?
VerifyingthedeductibilityofadonationsuchasMrPersche’swasviewedpotentiallyasajointundertaking. Atthesimplestlevel,itwasobviouslypossibleforthedonortorequestareceiptfromthecharitablerecipientinanotherMemberStateaswellasinformationaboutitscharitableactivitiesandstatus.AlthoughnotnormallycognisantofthefitbetweenthisMemberState’slegislativerequirementswithrespecttocharitiesandthoseofthedonor’sMemberState,Directive77/799allowstheappropriatetaxationofficialsfromthedonor’sMemberStatetoelicitthedataessentialtoassesstheextentofthetaxbenefitorotherwisefromanotherMemberState.OnceitisproventhattheelementsfortaxdeductibilityinoneMemberStatemirrorthecriteriasetdowninthelegislationofanotherMemberState,thedonor’staxationpositionshouldbesimilar.
Thiscasemaybeviewedat:www.bailii.org/eu/cases/EUECJ/2009/C31807.html
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2.8 trusts
2.8.1 CUNLIFFE V ATTORNEY-GENERAL (NSW) [2009] NSWSC 1450 (SUPREME COURT OF NEW SOUTH WALES, NICHOLAS J, 21 DECEMBER 2009)
TheplaintiffsarethetrusteesoftheStVincent’sHospitalatDarlinghurstinSydney(thetrustees).TheyholdlandsupontrustforthepurposesoftheStVincent’sHospital,pursuanttoastatute,theSt Vincent’s Hospital Act 1912 (NSW)(theSVHAct).Thelandsheldontrustarethoseoccupiedbythehospitalitself(whichisapublichospital),theStVincent’sPrivateHospital,theSacredHeartHospice,theStVincent’sClinic,theVictorChangCardiacResearchunit,theGarvanInstituteofMedicalResearch(theGarvan),andtheSistersofCharityOutreachService.
Theoverallgoverningentityofthisgroupingisacompanylimitedbyguarantee,theStVincent’sHospitalSydneyLimited(SVHS).ThesolememberofthatcompanyisStVincent’sHealthAustraliaLimited(SVHA),alsoacompanylimitedbyguarantee.Anothercompanylimitedbyguarantee,StVincent’sandMaterHealthSydneyLimited(SVMHS)providesmanagementservices,includingfinanceandadministration,tothegroup.ItssolememberisalsoSVHA.
On17August2009,thetrustees,SVHSandtheGarvanhadexecutedaprojectagreementforthedesignandconstructionofanewcancercentre,theGarvanStVincent’sCancerCentre(GSVCC).ThelandonwhichtheGSVCCwastobebuiltisheldontrustforthebenefitofthehospitalundersection2oftheSVHAct.Theprojectagreementincludedprovisionforaleaseof82yearstoobtainjointtenancyoccupationoftheGSVCCbuildingbyboththeSHVSandtheGarvan.
AfundingagreementhadalsobeenenteredintowiththeCommonwealthgovernmentforprovisionof$70milliontowardsthetotalcostoftheproject($90.6million),withtheremaindertocomefromprivatedonations.Somedonationshadalreadybeenreceived.Thefundingagreementrequiredthattenureofthelandbesettledwithin20businessdaysofthedateofthefundingagreementon17August2009.
TheAttorney-GeneralofNewSouthWales,asdefendant,wasactinginhisroleasprotectoroftrustassets.TheprincipleraisedherewaswhetherthenewGSVCCservedthepurposesofthetrustunderwhichthehospitalwasestablished.Themainissueforconsiderationwasthepowerofthetrusteestoenterintothe82yearleaseundersection6oftheSVHAct.Thissectiongivesspecificpowertothetrusteestoleaseland,butsection6(1)providesforamaximumtermof21yearstoapublicauthority,oramaximumof10yearstoanyotherperson.
Thejudgeacceptedthetrustees’contentionthattheonlypossibledetrimentarisingfromsuchalongleasetermwasthatthelandwouldnotbeavailableforanyotherpurposeduringthisterm.HisHonouragreedthatthisdetrimentwasoutweighedbytheadvantagesoftheGSVCCforboththehospitalanditspatients.TheAttorney-Generalwasconcernedthattheterminationrightsunderclause15.5oftheprojectagreementweresignificantlylessthanthoseavailabletootherparties,inthattheeventsofdefaultwereverylimited.
HisHonourfeltthatthisneededtobelookedatinthelightoftheprojectasawholeandtheevidenceoftheprobableconsequencesofthetrustees’participationinit.Theprojecthadconsiderablebenefitsforthetreatmentofcancer,offeringsynergiesbetween
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theleadingresearchoftheGarvan,andthealreadyadvancedtreatmentoptionsofferedattheSVH.Theofferingofmultidisciplinarycaretopatientswasapotentconsiderationwithinsection81oftheTrustee Act 1925(NSW)whichallowsfor‘advantageousdealings’tobeenteredintodespitelackofpowervestedintrustees.Ifthetrustees’dealingswereadvantageoustothepurposesofthetrustwithinsection81,thenthecourtcouldordermattersasitthoughtfit.
Sincetheprojectandtheleaseoffered‘advantageousdealings’,thepowersoughtbythetrusteestoenterintotheprojectagreementandtheleasewasgrantedpursuanttosection81oftheTrustee Act.Theplaintiffswereorderedtopaythedefendant’scosts.
Thecasemaybefoundat:www.austlii.edu.au/au/cases/nsw/NSWSC/2009/1450.html
Implications of this case
Thiscaseshowedthattrustarrangementsenteredintointhepastcanbeasignificantobstacletotrusteesinchangingtimes.Inthiscase,therewasaspecificstatutedatingfrom1912underlyingthetrust.However,thecourtwaspreparedtointerprettheprovisionsoftheunderlyingacttoaccommodatepurposeswhichwereinlinewith,butnotexactlythesameas,thetrust’sstatedpurposes.TheactionoftheAttorney-GeneralinthiscasewerepartoftheAttorney’sdutytoprotecttrustassetsinthepublicinterest.
2.8.2 NSW MASONIC YOUTH PROPERTY TRUST V A-G (NSW) [2009] NSWSC 1301 (SUPREME COURT OF NSW, 19 NOVEMBER 2009, HALL J )
TheplaintiffsinthiscaseweretwocorporatetrusteesoftheMasonicWelfareFundofNewSouthWalesandtheAustralianCapitalTerritory(theFund’),theNewSouthWalesMasonicYouthPropertyTrustandtheNewSouthWalesMasonicWelfarePropertyTrust.ThesecorporatetrusteeswerealsothetrusteesoftheEdithBoydMemorialTrustFund(theEdithBoydFund).
TheAttorney-GeneralofNewSouthWaleswasthefirstdefendantrepresentingallcharitableinterestsinNewSouthWales,whiletheseconddefendantwasarepresentativeofallthosewhomighttakepartofthecorpusorincomeoftheFundifthecourtweretodeterminethatnotrustexisted.
ThequestionsbeforethecourtstemmedfromalonganddetailedhistoryrelatingtotheFund.Thesewere:
1. WhetherthepropertyoftheFundwasheldontrustforcharitablepurposes;
2. Ifso,whatwerethecharitablepurposesinvolved?
3.WhetherthetrusteeswerevalidlyappointedasthetrusteesoftheEdithBoydFund;
4. Ifthecharitablepurposescouldnotbeexecuted,whetherthetrustsshouldbeexecutedcy-près.
Inapreviousjudgementon24March2009(seecase2.8.6,below),anotherquestionhadbeendeterminedrelatingtothetrusts.Inthiscontext,itisimportanttonotethatthetrustwasestablishedon28March1923asavalidtrust.Theearlierquestionwaswhetherthetrusteesofthetrustestablishedon28March1923werethemembersfromtimetotimeoftheFundorthemembersfromtimetotimeoftheExecutiveoftheFund.JusticeHalldeterminedthatthetrusteesoftheFundwerethemembersfromtimetotimeoftheExecutiveoftheFund.FiveindividualpersonaltrusteeswerelaterpurportedlyestablishedasthetrusteesbyaDeedexecutedon14January1927.Subsequently,fromabout27November1972,allthepropertyoftheFundhasbeensupposedlyheldandcontrolledbythetwocorporatetrustees.AsatJune2008,theFundheldnetassetsof$10,844,000.
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ThehistoryoftheFundwasinextricablylinkedtotheestablishmentoftheWilliamThompsonMasonicSchoolandHostelsinNSW.WilliamThompsonwastheGrandMasteroflodgesinNSWin1921whenheproposedtheestablishmentofaMasonicschoolforchildrenofdeceasedbrethren.ThiswasdulyestablishedandtheMasonicSchoolsWelfareFundwasthencreatedtofundvariousactivitiesoftheschoolwhichwereoutsidethedaytodayoperationsoftheschool.TheFundwasoriginallycreatedasacommitteeofMasonsfromeachlodgeinNSW.Theschoolandhostelsweremuchusedbetween1923andthe1960sbutweregraduallyfoundtobeunnecessaryandceasedtoexistin2001.SincethattimenochildhasfallenwithintheoriginaldescriptionofthepurposeoftheFundasstatedinits1923constitution.
Theconstitutionfirstdraftedin1923statedthattheFund’sobjectsweretoassisttheschoolandthechildrenintheschoolbyprovidingbenefitsoutsidetheusualschoolfunctions,suchassportsequipment,librarybooks,prizes,entertainments,anannualpicnic,vacationaccommodation,railwayfares,theprovisionofsuitablepositionsinworkafterschoolwascompleted,financialassistancebothduringandafterschool,andwhereapplicable,evenuniversityeducation.JusticeHallheldthisconstitutionwasvalidandthatitestablishedatrustwiththeobjectsstatedintheminutesofthemeetingheldon23March1923.
Themostimportantaspectofthisconstitutionwasthatitdidnotincludeaprovisiontoamendthetrust.Thismeantthatthetrust’scharitableobjectscouldnotbeamended,norcouldaprovisiontoamendthetrustbeinsertedatalaterdate.Nevertheless,severalsetsofamendmentstothetrusthadpurportedlybeenmadeovertheensuingyears.Particularlyimportantamendmentsweremadein1926,1927,1936,1956,1965,1972and1997.Thesewere:
1. 1926:furtherclauseswereaddedtotheconstitutiontomakethepropertyofthetrustvestinfivetrusteestobeelectedbymembers.Adeedtothiseffectwassignedon14January1927.
2. 1927:amendmentsweremadetotheconstitutiontochangetheobjectsoftheFundtoincludethepowertoestablishaccommodationhostelsforbothchildrenattheschoolandforthosewhowereinworkafterfinishingschooling,andtoinsertapowerofamendment.
3.1936:furtheramendmentsweremadetotheconstitutionandobjects,thoughthesereflectedtheoriginalminutesofthe1923meeting,andthe1927decisionabouthostels.
4.1956:amendmentsweremadetoestablish‘auxiliaries’throughoutNSWwhichweretocollectorraisefundsforthegeneralpurposesandobjectsoftheFund.Inaddition,theobjectswerefurtherrefinedtoreflecttheincreasinginterestoftheFundinex-studentsoftheschoolwhowereinnecessitouscircumstances–provisionwasmadetoassistsuchex-studentsbyfinancialaid,provisionofaccommodation,purchasingtextbooks,necessaryclothes,toolsoftrade,professionalinstrumentsandequipment,andotheritemstofurthertheirchosencareers.
5.1965:substantialamendmentsweremadetotheobjectsoftheFundtoextendandbroadenthecoverageoftheFundbeyondex-studentsoftheschool(whichwasfallingintodeclineinuse)tochildrenofdeceasedandincapacitatedmembersoftheNSWLodgeofMasonsgenerally,andprovidereliefandassistancetoMasonicyouthinnecessitouscircumstancesgenerally.Inaddition,thenumberoftrusteeswasreducedfromfivetothree.
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6.1972:afterbothlegalandjudicialadvicewasobtainedin1970and1971totheeffectthattheFundwasnotcharitableinthelegalsense,andcouldnotqualifyforexemptionfromincometax,thecorporatetrusteeswereappointedon6April1972.TheassetsoftheFundhadpurportedlybeencontrolledbythecorporatetrusteessinceabout21November1972.The1972amendmentstotheconstitutionoftheFundeffectedthischange.
7. 1997:on8December1997,aspecialgeneralmeetingoftheFundresolvedtoadoptanewconstitution.Theobjectswereto‘relieveandassistYouthinnecessitouscircumstancesinanyoneormoreofthefollowingways,namely,byensuringtheprovisionofadequateprimary,secondary,tertiaryorothereducation,byencouragingscholasticattainments,vocational,professionalambitionsoraptitudes,byassistingthoseshowingpromiseortalenttoproceedtoUniversityorengageinanyothercourseofstudyorspecialcourseoftrainingwithoutregardtosex,race,colourorreligionoravocationorprofession,byprovidingfinancialaid,medical,hospitalanddentaltreatment,byobtainingsuitablehomeaccommodationorboardandresidencebyprovidingnecessaryclothes,textbooks,tools-of-trade,professionalequipmentoranyotheressentialrequisiteinthefurtheranceofthecareerchosen’.
TheevidencepresentedwasthatthepurposeofthetrustnolongerexistsastheMasonicschoolandhostelsnolongerexist.
IndiscussingthepurportedamendmentstotheFund,JusticeHallobservedthatitissettledlawthatonceacharityhasbeenfoundedanditstrustshavebeendeclared,thesetrustscannotberevoked,variedoraddedtobythefounderorfoundersunlessavalidpowerofamendmentorrevocationwasincludedatthetimethetrustsweredeclared.Thisrulebindsthetrusteesaswellasthefounderorfounders.Atgenerallaw,acourt’sjurisdictionismerelydirectedtoenforcementofpurposesofthetrustasitwasoriginallycreated,andtoavoidunnecessarydeparturesfromthetermsofthetrust.
JusticeHallfoundthattherehadbeenonecontinuousFundoperatingovertheyearssince1923,andtherewasnobasisforfindingthatthetermsoftheoriginaltrusthadbeenalteredbyanyofthepurportedamendments.Inparticular:
1. Avalidexpresstrustwascreatedon28March1923withtheconstitutionalsocreatedonthatdate.
2.Thepurportedamendmentstothe1923trustwerelegallyineffective,andsodidnotvarythetermsofthe1923trust.
3.Thepurportedappointmentofcorporatetrusteesin1972wasnoteffectiveasitproceededonanincorrectlegalpremise,namelythatthedeedexecutedin1927validlyappointedfiveindividualtrustees.
4.Therefore,thetrusteesoftheFundsince1923hadbeenthemembersfromtimetotimeoftheExecutiveoftheFund.
5.Theplaintiffs,thecorporatetrustees,weretrusteesde son tort (operatingincorrectly),andhavebeensosincetheirpurportedappointmentin1972.
6.ThemoneyandpropertysettledontheFundinandafter1923wasimpressedwiththetrustcreatedin1923.
Therefore,theonlyvalidtrustoperatingwasthatwhichestablishedtheFundon28March1923.
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Was this a valid charitable trust?
Tobeacharitabletrust,itmusthavebeenestablishedforcharitablepurposes.Legally,acharitabletrustmustfallwithinoneofthefourclassesrecognisedinthePemselcasein1891:atrustfortheadvancementofeducation,forthereliefofpoverty,fortheadvancementofreligion,orforotherpurposesbeneficialtothecommunity.Inaddition,thetrustmustbeofapublicnatureandforthepublicbenefit.Afterconsideringthepossibilities,JusticeHallagreedwiththesubmissionoftheAttorney-GeneralofNSWthatthe1923trustwasoneforthereliefofpoverty,andthereforeforcharitablepurposes.Itspurposewastoassistimpoverishedchildren,andalthoughnotexpresslystatedassuchinthe1923constitution,thereliefofpovertycouldbeinferredfromorwasimpliedintheobjectsofthetrust.Thus,itwasavalidcharitabletrust.
InrespectoftheEdithBoydFund,theplaintiffscoulddemonstrateaclearchainoftitleastrustees,andcouldbedeclaredasthepropertrusteesofthatFund,whichhadadifferenthistoryfromtheWelfareFund.
AsthecharitablepurposesoftheWelfareFundcouldnolongerbeexecuted,itwasproperthatacy-prèsschemebedevelopedfortheFund.Thehearingastothenatureofthecy-prèsschemewasheldovertoalaterdate.
Thiscasemaybefoundat:www.austlii.edu.au/au/cases/nsw/NSWSC/2009/1301.html
Implications of this case
Thiscaseillustratesthedifficultieswhichcanarisewhenatrustisestablishedatatimeinthepast,andthenisdealtwithbytrusteesorotherpersonswhohaveimperfectunderstandingofthetrustoroftrustlaw.Inthiscase,overmorethan70years,trusteeshadpurportedlybeenappointed,andamendmentsmadetothepurposesofthetrust,withoutanyproperreferencetotheoriginaltrustterms.Moreover,adviceontrustmattershadbeensoughtfromvariousprofessionalpersonswhodidnotdiscerntheactualtermsofthetrust,orthemodeofproperoperationofthetrust.Meanwhile,thetrusthadoperatedquitesuccessfully.Itwasonlyatitsdissolutionthatthelegalproblemsemerged,whichresultedinthislitigation.Trusteesshouldnotmakeanychangestoatrustwithoutproperlegaladviceastothelegitimacyoftheproposedchanges.Theoutcomehereofacy-prèsapplicationofthesubstantialtrustfundsistheproperoneinthecircumstances.
2.8.3 THE PUBLIC TRUSTEE OF QUEENSLAND AS ExECUTOR OF THE ESTATE OF BRIAN EDMUND MONCKTON, ALSO KNOWN AS, BRYANT EDWARD MONCKTON, DECEASED V ATTORNEY-GENERAL (QLD) [2009] QSC 353 (SUPREME COURT OF QUEENSLAND, A LYONS J, 7 OCTOBER 2009)
BrianMoncktondiedin2006.Hislastwill,madein1997,appointedthePublicTrusteeasadministratorandlefthisentireestatetohiswifeifshesurvivedhimby30daysand,ifnot,totheQueenslandChildren’sResearchFoundation(QCRF)‘forthecharitablepurposesofthefoundation’.
TheQCRFwasformedinMay1973withobjectivesprincipallytopromoteresearchintothetreatmentofillnessanddiseasesaffectingchildren.TheQCRFwasnotparticularlyactiveandduring1993allofitsfundsweredonatedtotheRoyalChildren’sHospitalFoundation.Itwasderegisteredin1994,threeyearsbeforethedeceasedhadmadehiswill.
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ThePublicTrusteeappliedtothecourtundersection134ofthePublic Trustee Act 1978fordirectionsastohowtoapplythegift(theestatewasworthabout$424,000).ThequestionforthecourtwaswhetherthegifttotheQCRFwasstillvalidandifso,howwasittobedealtwith.
Thetraditionalapproachofthecourtsisthatatestamentarygiftlapsesincaseswhereanentityceasedtoexistduringthetestator’slifetime.HerHonourcanvassedthethreestandardexceptionstothisruleandnoted(para13)thatcourtshavedevelopedafourthexceptiontothelapserule.ThiswastheapproachusedbytheSupremeCourtintherecentcaseofMary Agnes Ball(seecase2.8.5,below).Thislooksatthecircumstancessurroundingagifttoaninstitutionthathasceasedtoexist,todetermineifitisagiftforacharitablepurposeofthatinstitution,ratherthananoutrightgift.Ifthatcharitablepurposecanbefound,thefundcanbeappliedtoaninstitutionwhichcancarryoutthatpurposeandfulfillthetestator’sintention.
HerHonourfoundthatthegifthadnotlapsedastherewasnofailureofthegeneralcharitablepurposedeclaredinthewill.Whilethebequestdidnotstateaparticularpurpose,bythefactthatitwasagifttoaFoundationwhichwasformedtoraisefundsformedicalresearchforchildren’sillnessesitwasinterpretedashavingacharitablepurpose.HerHonouralsonotedthatinAustraliaagifttoacharitableinstitutionisprimafacieagiftforacharitablepurpose.(seeMontefiore Home v Howell & Co(19842NSWLR406)).
ThereforethecourtdirectedthepropertythesubjectofthegiftbepaidtotheRoyalChildren’sHospitalFoundationasithadthecapacitytofulfilthepurposeofthegift.
Thecasemaybefoundathttp://sclqld.org.au/qjudgment/2009/QSC/353
Implications of this case
Thiscaseonceagaindemonstratestheimportanceofkeepinganuptodatewillandcheckingthecorrecttitleofacharitywhennamingitinawill.Ifanorganisationnolongerexists,thecourtwillhavetodeterminewhetherthereisasuccessororganisationtoacceptthegift,orestablishwhetherthetestatorhadageneralcharitableintention.Inthatcasethecourtneedstodeviseacy-prèsschemetogiveeffecttothecharitablepurposeofthewill.Suchaschemedirectsabequestinawilltosuitablecharitablepurposewhentheonenamedinthewillcannotbecarriedout.Whileareviewofthecaselawshowsthecourtswill,insofaraspossible,inferageneralcharitableintentiontopreventthelapseofacharitablegift,theprocessforacy-prèsapplicationcanbelongandinvolvedwithmanycompetingorganisationsapplyingforthebequest.Also,asthecostsassociatedwithanycourtactionarenormallyorderedagainsttheestate,thisdecreasestheamountoffundsthatwillultimatelybegiftedtothecharity.Accordingly,bestpracticewhendraftingawillwouldinvolvecontactingorcheckingthewebsiteofanycharitytowhichagiftistobegiven,toconfirmitscorrectlegalname.Mostcharitieshaveasuitablebequestclausealreadydraftedtobeusedinwills.Regularcheckstoensurethecharitystilloperatesorhasnotchangeditsnameandifsoupdatingthewillcanpreventuncertaintyandthepossibilitythatanintendedgiftwilllapseandreverttotheestate.
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2.8.4 MITRESKI V HIS EMINENCE METROPOLITAN PETAR THE DIOCESAN BISHOP OF THE MACEDONIAN ORTHODOx DIOCESE OF AUSTRALIA AND NEW ZEALAND [2009] NSWCA 319 (NEW SOUTH WALES COURT OF APPEAL, 10 SEPTEMBER 2009 FILE NO: 40202/09
Thisisacourtcaseinvolvingthelong-runningdisputeamongmembersoftheMacedonianOrthodoxChurchconcerninghowitspremisesinRockdaleinSydneyshouldbeutilized6.Complaintsaboutthegeneralconductofthechurch’sbusinesshadalsobeenairedovertheprecedingtwelveyearsoflitigation.DuringanearlierattempttobringthematterbeforetheNewSouthWalesCourtofAppeal,Metropolitan Petar v Macedonian Orthodox Community ChurchSt Petka Inc [2007]NSWCA263, thejudgesdecidedthatonlyasingleappealwouldbepermittedtodealwiththeissuesraisedpreviouslyintheEquityDivisionoftheSupremeCourt.Suchanappealwasenvisagedtooccursometimelater,afterthetrial’sconclusion.
TheseproceedingswereanattempttodojustthatonthelegalbasisthatafurtherrulingbyChiefJusticeYoungintheEquityDivision,Metropolitan Petar v Mitreski [2009]NSWSC106,hadfailednotonlytoensureproceduralfairnessforthemembersoftheMacedonianOrthodoxChurch,butalsotodetermineallthequestionsatissue.ParticularmentionwasmadeofthefactthatHisHonourhadalludedtoabreachwhichhewasnotrequiredtoaddress.IntheFullCourtoftheCourtofAppeal,JusticeTobiasstatedthereferencewasclearlytoanallegedbreach.Decisionsastoanyunresolvedmatterswereregardedasstillinthepipeline.Afterreferringtothethrustofthe2007judgment,allthreeAppealCourtjudgesconcludedtherewasnosubstancetotheclaimsadvancedbythecounselforthemembersoftheMacedonianOrthodoxparishofSt.PetkaatRockdale.Therefore,noleavewasgrantedtoappealChiefJusticeYoung’sdecision.
Theopportunitywasalsotakeninthisactiontorevisitthe2003case,Metropolitan Petar v Mitreski [2003]NSWSC262,withaviewtoagainapplyingforleavetoappealJusticeHamilton’sorders.Intheinterestsofjusticeandultimatelyoftheparties,theCourtofAppealre-iterateditsstancethattherewasstillscopeintheEquityDivisionoftheSupremeCourt,forhandlingsuchmatters.Onlywhenthisavenuewasexhausted,shouldtheybebroughtbeforetheCourtofAppeal.Leavewasonceagainrefused.
Thiscasemaybeviewedat:www.austlii.edu.au/au/cases/nsw/NSWCA/2009/319.html
Implications of this case
ThiscasewaspartofaverylongrunningseriesofcourtapplicationsconcerningabranchoftheMacedonianOrthodoxChurchinAustralia.Itillustratesthatinternecinedisputeswithinassociationscanresultinbitterlitigationwhichiswastefulofbothanassociation’sresourcesandofthecourt’stime.Asthepresidingjudgesaidinoneofthemanyapplicationsinthislitigation‘ithadbeeninthelistsfartoolong’(see2.8.7below).
6 EarlierhearingsinthemattercanbeseenincasenotesonTrustsandWillsathttps://wiki.qut.edu.au/display/CPNS/Trusts
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2.8.5 THE PUBLIC TRUSTEE OF QUEENSLAND AS ExECUTOR OF THE ESTATE OF MARY AGNES BALL, DECEASED V STATE OF QUEENSLAND AND ORS [2009] QSC 174 SUPREME COURT OF QUEENSLAND – BYRNE SJA – 3 JULY 2009
MaryAgnesBallmadeawillin1987whichleftherentireestatetoherhusbandifhesurvivedherby30days,andifnot,inequalsharestotheGuideDogsfortheBlindAssociationofQueensland,theQueenslandDeafSocietyIncorporated,andtheNorthBrisbaneHospitalsBoardforthepurposesoftheRoyalBrisbaneChildren’sHospital.Inallcases,thebequestwasforthepurchaseofequipmentforthecharitiesinquestion.
MrsBall’shusbandpredeceasedher,andthequestionforthecourtwaswhetherthegifttotheNorthBrisbaneHospitalsBoard(theBoard)wasstillvalidandifso,howwasittobedealtwith.
ThisquestionarosebecausetheBoardhadceasedtoexistatthedateofMrsBall’sdeathin2007.TheNorthBrisbaneHospitalsBoardwasincorporatedin1959tooperatepublichospitalsonthenorthernsideoftheBrisbaneRiver,includingthethenBrisbaneChildren’sHospital.In1968,thishospital’snamehadchangedtotheRoyalChildren’sHospital,sothatitwasmisdescribedinthewillwhenthewillwasmadein1987.In1982,anewboardwascreatedtooperatethehospital,calledtheRoyalChildren’sHospitalsBoard.TheBoardcontinuedtorunotherpublichospitalsuntiltheHealth Services Act 1991 (Qld) abolishedallQueenslandhospitalboardsin1991.Therewerealsolaterreorganisationsinmanagementofthehospitals,andatthetimeofMrsBall’sdeath,thehospitalwasmanageddirectlybytheQueenslandgovernment.
Was the charitable gif t to the Board still valid?
Howwasittobedirectedandused?Abequesttoapublichospitalisarecognisedgiftforacharitablepurpose(Re Sutherland, deceased; Queensland Trustees Limited v Attorney-General [1954]StRQd99;Le Cras v Perpetual Trustee Co Ltd; sub nom In Re Resch’s Will Trusts [1969]1AC514).HisHonoursaidatparagraph6:
‘TheHospitalwas,itseems,functioningin2007muchasithad20yearsearlierwhenthewillwasmade.Itstillis.Sothereisnopracticalimpedimenttoapplyingthegifttothespecificpurpose.NoristherealegalobstacletogivingeffecttoMrsBall’sconcerntobenefittheHospital.’
TherewasnoquestionofthegifthavinglapsedbecauseasHisHonoursaidatparagraph12:
‘Theidentityofthedesignateddoneewasnotoftheessenceofthegift.ThedeclaredcharitablepurposeiswhatmatteredtoMrsBall.Therehasbeenafailureoftheparticularmeansbywhichthecharitablepurposewastobeeffected.Butthereisnofailureofthatpurposeassuch.Thegifthasnotlapsed.’
Sincethegifthadnotlapsedtherewasnoneedforacy-prèsscheme.AllthatwasrequiredwasforthegifttobepaidtoasuitablepersonorentitywiththeresponsibilityforbuyingequipmentfortheRoyalChildren’sHospital.Allinterestedparties,includingthePublicTrusteeandtheAttorney-General,agreedthatthesuitablerecipientinthecircumstanceswastheRoyalChildren’sHospitalFoundation(theFoundation),asopposedtotheQueenslandgovernment.
48
Therefore,HisHonourdirectedthatthebequestbepaidtotheTreasurerorotherappropriateofficeroftheFoundation,andthatallcostsbepaidfromtheestate.
Thecasemaybefoundat:http://archive.sclqld.org.au/qjudgment/2009/QSC09–174.pdf
Implications of this case
Thiscasedemonstratestheimportanceofkeepinganuptodatewill,andofcheckingthecorrectnameforacharitywhennamingacharityinawill.Insomecases,theCourtmayneedtodeviseacy-prèsschemetogiveeffecttoacharitablepurposeinawill.Suchaschemedirectsabequestinawilltoasimilarorganisationwithsimilarpurposestotheonenamedinthewillwhichhasnowceasedtoexist.However,theprocessforacy-prèsapplicationcanbelongandinvolved,withmanycompetingorganisationsapplyingforthebequest.Therefore,itisbesttoupdateawillregularlyandtocheckthatcharitiesnamedstillexist,andthatthecorrectnamehasbeenusedinthewill.Correctnamescanbecheckedfromacharity’swebsite,whichmayalsocontainsuitablebequestclausestouseinawill;orbycontactingthecharitydirectlyforabequestkitorotherappropriatedetails.
2.8.6 NSW MASONIC YOUTH PROPERTY TRUST & ANOR V HER MAJESTY’S ATTORNEY-GENERAL IN AND FOR THE STATE OF NSW & ANOR [2009] NSWSC 181 (24 MARCH 2009) FILE NUMBER: NO 5534 OF 2007
AqueryarisingoutofasubmissionbytheAttorney-Generalinamatterauthorisedundersection6oftheCharitable Trust Act 1993 (NSW),sawtheSupremeCourtofNewSouthWalesdirectedtoaddresstheissueofwhotheactualtrusteesofthe NSW Masonic School Welfare Fund (theFund) were.Moreparticularly,acceptingthatthetrustwasvalidlyconstituted,thequestionforconsiderationwas,werethemembersoftheFundfromtimetotimethetrusteesordidthetrusteesonlyincludethemembersoftheFund’sExecutiveforthecorrespondingtimeframe?
ThisFundwasestablishedatageneralmeetingofrepresentativesofvariousLodgesofMasonson28March1923.FollowingsomejudicialadvicefromHisHonourMrJusticeStreetin1971,corporatetrustees,theNewSouthWalesMasonicYouthPropertyTrustandtheNewSouthWalesMasonicWelfarePropertyTrust,wereappointedon21November1972,tooverseetheFund.ThesetrusteesholdalltheFund’spropertyaswellasadministeringbankaccountsinthenameoftheMasonic Youth Welfare Fund of NSW & ACT.
ItwasrecognisedinthesubmissionofcounselfortheAttorneyGeneralthattheestablishmentoftheFundin1923,plusthemonetarypaymentsintoitsatisfiedtherequirementsofanexpresstrust.Thetrustpropertyconsistedofthefinancialdonationswhichweretobeheldontrusttoaddresstherelatedneeds,notnecessarilyeducationalinnature,ofthenominatedbeneficiaries,childrenoftheMasonicSchoolsofNewSouthWales.Suchneedsincludedmattersinvolvingmedicalanddentalcareaswellastheprovisionoffood,clothingandaccommodation.WhiletheFund’sConstitutionwasclearinthisregard,itwasnotclearexactlywhoweretocompriseitstrustees.
JusticeHallsoughtguidancefromtheMinutesoftheGeneralMeetingof28March1923,astotherepresentatives’intentionconcerningtheappointmentoftrusteestomanagetheFund.NotonlydidtheMinutesevidenceanintentforanExecutivetodirecttheFund’sbusinessoperation,butalsotheysanctioneditsinvolvementinfundraisingwheneverrequired.Scantmentionwasmadeoftherightsandresponsibilitiesof
49w o r k i n G P a P E r n o 4 9
individualmembers.Fromapracticalperspective,HisHonourdiscountedthepossibilityoftheFund’sefficientadministrationbytheentiremembershipofanunincorporatedassociation.NordidheaccepttheargumentthataresolutionpassedataspecialgeneralmeetingoftheFundon20December1926,totheeffectthattheFund’sassetsshouldvestinfiveelectedtrustees,illustratedthatpreviouslyallmembersoftheFundhadbeentrustees.ThesubsequentadoptionofaTrustDeedtoimplementthis,didnotalterhisstance.Infact,heinterpretedthedevelopmentsasindicatingadesirefortheExecutivetofacilitateitsownrenewal.
Therefore,HisHonourdecidedthatthetrusteeswerethemembersoftheFund’sexecutivefromtimetotime.
Thiscasemaybeviewedat:www.austlii.edu.au/au/cases/nsw/NSWSC/2009/181.html
Forarelatedcasesee2.8.2,above.
2.8.7 METROPOLITAN PETAR V MITRESKI [2009] NSWSC 106 SUPREME COURT OF NEW SOUTH WALES – 4 MARCH 2009
ThishearingwastofinaliseoneissueofmanyinacasewhichHisHonourstated‘hasbeeninthelistsfartoolong’.Theproceedingscommencedon28July1997whenadisputearosebetweentheBishop(MetropolitanPetar)andthegoverningbodyoftheincorporatedassociationwhichcontrolledtheparishofStPetkainNewSouthWales.Thedisputeconcernedtheappointmentoftheparishpriestandcontrolovermoneyandpropertywithintheparish7.
AChurchtrusthaspreviouslybeenheldtoexistinthiscase(seeMetropolitan Petar v Mitreski[2003]NSWSC262(4April2003)).TheissueshereweretoascertainthetermsoftheChurchtrustwhichwasallegedtohavebeenbreachedbythedefendants,andtodeterminewhetheranyofthosetermswerefundamentalterms.
TheallegedbreachesoftrustwerethattheauthorityoftheBishophadbeendeniedby:
a.preventingtheDiocesanBishopfromconductingservicesintheChurchBuilding;
b.preventingapriestappointedbytheDiocesanBishopasparishpriestoftheStPetkaParishfromconductingreligiousservicesintheChurchBuilding;
c. preventingapriestlicensedbytheDiocesanBishoptoconductreligiousservicesintheChurchBuildingfromdoingso;
d.(excludingthepriestappointedbytheDiocesanBishopasparishpriestoftheStPetkaParishfromtheexecutivecommitteeofthebodyresponsiblefortheadministrationoftheStPetkaParish;
e. employingapriestnotappointedbytheDiocesanBishoptoactastheparishpriestoftheStPetkaParish;
f. employingapriestundervalidecclesiasticaldisciplineinaccordancewithChurchLawtoactastheparishpriestofStPetkaParish;
g.requiringorpermittingapriesttoconductreligiousservicesupontheChurchLandwhen:
i. thatpriesthasnotbeenauthorisedbytheDiocesanBishoptodoso;or
ii. thatpriestisundervalidecclesiasticaldisciplineinaccordancewithChurchLaw.
7 EarlierhearingsinthemattercanbeseenincasenotesonTrustsathttps://wiki.qut.
edu.au/display/CPNS/Trusts
50
h.anyorallof:
i. closingtheChurchBuilding;
ii. removingtheHolyObjectsfromtheChurchBuilding;
iii.installingHolyObjects;
iv.reinstallingHolyObjects;
v. carryingoutofbuildingworksinandupontheChurchBuildingwithouttheauthorityandblessingoftheDiocesanBishop.
i. refusingorfailingtoacceptapplicationsformembershipfrombelieversinthedoctrinesoftheMacedonianOrthodoxChurchwhohavesatisfiedthecriteriaforeligibilityspecifiedintheConstitution,theDiocesanStatuteandtheBy-Laws;
j. failingtoremittotheDiocesanBishopthecontributionfromtheincomeoftheparishasspecifiedintheDiocesanStatute.
Inacomprehensivejudgment,whichincludedanin-depthconsiderationofthehistoryoftheMacedonianOrthodoxChurch(MOC)andrelevantCanonLaw,HisHonourfoundthattheMOCwasfoundedbothhistoricallyandinthepresentonabsoluteauthorityofitsBishopric.HisHonoursaidthat:
‘ThedoctrineofApostolicSuccessionasacceptedbytheMOCheavilyreliesonthetraditionfromonesetofbishopstothenextofthefaithoftheApostles.Thedirectionofthechurchbyapersonwhoseorthodoxyispureandacceptedisvitaltotheframeworkofthewholechurch.’
Thus,thequestionofthetermsofthetrustinthiscaseshouldbeanswered‘bysayingthatthetermsoftherelevanttrustdonotjustifytheexclusionofthebishopfromtheparishChurchofStPetkanortheemploymentofanypriestnotauthorisedbythebishopnortheclosing,alteration,additiontotheChurchbuildingoritsornamentswithouttheBishop’sapproval’.Therefore,HisHonourheldthatallegedbreaches(a),(b)and(h)andtheirassociatedbreacheswerefundamentalbreachesoftrust.Hehaddoubtsastowhetherallegedbreaches(d),(i)and( j)werefundamental,butstatedthatthiswas‘oflittlemomentasthesematterswillbesubsumedinthemoreseriousmatters’.
ThismeantthatthegoverningbodyoftheincorporatedassociationoftheparishofStPetkawasinbreachoftheChurchtrust.
Thecasemaybefoundat:www.austlii.edu.au/au/cases/nsw/NSWSC/2009/106.html
Implications of this case
Seeinplicationsforcase2.8.4above
2.8.8 THE ESTATE OF DULCIE EDNA RAND (DEC’D) [2009] NSWSC 48 (SUPREME COURT OF NEW SOUTH WALES, 16 FEBRUARY 2009) FILE NUMBER: 4649 OF 2008
DulcieRanddiedon21February2006.Inher1997will,RonaldCarterwasnamedexecutorofherestate,estimatedtobeworth$1,898,243.08.Probatewasgrantedon22April2006.AfterRonaldCarter’sdeathinDecember2007,hiswidow,FayeCarterwasgrantedprobateofhiswill.MrsCartersoughtdirectionastohowtodistributeoneofthesixequalsharesinDulcieRand’swill.Underclause4(f),theshareinquestionwasleftto,‘ThePhilippinesandAustraliaEpiscopalChurchofGlendinning,NewSouthWales,’anon-existentbody.
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InvestigationrevealedthattheSt.Paul’sMulticulturalFilipino-AnglicanMinistry,acongregationoftheAllSaintsAnglicanChurchinNorthParramatta,professedtobethecurrentpersonaoftheearlierunincorporatedassociation.Thepreviousdesignationreflectedthechurch’sstatusasanAreaMissionoftheEpiscopalChurchinthePhilippinescateringforthespiritualneedsofFilipinosinSydney.WhenthechurchbecamepartoftheAnglicanDioceseofSydneyinOctober2002,anewnamewasadoptedtoreflect thisaffiliation aswellastobroadenitsethnicmigrantbase.LettersconfirmingthischangeofidentitywerereceivedfromrepresentativesofboththeWesternSydneyRegionoftheAnglicanChurchDioceseofSydneyandtheEpiscopalChurchinthePhilippines.RepresentationswerealsomadebytheLegalOfficeroftheAnglicanChurchDioceseofSydneywhorecommendedthemoneysbepaidtotheAnglicanChurchPropertyTrustDiocese(theTrust)ofSydneyastrustee,tobeusedasDulcieRandwished.
Viasubmissions,theTrustcontendedthatthename,thePhilippinesandAustraliaEpiscopalChurchofGlendinning,wasamisnomerfortheFil-AussieChristianFellowshipwhichoperatedatRootyHillin1997.RonaldCarterhadbeenmistakenastothenamewhenMaxRandenquiredaboutitonDulcie’sbehalf.Glendinningwas,infact,wherethepriest,theReverendGayagay,lived.JusticeHarrisonagreedthattheFil-AussieChristianFellowshipwastheintendedbeneficiary,butdeclaredthatthediscrepancyinthenamewasnotmaterialsinceclearlytheSt.Paul’sMulticulturalFilipino-AnglicanMinistrywasitssuccessor.ThisconclusionwasreinforcedbythecontinuinginvolvementoftheReverendGayagaywiththeethnicministryandhishistoricalaccountofitsdevelopment.
Therefore,HisHonouradvisedthattheresiduaryonesixthoftheestateshouldbedistributedtotheSt.Paul’sMulticulturalFilipino-AnglicanMinistry.AstothequestionofwhethertheTrustshouldadministerthebequestonitsbehalf,JusticeHarrisonsuggestedthepartiesthemselvesworkoutanexpeditioussettlement.
Thiscasemaybeviewedat:www.austlii.edu.au/au/cases/nsw/NSWSC/2009/48.html
Implications of this case
Thiscaseshowsyetagain,theimportanceofkeepingacurrentwill.Thenamedbeneficiaryinthiscasewasanunincorporatedassociationwhichhadceasedtoexistunderthatnameatthetimeofthetestator’sdeath.Thistypeofproblemcanbeverydifficultforexecutorstoresolve,sothesemattersfrequentlyendupintheSupremeCourt.
Leavingagiftinawilltoanunincorporatedassociationcanalsocauseproblemsbecauseitisnotalegalentity.Thereforeitisalwayswisetofindoutthecorrectnameofyourintendedbeneficiaryanditslegalstatus.Manynonprofitorganisationsareabletosuggestcorrectdraftingofclausesifyouwishtoleavethemagiftinyourwill.
2.9 MiscEllanEous
2.9.1 ACCC V AUSTRALIAN KARTING ASSOCIATION (NSW) INC [2009] FCA 1255 (FEDERAL COURT OF AUSTRALIA, BENNETT J, 6 NOVEMBER 2009)
TheAustralianKartingAssociation(AKA)isanincorporatedassociationwhichwasformedbyvariousindividualkartracingclubsinNSWandtheACT.AtthetimeoftheproceedingstheAKAhad19memberclubs.Kartracingisaspecialisedmotorsportandhasitsownlicensingregime.TheAKAactstopromote,co-ordinateandadministerall
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aspectsofkartinginNSWandtheACT.TheAKAraisesitsrevenuebyissuinglicencestoindividualdriversbutdoesnotownanykartcircuitsorsupplyanykartcircuithireservices.Thereare15kartcircuitswhicharemanagedbyAKAmemberclubsinNSWandtheACTand7kartcircuitsownedormanagedbynon-AKAmembers.EachoftheAKAmemberclubsisformedaroundakartcircuitinaparticularlocationandmanagesthatcircuit.EachoftheAKAmemberclubsisasportingclubrunbyvolunteersandtheclub’sactivitiesincludeconductingkartracingevents,organisingsprintkartracingseriesandhiringoutthekartcircuit.
InNSW,inadditiontotheAKA,thereareotherbodies,suchas,ProkartandAustralianBracketRacingAssociation(ABRA),whomanagekartcircuitsororganisekartracingevents.PriortoJuly2008,ProkarthadhiredkartcircuitsfromdifferentAKAclubsbydealingdirectlywiththeclubsandhadheldracesateachofthosehiredkartcircuits.
On19July2008theAGMofAKAwasheld.All19clubswererepresentedatthemeeting.DuringthecourseofthismeetingtwomemberclubrepresentativesledadiscussionaboutsettingascheduleoffeesforcircuitsoperatedbyAKAmembersandhavingtheAKAofficehandlenegotiationsforcircuithire.Theminutesofthatmeetingrecordthatthefollowingmotionwascarriedunanimously:
‘Allapplications/negotiationsaretobehandledbytheStateOfficeforanyAKANSWlicensedcircuitthatistobeusedforkartracing.Theminimumfeeis$4,000plusGSTperdayforcountryclubsand$6000plusGSTperdayformetropolitanclubsandCanberraKartRacingClub.’
Between31July2008and8August2008,ProkartrangtheAKAonthreedifferentoccasionstoobtainquotesforhirefeesforparticularAKAclubcircuitsandasaconsequenceoftherequest,writtenconfirmationofthehirefeewasprovidedtoProkart.OneachofthesethreeoccasionstheprocedureundertakenandthehirefeesquotedwereinaccordancewiththeresolutioncarriedattheAGMthusgivingeffecttotheprovisionsoftheminimumhirefeesunderstanding.Thecourtreferredtothisunderstandingasthe‘KartCircuitHireUnderstanding’forthepurposesofapplyingtheCompetitionCodeofNSW.ThecourtwassatisfiedthattherewasamarketforkartcircuithireandthattheAKAcouldexercisesignificantmarketpowerasitsclubsmanageandhire15ofthepossible22kartcircuitsinNSW.
WhileProkartdidnotproceedwithhiringanyoftheAKAclubcircuits,theactionsoftheAKAweresufficientfortheACCCtoconductaninvestigationandsubsequentlycommencecivilproceedingsagainsttheAKAandthreeofitsmembersforengaginginconductincontraventionofsections45(2)(a)(i)and45(2)(a)(ii)oftheCompetitionCodeofNSW.ThesesectionsoftheCodeconcernpricefixing,controllingpricesormaintainingorprovidingforpricefixingtosubstantiallylessencompetition.Immediatelyuponlearningthattheiractionswereagainstthelaw,AKAceasedgivingeffecttothekartcircuithireunderstanding.
TheAKAanditsmembersco-operatedfullywiththeACCCincludingprovidingalldocumentsandinformationrequiredbytheACCC.TherespondentsmadefulladmissionsandreachedagreementwiththeACCConthepenaltiesthatshouldbeimposed.Thequestionforthecourtcentredontheappropriatenessoftheconsentorderagreedbetweenthepartieswhichproposedthenatureofthepenaltiestobeimposed.Theproposedconsentorderprovidedfordeclarationsidentifyingthecontraveningconduct,a$10,000fine,injunctionsandatrainingandeducationprogram(complianceprogram)fortheAKAanditsmembers.
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JusticeBennettnotedthatitisnotsufficientforthecourtmerelytogiveeffecttoaprivateagreementbetweenthepartiesbyconsentingtotheproposedorder:‘TheCourtisnotmerelygivingeffecttothewishesoftheparties.Itisexercisingapublicfunctionandmusthaveregardtothepublicinterestindoingso’(para68).HerHonourconsideredatlengththelegalprinciplesandrelevantfactorssurroundingthecontravention.ShefounditnoteworthythattherespondentsweretotallyignorantthattheiractionsconstitutedcontraventionsoftheCodeconcludingthatthisshowedtheyhadnointentiontocontravenetheCode.HerHonouralsotookintoaccounttherespondents’fullco-operationwiththeACCCandthenonprofitpurposeofAKAanditsmemberclubs.Thefactthattheparticipantsoftheclubsarevolunteerswastakenintoconsiderationwhenassessingwhethertheproposedpenaltieswereappropriate.
DespitethefactthattherespondentsunknowinglybreachedtheCodeandwereunlikelytore-offend,JusticeBennetttooktheviewthatitwasinthepublicinteresttosendamessagetosimilarorganisationsthattheyneedtobeawareoftheCompetitionCode.ShewassatisfiedthatinjunctionsagainsttheAKAandtherespondentclubspermanentlyrestrainingthemfrompricefixingarrangementstogetherwiththeproposed$10,000fineandtheestablishmentofaneducationandtradepracticescomplianceprogramforitsofficersandemployeeswouldhaveasignificantdeterrenteffectupontheAKAandaccordinglytheproposedconsentorderswereappropriateinthecircumstances.
JusticeBennettalsoplacedastrongemphasisongeneraldeterrencebeingaprincipalobjectofapenalty.HerHonourwasmindfulthatitwasinthepublicinteresttomakeaclearstatementtoothersportingorganisationsinsimilarpositionstotheAKA.
Thiscasemaybeviewedat:www.austlii.edu.au/au/cases/cth/FCA/2009/1255.html
Implications of this case
ThiscaseillustratesthatallorganisationsneedtobeawareoftheoperationoftheTradePracticesActandStateorTerritoryCompetitionCodeswhenengagingincommercialactivities.Organisationsengagedinprice-fixingandotheranti-competitivebehaviourwillbesubjecttoseverepenalties,eveniftheorganisationsinvolvedarenonprofitandeveniftheyarenotawareofthelaw.
2.9.2 CAROONA COAL ACTION GROUP INC V COAL MINES AUSTRALIA PTY LTD AND MINISTER FOR MINERAL RESOURCES [2009] NSWLEC 165 (LAND AND ENVIRONMENT COURT NSW, PRESTON CJ, 24 SEPTEMBER 2009)
Theapplicant,CaroonaCoalActionGroup,isanincorporatedassociationwhichwasformedtoopposeanyexplorationactivitiesand/orminingintheCaroonaDistrictontheLiverpoolPlainsinNSW.MembersoftheGroupcomprise80%ofthelandownersintheCaroonaDistrictwhosepropertiesarewithintheareaofanexplorationlicencegrantedbytheMinisterforMineralResourcestoCoalMinesAustraliaPtyLtd.TheGrouphadbroughtproceedingstochallengethegrantingoftheexplorationlicenceandcoalauthorisationtoundertakeexplorationactivitiesintheCaroonaDistrict.ThismatterwasanapplicationbytheGroupforanorderspecifyingthatthemaximumcoststhatanypartycouldrecoverfromanyotherpartyinthemainproceedingwouldbe$34,000.
TheCourthasanumberofsourcesofpowertomakeamaximumcostsorderinadvanceoflitigation.HisHonourdiscussedthesourcesandtheexerciseofthepowertomakeamaximumcostsorderindetail(paras9to15)buttheoverridingpurposeofmaximum
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costsordersistofacilitateaccesstojustice.Itiswellunderstoodaccesstojusticeisimpededwherethecostoflitigationishigh.Amaximumcostsorderisawayofachievingproportionalitybetweenthecostoflitigationandtheimportanceandcomplexityofthesubjectmatterofthedispute.Thiscanbeparticularlyimportantinpublicinterestlitigation,butpublicinterestisjustoneconsiderationindeterminingtheaccesstojusticequestion.
TheActionGrouparguedthatamaximumcostsordershouldalwaysbeavailable‘wheneverproceedingsarebroughtinthepublicinterest’buttheCourtrejectedthis(para59).TheCourtlookedatcaseswhereanorderwasmadeonthebasisthatthepublicinterestplaintiffwouldbedeterredfromcontinuingproceedingsifamaximumcostsorderwasnotmade,andasaconsequenceissuesofsomepublicsignificancewouldnotbeabletobeheardanddeterminedbyacourt(para60).
However,theCourtheldthatamaximumcostsordershouldnotbemadeinthiscasebecauseaccesstojusticewouldnotbeimpededbynotmakingtheorder.TheActionGroupdidnotclaimthatitwouldnotcontinuewiththeproceedingsifamaximumcostsorderwasnotmade.TheCourtfound(para61)thatalthoughtheActionGoup’sassetswerenotsignificant,itsmembershipwasmostofthelandownersaffectedbythemininglicence.Theirpropertieswereofhighagriculturalproductivity,sotheirconcernwasthepotentialadverseeffectsontheirproductivity.HoweverthisalsomeantthattherewasafinancialincentiveforthelandownerstoprovidefinancialresourcestotheActionGrouptocontinuewiththelitigationregardlessofwhetheramaximumcostsorderwasmade.
TheCourtalsofoundthattheestimatedamountofcostswouldnotbedisproportionatetotheimportanceandcomplexityofthesubjectmatteroftheproceedings.
Inaddition,thetrialjudgewouldhaveadiscretiontorefusetomakeacostsorderagainsttheapplicanteveniftheywereunsuccessfulattrial,onthebasisofthepublicinterestnatureofthelitigation.
Thiscasemaybeviewedat:http://austlii.edu.au/au/cases/nsw/NSWLEC/2009/165.html
Implications of this case
Thecriticalquestionindetermininganyapplicationforamaximumcostsorderiswhetheraccesstojusticewillbepromotedorimpededbymakingornotmakingtheorder.Theparticularcircumstancesofthelitigation,includingitsnatureas‘publicinterest’litigation,andoftheplaintiffarerelevantinansweringthiscriticalquestion,butthesemattersarenotendsinthemselves(para58).
Whilemaximumcostsordersareaneffectivewayforcommunitygroupspursuingpublicinterestlitigationtocontainthelegalcoststhatcanbeawardedagainstanyparty,thecourtwilllooktosurroundingcircumstancesofthecasewhendeterminingiftheoverridingpurposetoensureaccesstojustrequiredsuchanorder.Inthiscase,thefinancialincentivefortheActionGroup’smemberstocontinuethelitigationregardless,combinedwiththefactthatcostswouldnotbedisproportionatetotheimportanceandcomplexityofthematter,weredecidingfactors.
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2.9.3 BURRELL PLACE COMMUNITY ACTION GROUP INCORPORATED V GRIFFITH CITY COUNCIL [2009] NSWLEC 120 (LAND AND ENVIRONMENT COURT NSW, LLOYD J, 29 JULY 2009)
BurrellPlaceCommunityActionGroupInc(theActionGroup)wasincorporatedundertheAssociations Incorporation Act 1984(NSW)on4March2009.TheprincipalactivityoftheActionGroupisdescribedas‘takingreasonableactionwithrespecttoplanningissuesatBurrellPlace’.InSeptember2008DunebaInvestmentGroupPtyLtd(Duneba)lodgedadevelopmentapplication(DA)withtheCounciltobuildasupermarketatBurrellPlace.InFebruary2009theCouncilconsentedtotheDA.InMarch2009theActionGroupwasformedtoopposetheconstructionofasupermarketatthatlocation.On4May2009theActionGroupcommencedproceedingsintheLandandEnvironmentCourtseekingadeclarationthattheCouncil’sconsenttotheDAwasinvalidandofnoeffect.
TheActionGrouphad22membersandatthetimeoftheproceedingshad$5795.00initsbankaccountanditssolicitorswereholding$2560.40ontrust–clearlyinsufficientfundstopayacostsordershouldtheActionGroup’sclaimfail.
TheCouncilandDunebaappliedforsecurityforcostspursuanttorule42.21oftheUniform Civil Procedure Rules 2005(NSW)(UCPR)whichgivesthecourtjurisdictiontomakeanorderforcostsandtostayproceedingsuntilthesecurityisgiveninanyofthecircumstancessetoutintherule.Inthisparticularinstancerule42.21(d)wasreliedupon,namely,‘that there is reason to believe that a plaintiff, being a corporation, will be unable to pay the costs of the defendant if ordered to do so...’
TheActionGroupargueditwasnotacorporationwithinthemeaningoftheCorporations Act 2001(Cth)andthereforethedefendantscouldnotbringanapplicationforsecurityforcostsunderthisrule.HisHonourrejectedthisargumentonthebasisthattheGroupwasabodycorporatewhichiscapableofsuingandbeingsuedandthereforemustbetreatedlikeanyotherbodycorporatewithintheordinarymeaningoftheword‘corporation’inrule42.21oftheUCPR.TheUCPRdoesnotreferto‘acorporation’withinthemeaningoftheCorporations Actandthereforethebroadermeaningisadopted.Inanyevent,ifthisruledidnotapplythenrule42.21(e)couldbeapplied.
Thepurposeoftheruleallowingsecurityforcostsistoprotectdefendantsfromunjustconsequencesofanunsuccessfulclaimagainstthem.Althoughitisentirelywithinthecourt’sdiscretionwhethertoordercostsinanactionthelongestablishedruleisthatcostsfollowtheevent.ThereareanumberoffactorstheCourttakesintoconsiderationindecidingwhethertoordersecurityforcostsincludingthestrengthandbonafidesofthecase.
HisHonouralsotookintoconsiderationthatinproceedingssuchasthepresentanorderforsecurityforcostsdoesnotdeprivetheapplicantplaintiffofanyfundamentalrightwherethereareotherswhomightprosecutethecaseundertheprovision.
Anotherissueinthecasewasthatrule4.2(2)oftheLand and Environment Court Rules 2007(NSW)providesthatacourtmaydecidenottomakeanordertogivesecurityforcostsifitissatisfiedthattheproceedingshavebeenbroughtinthepublicinterest.RelyingonpreviousdecisionsoftheNewSouthWalesLawandEnvironmentCourt(NSWLEC),HisHonourdeterminedthatadeparturefromtheusualorderforcostsrequiressomeotherfactorinadditiontothepublicinterestnatureofthelitigation,suchasanimportantquestionofstatutoryinterpretationorthebreakingofnewgroundoflegalprinciple.
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ThereforeHisHonourorderedsecurityforcostsagainsttheActionGrouponthebasisthatitscasewasinherentlyweak;andthatitdidnotraiseanyquestionofconstructionornewprincipleandthereforewasnotinthepublicinterest.Securityforcostsforanamountof$85,000wasordered,inadditiontoanorderforcostsagainsttheGroupforthisapplication.Theproceedingswerestayeduntilthesecurityforcostswaspaid.
Thiscasemaybeviewedat:www.austlii.edu.au/au/cases/nsw/NSWLEC/2009/120.html
Implications of this case
Incorporatedassociationsarenotimmunefromanorderforsecurityforcosts.Howeverthelikelihoodofhavingsuchanordermadeisdirectlylinkedtothestrengthofthecaseiftheassociationispursuingaclaim.Evenifthelitigationhasapublicinterestnaturethiswillnotofitselfbesufficienttoresistanorderforcosts.Therealsoneedstobeanimportantorgroundbreakinglegalaspecttothecase.
2.9.4 CALVO V SWEENEY [2009] NSWSC 719 (29 JULY 2009)
TheAustralianInstituteofMusicLtd(AIM)isanonprofitcompanywithpurelyeducationalandculturalaims,underpinnedbyacharitableintent.DrandMrsCalvoweretheownersandwerealsodirectors.Theirsonwasthethirddirector.From1989,AIMofferedprivate,tertiarymusiceducationaswellasnon-tertiarymusicstudiesandperformanceclasses.Itexpandedin2002withtheassistanceofa$2.4millionNewSouthWalesGovernmentgrant,provideditretaineditsnonprofitstatus.Withexpansion,rentaloverheadsincreasedsignificantly.
AIM’smonetarypositiondeteriorated,andin2002/2003theauditorqualifiedhisopinion.InMay2003,theCommonwealthGovernmentforeshadowedaFee-HelpschemeunderanewHigherEducationLoanProgram,but,foritsstudentstobeeligible,AIMhadtosatisfytherequirementstobeclassifiedasaHigherEducationInstituteontheAustralianQualificationsFrameworkRegister.ThiswouldhavebeenasourceofincreasedprofitabilitybutAIM’sfinancialsituationmeantitcouldnotgetrecognitiononthisregister.Atthesametime,DrCalvodecidedhewantedtoretireanddecidedtoputAIMonthemarket.HewasintroducedtoMrSweeney,anaccountant,todeterminearealisticexitstrategy.
DrCalvosaidhewaswillingtosella20%stakeinAIMfor$2million,whichMrSweeneythoughtwasanoverlyinflatedfigure.Followingameetingofstakeholderson29October2003,itwasdecidedtocompileadetailedinformationmemorandumforprospectiveinvestors.Thatwascompletedby20May2004butintheprocessitwasdiscoveredthattheCalvoshadhadtoselltheirhomeinlateNovember2003,todischargetheiroverdraftwithWestpac,theirformerfinancialcontroller,andfreeupsomefundsforAIM.
ToreinforcethepositiveoutlookforAIM,MrSweeneysaidithadtogenerateprofitstoattractinvestorsandherecommendedthatitrepositionitselfasa‘for-profit’company.DiscussionscontinuedbetweentheCalvosandMrSweeneyabouttheamountandtermsofpaymenttoDrCalvoandtheholdingthatanyinvestorwouldreceiveinreturn.InlateJuneAIMsoughtaccreditationasaHigherEducationInstituteundertheHigher Education Support Act 2003(Cth)sothatitcouldattractFee-Helpforitsstudents.
On2July2004DrCalvowasadmittedtohospitalaftersufferingastroke.Thedaybefore,AIM’slandlord(Ellimark)hadtakenafixedandfloatingchargeoverallofAIM’sassetstosecureitsobligationsunderitslease.MrSweeneywasnotawareofthisuntilAugust.On6JulyMrSweeneyexpressedhisinterestinpersonallyinvesting$500,000inAIMandassistingDrCalvotopurchaseahome,providedDrCalvo’sshareholding
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waseventuallyreducedto5%.Nootherprospectiveinvestorscouldbefound.AfterdiscoveringthefixedandfloatingchargeandAIM’sdirefinancialposition,MrSweeneyinsistedonabsolutecontrolofitsmanagementaswellasaconcertedefforttoqualifyasahighereducationprovider.Thiswouldhaveimprovedthefinancialoutlookbecauseofthefeeassistance,buttheCommonwealthDepartmentofEducation,ScienceandTraining(DEST)hadseriousconcernsaboutAIM’slongtermfinancialviability.
On2September2004,MrSweeneyconvincedDrandMrsCalvothatademonstrablechangeinmanagementstyleandgovernancewererequiredtoimprovebothEllimark’sandDEST’sperceptionsofAIM.Soon6September2004,theCalvosallotted51%oftheAIMsharestoMrSweeney,leavingthemselveswith24.5%each–whichtheybelievedwasapurelytemporarymeasure.
The court actions – Trade Practices Act claims
On19July2007,theCalvosbroughtactionintheNewSouthWalesSupremeCourt.Partoftheirclaimwasbasedonmisleadinganddeceptiveconductundersection51oftheTrade Practices Act 1974 (Cth)(TPA).FirstlytheysaidtheywereinducedtoissuethenewsharesbecauseofsupposedmisrepresentationsbyMrSweeneyon2September2004.
Theclaimedmisrepresentationswere:
• thatEllimarkwouldnotalteritsstanceonrentalconcessionsinexchangeforshareswhiletheCalvosweremanagingAIM;
• theinferencethatDESTwouldprefertoconductbusinessdealingswithMrSweeney.
Thefirststatementwaspatentlyfalse,buttheCalvossubsequentlydenieditwasuttered–meaningthat,bytheirownadmission,theycouldnothavereliedonit.Withrespecttothesecondcomment,HisHonourpointedoutitwasnotmisleadingasMrSweeneywasmerelystatinghisopinionbasedonDEST’slengthystatementofconcernsaboutAIM’sfinancialandcommercialmanagement.
Afurtherclaimwasmadethaton6September2004,MrSweeneyallegedlyofferedtheCalvospaymentof$1millionupfrontwiththepromiseofafurther$1millioninayear’stimetoinducetheCalvostogivehima51%stakeinthecompany.SuchfundswouldhavecomeviaAIMasrepaymentofDrandMrsCalvo’s2003loantothecompany.However,JusticeWhitefoundthisnotiontobeimplausiblesinceMrSweeneyneededtogainamajorityshareholdingaswellastoinjectfundsintoAIMtoimprovetheefficiencyofitsoperation.TherewasalsonoevidencethattheCalvoswereinfluencedtopartwiththeirsharesbyanyremarkmadebyMrSweeneyonthatday.HisHonournotedthatMrSweeneyhadinsistedthatDrandMrsCalvoobtainlegaladvice.
Therefore,noclaimofmisleadinganddeceptiveconductundersection51oftheTPAcouldbesubstantiated.
The court actions – breach of fiduciary duty claim and undue influence
ThroughoutSeptember2004,negotiationscontinuedregardingtheamountandtermsofMrSweeney’sinvestment;theleasedebtwithEllimark;aninjectionoffundstosecureanunqualifiedaudit;theholdingtoberetainedbytheCalvos;andaccreditationasahighereducationprovider.ItwasagreedthatMrSweeneywouldtake37.5%ofAIM;Ellimarkwouldwriteofftheexisting$1.6milliondebtinreturnfor37.5%ofthebusinessandreduceAIM’srenttoJune2005;theCalvoswouldkeeptheremaining25%of
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AIM,butMrSweeneyinsistedonanoptionovertheirholdingaswellasanirrevocableproxy–effectivelygivinghimcontrolofthecompany.On22Septemberheagreedtopurchase15%ofAIM’ssharesfromtheCalvosprovidedthebusinessmade$1.5millionforthe2005/2006financialyear.DrCalvoaskedfor$1.56millionwhenthesharesweretransferred.
TheCalvosresignedasdirectorsofAIMon24SeptembertobereplacedbyMrSweeneyandoneother.Theshareallotmentwaseffectedthatday.Therewasdisputeastowhethertheshareholders’agreementwasconcludedthatdayoron27September2004.Aso-calledco-operationdeedlegitimisedMrSweeney’sproxyvotingrightsovertheCalvos’shareholding.Theyweretocontinueasconsultantsonasalaryuntil30June2007.
WhenAIMfinallyachievedhighereducationproviderstatuson9November2004,MrSweeneyandarelatedcompanymadetax-deductiblegiftsof$150,000and$250,000respectively.
DrandMrsCalvofirstsoughtlegaladviceregardingpaymentfortheirsharesinDecember2004.JusticeWhiteconcludedthat,sincetheyhadnotsoughtlegaladviceatthetime,theydidnotfullyunderstandthedocumentstheyhadsigned.TheproblemwascompoundedbytheeffectsofDrCalvo’sstrokewhichlefthimmoreamenabletoMrSweeney’ssuggestions.
InJune2005,ademandfor$1.56millionwasmadeforthetransferofthe37.5%shareholdingtoMrSweeney.MrSweeneysuggestedconvertingthecompanytoa‘for-profit’venture.Hemadeothersuggestionsforbusinessschemesoversubsequentmonthsbutnopaymenteventuated.On2April2007,DrCalvowasinformedhewouldbefinishingupattheendofthefinancialyear.
InthiscourtactiontheCalvosaccusedMrSweeneyofcompromisinghisfiduciarydutyofloyaltytothemthroughhisAIMshareholdingandactiveinvolvementasitsChiefExecutiveOfficersince27September2004.
MrSweeneyarguedhisrolewasthatoffinancialadvisortoAIM,andhehadnofiduciaryobligationtoDrandMrsCalvo.However,JusticeWhitedisputedthisargumentbecausetheCalvoswerenotonlyreliantonMrSweeney’snegotiationskills,butalsoconvincedonlyhecouldrescueAIMfromitsprecariousfinancialstate.Inaddition,hehadunlimitedaccesstoconfidentialmaterialconcerningAIM.HisHonourdeterminedthatafiduciaryrelationshipentailingloyaltydidexistbetweentheCalvosandMrSweeney.SinceMrSweeneyhadbeenemployedtooverseetheCalvos’exitstrategy,itwasinappropriateforhimtoattempttobrokerasizeablepersonalshareholdinginAIM,unlesshehadtheirfullyinformedconsent.
MrSweeneyarguedhisdirectinvolvementwasneededtosafeguardtheCalvos’businessinterestsandthiscounteredhisapparentconflict.Thiswasrejected.AsJusticeWhitepointedout,acquiringa37.5%stakeinandeffectivecontrolofAIMwhilefailingtoremuneratetheCalvoswasinherentlyunfair.Therewasnoevidencethathiswasthebestdeal;andMrSweeneyusedtimepressuresrelatingtoAIM’saccreditationtohisadvantage.TheirrevocableproxyovertheCalvos’shareswasusedtoreinforcehisdominantrole.
AccordingtoJusticeWhite,thisactionalsodemonstratedthattheCalvosweresubjecttoundueinfluencefromMrSweeney.AlthoughDrCalvoandhiswifehadalwaystrustedMrSweeney’sjudgment,followingDrCalvo’sstroke,theybecameincreasinglyvulnerabletotheabuseofthatinfluence.MrSweeneycouldnotrebutafindingofundueinfluenceinthewayhe’dseizedcontrol.
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The remedy
JusticeWhitedeclaredthatMrSweeneyheldhissharesinAIMontrustfortheCalvos.ThesesharesandanyaccompanyingcertificatesweretobetransferredtoDrandMrsCalvowithintwentyonedays.
Thiscasemaybeviewedat:www.austlii.edu.au/au/cases/nsw/NSWSC/2009/719.html
Implications of this case
Regardlessofanyagreementsmadethecourtcanlookatthenatureoftherelationshipbetweenthepartiesanddeterminewhetherthereissufficientindependenceofactiontoplaceallpartiesonthesamefooting.HeretheCalvoswereatadistinctdisadvantageandhadplacedtheirtrustinMrSweeneywhowasinasuperiorposition.Consequentlythecourtdeterminedtheyhadbeenundulyinfluencedandfoundintheirfavour.
2.9.5 LIBERAL PARTY OF AUSTRALIA AND AUSTRALIAN ELECTORAL COMMISSION [2009] AATA 551 (ADMINISTRATIVE APPEALS TRIBUNAL, 23 JULY 2009) FILE NO: 2009/1311
TheLiberalPartyofAustralia(theLiberalParty)approachedtheAustralianElectoralCommission(theCommission)undertheFreedom of Information Act 1982 (Cth)(theAct)aboutaccessingtwolegaladvicesonthesubjectofregisteringpoliticalparties.OneofthesecamefromtheLegalServicesSectionoftheCommissionon17May2007,andtheotherwasgiventotheCommissionbytheAustralianGovernmentSolicitoron3Augustofthesameyear.BothsetsofadvicefollowedanattemptinFebruary2007,toregisterapoliticalpartycalledtheLiberalDemocraticParty,thenameofwhichhadobvioussimilaritiestoanexistingAustralianpoliticalparty.Inresponse,theCommissionrefusedtherequest,maintainingthat,becausethedocumentswouldbesubjecttolegalprofessionalprivilegeinanylegalproceedings,theywereexemptundersection42oftheAct.
Althoughanunincorporatedassociation,theLiberalPartyhadstandingtoapplyforareviewofthisdeterminationtotheAdministrativeAppealsTribunal(theAAT)assection27(2)oftheAdministrative Appeals Tribunal Act 1975 (Cth)statesthat,‘Anassociationofpersons,whetherincorporatedornot,’qualifiesaspersonsaffectedbythisdecision.Itsgroundsforthereviewwerethatthedocumentsinquestionwerenotprotectedbylegalprofessionalprivilegeandthat,withrespecttotheAustralianGovernmentSolicitor’sadvice,theCommissionhadwaiveditsprivilege.
SeniorAATMember,J.W.Constance,addressedthislattermatterfirst.HefoundfortheLiberalPartybecausetheCommission’suseoftheAustralianGovernmentSolicitor’smaterialunderpinneditsdecisiontodenytheLiberalPartyaccesstothematerialsought.ItwasagreedthatsuchopenreliancesupportedthewaivingoftheCommission’slegalprofessionalprivilege.Thereforeintheinterestsoffairness,theLiberalPartyshouldbepermittedtoviewtheadvicefromtheAustralianGovernmentSolicitor.Noreductioninthechargeforaccessingthelegaldocumentwasmeritedas,intheSeniorMember’sopinion,itfailedthepublicinteresttestoutlinedinsection29(5)(b)oftheAct.
ConsiderationoftheadvicefromtheCommission’sownlegalteamwarrantedadifferentoutcome.Inthisinstance,theadvicewasregardedasaconfidential,legalopinionsuppliedtoaclient,regardlessofwhetherthesolicitorwasemployedbythatclient,theCommission.Therewasnoevidenceofprivilegebeingwaived.DespitetheLiberalParty’seffortstoarguethatthedocumentwasanexceptiontosection42(1)oftheActsinceitmet
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thecriteriaundersection9(1)suggestingithadbeenproducedbytheCommissionforitsofficers’decision-makingpurposes,theAAT’srulingwasthattheLegalServicesSectionhadcompileditforaparticularcaseratherthanforgeneralapplication.
Thiscasemaybeviewedat:www.austlii.edu.au/au/cases/cth/AATA/2009/551.html
2.9.6 O’HARA V SIMS [2009] QCA 186 (QUEENSLAND COURT OF APPEAL, KEANE, MUIR AND FRASER JJA, 10 JULY 2009)
ThiswasanappealfromaSupremeCourtciviljurytrial(O’Hara v Sims[2008]QSC301).Thejuryfoundtherewerenodefamatoryimputationsabouttheplaintiff(O’Hara)inaletterthedefendant(Sims)hadsenttoothermembersoftheGoldCoastTurfClub.MrO’Haraappealedthedecisiononthegroundsthat:eachofthejury’sfindingswasonethatnoreasonablejurycouldhavereached;andthetrialjudgeerredindeterminingthatifthejuryhadfoundtheimputationsdefamatorythedefenceofqualifiedprivilegewouldhaveapplied(section30,Defamation Act 2005(Qld)).
MrO’Hara,amemberoftheGoldCoastTurfClubCommittee,wasseekingre-electiontothecommitteeinthe2007biennialelection.Inthelead-uptotheelectiontherewascontroversyoverasuggestedproposalthattheracetrackbemovedtoanewlocation.MrO’HaragaveaninterviewtotheGold Coast Bulletinnewspaperinwhichhewasreportedassayinghewasinfavourofthemove,althoughhelaterassertedthearticlemisquotedhiminrespectofhissupportbeingunconditional.MrSims,alifememberoftheclub,wasopposedtoanysuggestionthatthetrackshouldberelocatedandwrotetoclubmembersurgingthemtoexaminethecredentialsofeachcandidateforelectionclosely,beforevoting.InhisletterhestatedhehadpreviouslysupportedO’Harabuthadchangedhisopinionandgavereasons;thenconcluded:‘Inmyviewthismanisnowunworthyofapositiononourcommittee.IwillnotbevotingforBrianO’Hara’.MrO’Haraconsideredtheletterconveyeddefamatoryimputationsandbroughtanactionfordamagesfordefamation.
The trial
Attrial,thequestionforthejurywaswhethertheletterconveyedimputationsthatweredefamatoryofMrO’Hara,inthat:
1. HehadengagedinconductmakinghimunworthytobeacommitteememberoftheTurfClub(imputation1);
2.HehadsubordinatedthedueperformanceofhisdutyasacommitteememberoftheTurfClubtohisinterestinself-promotion(imputation2);and
3.HehadactedrashlyasacommitteememberoftheTurfClub(imputation3).
MrSimsdefendedtheactiononthebasisthattheletterhadnotconveyedtheimputationsasalleged,andinanyeventifsuchimputationswereconveyedtheywerenotdefamatoryofMrO’Hara.Alternativelyifthepurportedimputationswerefoundtobedefamatoryhereliedonthedefencesoftruth,honestexpressionofopinionandqualifiedprivilegepursuanttosections25,30and31oftheDefamation Act 2005 (Qld).Thetrialjudgewithdrewthedefencesoftruthandhonestexpressionofopinionfromthejury’sconsiderationandreservedhisrulingontheavailabilityofthequalifiedprivilegedefenceuntilafterthejuryreturneditsverdict.Thejuryconcludedthatimputation1wasnotconveyedbytheletterbutimputations2and3were;however,theywerenotdefamatoryofMrO’Hara.JudgmentwasenteredforMrSims.
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Thetrialjudgeaddressedthequestionofthequalifiedprivilegedefence,whichisavailableifthedefendantprovesthat:
a.Therecipienthasaninterestorapparentinterestinhavinginformationonsomesubject;and
b.Thematterispublishedtotherecipientinthecourseofgivingtotherecipientinformationonthatsubject;and
c.Theconductofthedefendantinpublishingthatmatterisreasonableinthecircumstances.
Thetrialjudgeconcludedtherewas‘nodoubtthatMrSims’sletterwasacommunicationofsuchanaturethathehadaninterestinmakingitandthememberstowhomhewrotehadacorrespondinginterestinhavingitmadetothem.Thecommunicationwasthereforeprivilegedunlessmademaliciouslyorunreasonably’([2008]QSC301atparas44to45).MalicewasnotassertedandonthequestionofreasonablenessHisHonourfoundthatthecircumstancesoftheelectionandthemembers’commoninterestintheelectionofcommitteememberswereenoughtoestablishitsreasonableness.ThereforethedefenceofqualifiedprivilegeappliedandjudgmentwasenteredforMrSims.
This Appeal
Onanappealfromaciviljurytrial,theroleoftheCourtofAppealisnottore-opentheevidenceandconsiderwhetherthejury’sconclusionisthemostreasonableconclusionthatcouldhavebeenreached,butonlytoensurethejuryverdictisrealisticinthecircumstances.Inordertodeterminewhetherthejury’sverdictcouldreasonablyhavebeenreachedtheCourtconsideredthethreeimputations.Applyingthetestthatanimputationisdefamatoryifthepublicationofitislikelytoleadordinarydecentpersonstothinklessoftheplaintiff,JudgeofAppealKeaneheldthatMrO’Haramustshowthattheviewstakenbythejurywerenotrationallyopentoit(para34).
Imputation 1
Inrelationtoimputation1whichconcernedtheappellant’s(MrO’Hara’s)worthinesstobeacommitteemember,JudgeofAppealKeanehelditwasopentothejuryreasonablytoconcludetheletterdidnotconveytheimputationthathewasunworthyasacommitteememberbutinsteaditwenttotheissuewhetherhewasunworthytobeelected.HisHonournotedthedifferencebetweenO’Hara’sprospectofelectionbeingdamagedbytheletterandhisreputationbeingdamagedbytheletter(para39).JudgeofAppealFraserhadasimilarview(para81)
Imputation 2
Inrespectofimputation2,JudgeofAppealFraserthoughttheimputationwasnotasseriousastheappellantcontendedbutconsidereditwouldcauseordinarypeopletothinklessoftheappellantandthereforewasunabletoseehowthejurycouldnothavefounditdefamatory(paras89to90).JudgeofAppealMuiragreed.JudgeofAppealKeanewasnotpersuadedthejury’sconclusion(theimputationwasconveyedbytheletter,butwasnotdefamatory)wasnotreasonablyopentoit.HoweverheconsideredthatiftheimputationdidmakepeoplethinklessofMrO’Haraitwouldonlybetoaminimalextentwhichisrelevanttotheissueofqualifiedprivilege.
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Imputation 3
TheCourtconsideredthattheimputationofrashnessagainstMrO’Harawasnotsuchastocauseordinaryandreasonableorright-mindedpeopletothinkthelessofhim(paras53,91).
Defence of Qualified Privilege
TheCourtofAppealhadtodeterminewhetherthetrialjudgewasrighttoreachtheconclusionthatthequalifiedprivilegedefencehadbeenestablished.KeaneJAconsideredthatthecriticismsofthetrialjudge’sdecisionwerewithoutsubstanceandFraserJAwasnotpersuadedthetrialjudgehaderredinanyrespectinfindingtheimputationslackedseriousnessandwerereasonableinthecircumstances.MuirJAconcurred.
Theappealwasdismissedunanimously,withcostsagainstMrO’Hara.
Thiscasecanbeviewedat:www.sclqld.org.au/qjudgment/2009/QCA/186
Implications of this case.
ThelawofdefamationinQueenslandisgovernedbytheDefamation Act 2005,partofnationaluniformlegislationgoverningthelawofdefamation.Thiscasedemonstratesthatthewell-settledtestonwhetherapublicationisdefamatoryisthatitisactionableasdefamationifitcausesordinaryanddecentpeopletothinklessofaperson.Justbecauseacriticismofapersonispublisheddoesnotnecessarilymeanitisdefamatory.Butiffoundtobedefamatory,statutorydefencesmayapply,e.g.qualifiedprivilegemayapplyifthepublicationistoapersonwithaninterestinreceivingtheinformationandpublicationisreasonableinthecircumstances.
2.9.7 AUSTRALIAN BARTER CURRENCY ExCHANGE PTY LTD V UNITING CHURCH NSW TRUST ASSOCIATION LIMITED [2009] NSWSC 607 (2 JULY 2009) FILE NUMBER: 11739/2009
MrDavidCassanitiwhowasinvolvedwithseveralcompanies,includingAustralianBarterCurrencyExchangePtyLtd,borrowedabout$14millionthroughtheUnitingChurchNSWTrustAssociationLimited(theUnitingChurchNSW)in2004.Inexchangefortheloans,mortgagestothevalueof$27millionweretakenover29properties.Whenpaymentbecameduein2006,MrCassanitiwasinjailwherehewasdetaineduntilJuly2008.Atthattime,thecompanieswereplacedinprovisionalliquidation.Duringthistime,theloansremainedunpaidandinterestdemandswerenotmet.
ThisstateofaffairspromptedtheUnitingChurchNSWtoservenoticesonMrCassanitiundersection57(2)(b)oftheReal Property Act 1900 (NSW).Saleofthepropertiesaspermittedbysection58wasanoptionifhefailedtocomplywiththelender’slegitimatedemands.Forhispart,MrCassanitiwashamperedinhisquesttorefinancetheloansbythefacthiscompanieswereinthehandsofaprovisionalliquidator,MrRobertMoodie.Alternativelenderswereunderstandablyreluctanttoadvancefunds.ThesituationwasfurthercomplicatedbythefactthatMrMoodiehadlodgedcaveatsovertheprovisionallyliquidatedcompaniestoensurepaymentofhisprofessionalfees.Thesecaveatswerenotremoveduntil27May2009.Inaddition,theAustralianSecuritiesandInvestmentsCommission(ASIC)sawfitnottonoteMrCassanitiasadirectorinthecompanies’recordsagainbefore2June2009.
AfterMrCassanitisuggestedanumberofunworkableschemestotheUnitingChurchNSW,itwasdecidedinlateJanuary2009,toauctionfiveofthe29propertieson2and8April2009.AttheendofMarchMrCassanitiunsuccessfullysoughttoprevent
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thisactionbeingtaken.However,thepropertiesweredulysold,reducingthedebtto$7.061millionandleavingtheUnitingChurchNSWinpossessionofsurplusfunds.
Whenthepublicauctionofafurtherfourpropertieson11June2009,wasproposedbytheUnitingChurchNSW,MrCassanitisoughtaninjunctiontohaltthesaleofthethreeinBathurstStreet,Liverpool,althoughhewasagreeabletotheauctioningofaBaulkhamHillsproperty.Hemaintainedthatnotonlywasrefinancingunderway,butalsothesecurityofferedbythepropertieswaswellinexcessofthedebtowedtotheUnitingChurchNSW.Fromitsperspective,theUnitingChurchNSWobjectedtotheinterferencewiththemortgagee’spowerofsaleaswellasthefinancialcostsincurredinfindingoutaboutMrCassaniti’sactionstwentyfourhoursbeforetheproposedsale,especiallywhenhehadknownabouttheauctionsince24May.
DespitesympathisingwiththeUnitingChurchNSW’sposition,JusticeHoebengrantedtheinjunctionbecausetherewasnoprospectofitsfacingfinanciallossandtherefinancingofMrCassaniti’sloansseemedassured.Costs,however,wereawardedintheUnitingChurchNSW’sfavourbecauseoftheshortnoticegivenofMrCassaniti’sintentions.
Thiscasemaybeviewedat:www.austlii.edu.au/au/cases/nsw/NSWSC/2009/607.html
2.9.8 WHITE CITY TENNIS CLUB LTD V JOHN ALExANDER’S CLUBS PTY LTD AND ANOR [2009] NSWCA 114 (3 JUNE 2009) FILE NUMBER: 40038/09
WhiteCity,situatedatPaddingtoninSydney,wasTennisNSWheadquarterspriortoitsrelocationtoHomebushinabout2000.Fromitsestablishmentin1948,theWhiteCityTennisClubLtd(theClub)operatedatennisclubthere.Later,itleasedpartofabuildingerectedundertheCentreCourtin1970.Themostrecentleaseforaperiodoftwentyfiveyearswasenteredintoon1October1995.Whenitwasdecidedtoredevelopthestadium,TennisNSWandtheClubendorsedaHeadsofAgreementon19January2004,indicatingtheClubwouldhaveanoptiontobuythepieceoflandonwhichitsoperationswerecentred.Subsequently,onthe23April2004,JohnAlexander,therenownedinternationaltennisplayer,approachedtheClubthroughhiscommercialarm,JohnAlexander’sClubsPtyLtd(JACS),withapropositionforaJointVentureAgreement(arevisedversionofanearliersubmission).TennisNSWthenrescindedtheHeadsofAgreementregardingtheland,andon26August2004,itwasannouncedthatthelandinquestionwouldbesoldbypublictender.
Despitethisdevelopment,aMemorandumofUnderstanding(theMOU)wassignedbetweentheClubandJACSon28February2005,withtheclubpromisingtocontinuetorunatennisclubandJACSagreeingtodevelopafirst-classsportingamenityatWhiteCity.Clause3.7oftheMOUrelatedspecificallytopursuinganoptiontoacquirethenecessaryland.Aftertwopreviousattempts,anotherWhiteCityAgreement(theAgreement)wasnegotiatedon29June2005.Thesignatoriesincluded:thesuccessfultenderer,SydneyGrammarSchool;SydneyMaccabiTennisClubLtd(Maccabi);theClub;andJACS.Amongstothermatters,theAgreementprovidedanoptionforJACStoacquirelandotherthanMaccabi’ssouthofthestormwaterchannelbeforetheendofthe2007financialyear.IfJACSpasseduptheoption,theClubwouldhavethechancetodoso.
JACSservedaNoticeofTerminationoftheMOUon12April2006,citingtheClub’sfailuretomeetitsobligations.SuchgroundswerestrenuouslydeniedbytheClubwhichre-iterateditscommitmenttotheMOUinwritingon16August2006.
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On27June2007,PoplarHoldingsPtyLtd(Poplar),acompanyofwhichJohnAlexanderwasthesoleshareholder,boughtthelandavailableunderoption.Accordingtotheevidence,thecompanywassetuppurelytoimplementtheoption.However,theClubarguedthatanyinterestinthislandwasheldonconstructivetrustforit.OninitialtrialintheSupremeCourt,thejudgedidnotacceptthisargument,andviewedtheparties’negotiatingabilitiesasbeingequallybalancedandvoluntarilyemployed.Nopre-existingfiduciarydutyhadbeenviolated.
TheClubtooktheissueonappealtotheNewSouthWalesCourtofAppealalongwithademandthat,forthepaymentof$6.73million(theamountpaidbyPoplarinexercisingtheoption),thetitleandinterestinthedisputedlandbetransferredtotheClub.
JusticeMacfarlan,withwhomJusticesGilesandBastenagreed,pointedoutthattheWhiteCityAgreementhadnomaterialeffectonthescopeoftheMOU.Inaddition,heconcludedthattheexistenceofaconstructivetrustwasnotdependentonwhethertheMOUwasstillinforce,nordiditrequireapre-existingfiduciaryrelationshipbetweentheparties.Whatwascrucial,inHisHonour’sopinion,wasthattheClubhadrelinquisheditsownrightswithrespecttotheland,trustingJACStotakeuptheoptionfortheirjointventure,oralternativelypermittingtheClubtoutilisetheoption.ToallowJACStobypasstheClubforitsownaggrandisementwasclearlyunconscionable.
Clause3.7.1oftheMOUdealtwithusingtheoptiontoprocurethelandonbehalfofWhiteCityHoldingsLimited(WCH),acompanysetupforthatexpresspurpose.Underthatclause,theClubreliedonJACStohonouritspromiseorrisknotbeingabletomaintainitslinkwithWhiteCitythroughbeingineligibletopurchasetheproperty.Thewords,‘onbehalfofWCH’,expresslyindicatedtheexistenceofafiduciaryrelationshipwherebyJACSmustactintheClub’sinterestinWCHinanylandtransactionwithTennisNSW.InJusticeMacfarlan’sview,itmadenodifferencewhetherJACSoritsnominee,Poplar,securedthelandasbothcompanieswereMrAlexander’spuppets.SincetherewasnomandateforJACStopromoteitsowninterests,exercisingtheoptioninthismannerwassimilarlyimproperforPoplar.Therefore,PoplarmustholdthepropertyonconstructivetrustfortheClub.
AlthoughJusticeMacfarlanexaminedsection42(1)oftheReal Property Act 1900 (NSW)inregardtothepositionoftheClub’sunregisteredinterest,hebelievedthatthetransactiondidnotinvolve‘fraud’inthecriminalsense.Nevertheless,hefoundthattheClubhadgroundsofpersonalequityforobjectingtoPoplar’sactionssinceMrAlexander,throughhiscompanies,wastryingtoevadehisresponsibilitiestotheClub.Assuch,registrationofPoplar’sinterestundersection42(1)didnotpreventaconstructivetrustbeingimposed.
AftercommentingbrieflyontheinconclusivenessofthematerialrelatingtotherepudiationoftheMOUintheearliertrial,HisHonourdeclaredtheexistenceofaconstructivetrustandorderedthat,inexchangefor$6.73million,PoplartransferthelandinquestiontotheClub.HerefusedtoentertainpaymentofanylegitimateallowancetoJACSandPoplarwheretheiractionscouldbeshowntobehonest,astheirrequestsweretardyandtheClubhadtherighttopromptsettlement.
Thiscasemaybeviewedat:www.austlii.edu.au/au/cases/nsw/NSWCA/2009/114.htm
Implications of this case
Thecaseinvolvedanintricatesetofarrangementsandunderstandingsbetweenthepartiesandassociatedbodiesthathadevolvedoversomeperiodoftime.These
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arrangementsandunderstandingsweresetoutinaMOUwhichwasthenarguedtohavebeenrepudiated.Thecasedemonstratestheimportanceofhavingallpaperworkinordertobeabletoassertthetermsoftheagreement.Withinconclusivematerialrelatingtothetermsoftheagreementequitableremedieswereabletobereliedupon.Thismeansthecourtcanlooktotheconductofbothpartiesanddeterminewhatwouldbeconscionableinthecircumstances.
2.9.9 AYAN V ISLAMIC CO-ORDINATING COUNCIL OF VICTORIA PTY LTD & ORS [2009] VSC 119 (3 APRIL 2009)
ThiscaseinvolvedtheallegeddefamationofMrAbdulAyanthroughhisassociationwithabusinessnamed‘Aus-Halal’,whichpurportedtocertifyHalalmeat.ViaalettersenttoanumberofcustomersinMarch2001,writtenonofficialletterhead,thethenIslamicCo-ordinatingCouncilofVictoriaInc(theICCV)(nowtheIslamicCo-ordinatingCouncilofVictoriaPtyLtd)claimedthatneitherAus-Halalnor,moreparticularly,MrAyanwasauthorisedbytheAustralianQuarantineandInspectionService(AQIS)toissuesuchcertification.TheICCVwasalsocriticaloftheestablishmentofanotherorganisationcalledtheIslamicCo-ordinatingCouncilofAustralia(theICCA)whichprofessedAQISapproval,sincetheICCV,anamalgamofelevenMuslimgroups,wastheAQIS-endorsedorganisationtooverseetheslaughterofanimalsinaccordancewithIslamicreligioustraditions.Inaddition,theICCVassuredtheircustomersthatitwouldmakecertainthatbusinesswouldreturntonormalandtheywouldnotbedisadvantagedbyMrAyan’sactions.MrAyantookexceptiontotheclaimsandsoughtdamagesfordefamationfromtheICCVaswellasfromitschairman,MrIbrahimMohammed,itsvice-chairman,DrMirMohammedHabib,anditssecretary,MrIbrahimYalcin.
BecauseMrHabibandMrYalcindeniedanyknowledgeoftheletter’spublicationandwerenotattherelevanttimeholdingpositionsofresponsibilitywithintheICCV,JusticeBeachoftheVictorianSupremeCourtclearedthemofpublishinganydefamatorymatter.However,theuseoftheICCVletterheadwiththechairman’ssignatureclearlyinvolvedtheotherdefendantsintheletter’spublication.WithrespecttotheimplicationthatMrAyanlackedAQIS’sauthoritytoperformhisbusinessactivities,HisHonourdeterminedthatthethrustoftheletterwasdefamatoryinthatitcauseddamagetoMrAyan’sreputationinthebroadercommunityaswellasencouragingavoidanceofhisservicesbyfair-mindedpeople.HefoundthistobesoalthoughtheICCVwasprimarilyconcernedwithensuringcompliancewithIslamicslaughterritesratherthantarnishingMrAyan’sstandinginthecommunity.
Asadefence,MrMohammedandtheICCVattemptedtoarguejustificationundersection25oftheDefamation Act 2005 (Victoria)(theAct)onthebasisthattheletter’scontentsweresubstantiallytrue.Thisdefencefoundnofavourwiththejudge,whocriticizedthepoorarticulationofthesupposedlyjustifiableimputations.Heespeciallyhighlightedthedefendants’failureintheirwrittencriticismstodistinguishamonginterim,transferandfinalcertificates.WhilstauthorizationfromAQISwasneededforthefinalcertificateforexportpurposes,itwasperfectlyvalidforAus-Halaltoissuetheothercertificates,afacttheICCV’sletterconvenientlyskimmedover.
Inlikemannertohisdismissalofthedefenceofjustification,JusticeBeach rejectedthedefendants’attemptstoapplythedefenceofqualifiedprivilegefromsection30oftheAct.TheyreliedonanICCVreportproducedinFebruary2001,inresponsetoconcernsaboutwhethertheprocessingproceduresemployedbyAus-HalalweregenuinelyHalalcompliant.AccordingtoHisHonour,sincethisreportneglectedtoaddressthetopic
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ofwhetherMrAyanheldAQISaccreditation,therewasnonexusbetweenanyoftheprivilegedmattersinthereportwhichcouldhavebeenmadeavailabletotheappropriateabattoirsandtheletter’sdefamatoryallegations.Further,claimsbytheICCVthatAus-Halalsuppliedexportcertificatescouldnotbesubstantiated.
JusticeBeachthenreflectedonthequestionofmalice.Expressmaliceoverridesqualifiedprivilege,butitsestablishmentisunnecessarywherethedefenceofqualifiedprivilegehasnotsucceeded.Suchmaliceariseswherethereisactuallyanunderlyingmotivetotheclaimofqualifiedprivilegewhichpromptsthedefamatoryremarks.HisHonourmaintainedthatexpressmalicewasevidentinthedefendants’publicationofthelettercriticalofAus-HalalandMrAyan.ThedefamatoryimputationswereclearlydirectedatdissuadingMrAyan’scustomers,bothexistingandpotential,fromemployingAus-Halal’sMuslimslaughtermenandsupervisors.Inaddition,thesestatementsweredesignedtothwartMrAyan’slegitimaterighttoprovideinterimandtransfercertificatessimplybecausetheICCVsawhisparticipationintheseprocessesascompromisingtheintegrityofthefinalcertificates.
Therefore,JusticeBeachfoundthatMrAyanhadbeendefamedintheletterpublishedbytheICCVwiththeconsentofitschairman,MrIbrahimMohammed.Becauseoftheletter’sdisastrouseffectsonhisreputationandtheprofitabilityofhiscompany,MrAyanwasawarded$125,000indamagesplusinterest.
Thiscasemaybeviewedat:www.austlii.edu.au/au/cases/vic/VSC/2009/119.html
2.9.10 THE ARCHITECTS (AUST) PTY LTD T/AS ARCHITECTS AUSTRALIA V BETHANY BRISBANE INTERNATIONAL CHURCH INC [2009] QDC 56 (DISTRICT COURT OF QUEENSLAND, 11 MARCH 2009) FILE NO: 2217/07
TheArchitects(Aus)PtyLtdArchitects(ArchitectsAustralia)claimedthattheBethanyBrisbaneInternationalChurchInc(theChurch)owedthem$71,500infeesforarchitecturaldesignworkundertakenin2006–2007.ThisclaimwasrefutedbytheChurch.InOctober2006,accordingtoArchitectsAustralia,anunsigned,standardRoyalAustralianInstituteClientandArchitectAgreementoutlining aproposedbuildingprogramwassenttotheChurch’sboard.Schedule6ofthatagreementsetouttheprofessionalfeesinvolved.ThedesignsweretoincludeaworshipcumrecreationalfacilityaswellasstudentaccommodationandtherequiredparkingattheChurch’sEightMilePlainssite.AChurchrepresentative,MrHannyYasaputra,acceptedthecontractoverthetelephoneinNovember2006,andauthorisedMrKildey,thearchitectinchargeofthejob,tocommencework.
AnumberofmeetingswereheldbetweenSeptember2006,andMarch2007.Fromtheoutset,atthe25Septembermeeting,MrKildeymadeitclearthathisfeeswouldrangebetween10%and13%ofthecostofthedevelopment.Healsopointedoutthat,inhisestimation,theprojectwouldprovetobeexpensive.MrYasaputraindicatedthattheChurch’sbudgetwasapproximately$900,000,afigureMrKildeydismissedasinadequate.Unawarethatthe$900,000representedthelimitoftheChurch’sfunds,MrKildeyagreedtoundertakesomepreliminaryplanningonagoodfaithbasispriortoformalentryintoacontract,toallowtheChurchtoeffectsettlementoftheEightMilesPlainsland.
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Withnumerousrevisionstotheoriginalproposals,ArchitectsAustraliasubmittedanestimatedcostingof$1,628,650inaletterdated6February2007.Onequarterof10%ofthisamount,$40,716.25,wasowedtothefirmforthesuccessfulcompletionofStage1,asoutlinedinSchedule6.Atameetingon20March2007,attendedbybothboardandnon-boardmembers,thesubjectofthearchitecturalfirm’sfeeswasspecificallyraised.MrYasaputrabaulkedatthesuggestedfigure,maintainingthedevelopmentcouldbeachievedlessexpensively.Subsequently,inAprilMrKildeyofferedareductionintheexistingprofessionalfeeswhichtheChurchfailedtoaccept.Afterfurtherconsultationconcerningthefeenon-paymentwithMrHenryLouw,oneoftheChurch’snon-boardmembers,inlateJuneMrKildeywasinformedthattheChurchwishedtoterminatethecontractasthepropertydevelopmentnolongerseemedfeasible.AlastminuteofferfromtheChurchof$15,000forhisprofessionalservicestodatefailedtoswayMrKildeyandhegavenoticeofplacingthematterinhissolicitor’shandson27June2007.
ThemattercamebeforeJudgeSearlesintheQueenslandDistrictCourt.AftercommentingfavourablyonMrKildey’sveracity,HisHonourrejectedtheChurch’sattempttoarguethat,accordingtoparagraph14oftheBoardofArchitectsofQueenslandCodeofPractice,acontractforprofessionalfeesexceeding$1,500mustbeinwriting.Astherewasnolegalbasisforthiscontention,theChurch’srelianceonsection28(b)oftheAssociations Incorporation Act 1981(Qld)wasimpossible.IthadbeenitsintentiontoclaimthatMrYasaputrahadnoauthority,expressorimplied,toenterintosuchawrittencontract.AnynotionthatMrKildey’sserviceswereprovidedgratuitouslywasalsorejectedasfar-fetchedbythejudge.Noviable,architecturalbusinesscouldaffordtoembarkonacommercialventurewherepaymentwassubjecttotheclient’swhim.
IntheeventanagreementbetweentheChurchandArchitectsAustraliadidexist,theChurch’sendeavourtoinvoketheclausesrelatingtomisleadinganddeceptivepracticesundertheTrade Practices Act 1974 (Cth)ortheFair Trading Act 1989 (Qld)provedunsuccessfultoo.HisHonourdeclaredthatfeedeterminationonapercentagebasiswasclearlydelineated.ThementionofhourlyratesinItem4ofSchedule6wasnotmisleadingas,fromtheoutset,theChurchwasawareofthemethodtobeused.Finally,heassertedthatMrYasaputrapossessedtheauthoritytoactontheChurch’sbehalfandengageArchitectsAustralia’sservices.
Todeterminemorepreciselywhatthearchitecturalfirmwasowed,thejudgereliedontheevidenceofMrSimpson,anarchitectwith40yearsexperience.HestatedthatnotonlywasStage1complete,butalsothatStage2was65%finished,atotalinfeesof$76,181.80.JudgmentwasenteredforArchitectsAustraliafor$83,312,inclusiveof$11,812interest.
Thiscasemaybeviewedat:www.austlii.edu.au/au/cases/qld/QDC/2009/56.html
Implications of this case
Thiscaseillustratesthatallbusinessarrangementsneedtobeclearlyunderstoodandputinwritingtoavoidexpensivelitigation.TheinformalwayinwhichtheboardoftheChurchengagedprofessionalservicesforsuchamajorprojectalsobringsintoquestionthegovernanceprocedures.
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2.9.11 GRIFFITHS & ORS V JOHN FAIRFAx PUBLICATIONS & ANOR [2009] NSWSC 100 (3 MARCH 2009) FILE NUMBER: 20301/01
Theseproceedingsaroseoutofas.7AtrialinSeptember2005.AccordingtothedefinitionalsectionoftheNewSouthWalesSupremeCourtCommonLawPracticeNote4,suchatrialinvolves,‘Atrialofissuesprovidedbysection7A(1)(3)oftheDefamation Act 1974 (NSW).Althoughtheotherpartieswereunsuccessful,theFoundationforHumanity’sAdulthood(theFHA)wasfoundtohavebeendefamedinaSydney Morning Herald articletitled‘ProphetofthePosh’whichwaspublishedon22April1995.Thedefamatoryallegationinvolvedastatementclaimingthat,‘TheFHA’sdemandsonitsmemberstoretheirfamiliesapart.’
On14February2008,JohnFairfaxPublicationsPtyLtd,thepublishersoftheSydney Morning Herald,indicatedtheirintentiontodisputethisfindingwhichtheFHAclearlyhadaninterestinupholding.Later,on9December2008,thepublishers’solicitorssoughtfromtheFHAsecurityforthecostsofthetrialandexpendituresincurredasaresult,tothevalueof$500,000.BecausetheFHAclaimedpaymentofsuchasumwouldmakeitimpossiblefinanciallytomountitsowncase,therequestwasdeclined.Asaresult,thematterofwhethertheFHAshouldprovidesecurityforcostsfelltotheSupremeCourtfordeterminationinMarch2009.
TheFHAarguedthat,in1990,itwasincorporatedasacompanylimitedbyguaranteewhoseinterestlayinhumanevolutionandbiologicaldevelopment,withaspecificfocusonthepresentproblemsaffectinghomo sapiens andhowtheycouldbeaddressed.Sincethebeginningofthe2001financialyear,theFHAhasbeenregardedasincometaxexemptbecausetheAustralianTaxOfficedeemsitacharitableinstitution.TheFHAisreliantforitsfundsondonationsandholdsnointerestinland.
Donationsasasourceofincomearenotoriouslyunreliable,afactofwhichJusticeNicholaswasacutelyaware.Underthe Uniform Civil Procedure Rules 2005 Pt42,r.42.21(1)(d)or,inthealternative,undersection1335(1)oftheCorporations Act 2001 (Cth),securityforcostsisawardedwherethereisreasontobelieveacorporationwillbeunabletopaythecostsofadefendantwhoissuccessful.Atthetimeinquestion,theFHA’snetassetswere$777,115withanestimated$329,641.22incashinhand.Giventhisbasefigure,HisHonourwasnotsatisfiedthattherewouldbesufficientfundsinthefuturetocoverJohnFairfaxPublicationsPtyLtd’scostsiftheCourtsoordered.
TotheFHA’sclaimthatorderingsecurityforcostswouldfrustrateitslitigation,thejudgerepliedthattheevidencesuggestedtherewaseverylikelihoodthatthevoluntarydonationswhichhadfinanceditslegalproceedingssofar,wouldcontinuetodoso.Therefore,JusticeNicholasorderedthattheFHApaythe$500,000in$100,000instalmentsassecurityforcostspriortothehearingalreadysetdownfor10August2009.
Thiscasemaybeviewedat:www.austlii.edu.au/au/cases/nsw/supreme_ct/2009/100.html
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3.0 statE and tErritory lEGislation rEViEw 2008 3
3.1 coMMonwEalth TherelevantActsandRegulationsintheCommonwealth(orfederal)jurisdictioninclude:
• Corporations Act 2001
• Corporations (Aboriginal and Torres Strait Islander) Act 2006
• Extension of Charitable Purpose Act 2004
• Income Tax Assessment Act 1997
Inaddition,manyotherfederallawsapplytononprofitorganisationssuchasthosegoverningemploymentofstaff,anti-discrimination,usingdigitalcommunication,sendingfundsoverseasandbeinginreceiptofgovernmentagencyfunding.
Taxationissuesspecifictononprofitorganisationsarecoveredindetailbelow;see‘4.0 ATO Updates’.
Changes to Prescribed Private Funds
Since2001,ithasbeenpossibletoestablishprivatelycontrolledtrustsknownasPrescribedPrivateFunds(PPFs).Theywereentitledtoanumberoftaxationconcessionsincludingdeductiblegiftrecipient(DGR)statusandincometaxexemption.Theirsolepurposewastoprovidemoney,propertyorbenefitstoarangeofotherDGRssuchaspublicbenevolentinstitutions,healthpromotioncharities,overseasaidfunds,andorganisationsontheregisterofculturalorganisationsandtheregisterofenvironmentalorganisations.AfterareviewbyTreasury,legislationwasintroducedtoalterthePPFregulatoryregimeand on1October2009anewregimebegan,withPPFsnowknownasPrescribedAncillaryFunds(PAFs).Moredetailedcoverageofthechangescanbefoundbelow:see‘5.1PrivateAncillaryFunds’.
Regulation of trustee companies
InJuly2008,theCouncilofAustralianGovernments(COAG)agreedthattheCommonwealthwouldassumeresponsibilityfortheregulationoftrusteecompanies.TrusteecompanieshavepreviouslybeenregulatedatanentitylevelunderStateandTerritorylaws.Theselawsalsoallowprivatetrusteecompaniestoenterthemarketforpersonaltrusteeandestateadministrationworkandfacilitatetheestablishmentoflongtermandperpetualtrusts,suchascharitabletrusts.Thismakesregulationoftrusteecompaniesofinteresttothenonprofitsector.
Schedule2oftheCorporations Legislation Amendment (Financial Services Modernisation) Act 2009insertedChapter5D(Licensedtrusteecompanies)intotheCorporations Act 2001.Chapter5DimplementsthetransferoftrusteecompanyregulationfromtheStatesandTerritoriestotheCommonwealth.Theamendmentsarescheduledtocommenceon6May2010.
ThepolicyintentionisthattheCommonwealthwillhaveexclusiveresponsibilityfor‘entitylevel’regulationoftrusteecompanies’traditionalservices,includinglicensingthosecompaniesandregulatingthefeestheycanchargeforthosetraditionalservices.Atthesametime,StateandTerritorylegislation,andtherulesofcommonlawandequity,willcontinuetogovernthefunctionsandpowersoftrusteecompanies.Also,itisintendedtopreserveruleswhichapplygenerallytopersonssuchastrustees,executors,administratorsandguardians(includingtrusteecompanieswhentheyperformthoseroles).
Manyjurisdictionspreviouslyimposedcapsonthefeesthattrusteecompaniescouldcharge.Inrelationtocharitabletrusts,underDivision4ofChapter5Dthereis‘grandfathering’offeeschargedtoexistingclients,and‘capping’offeeschargedto
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newclients.Inrelationtonewtrustsandestatesotherthancharitabletrusts,thereisderegulation,subjecttorequirementsthatthecompany’sfeeschedulebedisclosedontheinternet,andthattrusteecompanieschargenomorethanthefeesspecifiedintheirpublishedfeescheduleimmediatelybeforethetrusteecompanystartedtoprovidetheservice.Thegovernmenthasindicatedthatitwillreviewthefeesarrangementsforbothexistingandnewcharitabletrustsaftertheprovisionshavebeeninoperationfortwoyears.
3.2 nEw south walEsTherelevantActsandRegulationsinNewSouthWalesare:
• Associations Incorporation Act 1984
• Associations Incorporation Regulation 1999
• Associations Incorporation Act 2009
• Association Incorporation Regulation 2009
• Charitable Fundraising Act 1991
• Charitable Fundraising Regulation 2008
• Charitable Trusts Act 1993
• Lotteries and Art Unions Act 1901
• Lotteries and Art Unions Regulation 2007
LegislationinNewSouthWaleshadanotablechangein2009,withtheenactmentoftheAssociations Incorporation Act 2009andAssociations Incorporation Regulation 2009,whichwillreplacetheAssociations Incorporation Act 1984andtheAssociations Incorporation Regulation 1999.ThenewAct2009waspassedbyStateParliamenton31March2009andgivenroyalassenton7April2009tocommencefromadatetobeproclaimed.ThenewRegulationsarecurrentlystillinthepublicconsultationphase.ItisexpectedthatthisActandRegulationwillcommenceinearly2010,atwhichtimethe1984Actand1999Regulationswillberepealed.
Oncecommenced,theActwillstreamlineandsimplifyregulationsandrequirementssurroundingtheincorporationofnonprofitassociations.Onekeydevelopmentistheintroductionofatwo-tieredsystembasedonafinancialthresholdtobespecifiedintheforthcomingregulations,relievingsmallerorganisationsofadministrativeburdenssuchasyearlyauditsthatarerequiredoflargerorganisations(sections42to49).Thelegislationalsointroducesmakesitanoffenceforcommitteeorboardmemberstomisusetheirpositionsorinformationgainedthroughtheirpositions,whichshouldprovidebetterprotectionfororganisationsfromdishonestboardorcommitteemembers(sections32and33).
Otherreformsaimedatsimplifyingtherequirementsofassociationsincludechangestoallowpostalvotingandtoenablegeneralmeetingstobeheldinmultiplelocations,throughtheuseoftechnologysuchasteleconferencing(sections30(2)and38(1)(b)).TheActalsoenablesappealsfromcertaindecisionsoftheDirector-GeneraltotheAdministrativeDecisionsTribunal(section104).Technicalchangesincludethesubstitutionof‘constitution’for‘rules’whichappearedinthe1984legislation,andaclearerdefinitionof‘pecuniarygain’,reducingtheambiguityassociatedwithdeterminingnonprofitstatusforsomeassociations.
FordetailsofActsandregulationsinNSWsee:
www.legislation.nsw.gov.au/maintop/scanact/inforce/NONE/0
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3.3 VictoriaTherelevantActsandRegulationsinVictoriaare:
• Associations Incorporation Act 1981
• Associations Incorporation Regulations 2009 (includingJan2010amendments)
• Charities Act 1978
• Charities Regulations 2005
• Fundraising Act 1998
• Fundraising Regulations 2009
• Lotteries Gaming and Betting Act 1966
• Gambling Regulation Act 2003
• Gambling Regulation Regulations 2005
InlinewithitsStrengthening Community Organisations Action Plan,theVictoriangovernmentmademanychangestothelawsregulatingtheoperationofnonprofitgroupsoperatinginitsstate,withamendmentstotheincorporatedassociationslegislation,aswellasbingoandfundraisinglaws.Furthersignificantchangestotheincorporatedassociations’regimeareexpectedin2010.
Incorporated associations
AstheAssociations Incorporation Regulations 1998 hadreachedtheirsunsetdate,theywerereplacedbytheAssociations Incorporation Regulations 2009 (enactedon28Julyinsubstantiallythesameformasthe1998regulations).Somesubsequentchangesweremadein29Septemberand19January2010.Aprescribedassociation(i.e.havinggrossreceiptsover$200,000orassetsover$500,000)nowhastopreparefinancialstatementsinaccordancewiththeaccountingstandardsapplicableundertheCorporations Act 2001(Cth),i.e.theAASBAccountingStandard(seereg.13A).Therearealsonewprovisionsaboutsecuritytobegivenbyliquidators(reg.14A);andallowingthecommitteetofinemembersforbreachoftherules(seereg.18Aandclause7ofmodelrules).
TheAssociations Incorporation Amendment Bill 2008 waspassedon7April2009.Someofthemainreformsarelistedinthefollowingtable.
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TABLE 1 REFORMS IN AIA BILL 2008
Topic and commencement
Comments
‘Publicofficer’to‘secretary’
11 Dec 2011 unless earlier date
Thischange(andseveraloftheotherchangesbelow)willrequireamendmentstothemodelrulessocommencementhasbeendelayedpendingare-writeoftherulesin2010.
Meetingminutes
11 Dec 2011 unless earlier date
Therulesofanincorporatedassociationwillberequiredtocoveranumberofnewmattersinrelationtothekeepingof,andaccessto,minutesofmeetings.
Returnofdocumentsheld
7 April 2009
Alloffice-holders,formeroffice-holdersormembersofanincorporatedassociationarerequiredtoreturnanydocumentsbelongingtoanincorporatedassociationwithin28daysiftheyceasetoholdofficeorbemembersoftheorganisation.TheassociationcanapplytotheMagistrates’Courttoensureperformance.
Specialresolutions
7 April 2009
Anoticeofaproposedspecialresolutionmustsetoutthefulldetailsoftheproposedspecialresolutionandmustbeprovidedtomembersatleast21daysinadvance.Thenoticemustalsomakeitclearthattheresolutionisbeingproposedasaspecialresolution.
DocumentsprovidedtoRegistrarandchangestorulestobeapprovedbyRegistrar
7 April 2009
TheRegistrar(ConsumerAffairsVictoria)hasanewpowertorefusetoreceiveanydocumentsubmittedbyanincorporatedassociationiftheRegistrarbelievesthedocumentisnotavaliddocumentoftheincorporatedassociation.
IfanincorporatedassociationsubmitsaspecialresolutionforalterationofitsrulestotheRegistrar(unders22),theRegistrarcanacceptsome,only,oftheproposedalterations.
Statutorymanagement
7 April 2009
Thisisacompletelynewremedy,likelytobeofassistancetofinanciallyviableassociationsexperiencingsomeformofseriousdysfunction.
TheRegistrarcaninvestigatetheaffairsofanassociation,includingitsfunctioningandfinancialcondition.Followinganinvestigation,iftheRegistrarconsidersitisintheinterestsofmembers,creditorsorthepublic,theRegistrarcanapplytotheMagistratesCourtfortheappointmentofa‘statutorymanager’toconducttheaffairsoftheassociation.
Ifastatutorymanagerisappointed,allmembersofthecommitteeofmanagement(orgoverningbody)immediatelyceasetoholdoffice.Astatutorymanagerhasarangeofpowerstodealwiththeassociation’saffairs.
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ActionsinMagistratesCourt
7 April 2009
ThereareanumberofnewactionsthatcanbetakentotheMagistratesCourt:
theRegistrarcanapplyforanorderrestrainingtheassociationfromdoinganactthatisoutsideitsstatementofpurposes,iftheRegistrarissatisfieditisinthe‘publicinterest’todoso;
amember(or,inmorelimitedcases,aformermember)canapplyforanorderpreventinganassociationfromengaginginoppressiveconduct.
Voluntarycancellationofregistrationandvoluntaryadministration
7 April 2009
Smallincorporatedassociationswithlessthan$10,000inassets(andwhichmeetotherrequirements)canapplytotheRegistrarforvoluntarycancellationoftheirregistration.
ThevoluntaryadministrationprovisionsoftheCorporations Act 2001(Cth)willnowapplytoVictorianincorporatedassociations.
Removalofauditor
7 April 2009
Anauditorcanberemovedbyaresolutionofmembersatageneralmeeting.Noticeoftheproposedresolutionmustbegiventomembersatleast2monthsinadvanceofthemeetingandcopiesmustbeprovidedtoboththeauditorandtheRegistrarassoonaspossible.
Surplusassetsonwindingup
Ruleforexistingassociationmadebefore7April2009valid
Anewprovisionnowpreventsthesurplusassetsofanincorporatedassociationfrombeingdistributedtomembersonvoluntarywindingup,unlessthe‘member’isabodycorporate(likeanassociationoratrust)whichitselfcannotdistributeassetstoitsmembers.
Fundraising
Asforeshadowedinthe2008LegalAlmanac,theFundraising Appeals and Consumer Acts Amendment Act 2008cameintoforceon11February2009(withafewprovisionscommencinglaterin2009).ThenameoftheprincipalActhasbeenchangedtotheFundraising Act 1998.ObjectshavebeenintroducedtotheAct,statedtobeforthefacilitationof‘transparencyandpublicconfidenceinthefundraisingindustryandinnot-for-profitorganisationsthatconductfundraising;andtheprotectionofmembersofthepublicfromwhommoneyorabenefitissolicitedforbeneficialorbenevolentpurposesinthecourseoffundraising;andtheprotectionofthepublicinterestinrelationtofundraising’.
Thedefinitionofafundraisingappealhasbeenchangedtorecognisethatanappealcanbeanon-goingactivity,ratherthanjustaone-offevent(section5(2)(ca)).
Newsection12Aand12BoftheActincreasethedisclosurerequirementsforbusinessesandfundraisers.Undersection12Aabusinesswhichrepresentsthataportionofmoneyreceivedinreturnforgoodsorservicesistobeappliedforbenevolentorbeneficialpurposesmustdisclosethedollarorpercentageamounttobeusedforthosepurposes.Thedisclosuremustbemadeinwritingtothepersontowhomthegoodsorservicesaretobesuppliedbeforethecontractofsupplyisenteredinto.Thesectionimposesamaximumpenaltyof240penaltyunitsforacorporationand120penaltyunitsinanyothercase.Undersection12B,otherdisclosurerequirementscanbeimposedonregisteredfundraisers.Otherchangesarealsoaimedatbettertransparencyforthebenefitofdonors,suchasensuringdirectdebitformsallowdonorstoworkoutthenatureofthearrangementtheyaresigningupfor.
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Community and charitable gaming (bingo)
Witheffectfrom25November2009therulesforVictoriancommunityandcharityorganisationsthatwishtoconductbingosessionswerechanged.Nowifacommunitygroupisa‘declared’organisation,itisnotrequiredtoobtainaminorgamingpermittoconductabingosession.Instead,adeclaredcommunityorganisationneedonlycompleteaformandlodgeitwiththeVictorianCommissionforGamblingRegulation(VCGR)atleastsevendaysbeforethecommencementofthebingogame(s).OncethecommunityorganisationnotifiesVCGRoftheintendedbingosession,itwillreceivea‘NoticeofAuthorisedBingoSessions’thatmustbeprominentlydisplayedattheentrancetothebingovenue.Ifnotalready‘declared’,anorganisationmayapplytobe‘declared’atthesametimeasitappliestoactuallyconductbingo,howevertheapplicationforbecomingadeclaredorganisationshouldbelodgedatleast28daysbeforethecommencementofthebingogame(s).VCGRhaspowertomakerulesforthegameandconductofbingo.RuleshavebeenpublishedandareavailableontheVCGRwebsite(www.vcgr.vic.gov.au).AnorganisationcanalsoapplytotheVCGRtovarytherules.SeeGaming Regulation Amendment (Bingo) Regulations2009 and,forVGRrules,theVictorianGovernment Gazette No.S419,20November2009.
TheGaming Regulation Further Amendment Bill 2009 (21October,2009)providesthatanyprizeofmorethan$1,000mustbepaidbycheque(notpayableto‘cash’)(Part7)andmadesomeamendmentstothepubliclotteriesprovisions(seePart4).
DetailsofallVictorianActsandRegulations(includingamendingActsandregulations)canbefoundat:www.legislation.vic.gov.au
PilchConnect’sfreemonthlye-bulletinprovidesupdatesofVictorianlegislativechangesandproposedlawreforms.(Seewww.pilch.org.au/PCLawReform).
3.4 QuEEnslandTherelevantActsandRegulationsinQueenslandare:
• Associations Incorporation Act 1981
• Associations Incorporation Regulation 1999
• Collections Act 1966
• Collections Regulation 2008
• Charitable Funds Act 1958
• Charitable and Non-Profit Gaming Act 1999
During2009theQueenslandgovernmentintroducedmajorreformsinrespectofthestructureofitscivilandadministrativereviewtribunalsandtheFreedomofInformationregime.ThereformsinrespectofthetribunalssawtheintroductionofonecomprehensiveTribunaltocoverallcivilandadministrativemattersinQueensland.TheQueenslandCivilandAdministrativeTribunal(QCAT)hasamalgamatedjurisdictionof23previousbodies(18ofwhichhavebeenabolished)andprovidesasinglegatewayforcivilandadministrativereviews.QCATcommencedoperationon1December2009.TheQueensland Civil and Administrative Tribunal (Jurisdiction Provisions) Amendment Act 2009amended216piecesofQueenslandlegislationtogiveQCATjurisdictionforawiderangeofmatters.TheconferredjurisdictionincludeschangesofjurisdictionforadministrativereviewproceduresandamendmentshavebeenmadetothefollowingrelevantActs:
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Associations Incorporation Act 1981
• AmendmentstotheheadingsinPart12.PreviouslythisPartwasheaded‘Reviewsandappeals’;itisnowtitledsimply‘Reviews’.Omittingthewords‘andappeals’reflectsthefactthat,underQCAT,appealsfromadministrativedecisionsareknownas‘reviews’.TheheadingofDivision1wasalsoamended:previouslytitled‘Reviewofdecisions’,itisnowtitled‘Internalreview’,makingclearthatreviewsundertheDivisionareinternalreviewsbythechiefexecutive.ReviewstoQCATareexternalreviews.
• Sections111and112wereamendedtoconferonQCATthejurisdictionpreviouslyheldbytheDistrictCourtinrespectofreviewofdecisionsabouttheincorporationofassociations.
Charitable and Non-Profit Gaming Act 1999
• UnderPart8oftheAct,reviewsofdecisionsofthechiefexecutiveincluding:mattersinrespectoflicences;appointinganadministrator;approvalsinrelationtogamingequipment;orforfeituretotheState,arenowtobemadetoQCAT(seesection174).
• AppealsfromQCATunderthisActcanonlybemadetotheCourtofAppeal(nottotheAppealTribunal)onaquestionoflaw
ForfulldetailsoftheoperationofQCATgotowww.qcat.qld.gov.au.
ReformsinrelationtotherightofaccesstogovernmentinformationhaveresultedintwonewActswhichwereintroducedduring2009.TheseActs,namelytheRight to Information ActandtheInformation Privacy Acthaverelevancetononprofitorganisations,especiallythosewhoarefundedbyorcontracttoprovideservicesforthegovernmentanddealwithpersonalinformation.AmorecomprehensivediscussionontheimpactsofthesereformsonthenonprofitsectorisincludedbelowunderPractitionerPerspectives:see‘5.7RighttoInformationandInformationPrivacy’.
DetailsofallActsandRegulationsinQueenslandcanbefoundat:www.legislation.qld.gov.au/Acts_SLs/Acts_SL.htm
3.5 wEstErn australiaTherelevantActsandRegulationsinWesternAustraliaare;
• Associations Incorporation Act 1987
• Associations Incorporation Regulations 1988
• Charitable Collections Act 1946
• Gaming and Wagering Commission Act 1987
During2009therewerenomaterialchangestotherelevantlawinWesternAustralia.ABillcurrentlybeforetheWesternAustralianParliamentwillamendtheformattingoftheAssociations Incorporation ActandtheCharitable Collections ActalongwithnumerousotherStateActs.TheStandardisation of Formatting Bill 2009,wasintroducedintotheLegislativeCouncilon18August2009,tobringuniformityoflayout,styleandformattingacrossthelegislationdatabase,inordertoimprovereadabilityandsearchfunctions.Havingastandardformatwillhelptomakelegislationmoreuser-friendly,improvingaccesstojustice.
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WesternAustralia(alongwithSouthAustraliaandtheNorthernTerritory)alsoenacteditsupdatedpayrolltaxlawsinaccordancewiththenationaltaxharmonisationproject.Ofrelevancetothecharityandnonprofitsectoristheexpansionofwageexemptionsincludedintheassessmentofpayrolltax.Theexemptionnowincludesanonprofitorganisationhavingacharitablepurposeasitssoleordominantpurpose(butexcludeseducationalinstitutions)andtakesintoaccountwagespaidforworkundertakentocarryoutthatcharitableorbenevolentpurpose.Anexemptionisalsoincludedforthewagesofworkerswhovolunteerasfire-fightersorforemergencyrelief.
ThereviewoftheAssociations Incorporation Actisstillcontinuing.InNovember2009itwasannouncedthatthefeedbackfromtheconsultationperiodindicatedthereweresomecontentiousmattersrelatingtotheproposaltointroduceathree-tieredstructureoffinancialaccountabilityandtheobligationtoappointapublicofficer.Itisnowproposedthatatwo-tierstructurebeintroduced,whereTier1associationshaverevenueoflessthan$500,000perannum,withTier2havingrevenueof$500,000orgreaterperannum.Tier1associationswillnotberequiredtohavetheirfinancialstatementsauditedbutwillstillhavetopresentthosestatementsinamannerwhichcaneasilyidentifythefinancialsolvencyoftheassociation.AuditingoffinancialaccountsforTier2associationswillbemandatory.Itisalsoproposedthatassociationswillnolongerberequiredtoappointapublicofficerasthisisconsideredtobetoogreataburdenonsmallerassociations.ItisexpectedthatanewBillwillbedraftedandpresentedtoParliamentsometimelaterin2010.Detailsmaybefoundat:www.commerce.wa.gov.au/associations
DetailsofallActsandRegulationsforWesternAustraliacanbefoundatwww.slp.wa.gov.au/legislation/statutes.nsf/default.html
3.6 south australiaTherelevantActsandRegulationsinSouthAustraliaare:
• Associations Incorporation Act 1985
• Associations Incorporation Regulations 2008
• Collections for Charitable Purposes Act 1939
• Public Charities Funds Act 1936
• Lottery and Gaming Act 1936
During2009theAssociations Incorporation ActwasamendedbytheStatute Amendment (Public Sector Consequential Amendments) Act 2009.Thisamendmentremovedsection49BwhichhadprovidedimmunityfromliabilityfordepartmentalofficersengagedintheadministrationorenforcementoftheAssociationAct.TheimmunitystillexistsbutisnowincludedinthePublic Sector Act 2009whichcommencedoperationon1February2010andprovidesacomprehensivecivilimmunityforpublicsectoremployeeswhichactingunderofficialpowersorexercisingoficialfunctions.
OtherrelatedlegislationwhichisofinterestistheMount Gambier Hospital Hydrotherapy Pool Fund Act 2009.ThisActcameintooperationon16April2009toovercomeadifficultsituationinrelationtofundscollectedforaprojectthathasbeenabandoned.TheMountGambierandDistrictsHealthServiceIncorporatedestablishedtheMountGambierHospitalHydrotherapyPoolFundin2000toraise$1milliontobuildahydrotherapypool.ByJune2003atotalof$270,769.00hadbeenraisedbutasitwaswellshortoftherequiredconstructioncosts,theproposalwasabandoned.TheMountGambierand
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DistrictsHealthServiceisaninstitutionlistedunderSchedule2ofthePublic Charities Funds Act 1935.Section11ofthisActprovidesinthesecircumstancesallfundsdonatedvestimmediatelyintheCommissionersforCharitableFundsandassuchthesemonieswouldbeheldunderacharitabletrustadministeredbytheCommissioners.PursuanttothePublic Charities Funds Act,thecharitabletrustestablishedwouldonlybeabletodisbursetheincomeofthetrustnotthecapitalandwouldbeunabletorefunddonations.Thelocalcommunitybelievedthemoniesdonatedshouldbereturnedtothedonorsorusedforanalternativeepurposeastherewasnolikelihoodofthepooleverbeingbuilt.TheMount Gambier Hospital Hydrotherapy Pool Fund Actaccedestothecommunitieswishesandallowsforthereturnofdonationswereapplicable,andtheutilisationofthefundsforanalternativepurpose.TheActtransfersthefundsheldtoCountyHealthSAHospitalIncorporatedtoadministerthefundsassetoutintheActincludingfindinganalternativecommunitypurpose.
ThisActhighlightstheshortcomingsofthePublic Charities Funds Actincircumstanceswherethereisastrongcommunitywishtoredirectfundsofanabandonedprojectforthebenefitofthecommunity.
SouthAustralia(alongwithWesternAustraliaandtheNorthernTerritory)enactednewpayrolltaxlegislationin2009inaccordancewiththenationalschemetaxharmonisationproject.Ofrelevancetothecharityandnon-profitsectoristheexpansionofwageexemptionsincludedintheassessmentofpayrolltax.Theexemptionnowincludeanonprofitorganisationhavingacharitablepurposeasitssoleordominantpurpose(butexcludeseducationalinstitutions)andtakesintoaccountwagespaidforworkundertakentocarryoutthatcharitableorbenevolentpurpose.Anexemptionisalsoincludedforthewagesofworkerswhovolunteerasfire-fightersoremergencyrelief.
DetailsofallActsandRegulationsforSouthAustraliacanbefoundat:www.legislation.sa.gov.au/index.aspx
3.7 tasManiaTherelevantActsandRegulationsinTasmaniaare:
• Associations Incorporation Act 1964
• Associations Incorporation Regulations 2007
• Associations Incorporation (Model Rules) Regulations 2007
• Collections for Charity Act 2001
• Gaming Control Act 1993
TherewerenorelevantBillsorothermaterialchangestothelawinTasmaniaduring2009.
DetailsofallActsandRegulationsforTasmaniacanbefoundat:www.thelaw.tas.gov.au/index.w3p
3.8 northErn tErritoryTherelevantActsandRegulationsintheNorthernTerritoryare:
• Associations Act
• Associations Regulation
• Associations (Model Constitution)Regulation
• Gaming Control Act
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TherewerenorelevantBillsorothermaterialchangestotheabovelistedlegislationduring2009.
Howeveraspartofthenationaltaxharmonisationprogramtoreducepayrolltaxcompliancecostsforbusinesses,theNorthernTerritorygovernmentintroduceditsnewPayroll Tax Act 2009.PursuanttotheagreementofallStatesandTerritories,thenewprovisionsweretotakeeffectfrom1July2009.NewSouthWales,VictoriaandTasmaniahadenactedprovisionsinaccordancewiththeharmonisationprogramin2008.Queenslandalreadyhadconsistentprovisionsinplace.AtthetimetheNorthernTerritorylegislationwasintroduced,SouthAustraliawasmovingtowardsfullyharmonisingitspayrolltaxlegislationaswasWesternAustralia(seeabove).TheNTActwasassentedtoon25June2009andcommencedon1July2009.ThenewPayroll Tax Actextendsexistingpayrolltaxexemptionforwagespaidbyreligiousinstitutionsandpublicbenevolentinstitutionstoincludenonprofitorganisationsthathaveasoleordominantpurposethatischaritable,benevolent,philanthropicorpatriotic.Theexemptionisconditionalonthewagesbeingpaidtoapersonwhoisexclusivelyengagedinworkofareligious,charitable,benevolent,philanthropicorpatrioticnature.Payrolltaxexemptionsarealsoextendedtoemployeesparticipatinginvoluntaryworkforbushfiresoremergencyrelief.
DetailsofallActsandRegulationsfortheNTcanbefoundat:www.nt.gov.au/dcm/legislation/current.html.
3.9 australian caPital tErritoryTherelevantActsandRegulationsintheACTare:
• Associations Incorporation Act 1991
• Associations Incorporation Regulation 1991
• Charitable Collections Act 2003
• Charitable Collections Regulation 2003
• Lotteries Act 1964
TherewereanumberofamendmentstotherelevantlegislationintheACTduring2009.
TheAssociations Incorporations Act 1991wasamended(witheffectfrom11September2009)toallowtheRegistrar-Generaltokeepconfidentialtheresidentialaddressofacommitteememberofanassociation.ApplicationcanbemadetotheRegistrar-Generalwhohasthediscretionwhethertoaffordtheapplicantconfidentialityasrequested.
FurtheramendmentsweremadetotheAssociations Incorporation ActtoincorporatetherecommendationsoftheStandingCommitteeonPublicAccounts(ReportNo17of2008)withregardtoincorporatedassociations.TheamendmentsextendedthecircumstancesunderwhichtheRegistrar-Generalcanbegintheprocessforcancellinganassociation’sincorporationundersection93,toinclude:
• Wheretheassociationhasfailedtosubmitanannualreturnforeachoftheprevioustwoyears(previouslythiswasthreeyears);
• where,forthepreviousthreeyears,theassociationhasfiledanannualreturnwithqualifiedauditswheretheauditorisunabletoaffirmwhetherornottheassociationhascompliedwiththeaccountingrequirementsandotherprovisionsoftheAct.
OthersituationswheretheRegistrar-Generalmayinstigatecancellationremain,forexamplewhereanassociationhasnotconvenedanAGMforthepreviousthreeyears.
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TheamendmentswerecontainedintheJustice and Community Safety Legislation Amendment Bill 2009 (No 2),andtookeffectfrom29September2009.
TheCharitable Collections Act 2003section7,wasamendedtoclarifytheactivitiesthatareexemptfromtheoperationsoftheAct.UptothispointtheCharitable Collections Regulation 2003setoutthecoverageoftheAct,inparticular,thatentitiesthatdonotsolicitdonationsorthatdonotconductcollectionsarenotboundbytheCharitable Collections Actsimplybecausetheyreceiveadonation.TheexemptionisnowincludedinthetextoftheAct(section7)itselftoensurethattherewillbenodisputewhenreadingtheprovisionsoftheActthatthesesortsofactivitiesareexemptfromtherequirementsoftheAct.(TheamendmentswerecontainedintheJustice and Community Safety Legislation Amendment Bill 2009 (No 2).
ThenewUnlawful Gambling Act 2009isawaitingcommencement.ItreplacestheUnlawful Games Act 1984andtwootheroutdatedActs,namely,theGaming, Wagers and Betting Houses Act 1901andtheGaming and Betting Act 1906.OnceproclaimeditwillbetheprincipallegislationregulatinggamblingintheACT,includingcharitablegambling.TheprovisionsofthisActweredevelopedfollowingapublicreviewoftheUnlawful Games Act 1984bytheGamblingandRacingCommission.TheUnlawful Gambling ActprovidesthatallgamblingintheACTisunlawfulexcepttotheextentitispermittedbylegislation.Approvedcharitablefundraisingthroughgameswillbepermittedundercertaincircumstancesandundercertaincontrols.TheActrecognisesthatfund-raisingactivitiesareanimportantpartofthecommunitybuttheprovisionsseektoensurethereisintegrityinanyfund-raisinggamblingactivities.Thedraftregulationdealingwiththeissueofcharitablegamblingsetsoutthenatureofrecordkeepingandreportingthatwillberequired.
DetailsofallActsandRegulationsfortheACTcanbefoundat:www.legislation.act.gov.au
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TheAustraliaTaxOffice(ATO)maintainsasignificantamountofmaterialfornonprofitorganisationwhichisavailableatwww.ato.gov.au/nonprofit.YoucanviewastreamedvideoofhowtofindyourwayaroundthesitefromtheACPNSDevelopingYourOrganisationsitehttps://wiki.qut.edu.au/display/CPNS/DYO+Home.
In2009theATO:
• releaseditsviewsontheWordInvestmentcase(HighCourt)andtheVictorianWomen’sLawyersAssociationcase(FederalCourt).DecisionImpactStatementswerereleasedforbothcases,andTaxationRulingsTR2005/21andTR2005/22areunderreviewasaresultoftheCourts’decisions;
• preparedguidelinesandmaterialsforthenewdeductiblegiftrecipientcategoryofPrivateAncillaryFunds(formerlyPrivatePrescribedFunds),whichcommencedon1October2009;
• wontheBargwannacaseandtheAid/WatchCase(casenotesforbothofthesecasescanbefoundintheCasenotespartofthisLegalAlmanac,undertheTaxationheading);
• alloweddeductionsfortheVictorianbushfires,Italianearthquake,Taiwantyphoon,Samoanearthquakeandtsunami,earthquakedamageinSumatra,andthetropicalstorminthePhilippines.
TheATOalsohasanonprofitnewsservicereaderscansubscribeto.Belowarearticlesfrom2009,whichcanbeviewedatwww.ato.gov.au/nonprofit/pathway.asp?pc=001/004/020.
Non-Profit News Service No. 0261 – Proposed amendments relating to higher education providers and deductible gift recipient (DGR) status
Dec2009.Treasuryisinvitingcommentsonproposedamendmentstothetaxlaw.TheamendmentsincludevaryingtherequirementsforDGRendorsementunderthecategories‘Highereducationinstitution’and‘Affiliatedresidentialeducationalinstitution’.
Non-Profit News Service No. 0260 – Rewrite of Part 3 of the Charities consultative committee – resolved issues document
Dec2009.Part3oftheCharitiesconsultativecommitteeresolvedissuesdocumenthasbeenupdated.
Non-Profit News Service No. 0259 – Productivity Commission releases draft report on the contribution of the not-for-profit sector
Nov2009.On14October2009,theProductivityCommissionreleaseditsdraftreportonthecontributionoftheAustraliannot-for-profitsector.
Non-Profit News Service No. 0258 – New products released for private ancillary funds
Oct2009.TheTaxOfficehasreleasednewproductstoassistorganisationsseekingdeductiblegiftrecipientstatusunderthenewcategoryforprivateancillaryfundseffectivefrom1October2009.
Non-Profit News Service No. 0257 – Donations to help disaster victims in Samoa, the Philippines and Sumatra
Oct2009.WeprovideinformationforindividualsandorganisationswantingtocollectfundsormakedonationstohelpvictimsoftherecentdisastersinSamoa,thePhilippinesandSumatra.
4.0 ato uPdatEs 4
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Non-Profit News Service No. 0256 – Court decision confirms Tax Office’s view on what is a charitable institution
Oct2009.On23September2009,theFullFederalCourtofNSWruledinfavouroftheTaxOfficeinitsdecisioninthecaseofAid/WatchIncorporated.
Non-Profit News Service No. 0255 – Government consultation on GST reforms – non-profit sub-entities
Sep2009.TheAssistantTreasurerrecentlyreleasedasecondconsultationpaperonGSTreformsthatincludenon-profitsub-entitiesaccessingthesameGSTconcessionsasparententities.Consultationcloses9October2009.
Non-Profit News Service No. 0254 – Prescribed private fund information return for the period 1 July 2008 to 30 June 2009
Sep2009.Theprescribedprivatefundinformationreturnfortheperiod1July2008to30June2009isnowavailableonourwebsite.Thereturnformsandtheirinstructionswillnotbemailedoutthisyear.
Non-Profit News Service No. 0253 – Private ancillary funds: legislation passed
Sep2009.TaxLawsAmendment(2009MeasuresNo4)Bill2009hasbeenpassedandawaitsroyalassent.Thebillamendsthetaxlawtoimprovetheintegrityofprescribedprivatefunds(PPFs),renamedprivateancillaryfunds(PAFs)underthenewframework.
Non-Profit News Service No. 0252 – Revocation of endorsement as a tax concession charity
Sep2009.Whenacharitablefundisnotappliedtothepurposeforwhichitwasestablished,itscharityendorsementmayberevoked.ThisarticlediscussesrecentcomplianceactivitiesundertakenbytheTaxOfficeinthisarea.
Non-Profit News Service No. 0251 – Support for victims of Typhoon Morakot in Taiwan
Aug2009.TheAssistantTreasurerhasannouncedhisdecisiontorecogniseTyphoonMorakotinTaiwanasadisasterforthepurposesoftaxdeductibilityofdonations.
Non-Profit News Service No. 0250 – Compliance Program 2009–10 released
Aug2009.On6August,TaxCommissionerMichaelD’AscenzoreleasedtheComplianceProgram2009–10.Thecomplianceprogramcontainsanon-profitorganisationschapterthatoutlinesthekeyprioritiesandactivitiesforthenon-profitmarketsegment.
Non-Profit News Service No. 0249 – Addendum to GSTR 2006/9 Goods and services tax: supplies
Jul2009.WerecentlyreleasedGoodsandServicesTaxRulingGSTR2006/9A2–Addendum.ItfurtherclarifiesandgivesexamplesoftheTaxOfficeviewonmultipartyarrangements,especiallythethirdpartyproposition.
Non-Profit News Service No. 0248 – Deductibility of management fees – High Court decisions (Spriggs & Riddell)
Jul2009.On18June2009,theHighCourthandeddownitsdecisionsinSpriggsv.FCofTandRiddellv.FCofT.Thecourtallowedthetaxpayers’appealstodeductmanagementfeesfornegotiatingcontractswithnewclubs.
Non-Profit News Service No. 0247 – Recent case: fund denied charitable status
Jul2009.On12June2009,theFederalCourthandeddownitsdecisioninthecaseCommissionerofTaxationvBargwanna.
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Non-Profit News Service No. 0246 – Private ancillary funds: legislation introduced and draft guidelines released
Jul2009.On25June,legislationwasintroducedintoparliamenttoestablishacomprehensivelegalframeworkforprivateancillaryfunds(PAFs).DraftguidelinesonhowthenewPAFframeworkwillapplywerealsoreleasedforpublicconsultation.
Non-Profit News Service No. 0245 – GST: Change in use of goods and services
Jul2009.Ifthecreditablepurposeofgoodsandserviceschanges,youarerequiredtomakeanadjustmenttotheamountofGSTcreditspreviouslyclaimed.
Non-Profit News Service No. 0244 – Refund of franking credits mailout
Jun2009.On19June2009theTaxOfficemailedthe2008–09refundoffrankingcreditsapplicationpackagetonon-profitorganisationsthatreceivedarefundoffrankingcreditsintheprioryear.
Non-Profit News Service No. 0243 – New ruling SGR 2009/2 on the meaning of ‘ordinary time earnings’ and ‘salary or wages’
Jun2009.AnewsuperannuationguaranteerulingSGR2009/2hasbeenreleasedonthemeaningoftheterms‘ordinarytimeearnings’and‘salaryorwages’.Therulingincludeseasy-to-followexamplesandreplacesSGR94/4andSGR94/5.
Non-Profit News Service No. 0242 – Decision impact statements released: Word Investments Ltd and Victorian Women Lawyers’ Association Inc
May2009.TheCommissionerhasreleaseddecisionimpactstatementsoutlininghispositioninrelationtothecasedecisionsinWordInvestmentsLtdandVictorianWomenLawyers’AssociationInc.
Non-Profit News Service No. 0241 – Updated fringe benefits tax (FBT) web products
May2009.Providesalinktofourfringebenefitstax(FBT)webproductsthathavebeenrecentlyupdatedtohelpyoumeetyourFBTobligations.
Non-Profit News Service No. 0240 – 2009–10 0240 – 2009–10 Budget: measures relevant to non-profit organisations
May2009.TheGovernmenthasannouncedseveralmeasuresthatarerelevantorofinteresttonon-profitorganisationsinthe2009–10Budget.
Non-Profit News Service No. 0239 – Education tax refund for approved care organisations
Apr2009.Theeducationtaxrefundisanewtaxoffsetapprovedcareorganisations(ACO)canclaimfortheeligibleeducationexpensestheyincurforeachchildintheirresidentialcarewhoisinprimaryorsecondaryschool.
Non-Profit News Service No. 0238 – Support for victims of recent Italian earthquake
April2009.TheAssistantTreasurerhasannouncedhisdecisiontorecognisethe2009Italianearthquakeasadisasterforthepurposesoftaxdeductibilityofdonations.
Non-Profit News Service No. 0237 – Productivity Commission to review the contribution of the not-for-profit sector
April2009.ThegovernmenthasannouncedtheProductivityCommissionwillexaminethenot-for-profitsector’scontributiontoAustraliansociety,howtheircontributionsarecurrentlymeasuredandobstaclestomaximisingtheircontributionstosociety.
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Non-Profit News Service No. 0236 – Support for victims of recent Victorian bushfires
April2009.TheTreasurerandAssistantTreasurerhavedeclaredtherecentVictorianbushfiresasadisasterforthepurposesoftaxdeductibilityofdonations.
Non-Profit News Service No. 0235 – GST and gambling activities
Mar2009.Inmostcases,gamblingsalesyourorganisationmakes(suchaslotteriesorgamingmachineactivity)aretaxable.YouonlyapplyGSTtoyourmarginonthesetaxablegamblingsales–nottoeachindividualsale.
Non-Profit News Service No.0234 – Guidance for non-profit organisations on counter-terrorism financing
Mar2009.TheAttorney-General’sDepartmenthasreleasedadraftguidancedocumenttoassistNPOstoprotectthemselvesfromtheriskofterrorismfinancing.TheAttorney-General’sDepartmentencouragesinterestedpartiestoprovidetheircomments.
Non-Profit News Service No.0233 – Legislation tabled: proposed changes to Australian disaster relief funds
Feb2009.ProposedamendmentstabledinParliamenton25February2009containmeasuresaffectingthedeductiblegiftrecipientcategory–Australiandisasterrelieffund.
Non-Profit News Service No. 0232 – Recent bushfires and floods and GST concessions for charitable fund-raising events
Feb2009.Certainorganisationscanchoosetohaveallsuppliestheymakeinconnectionwithafund-raisingeventtreatedasinputtaxedforgoodsandservicestaxpurposes.
Non-Profit News Service No. 0231 – GST-free non-commercial activities
Feb2009.Non-commercialactivitiesareGST-freeforsomenon-profitorganisations.
Non-Profit News Service No. 0230 – Henry Review releases consultation paper
Jan2009.TheAustralia’sFutureTaxSystemReviewPanelhasreleaseditsconsultationpaper,providingthebasisforfurthercommunityinputin2009.Section7ofthepaperconsidersthemaintaxconcessionsavailabletonot-for-profitorganisations.
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Forthefirsttime,wehaveinvitedanumberoflegalpractitionerstoprovidesuccinctsummariesofsignificantlegalissuesnonprofitorganisationscanencounter.Thesesummariesaremeantasareadyreferencepointratherthanadefinitiveguideandyoushouldconsidertakingformalandconsideredlegalassistancewhereappropriate.
5.1 PriVatE ancillary fundsJohn Emerson, Freehills
Since2001,ithasbeenpossibletoestablishprivatelycontrolledtrustsknownasprescribedprivatefunds(PPFs).PPFswereentitledtoanumberoftaxationconcessionsincludingdeductiblegiftrecipientstatusandincometaxexemption.Theirsolepurposewastoprovidemoney,propertyorbenefitstoarangeofotherdeductiblegiftrecipientssuchaspublicbenevolentinstitutions,healthpromotioncharities,overseasaidfunds,andorganisationsontheregistersofculturalorganisationsandenvironmentalorganisations.By30June2009,over800PPFshadbeenestablished,theyhadreceivedmorethan$1.3billioningifts,anddistributedmorethan$300milliontodeductiblegiftrecipients.On1October2009anewregimebeganforPPFs.
Main changes
ExistingPPFsbecamePrivateAncillaryFunds(PAFs)andtheyweretakentobeendorsedasdeductiblegiftrecipients.TheMinisterwasgivenpowertomakeguidelinesabouttheestablishmentandmaintenanceofPAFs.EachtrusteeofanexistingPPFwastakentohaveagreedtocomplywithPAFGuidelines.OnlyaconstitutionalcorporationcanbeatrusteeofaPAF.
TheadministrationofPAFswasvestedfullyintheCommissionerofTaxation,subjecttosometransitionalprovisions.TheCommissionerhaspowerto:
• endorsePAFsasdeductiblegiftrecipientsandtaxconcessioncharitiesorincometaxexemptfunds;
• revokeendorsement;
• imposeadministrativepenaltiesontrustees,andtheirdirectors;and
• suspend,removeandreplacetrustees.
ThelegislativechangesarecontainedinTax Laws Amendment (2009 Measures No. 4) Act 2009(Cth)whichreceivedRoyalAssenton18September2009.ThePAFGuidelinesweresignedon28September2009andamodeltrustdeedwasreleasedsoonafterbytheAustralianTaxationOffice.
ThePAFGuidelinesarealegislativeinstrumentandsohavelegaleffect,incontrasttotheguidelinesthatappliedtoPPFs.PAFsmustagreetocomplywiththeGuidelines.
Main requirements in Guidelines
Ineachfinancialyear,aPAFmustdistributetodeductiblegiftrecipientsanamountequaltoatleast5%ofthemarketvalueofitsnetassetsasattheendofthepreviousfinancialyear.ThemarketvalueoftheassetsmustbeestimatedasspecifiedintheGuidelines.
APAFmustnotacquireacollectable,maynotcarryonabusiness,andmaynotsolicitdonationsfromthepublic.APAFisalsolimitedinthedonationsitcanacceptfrom‘outsiders’.
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APAFmusthaveandmaintainacurrentinvestmentstrategyandsubjecttosomeexceptions,maynotborrowormaintainanexistingborrowing.ThetrusteemustprepareandmaintainacurrentinvestmentstrategymeetingtherequirementsofthePAFGuidelines.Specialobligationsarealsoimposedontheindependentresponsiblepersonontheboardofdirectorsofthetrustee.
TheGuidelinescontainsomeexceptions/qualificationsinrespectoftheaboverules,andtheGuidelinesandActcontaintransitionalprovisionsinrespectofcertainPPFsthatexistedbefore1October2009.
ThenewregimedoesnotaffectthebasictaxconcessionsthatappliedtoPPFs.Itis,however,essentialthatthetrusteeofeachexistingPPFanditsdirectorsexaminethenewlegislationandthePAFGuidelinescarefullytoensuretheirPAFcomplieswiththem.
Further information
ThematerialsoutlinedbelowcanbelocatedontheATOwebsite(www.ato.gov.auandbysearchingfor‘PAF’).
• TheTax Laws Amendment (2009 Measures No 4) Act 2009,Schedule2PrivateAncillaryFunds;
• Explanatory Statement to PAF Guidelines(28September2009);
• ATO Non-Profit News Services,No.0246,1July2009;No.0253,14September2009;andNo.0258,15October2009;
• Private Ancillary Fund Model Trust Deed;
• Endorsement as a Deductible Gift Recipient,NAT2949;
• AgreementtocomplywiththerulesinthePAFGuidelines;
• Revocation of the agreement to comply with the rules in the PAF Guidelines;
• Private Ancillary Fund – Schedule for deductible gift recipient applicants;
• TransitionalarrangementsforPPFs;
• Private Ancillary Fund Guidelines 2009(undertheTaxation Administration Act 1953 )areavailableontheFederalRegisterofLegislativeInstrumentsatwww.frli.gov.au–seewww.ato.gov.au/nonprofit/content.asp?doc=/content/00216088.htm.
TheATOisalsointendingtoissueadetailedlistofFAQs.
5.2 national rEntal affordability schEMEMark Fowler, Neumann and Turnour Lawyers
TheNationalRentalAffordabilitySchemecommencedwiththeenactmentoftheNational Rental Affordability Scheme Act 2008(Cth),theNational Rental Affordability Regulations 2008 (Cth)andnewlyinsertedDivision380oftheIncome Tax Assessment Act 1997(Cth)( ITAA97).TheScheme’sprincipalaimistostimulatetheconstructionof50,000newdwellingsacrossAustralia.Thesedwellingsaretobelettotenantswhomeetmeans-testedeligibilitycriteriaforamaximumof80%ofthethencurrentmarketrent.
ApplicantsareinvitedtosubmittenderstotheDepartmentofFamilies,Housing,CommunityServicesandIndigenousAffairs,theCommonwealthdepartmentresponsibleforoverseeingtheScheme,forashareof50,000individual‘allocations’,eachofwhichislinkedtoan‘approvedrentaldwelling’.Theseallocationsaretobereleasedacrossthreerounds.Atthetimeofpublication,roundsoneandtwowereclosedwiththefinal
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roundremainingopento31August2010.Theholderofanallocation(‘theapprovedparticipant’)willbeentitledtoanannual‘incentive’intheamountsdisplayedatTable2(toincreaseinlinewithConsumerPriceIndex).
TABLE 2 : INCENTIVES
Contributed by Amount
Australiangovernment $6504.00
State/Territorygovernment $2168.00
Total $8672.00
UnderDivision380oftheITAA97theapprovedparticipantmaybeoneofthefollowing:
• anindividual;
• apartnership;
• atrust;or
• aparticipantina‘non-entityjointventure’.
Subjecttotheindividualtaxcircumstancesoftherecipient,theincentivemaytaketheformofeitherataxoffsetcertificate,orapayment.Entitlementtoanincentivewillbedeterminedbytheproportionofactualrentreceivedbytheinvestor,whichinturnisconsequentuponthestructuringoftheapprovedparticipant.Ongoingentitlementtotheincentiveisconditionaluponsatisfactionofongoingreportingandcompliancerequirements.IndividualStategovernmentrequirementsvaryacrossAustralia.
Nonprofit involvement
Giventhestronghistoricalinvolvementofthenonprofitsectorinaffordablehousing,fromitsinceptiontheSchemeanticipatedtheparticipationofthesector.EnactmentstotheExtension of Charitable Purpose Act 2004(Cth)wereintroducedtoensurethecharitableendorsementsofNFPswouldnotbeaffectedbyparticipationinrounds1and2oftheScheme.SubsequentlytheTreasurerhasexpressedhisviewthat,subjecttothecircumstancesoutlinedintheCommissioner of Taxation v Word Investments Ltd,8NFPsparticipatingintheSchemewillretaintheircharitableendorsementsunderthetaxlawswheretheydirectsurplusfundsgeneratedfromtheirparticipationintheSchemetowardstheircharitablepurpose.
ThereareseveralformsthatNFPparticipationintheSchememaytake,includingpropertyandtenancymanagement,jointequityinvolvement,syndicationoroutrightownership.ThenovelaspectformanyNFPprovidersenteringtheSchememaybethelevelofdirectengagementwithprivateandinstitutionalinvestorsandconsequently,thetensionbetweenmarketimperativesandtenantinterests.
ThedifferentpotentialmanifestationsofnonprofitinvolvementareperhapsbestillustratedbyasampleofthepropertystructuresthatarecurrentlybeingutilizedwithintheScheme.
8 CommissionerofTaxationvWordInvestmentsLtd(2008)236CLR204.
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Property Structuring
1. HeadLeaseModel,comprisingnon-entityjointventure
NFP
GOVERNMENT OWNER
TENANT
Residential Tenancy
Agreement
Rent 80% Market Value
Incentive
Rent Lease (NEJV)
AtthetimeofprintingtheTreasurerandMinisterforHousinghaveflaggedtheirintentiontointroducelegislativechangetoclarifyfurtherthetaxationconsequencesofentrancetothismodel.9
2.RentalUnitTrust
NFPas trustee For
reNtal uNit trust
GOVERNMENT
OWNERTENANT
Residential Tenancy
Agreement
Rent 80% Market Value
Incentive
Distribution Rent
Incentive
Owner purchases Units
in the Trust equivalent to rental value
LEASE
9 ATOInterpretiveDecisionNo.2009/146providesfurthercommentaryonthenon-entityjointventuremodelwhereittakestheformofaHeadLease,andinparticularthepartiesentitledtoreceiptoftheincentivewithinsuchamodel.TheillustrationgivenshouldbereadinconjunctionwiththatInterpretiveDecision.
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3.DirectOwnership
NFP
GOVERNMENT
TENANT
Residential Tenancy
Agreement
Rent 80% Market Value
Incentive
IneachoftheabovemodelstheNFPmayconductthefollowing:
• ApplicationtoFederalGovernmentforIncentive(approvedparticipant);
• Tenancyandpropertymanagement(theNFPmayelecttosubcontractthisactivity);and
• CompliancereportingtoFederal(andState)Government.
Issuesrequiringtheconsiderationofthenonprofitinassessingthemeritsofindividualpropertystructuresmayinclude:
• Protectionoflongertermsecurityoftenureforresidentialtenants;
• Potentialliabilitytoinvestorsintheeventofnon-receiptoftheincentive;
• Occupier’sliabilityassublessorofproperty(iftheNFPistohaveexclusivepossessionoftheapprovedrentaldwelling);
• ConsequencesofsaleofapprovedrentaldwellingbyOwner;and
• GSTconcessionalbenefitsflowingfromcharitablestatus.
FurtherinformationontheSchemeisavailableatwww.fahcsia.gov.auandtheAustralianTaxOfficehavereleasedseveralexamplesofpropertystructuringarrangementsforparticipationinNRAS,availableontheirwebsitewww.ato.gov.au.ItisrecommendedthatnonprofitentitiesconsideringparticipationinNRASshouldseektheirownlegalandtaxationadvice.
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5.3 MonEy laundErinGHeather Watson, McCullough Robertson – Lawyers
Moneylaunderingisanimportantandnecessaryelementofanyorganisedcrimenetworkengagedincrimeswithafinancialreward.Moneylaunderingtechniquesarealsoemployedbyterroristorganisationstoaccessfundsrequiredtocarryoutterroristactivities.
Moneylaunderingistheprocessbywhichcriminalorganisationsattempttoconcealthetrueoriginandownershipoftheproceedsoftheircriminalactivities.Ifmoneylaunderingissuccessful,thoseproceedscanlosetheirapparentcriminalidentityandappearlegitimate.
In2006,theCommonwealthgovernmentenactedtheAnti-Money Laundering and Counter Terrorism Financing Act 2006 (Cth)(AML/CTFAct).TheAustralianTransactionsReportsandAnalysisCentre(AUSTRAC)istheregulatorybodyresponsibleforenforcingcompliancewiththeAML/CTFAct.TheActimposesvariouscomplianceobligationsonpersonswhoprovidecertain‘designatedservices’.Theseobligationsinclude:
a. identificationandverificationproceduresforcustomers;
b.suspiciousmatterreporting;
c. thresholdtransactionreporting;
d.AML/CTFActcompliancereporting;
e. cross-bordertransferreporting;
f. implementationofAML/CTFprograms;and
g.recordkeepingrequirements.
Section6oftheAML/CTFliststhedesignatedserviceswhicharecaughtbytheregime.Themajorityoflisteddesignatedservicescouldbedescribedasrelatingtotheprovisionoffinancialservices,suchasbankingactivities,loansbusinesses,certaindealingswithsecuritiesandactingasanagentforapersoninrelationtotheprovisionofafinancialservice.Gamblingservices,dealingsinpreciousmetalsandcashremittanceservicesarealsolisteddesignatedservices.
Potentially,theprovisionofa‘oneoff’designatedservicemaybecaughtbytheAML/CTFAct.Section5providesthatabusinessconcerningtheprovisionsofadesignatedserviceincludes:‘Aventureorconcernintradeorcommerce,whetherornotconductedonaregularrepetitiveorcontinuousbasis’.
AUSTRAChaspublisheditsinterpretationof‘carryingonabusiness’initsPublic Legal Interpretation,No.4of2008,whichprovidesthat:‘Itisnotessentialthattheactivitiesbeundertakenforgainorprofit,butthattheactivitiesmustoccuraspartofaventureorconcernintradeorcommerce’.BasedonAUSTRAC’sassessment,itwouldappearthatnonprofitactivitieswhichinvolvetheprovisionofadesignatedservicewillfallwithinthescopeoftheAML/CTFAct.
NonprofitentitieswhoareincidentallyinvolvedintheprovisionofadesignatedservicesmayalsoberequiredtocomplywiththeAML/CTFAct,dependinguponthescopeoftheiractivities.Forexample,anonprofitentityprovidingfinancialaccommodationtoindividualsintheformofaloanmayberequiredtocomplywiththeAML/CTFAct.
NonprofitentitiesshouldseeklegaladviceiftheyareunsurewhethertheiractivitiesmaybecaughtbytheAML/CTFAct.MoreinformationinrelationtotheActcanbefoundatwww.austrac.gov.au.
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5.4 workPlacE hEalth and safEtyNathan MacDonald, PilchConnect
On1February2008,theWorkplaceRelationsMinisters’CouncilagreedthatthebestwaytoachieveuniformityofAustralia’soccupationalhealthandsafety(OHS)lawsisthroughthedevelopmentofmodellegislation.10ThisprocessincludestheimplementationofamodelOHSAct,modelOHSregulationsandmodelOHScodesofpractice.
On11December2009,SafeWorkAustraliareleasedthemodelWork Health and Safety Act (ModelAct).DependingonwhatstateorterritoryOHSlawsyouarefamiliarwith,theModelActrepresentsvaryingdegreesofchangefromexistingOHSframeworks.
Primary duty of care
Asastartingpoint,theModelActimposesaprimarydutyofcareonany‘personconductingabusinessorundertaking’toensure,asfarasisreasonablypracticable,thehealthandsafetyofworkers.Volunteersareincludedinthedefinitionof‘worker’andarethereforeowedthesamedutiesundertheModelActaspaidemployees.11
TheModelAct’sprimarydutyofcaredoesnotdistinguishbetweenoperationsthatareconducted‘for-profit’,andthosethatare‘nonprofit’.However,theModelActexcludes‘volunteerassociations’fromthedefinitionof‘conductingabusinessorundertaking’,whicheffectivelymeansthattheseorganisationsdonotowethisprimarydutytotheirworkers.Section5(5)definesa‘volunteerassociation’as:
agroupofvolunteersworkingtogetherforoneormorecommunitypurposeswherenoneofthevolunteers,whetheraloneorjointlywithanyothervolunteers,employsanypersontocarryoutworkforthevolunteerassociation.
Itcanbeinferredfromthisdefinitionthatonceanorganisationtakesonjustonepaidemployee,itwillnolongerbedeemeda‘voluntaryassociation’andthereforewillbeunabletorelyontheModelAct’sexclusion.Howthisappliestoorganisationsthatengagepart-timecontractorsorperiodicpaidstaff(e.g.,abookkeeper)remainstobeseen.
Other duties of care
TheModelActimposesfurtherdutiesofcareinrelationtocertainactivities,particularlywherethereis‘managementandcontrol’ofaworkplace.TheModelActdefinesa‘workplace’asaplacewhereworkiscarriedoutforabusinessorundertakingandincludesanyplacewhereaworkergoes,orislikelytobe,whileatwork.Itishopedthatthisdefinitionisclarifiedfurthertoprovidecertaintytothenonprofitsector,whichoperatesinmanynon-traditionalworkplacessuchasprivateresidencesandpublicspaces.
WhereanorganisationowesadutyundertheModelAct,anofficer12ofthatorganisationmustexerciseduediligencetoensurethatdutyiscompliedwith.
10 WorkplaceRelationsMinisters’Council,Communiqué,1February2008,www.workplace.gov.au/NR/rdonlyres/31BED76B-2655–4CDF-952F-
E84FE0CD3469/0/WRMC75AgreedCommunique.pdf(accessed18February2010).11 Section7oftheModelAct.12 Asdefinedatsection9oftheCorporationsAct2001(Cth).
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Offences
TheModelActintroducesthreecategoriesofoffenceswhereapersonisfoundtohavebreachedasafetyduty.
Category 1offencesarethemostseriousandconsequentlyprovideforthemostseverepenalties.Thiscategoryisreservedforpersonswhobreachasafetydutywhichcausesseriousinjuryordeath(orahighriskofthisoccurring),andwherethatpersonisfoundtoberecklessastotheseconsequences.
Category 2offencesapplytopersonswhohavebreachedasafetydutyinthesamecircumstancesasCategory1,butarenotfoundtohavebeenreckless.
Category 3providestheleastseverepenalties,andincludesallotherbreachesofthesafetydutiesnotfoundtofallwithinthefirsttwocategories.
Treatment of volunteers
WhilevolunteersareoweddutiesundertheModelActasworkers,theyareexemptfromincurringliabilityunderthemajorityoftheoffenceprovisions.However,volunteersmaystillbeliablewheretheyfailtocomplywiththedutytotakereasonablecarefortheirownhealthandsafety,orwheretheyfailtotakereasonablecaretoensurethattheiractionsdonotadverselyaffectthehealthandsafetyofothers.13
Theterm‘volunteer’isdefinedintheModelActasapersonwhoisactingonavoluntarybasis,irrespectiveofwhetherthepersonreceivesout-of-pocketexpenses.14Thevolunteerexclusionfromtheoffenceprovisionsisthereforerelevantforvolunteercommitteeorboardmembers,orvolunteermanagerswhomightotherwisebeconsideredtobeconductingabusinessorundertakingandwouldthereforeincurliability.
From here
TheModelActisthefirststageofreforms,withregulationsandacodeofpracticestilltobedevelopedin2010.SafeWorkAustraliahasindicatedthattherewillbefurtherpublicconsultationthroughoutthisprocess.Itintendstohavealljurisdictionsenactthemodellawsbytheendof2011.
Resources
PilchConnect’sfreemonthlye-bulletin(seee-bulletinlinkon:www.pilch.org.au/PCLawReform)providesupdatesofVictorianandrelevantnationallegislativechangesandproposedlawreforms.Tosubscribepleaseemailconnect@pilch.org.au.
5.5 chanGEs to thE workPlacE rElations rEGiME
Tim Longwill, McCullough Robertson
Anumberofemployersacrossthecountry,includingnonprofitorganisations,havebeenaffectedbythecommencementoftheFair Work Act 2009 (Cth)(theAct).From1January2010,allstatesexceptWesternAustraliareferredtheirindustrialrelationspowertotheFederalgovernment.ThismeansthatthemajorityofAustralianemployers,
13 Section33oftheModelAct.14 Section4oftheModelAct.
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includingthosethatarenot‘constitutionalcorporations’,arenowcoveredbythefederalregime.Thisarticlebrieflyoutlinessomeofthemajorchangesaffectingemployersinthenonprofitsector.
Introduction of the National Employment Standards
TheNationalEmploymentStandards(NES)setouttheminimumstandardsapplicabletoallnational-systememployeesfrom1January2010.TheNESeffectivelyintroducethefollowingfivenewstandards:
1. therightofanyemployee,whoistheparentorcarerofachildunderschoolage,oradisabledchild,torequestflexibleworkingarrangements;
2. therighttobeabsentfromworkinordertoconductrecognisedcommunityserviceactivities.Theseactivitiesarecurrentlylimitedtojuryserviceandvoluntaryemergencymanagementduties;
3.anentitlementtoredundancypay(althoughthereisanexceptionforsmallenterprises);
4.aneligibleemployee’sentitlementto12monthsofunpaidparentalleaveonthebirthoradoptionofachildandtheirrighttorequestanextensionofparentalleaveforafurtherperiodofupto12months;and
5.anemployer’sobligationtogiveeachnewemployeeaFairWorkInformationStatement(whichmaybedownloadedfromwww.fairwork.gov.au)assoonaspracticableaftertheycommenceemployment.
TheNESalsoconfirmsthat:
• employees’hoursofworkmustnotexceed38hoursperweek;and
• eligibleemployeesareentitledto:
• annualleave;
• personalleave,carer’sleaveandcompassionateleave;
• longserviceleave;and
• publicholidays.
ItisimportantforemployerstonotethattheNESwillapplytoallemployeesregardlessofanyagreementsbetweentheemployerandtheemployee.AnycontractualprovisionwhichisinconsistentwiththeNESwillnolongerbevalid.Althoughthiswillnotinvalidatetheremainingtermsofanyemploymentcontract,employersmaywishtoconsiderupdatingtheircontractstoreflectthesechanges.
Introduction of modern awards
Generallyspeaking,modernawardsalsocommencedapplicationon1January2010.However,specialtransitionalarrangementsareinplacefororganisationswhichonlybecamesubjecttothefederalregimeduetothe‘referralofpowers’legislation.Thesearrangementswillaffectalargenumberofnonprofitorganisationswhicharenotconstitutionalcorporations.Inmostcasesmodernawardswillnotapplytotheseorganisationsuntil1January2011.However,itisimportanttonotethatthereisanexceptiontothisruleiftherewasnoStateawardapplyingtotheorganisationinquestionon1January2010.
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Foremployerswhoareconstitutionalcorporations,transitionalarrangementshavebeenintroducedintoeachmodernaward,permittingthe‘phasingin’ofnewfinancialprovisions.Thismeasureisintendedtoeasetheburdenoftheintroductionofnewpayscalesonbothemployersandemployees.
Allemployersshouldfamiliarisethemselveswithanyrelevantmodernawardswhichmayapplytotheirorganisations.Modernawardsmaybedownloadedfromwww.airc.gov.au/awardmod/fullbench/awards.htm.
Other relevant changes
AnumberofotherchangeshavebeenintroducedbytheAct.Theseinclude:
• changestounfairdismissallaws,includingtheintroductionoftheSmallBusinessFairDismissalCodeforemployerswithfewerthan15employees;
• theintroductionof‘workplacerights’laws,whichprohibitanyadverseactiononthebasisoftheexerciseofanemployee’sworkplaceright;
• amended‘rightofentry’lawssettingoutthecircumstancesinwhichaunionofficialcanenteraworkplace;and
• theformationofFairWorkAustraliaandtheFairWorkOmbudsman.
Further advice
Althoughthisarticleaimstoprovideabriefoutlineofthemajorchangesaffectingnonprofitorganisations,pleasebearinmindthattheAct introducesacomplexnewindustrialrelationsregime.Inanumberofrespects,theapplicationoftheActtoeachorganisationwillbeaffectedbytheirindividualcircumstances.Independentadviceshouldthereforebesoughttoensurecompliancewiththenewlaws.
Inparticular,assistancemayberequiredtodeterminewhetheranorganisationisaconstitutionalcorporation,whichwillaffectmodernawardcoverage(althoughformanyorganisationsthisexercisewillalreadyhavebeenundertakenundertheWorkChoicesregime).Advicemayalsoberequiredtonavigatethetransitionalprovisionsforawards,particularlyforemployersthatarenotconstitutionalcorporations.
5.6 coMPaniEs liMitEd by GuarantEEMatthew Turnour and Nathan Rieck, Neumann and Turnour Lawyers
InDecember2009theCommonwealthgovernmentannouncedproposedchangestothelawsregulatingthereportingrequirementsforcompanieslimitedbyguarantee.Theproposedchangesaretosimplifythereportingrequirementsforcompanieslimitedbyguaranteedependingupontheirannualrevenueandtheirtaxdeductibilitystatus.Thesechangesappeartobebasedonadesiretosimplifythereportingrequirementsofsmallentitiesandreducethecostsofcomplyingwiththerequirementswhilstensuringthatallrelevantinformationismadeavailabletothosewhowouldbemostadverselyaffectedshouldacompanybecomeinsolvent.Thesechangesformpartofawideragendaacrossthecommonlawworldtoreformcorporationsthroughwhichcitizensparticipateincivilsociety.Inthisoverviewtheproposedchangesaresummarisedandlocatedintheinternationaldiscourse.
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Current Legislation and Proposed Changes
Underthelegislation,asitcurrentlystands,companieslimitedbyguaranteeareregulatedasotherpubliccompaniesandassucharerequiredtocomplywiththesubstantialreportingrequirementsimposeduponthem.
AsthemajorityofcompanieslimitedbyguaranteeinAustraliaaresmall,community-basedorcharityorganisations,thesereportingrequirementscanbecomequiteonerous.Theproposedchangesseektocategorisecompanieslimitedbyguaranteeintooneofthreetiersaccordingto(a)theannualrevenueofthecompanyand(b)thetaxdeductibilitystatusofthecompany.Thereportingrequirementsvaryforeachtier.ThefollowingtablesetsouttheproposedreportingrequirementsforeachofthetiersassetoutintheCorporate Amendment (Corporate Reporting Reform) Bill 2010(Cth).
TABLE 3 REPORTING REQUIREMENTS FOR THREE TIERS UN
Tier Qualifications Companies with: Reporting Requirements
FirstTier • Annualrevenuelessthan$250,000whichdonothavedeductiblegiftrecipientstatus.
• Companieswouldbeexemptfrompreparingthefinancialreportanddirectors’report.
SecondTier • Annualrevenuelessthan$250,000thataredeductiblegiftrecipients;or
• Annualrevenueof$250,000ormorebutlessthan$1million,irrespectiveofwhetherthecompanyisadeductiblegiftrecipient.
• Prepareafinancialreportwhichtheycouldelecttohavereviewedratherthanaudited;
• Prepareastreamlineddirectors’report,ratherthanafulldirectors’report;and
• Besubjecttoastreamlinedprocessfordistributingtheannualreporttomembers.
ThirdTier • Annualrevenueof$1millionormore,irrespectiveofwhetherthecompanyisadeductiblegiftrecipient.
• Continuetoprepareanauditedfinancialreport;
• Prepareastreamlineddirectors’report,ratherthanafulldirectors’report;and
• Besubjecttoastreamlinedprocessfordistributingtheannualreporttomembers.
Streamlined Directors’ Report
Insteadofthereportingobligationsrequiredofapubliccompanywhichcompanieslimitedbyguaranteearecurrentlyrequiredtocomplywith,undertheproposedamendments,theannualDirectors’Reportforsecondandthirdtiercompaniesneedonlyaddressthefollowing:
• StrategicIssues:
• Shortandlongtermobjectivesofthecompany;
• Strategyforachievingtheobjectives;
• Activitiesundertakenbythecompany;
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• Howtheactivitiesassistinachievingobjectives;
• Performancemeasures;
• Governanceissues
• Detailsofdirectors;
• Qualificationsofdirectors;
• Numberofmeetings;
• Amountthatmembersareliabletocontributeifthecompanyiswoundup(byclassandintotal).
FirsttiercompaniesarenotrequiredtoprepareaDirectors’Report.
Review of Financial Reports
Underthecurrentlegislation,companieslimitedbyguaranteearerequiredtohavetheirreportsauditedbyaregisteredcompanyauditor.Theproposedstreamlinedprocessaimstoreducecosts.Ratherthansubjectallcompanieslimitedbyguaranteetoacompleteaudit,companiesthatfallintothesecondtiermayelecttoundertakeareviewprocessbyaregisteredcompanyauditororamemberofaprofessionalaccountingbodywhoholdsapractisingcertificate.Thisallowsmorepeopletoundertakethereviewprocessandshouldreducecompliancecosts.
Thereviewprocess,asopposedtoanaudit,isnotdesignedtoprovideanyassurancethatthefinancialreportsarefreefromerror.Thereviewprocessconsistsofapreliminaryinvestigationandreviewoffinancialandaccountingprocessesandthepeopleinvolvedintheseprocesses.Thiswillbringsomemattersofconcerntotheattentionofthedirectorsbutdoesnotcoverthedetailrequiredtoprovidecompleteassurances.
Undertheproposedamendmentsthereviewprocesswillonlybeanoptionavailabletosecondtiercompanieslimitedbyguarantee.Firsttiercompanieslimitedbyguaranteewillnotberequiredtopreparefinancialreportswhilethirdtiercompanieslimitedbyguaranteewillstillberequiredtopreparefullyauditedfinancialreports.
Streamlined Distribution Process
Companieswhichfallwithinthesecondandthirdtiersandwhichdonothavethetechnologyfacilitiesavailabletomaketheirannualreportsavailabletomemberselectronicallywouldberequiredtowritetotheirmembersandinformthemthatthereportshavebeenpreparedandhowtheycanobtainprintedcopies.
International Context
Thesechangesarelikelytosimplifyandreducethecostoftheregulatoryandreportingrequirementssignificantlyformostclubsandcharitableorganisations.However,theyfallalongwayshortoftheinternationaldevelopmentsinlegislationtofacilitateandencourageparticipationinthevoluntarysector.
ThemostrecentdevelopmentofthisbodyoflawisinCanadawhereanon-profitcorporationstatute,theCanada Not-for-Profit Corporations Act 2009,hasbeenpassedbutisnotyetlaw.IntheUnitedKingdom,EnglandandWalesnowhavespecialistcivilsocietyfacilitatingentitiesintheformoftheCharitableIncorporatedOrganisationandCommunityInterestCompany.In2008,theStateofVermontintheUnitedStatesofAmericapassedspecialistlegislationfacilitatingnonprofittradingentitiescalledL3Cs.
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Conclusion
Withthesechanges,theAustraliangovernmenthasnottakentheopportunitytobuildfrominternationaldevelopments.Insteadtheproposedchangeshavebeenrelativelyminor.Theyare,however,likelytobewellreceivedinthesectorandshouldsimplifyproceduresformanycompanieslimitedbyguarantee.
5.7 riGht to inforMation and inforMation PriVacyLinda Lavarch, The Australian Centre for Philanthropy and Nonprofit Studies
Untilrecently,informationheldbytheQueenslandgovernmentwasregulatedbytheFreedom of Information Act 1992(Qld)(FOIAct).ThisActanditslegislativeframeworkoperatedtoprovideanavenueforthepublictoaccessinformationheldbygovernment,includingpersonalinformation.Itwasnotintendedtoapplytotheprivatesectorandthereforeonlyhadaminorimpactontheoperationsofnonprofitorganisations.Theprincipallegislationregulatingpersonalinformationheldbytheprivatesector,includingnonprofitorganisations,isaCommonwealthAct,thePrivacy Act 1988(Cth).
However,in2008thegovernmentreleasedareport,The Right to Information: Reviewing Queensland’s Information Act,whichhasledtosignificantreformtotherighttoinformationandtheprivacyininformation,chieflytheenactmentoftheRight to Information Act 2009(Qld)andtheInformation Privacy Act 2009(Qld).ThesetwoActshavethepotentialtohaveagreaterimpactontheprivatesectorincludingnonprofitorganisations.
ThisarticleaimstooutlinebroadlythemostsignificantimpactthechangesmighthaveonanonprofitorganisationandbrieflyoutlinestheproposedchangestoCommonwealthprivacylawsthatmayaffectnonprofitorganisations.
Changes in the new Queensland Acts
TheRight to Information Act 2009(RTIAct)andtheInformation Privacy Act 2009( IPAct)operatetocomplementeachotherandtogethertheyreplacetheFreedom of Information Act 1992(Qld)(FOIAct).TheRTIActgivesalegalrighttoaccessinformationinthegovernment’spossessionandunderitscontrolunlessitiscontrarytothepublicinteresttogivetheaccess.Itdealswithnon-personalinformation.TheIPActgivesaccessto,ortherighttoamend,anapplicant’spersonalinformation.
WhiletheprovisionsofbothActsareaimedpredominantlyatthepublicsector,thereversalofthetestforthereleaseofdocumentsandthebroadeningofthecoveragemayseetheirapplicationtothenonprofitsectorchange.UndertheoldFOIActrégime,theprinciplewasthatinformationshouldonlybereleasedwhenitwasinthepublicinteresttodoso.UnderthenewRight to Information Acttheapproachnowisthatinformationshouldbereleasedunless,onbalance,itisnotinthepublicinteresttodoso.Thenewapproachtoaccesstoinformationadoptsa‘push’modelratherthantheprevious‘pull’model–i.e.thestartingpointispro-disclosure,ratherthanpro-protection,ofinformation.
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Privacy
Priortotheenactmentofthe2009Acts,QueenslanddidnothaveanyprivacylegislationwiththeexceptionoftheInvasion of Privacy Act 1971whichdoesnotgiveageneralprotectionforprivacyorpersonalinformation.TheIPActintroducesanewframeworktosafeguardthehandlingofpersonalinformationheldinthepublicsectorenvironment,thatispersonalinformationheldbyagencies.InordertounderstandthechangesmadetoprivacylawsinQueenslandandthepossibleimpactonnonprofitorganisationstherearetwocriticaltermsthatmustfirstbedefined:
‘PersonalInformation’:theIPActhasthesamedefinitionastheCommonwealthPrivacy Act 1988.Thistermcoversanyinformationoropinionthatidentifiesapersonorcouldbeusedtoidentifyaperson.
‘Agency’isdefinedinsection18oftheIPAct(formostpurposesoftheAct)as:
a.aMinister;or
b.adepartment;or
c. alocalgovernment;or
d.apublicauthority,whichisanybodycreatedbyanActofparliamentforapublicpurpose.
(Anyboard,council,committeeetc,establishedtohelportoperformfunctionsconnectedwithanagencyistakentobepartoftheagency.)
TheActsetsoutinformationprivacyprinciples(IPPs)inSchedule3.Most‘agencies’mustcomplywiththeseprinciples(apartfromtheHealthDepartmentwhichmustcomplywiththenationalprivacyprinciples(NPPs)inSchedule4).
Application to the nonprofit sector
Thereareanumberofnonprofitorganisationsthatforvariouslegalreasonswerecreatedbyenactment,typicallyschoolsandchurches.Howeveritisunlikelytheywouldbeconsideredtobepublicauthorities(andthereforeagencies)becausetheyhavenotgenerallybeencreatedforapublicpurpose.(Schedule2oftheActspecificallyexemptsgrammarschoolstowhichtheGrammar Schools Act 1974(Qld)applies.)
ForothernonprofitorganisationsestablishedbylegislationtheywouldonlybecaughtbytheprovisionsofthisActiftheymetthepublicpurposetest.Theexceptiontothiswouldbethoseorganisationswhicharesupporteddirectlyorindirectlybygovernmentfundsorotherassistance,oroverwhichthegovernmentisinapositiontoexercisecontrol.AnexampleofthistypeoforganisationwouldbeahospitalfoundationcreatedundertheHospital Foundations Act 1982(Qld).
However,organisationsthatprovideservicesonbehalfofthegovernmentwillprobablybeconsideredtobepublicauthorities.ThisisbecauseofChapter2.
Chapter2oftheIPActregulatescompliancewiththeprivacyprinciples.Part4ofChapter2binds‘contractedserviceproviders’tocomplywiththeprivacyprinciples.ThisislikelytohavethegreatestimpactuponQueenslandnonprofitorganisations,asanorganisationthatmakesacontractorarrangementtoperformoneormorefunctionsofanagencymustcomplywithPart1or2andPart3ofChapter2,iftheydealwithortransferpersonalinformationunderthearrangementwiththegovernmentagency.
ThereislittleguidanceintheActastowhatismeantby‘functionofanagency’,andgiventhewidevarietyandconstantlychangingrolesperformedbygovernmentitis
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impossibletocreateanexactlistofagencyfunctions.Anynonprofitorganisationthatcontractstoprovideaserviceforanagencyshoulderronthesideofcautionandassumethatitisperformingafunctionoftheagency.
Anonprofitorganisationthatentersintoanarrangementtoprovideservicesfortheperformanceofoneormoreofagovernmentagency’sfunctionsmustcomplywiththeIPPsinSchedule3;orifitcontractstoprovideservicesfortheHealthDepartment,itmustcomplywiththeNPPsinSchedule4.Generallyspeakingtheseprinciplesdealwiththewayanorganisationcancollect,store,useandaccesspersonalinformation.ThesenonprofitorganisationsmustalsocomplywiththerequirementsabouttransferringpersonalinformationoutsideofAustralia(Part3ofChapter2).
Undersection35,theobligationisplacedonthegovernmentagencytoensurethatitscontractedserviceprovider‘isrequiredtocomplywithpart1or2andpart3[ofChapter2],asifitweretheagency,inrelationtothedischargeofitsobligationsunderthearrangement’.Thisappliesonlyifthecontractedserviceproviderwilldealwithpersonalinformationonbehalfofthecontractinggovernmentagency;ortheprovisionofservicesunderthearrangementwillinvolvetransferofpersonalinformationtotheagencyorwillinvolveprovidingservicestoathirdpartyfortheagency(seesection35(2)).
Undersection36,thecontractedserviceproviderhastocomplywiththeprivacyprincipleswhendischargingitsobligationsunderthearrangementwiththegovernmentagencyasifitwerethegovernmentagency.It’simportanttonotealsothatthenonprofitorganisationcontinuestobeboundbytheprivacyprinciples‘inrelationtopersonalinformationitcontinuestohold’,evenaftertheservicearrangementisfinished(section36(2)).
Anynonprofitorganisationthatcontracts(whetherformallyorbyarrangement)toprovideaserviceforanagency,shouldalwayscheckwhetheritwillbecaughtbytheprovisionsoftheIPAct.TheOfficeoftheInformationCommissioner(Qld)hasproducedanumberofresources,including‘Contractedserviceproviders–achecklistforagencies’,availableonlinefromwww.oic.qld.gov.au/toolkit
The test
Chapter3oftheIPActgovernsaccesstopersonalinformation.Anindividualcanapplytotheagencytoaccessherorhisownpersonalinformationandtoamendinaccurate,outdatedormisleadingpersonalinformationindocumentsheldbytheagency.Section40oftheActlimitsaccessonlytodocumentsthatcontaintheapplicant’spersonalinformation(althoughthedocumentsmaycontainotherinformationaswell;irrelevantmaterialmaybedeletedbeforeaccessisgiven:section88).Section54oftheActsetsoutthestepstobeundertakenbytheagencytoassesswhethertheapplicationcanbemadeunderthisAct.
Thepro-disclosureapproachisinsection64,i.e.theagency(orcontractedserviceprovider)shoulddecidetogiveaccesstothedocumentunlessgivingaccesswould,onbalance,becontrarytothepublicinterest.Thereisarighttorefuseaccesstodocumentsundersection67.Thisrequiresconsiderationofwhetherthereleasewouldbecontrarytothepublicinterest,andthegroundsonwhichaccessmayberefusedaretobeinterpretednarrowly.Refusalofaccessrequiresaninformeddecisionbythedecision-makerintheorganisation.
Right to Information
TheRight to Information Act 2009(RTIAct)appliestoapplicationsforinformation,otherthanpersonalinformation,whichisheldbyan‘agency’.ApplicationsrelatingtopersonalinformationmustbemadeundertheIPActasoutlinedabove.
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Section14oftheRTIActdefinesan‘agency’as:
a.adepartment;or
b.alocalgovernment;or
c. apublicauthority(asdefinedinsection16);or
d.agovernmentownedcorporation;or
e. asubsidiaryofagovernmentownedcorporation.
TheRTIActismostlyconcernedwiththemechanicsofmakinganapplication,andwiththeoperationoftheOfficeoftheInformationCommissioner.TheActgivestherighttoaccessdocuments,definedinsection12tomeandocumentsinthepossessionorunderthecontroloftheagency,includingdocumentstheagencyisentitledtoaccess.
Application to nonprofit organisations
Importantlyfornonprofitorganisationswhicharefundedbygovernmentagenciesorwhichcontracttoprovideservicesforgovernmentagencies,documentsinthepossessionorcontrolofthegovernmentagency,whichrelatetotheirfundingorserviceproviderarrangement,maybesubjecttoarighttoinformationrequest.However,theinformationrequestwouldbetothegovernmentagency,nottothenonprofitorganisation.ThiswouldalsohavebeenthecaseunderthepreviousFOIAct,buttheapproachtoreleaseofinformationhaschangedasoutlinedabove,i.e.theapproachisnowpro-disclosureofinformationratherthanpro-protectionofinformation.Itisalsoimportanttonotethat,undersection37anagencymustnotdiscloseinformationwheredisclosurewouldbeofconcerntoarelevantthirdparty,withoutfirstinformingthethirdpartyandgettingtheirresponse.Thiswouldberelevanttoanonprofitorganisationifanapplicationweremadeforaccesstodocumentsrelating,forexample,totheirfundingagreementorserviceprovidercontract.Thenonprofitmustbeaskedforitsviewaboutwhethertheinformationisexemptoritwouldnotbeinthepublicinteresttodiscloseit.
FormoredetailedinformationgotothewebsiteoftheOfficeoftheInformationCommissioner(Queensland):www.oic.qld.gov.au
Proposed Changes to the Privacy Act 1998 (Cth)
TheAustralianLawReformCommission(ALRC)publishedtheFor Your Information: Australian Privacy Law and PracticereportinAugust2008.Thisreportmade295recommendationsdesignedtosimplifyandimproveAustralia’sprivacylaws.Therecommendationsofthereportaretobeintroducedintwostagesoveraperiodofthreeyears.On14October2009SenatorLudwigpubliclyreleasedtheCommonwealthgovernment’sfirststageresponsetotheALRCreport,outliningthegovernment’spositionon197recommendationsrelatingto:
• developingasinglesetofPrivacyPrinciples;
• redraftingandupdatingthestructureofthePrivacy Act;
• addressingtheimpactofnewtechnologiesonprivacy;
• strengtheningandclarifyingthePrivacyCommissioner’spowersandfunctions;
• introductionofcomprehensivecreditreportingandenhancedprotectionsforcreditreportinginformation;and
• enhancingandclarifyingtheprotectionsaroundthesharingofhealthinformationandtheabilitytousepersonalinformationtofacilitateresearchinthepublicinterest.
TheCommonwealthgovernmentintendstoreleasedraftlegislationimplementingthefirststageresponseinearly2010.
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Implications for nonprofit organisations
AsaresultoftheexpansivechangesmadetotheQueenslandlawsregardingtherighttoinformationandinformationprivacyitisnowpossiblethatnonprofitorganisationswillberequiredtointroduceproperprotectionsforpersonalinformationincludingestablishingsystemstoreceiveanddecideapplicationsforaccesstopersonalinformationundertheIPAct.AnynonprofitorganisationplanningtocontractwiththeQueenslandgovernmenttoperformtheirservices,wherethearrangementwillinvolvereceivingortransferringanypersonalinformation,shouldfirstseekexpertadviceonestablishingpoliciesandsystemsforinformationprivacy.
FurtheritishighlylikelythattherewillbemajorchangestobothQueenslandandCommonwealthinformationprivacylawsinthenext12to18months.Itiscriticalthatallnonprofitorganisationskeeptheirinformationprivacysystemsuptodatewiththelaw.
5.8 disclosurE of ExPEnditurE on Political caMPaiGninGLinda Lavarch, The Australian Centre for Philanthropy and Nonprofit Studies
SincetheenactmentofthefirstCommonwealth Electoral Actin1902,politicaldonorshavebeenrequiredtofurnishreturnsiftheyhadspentanymoneyorincurredanyexpenseforapoliticalparticipant.OverthepastcenturytheCommonwealth Electoral Acthasbeensubjecttoanumberofamendmentssurroundingmeasuresthatsoughttoimproveintegrity,accountabilityandtransparency.
Overthistime,thirdpartyindividualsandorganisationsthatareindependentofpoliticalpartiesandcandidateshaveincreasinglyhadelectoralexpendituredisclosurerequirementsplaceduponthem.Inthepoliticalarenathereisafearthatthirdpartyindividualsorgroupswillbeusedasaloophole,tocircumventfinancialdisclosurerulesforcandidatesandpoliticalpartiesandasaconsequenceunderminethemeasuresputinplacetoensureaccountability,integrityandtransparencyintheelectoralsystem.
Nonprofitthirdpartiesplayacriticalroleinthedemocraticprocessincontributingtopublicdebatebyexpressingviewsonspecificissuesandadvocatingforchange.Theyplayacriticalroleactingasthelinkbetweenthecommunityandgovernmentconveyingimportantinformationtogovernmentsthatwouldotherwiseremainoutofthepublicarena.
In2006,thethenfederalgovernmentintroducedanumberofamendmentstotheCommonwealth Electoral Act 1918.OneoftheseamendmentsthathashadamajorimpactonthirdpartiesistherequirementforathirdpartytomakeanannualreporttotheAustralianElectoralCommission(AEC)documentingpoliticalexpenditure.Politicalexpenditureisbroadlydefinedbutrelatestoexpressinganopinionorviewonacandidate,partyorissueinanelection,forexample,the‘YourRightsatWork’campaignbytheAustralianCouncilofTradeUnions(ACTU).
Thereasongivenforthesereformshavingawiderreachthanpreviousdisclosurerequirementswasthatthemeasurewasnecessarytoensureaccountabilityandtransparencyandtogivevotersallrelevantinformationonthefinancingofcampaigns.Currentproposalstoamendtheexistingreportingregimealsohavethepotentialtodrawagreaternumberofnonprofitorganisationsand/ornonprofitactivitieswithintheCommonwealthElectoralAct’sdisclosureobligations.Soitisimportantthatnonprofitsbeawareofthereportingrequirementsundertheelectorallaws;andif,forexample,they
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areinvolvedinacampaignorstrategyexpressingaviewonanissuethatmayformpartofanelectioncampaign,theyshouldhaveasysteminplacetoidentifyandifnecessaryreportonwhathasbeenspentinthisregard.
Current Reporting Requirements under the Commonwealth Electoral Act 1918
Currently,individualsandorganisationsthatincur‘politicalexpenditure’abovethedisclosurethresholdarerequiredtolodgeanannualreturnwiththeAECby17Novemberineachyear.15(ThedisclosurethresholdisadjustedforCPIon1Julyeachyear;atpresentitis$11,200.)Thisreportmustdocumenttotalpoliticalexpenditureandidentifythevalueandsourceofdonationsusedtofundthepoliticalexpenditure.AnnualReturnFormsfor‘Thirdpartiesincurringpoliticalexpenditure’canbeaccessedviawww.aec.gov.au/Parties_and_Representatives/forms_handbooks/.
Politicalexpenditureisdefinedasexpenditureincurredbyapersonororganisation,orwiththeirauthority,on:
• publicexpressionofviewsonapoliticalparty,candidateinanelectionormemberoftheFederalParliamentbyanymeans;
• publicexpressionofviewsonanissueinanelectionbyanymeans;
• printing,production,publication,ordistributionofanymaterialthatisrequiredtoincludeaname,addressorplaceofbusiness16(allelectoraladvertisementsarerequiredtobeauthorisedatalltimes,includingadvertisementsontheInternet);
• broadcastofpoliticalmatterinrelationtowhichparticularsarerequiredtobeannounced;17
opinionpollingandotherresearchrelatingtoanelectionorthevotingintentionofvoters.
Theexpenditureonlyneedstobedirectlyrelatedtoanyofthecategoriesaboveanddoesnotinclude,forexample,amountsspentonadministrationortravel.Expenditureincurredtotallingmorethanthethresholdamountinthereportingyear(i.e.1Julyto30June)mustbereportedunderoneormoreofthefivespecifiedcategorieslistedabove.
‘Election’referstoageneralelectionoraSenateelection.TheelectionperiodisdefinedastheperiodcommencingonthedayofissueofthewritfortheelectionandendsatthelatesttimeonpollingdayatwhichanelectorinAustraliacouldenterapollingboothforthepurposeofcastingavote.18Anelectoraladvertisementisdefinedasanadvertisementintendedorlikelytoaffectvotinginanelection,includingcampaignadvertisementsbypartiesandorganisations.Inadditiontoreportingexpenditureabovethethreshold,giftsthataremorethanthethresholdamountwhichwereused,evenpartly,toincurthepoliticalexpenditureorreimbursetheamountspentaretobeincludedinthedisclosurereturn.
TheAECrecommendsthirdpartiesshouldconsiderthefinancialrecordingsystemsandproceduresnecessarytoenablethereturnformstobecompletedproperly.Thisentailsdocumentingandrecordingalltransactionsincludingadonationsregisterandretainingallrelevantreceiptsandinvoices.Recordsmustbekeptforthreeyears.Failuretolodgea
15 CommonwealthElectoralAct1918(Cth)s.314EB.16 CommonwealthElectoralAct1918(Cth)ss328and328A.17 BroadcastingServicesAct1992(Cth)Schedule2;seethebroadcastingguidelinesat
www.acma.gov.au.
18 CommonwealthElectoralAct1918(Cth)s.287.
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returnorretainrecordscanattractsignificantpenalties.19
Understandingwhatisandwhatisnotpoliticalexpenditurecanbedifficultforthirdparties.ThelackofguidancefromeitherfederalParliamentorthecourtsonwheretodrawthelinebetweenthenormaleverydayexpressionofviewsonanissueandtheexpressionofviewsinanelectionisespeciallyproblematic.Inresponsetothis,somethirdpartyorganisationsaresimplychoosingnottobeinvolvedinthepoliticalprocessasawayoferringonthesideofcaution.Althoughthisisachoicethatisunderstandableinthecircumstances,notbecominginvolvedinpublicdebateispotentiallyharmfultodemocracyinAustralia.
TheAEC’sFundingandDisclosureGuidecanbeviewedat:www.aec.gov.au/pdf/political_disclosures/handbooks/2009/ThirdParty-Guide.pdf.
Proposed Changes to the Commonwealth Electoral Act
InMarch2009,inresponsetoareportoftheJointStandingCommitteeonElectoralMatters,thefederalgovernmentintroducedintoParliamentaBillcontaininganumberofamendmentstotheCommonwealth Electoral Act.Threeoftheproposedamendmentswillaffectthirdparties’involvementinelectioncampaigns:
• Firstly,itisproposedthatthirdpartiesberequiredtolodgetheirreportswiththeAECdocumentingpoliticalexpenditureonceeverysixmonths(thenew‘reportingperiod’)insteadofannually.Aswell,thetimeperiodinwhichtolodgethereportwouldbereducedfromwithin20weeksaftertheendofthefinancialyearto8weeksaftertheendofthereportingperiod.
• Secondly,thefinesforprovidingmisleadingorfalseinformationinareporttotheAECwouldbesubstantiallyincreased.
• Themostsignificantproposalisthatthedisclosurethresholdbereducedtoaflatrateof$1,000.
Atthetimeofwriting,theBillhasfailedtopasstheSenate.Itislikelytobere-introducedtotheParliamentinthenearfuture.
States’ and Territories’ election expenditure disclosure requirements for third parties
Queensland
InQueensland,thirdpartieswhoincurexpenditureinanelectionperiodmustreportamountsof$200ormoreaftereachelection.Allbroadcasterswhobroadcastanadvertisementrelatingtotheelectionduringtheelectionperiodarerequiredtogiveareturnshowingdetailsoftheadvertisementsbroadcast.Publisherswhopublishadvertisementsrelatingtotheelectionduringtheelectionperiodarealsorequiredtogivereturnsifthetotalamountchargedfortheadvertisementsis$1000ormore.Reportsaretobefurnishedwithin8weeksaftertheelection.
FormoredetailsseeElectoralCommissionQueensland:www.ecq.qld.gov.au/asp
New South Wales
Thirdpartypoliticaldonorsarerequiredtoreportevery6monthswheretheyhaveincurred$1000ormoreofspecifiedelectoralexpenditure.Publishersandbroadcastersarenotrequiredtoreport.AnInquiryintopublicfundingofelectioncampaignsisbeingundertakencurrentlybytheElectoralMattersCommitteeoftheNSWParliament.
FormoredetailsseeNSWElectionFundingAuthority:www.efa.nsw.gov.au
19 SeeCommonwealthElectoralAct1918(Cth)s315.
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Western Australia
Thirdpartiesarerequiredtoreportaftereveryelectiononsumsofspecifiedelectoralexpenditurewherethetotalis$500ormore.Publishersandbroadcastersarenotrequiredtoreport.
FormoredetailsseeWAElectoralCommission:www.waec.wa.gov.au/pp_candidate/financial_disclosure
Victoria
Victoriadoesnothaveanyrequirementsforthirdpartiestodisclosecampaignexpenditure.
FormoredetailsseeVictorianElectoralCommission:www.vec.vic.gov.au
South Australia
SouthAustraliadoesnothaveanyrequirementsforthirdpartiestodisclosecampaignexpenditureorfunding.
FormoredetailsseeElectoralCommissionSouthAustralia:www.ecsa.sa.gov.au
Tasmania
TasmaniadoesnothaveanyrequirementsforthirdpartydisclosurehoweverunderPart6oftheElectoral Act 2004(Tas)therearestrictprovisionsforcandidateexpenditureinrespectofLegislativeCouncilelections.Theseprovisionsplaceacaponcampaignexpenditureforeachcandidate(atpresentthisis$12,000)andprohibitexpenditurebythirdpartieswithaviewtopromotingorprocuringthecandidate’selection.
FormoredetailsgotoTasmanianElectoralCommission:www.tec.tas.gov.au
ACT
Thirdpartiesarerequiredtoreportaftereveryelectionwheretheyhaveincurred$1000ormoreofspecifiedelectoralexpenditure.Publishersandbroadcastersarerequiredtoreportonelectoraladvertisementsaftereveryelection.
Formoredetailsgoto:www.elections.act.gov.au/parties/fad.html
Northern Territory
Thirdpartiesarerequiredtoreportaftereveryelectiononsumsofspecifiedelectoralexpenditurewherethetotalis$200ormore.Publishersandbroadcastersarerequiredtoreportonelectoraladvertisementsaftereveryelection.
FormoredetailsgotoNorthernTerritoryElectoralCommission:www.nt.gov.au/nteo
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Implications
Manynonprofitorganisations,especiallypeakbodies,lobbygovernmenttoseekpolicyandlegislativechanges.Manyrundirectedcampaignsonspecificissues.Lastyeardisclosuresweremadeby37organisations,amountingtoexpenditureofnearly$6.5milliononpoliticalcommentary,advertising,pollingorotherresearch.Inthepreviousyear(whichincludedthe2007federalelection)75third-partyreturnswerelodged,disclosingatotalexpenditureof$51million.ItcanbeunclearwhetherparticularexpenditurebyathirdpartycomesundertherequirementsoftheAct,buttheAECcanhelpclarifytheissue.Therequirementtodiscloseexpenditureshouldnotbeadeterrenttoengageindebateonpoliticalissues.Howeverthereisacostofcomplianceandorganisationswhichengageinpoliticalexpenditureshouldhaveinplaceasystemofrecordingandreporting.
Polit ical Donations and Tax Deductibility
Politicalpartiesarenotdeductiblegiftrecipients(DGRs)but,todate,individualsandbusinesseshavebeenabletoclaimincometaxdeductionsforcontributionsandgiftstopoliticalparties,independentcandidatesandMembersofParliament.Thevalueofthegiftordonationthatcanbeclaimediscappedat$1500.
Howeverthisisabouttochange,withenactmentoftheTax Laws Amendment (Political Contributions and Gifts)Bill2008whichcompleteditspassagethroughfederalparliamentinFebruary2010(atthetimeofwriting,theBillisawaitingroyalassent).Whentheamendmentscomeintoeffect,businesseswillnolongerbeabletoclaimtaxdeductionsforsuchpoliticaldonationsandgifts(neitherasapoliticaldonationnorasageneralbusinessdeduction).Individualswillstillbeabletoclaimthetaxdeductionforpoliticaldonationsandgiftsupto$1500.
Theamendmentswillapplyretrospectivelyfrom1July2008.
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Thereareanumberofcasesunderappealasindicatedearlier,andstatelegislationproposed.TheFederalGovernment,byitselforthroughtheCouncilofAustralianGovernments(COAG)process,hasasignificantreformagendaforthesector.TheProductivityCommissionResearchReportontheContributionoftheNot-for-ProfitSectorreleaseditsfinalreportinFebruary2010withfortyrecommendations,andatthetimeofwritingtheReportfromtheAustralia’sFutureTaxSystemReview(theHenryReview)hadbeenhandedtogovernment,butnotreleased.Wehavesummarisedsomeofthemoreimportantinquiries,reportsorinvestigationsinprogressinearly2010.FurtherbackgroundanddetailonmanyofthesecanbefoundintheLegalAlmanac2008.
6.1 council of australian GoVErnMEnts (coaG)Standard Chart of Accounts
Thelackofconsistencyinaccountingcategoriesandtermsforgrantreportingrequiredbystateandfederalgovernmentdepartmentscauses:
• Aninabilitytoaggregateandcomparefinancialdataforanypurposes,suchaspublicpolicydevelopment,benchmarkingofperformanceandindicationsoffinancialeffectivenessorefficiencytofunders;
• Significantcompliancecoststononprofits,and
• Significantadministrationcostsforgovernmentagencies.
AnationaltaxonomywouldresolvetheseissuesandtheQUTStandardChartofAccounts(SCOA)Project,aninitiativeofanAustralianCentreforPhilanthropyandNonprofitStudiesandSchoolofAccountancy20soughttodevelopsuchastandardtaxonomy.TheprojecthasimplementedstandardtaxonomiesforchartsofaccountsinQueensland,NewSouthWales,VictoriaandWesternAustralia.COAGagreedatitsDecember2009meetingtoimplementanationalstandardchartofaccounts.21Implementationistobeginby1July2010.
Fundraising Legislation Review
COAGalsoreferredtoitsBusinessRegulationandCompetitionWorkinggrouptheissueofwhetherstateandterritoryfundraisingregulationshouldbereformedtoprovideamoreconsistent.Therehavebeensubmissionsmadeforanationalfundraisingregime.
20 MoreinformationontheQUTStandardChartofAccountsisavailableattheACPNSwebsitehttps://wiki.qut.edu.au/display/CPNS/Standard+Chart+of+Accounts(accessed19February2010).
21 CouncilofAustralianGovernments,‘RegulatoryReform’,COAGCommunique,7December2009,www.coag.gov.au/coag_meeting_outcomes/2009–12–07/index.cfm?
CFID=518001&CFTOKEN=38641218#business_reg(accessed19February2010).
6.0 what doEs 2010 hold? 6
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6.2 trEasury rEViEw of financial rEPortinG for unlistEd coMPaniEs 200722
InDecember2009theCommonwealthgovernmentannouncedproposedchangestothelawsregulatingthereportingrequirementsforcompanieslimitedbyguarantee.23Thisfollowsonfroma2007Treasurydiscussionpaperonfinancialreportingbyunlistedpubliccompanies.Theexposuredraftbill,entitledtheCorporate Amendment (Corporate Reporting Reform) Bill 2010(Cth),seekstocategorisecompanieslimitedbyguaranteeintooneofthreetiersaccordingto:(a)theannualrevenueofthecompany,and(b)thetaxdeductibilitystatusofthecompany,withproportionatereportingrequirementsforeachtier.ThesemattersarediscussedinmoredetailunderSection5.5CompaniesLimitedbyGuaranteeabove.
6.3 disclosurE rEGiMEs for charitiEs and not-for-Profit orGanisations — sEnatE EconoMics coMMittEE JunE 200824
TheSenateEconomicsCommitteeissueditsfinalreportinmid-December2008.TheGovernmenthasdelayedrespondingtotherecommendationsuntilafterithasgivendueconsiderationtotheProductivityCommissionReportandteoutcomeoftheHenryReviewofAustralia’sFutureTaxSystem.InformationabouttheSenateCommittee’sinquiryandafulllistoftherecommendationscanbefoundintheLegalAlmanac2008.
22 AustralianTreasury,FinancialReportingbyUnlistedPublicCompanies–DiscussionPaper,www.treasury.gov.au/documents/1269/PDF/Discussion_paper_Financial_
Reporting_by_Unlisted_Public_Companies.pdf(accessed19February2010).23 TheHonChrisBowenMP,Pressrelease,No.42,4December2009,http://ministers.
treasury.gov.au/DisplayDocs.aspx?doc=pressreleases/2009/042.htm&pageID=00
3&min=ceba&Year=&DocType(accessed19February2010);theExposureDraftBillisavailableatwww.treasury.gov.au/contentitem.asp?NavId=037&ContentID=1677(accessed19February2010).
24 FurtherinformationontheSenateInquiryintoDisclosureRegimesforCharitiesandNot-For-ProfitOrganisations,includingthefullreport,isavailableviatheACPNSDevelopingYourOrganisationwiki:https://wiki.qut.edu.au/display/CPNS/DYO+Home(accessed19February2010).
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6.4 co-oPEratiVEs national lawIn1990,thereportoftheBradyCommitteeofInquiryintoNon-BankFinancialInstitutionsandRelatedFinancialProcesses25notedthatcooperativeshadbeenarguingthatexistinglegislationwasantiquatedanddidnotprovideasuitableframeworkinthecurrentcommercialandsocialenvironment.Thecooperativessubmittedthattheiractivitieswerehamstrungbytheinadequaciesofthelegislation.
Currently,allStatesandTerritoriesinAustraliahavelegislationwhichenablesacooperativetoregisterandtobecomeincorporatedasalegalentity.Thelegislationisverysimilaracrossjurisdictionsandisbasedonasetofstandardprovisionsdevelopedin1996bytheStandingCommitteeofAttorneys-General,whichsignedtheConsistentCooperativesLawsAgreement.Undertheagreementeachjurisdictionagreestoenactcooperativeslegislationcontainingtheagreedcoreconsistentprovisions.
ACo-operativesNationalLaw26isnowproposedforallStatesandTerritories.FairTradingNSWiscollectingcommentsonbehalfoftheMinisterialCouncilonConsumerAffairsontheproposedCo-operativesNationalLawBillandonaConsultationRegulatoryImpactStatementfortheproposedlegislation.
TheproposedCo-operativesNationalLawwillreplaceseparatecooperativeslegislationineachStateandTerritory.TheplanisthatNewSouthWaleswillenactthenationallawin2010.OtherStatesandTerritorieswillthenhave12monthstoenactthenationallaworenactconsistentlegislation.
6.5 australia’s futurE tax systEM (thE hEnry rEViEw) SinceMay2008theAustralia’sFutureTaxSystemReviewPanel(theHenryReview)hasbeenexaminingthecurrenttaxsystem,27holdingpublicmeetingsandfocusgroups,andtakingsubmissions.Thedeadlineforpublicsubmissionswas1May2009andapolicyconferenceonthetaxandtransferpolicywasheldinmid-June2009.Furtherconsultationwithindustry,professionalandcommunitygroupsonthebroadertaxandtransfersystemcontinuedduringthesecondhalfof2009.
InDecember2009,theReviewPaneldelivereditsfinalreporttotheTreasurer.However,thegovernmentisstillconsideringthereportandhasnotmadeitpublic.
25 Queensland,IndependentCommitteeofInquiryintoNon-BankFinancialInstitutionsandRelatedFinancialInstitutionsandRelatedFinancialProcessesintheStateofQueensland,ReportoftheIndependentCommitteeofInquiry(theBradyCommitteeReport),GovernmentPrinter,Brisbane,1990.
26 Seewww.fairtrading.nsw.gov.au/Cooperatives_and_associations/Cooperatives/
Cooperatives_legislation/Cooperatives_national_law.html(accessed18February2010).
27 BackgroundontheReviewanditsmandatecanbefoundintheLegalAlmanac2008.Timelineforthereview,isavailableathttp://taxreview.treasury.gov.au/content/
Content.aspx?doc=html/timeline.htm(accessed19November2008).
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6.6 national coMPactThesecondphaseofconsultationforthenationalcompact28washeldfromMaytoOctober2009(includinganonlineforumduringAugustandSeptember).Twobodieswereestablished:anAcrossGovernmentWorkingGroupacrosstheAustralianpublicservice;andtheNationalCompactJointTaskforce.TheJointTaskforceincludessectorrepresentatives,alongwithcommonwealthandlocalgovernmentandunionrepresentatives.
ADraftNationalCompactwasreleasedinFebruary2010March201028.TheNationalCompactisexpectedtobelaunchedon17March2010.
6.7 countEr-tErrorisM financinG TheCommonwealthAttorney-General’sDepartmentreleasedadraftpaperentitledGuidance for non-profit organisations on counter-terrorism financing inFebruary2009aspartofitsAnti-MoneyLaunderingandCounter-TerrorismFinancinginitiative.29(The Anti-Money Laundering and Counter-Terrorism Financing ActwaspassedinDecember2006andcommencedinstagesthroughout2007and2008.Seeabove,5.2MoneyLaundering,formoreinformationabouttheActandnonprofitorganisationsandmoneylaundering.)
6.8 thE ProductiVity coMMission’s rEsEarch study of thE contribution of thE not-for-Profit sEctorTheProductivityCommissioncommenceditsresearchprojectonthecontributionofthenonprofitsectortoAustraliansocietyinMarch2009.30TheCommissionpublishedadraftreportinOctober2009andreleaseditsfinalreportinFebruary2010.31Thereportincludedthefollowingrecommendationswhichthegovernmentwillrespondtoduring2010.
28 Availablefromhttp://fahcsia.gov.au/sa/communities/progserv/nationalcompact/
Pages/draft_national_compact.aspx
29 Australia,Attorney-General’sDepartment,GuidanceforNonprofitOrganisationsonCounter-TerrorismFinancing(draft),February2009.
30 InformationaboutthebackgroundandscopeoftheProductivityCommission’sstudycanbefoundintheLegalAlmanac2008.
31 ProductivityCommission,ContributionoftheNot-for-ProfitSector:Researchreport,2010;theReportandsubmissionscanbefoundatwww.pc.gov.au/projects/study/not-
for-profit(accessed19February2010).
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RECOMMENDATIONS
Building knowledge systems
Promoting national data systems on the NFP sector
Recommendation 5.1
TheAustralianGovernmentshouldinitiateanInformationDevelopmentPlanforthenot-for-profitsector.Givenitscentralroleinprovidingdataonthesector,anditslegislatedresponsibilityforstatisticalcoordination,theAustralianBureauofStatisticsshouldbegivenresponsibilityforformulatingtheInformationDevelopmentPlan.
AmongtheissuestheInformationDevelopmentPlanshouldaddressare:
• theappropriatefrequencyforpublicationofthesatelliteaccountonthesector
• thescopetodevelopadministrativeandotherlongitudinaldatasetstosupporttheanalysisofnetimpactsofsectoractivities
• thecollationoftheinformationfromtheseandotherdatasourcestoprovideamoredetailedassessmentofthecontributionofthenot-for-profitsectorovertime
• thefeasibilityofobtainingaccurateestimatesofthenumberofunincorporatednot-for-profitorganisationsinacost-effectivemanner.
Building a better evidence base for social policy
Recommendation 5.2
Australiangovernmentsshouldadoptacommonframeworkformeasuringthecontributionofthenot-for-profitsector.Havingregardtothediversityofthesector’sactivitiesandstructures,measurementusingthisframeworkshouldembodytheprinciplesofproportionality,transparency,robustness,flexibility,andrelevance.
Recommendation 5.3
Tominimisecompliancecostsandmaximisethevalueofdatacollected,Australiangovernmentsshouldagreetoimplementareformagendaforreportingandevaluationrequirementsfororganisationsinvolvedinthedeliveryofgovernmentfundedservices.Thisshould:
• committobasingreportingandevaluationrequirementsinservicedeliverycontractsonacommonmeasurementframework(appropriatelyadaptedtothespecificcircumstancesofservicedelivery)
• requireexpenditure(input)measurestobebasedontheStandardChartofAccounts
• developdatastandardsfortherelevantnon-expenditureitems
• ensurethatinformationgeneratedthroughperformanceevaluationsarereturnedtoserviceproviderstoenableappropriatelearningtotakeplaceandalloworganisationstobenchmarktheirperformance
• employ,wherepracticable,theprincipleof‘reportonce,useoften’.
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Recommendation 5.4
TheAustralianGovernmentshouldprovidefundingfortheestablishmentofaCentreforCommunityServiceEffectivenesstopromote‘bestpractice’approachestoevaluation,withaninitialfocusontheevaluationofgovernmentfundedcommunityservices.Overtime,fundingshouldalsobesoughtfromstate/territorygovernments,businessandfromwithinthesector.Amongitsroles,theCentreshouldprovide:
• apubliclyavailableportalforlodgingandaccessingevaluationsandrelatedinformationprovidedbynot-for-profitorganisationsandgovernmentagencies
• guidanceforundertakingimpactevaluations
• supportfor‘meta’analysesofevaluationresultstobeundertakenandmadepubliclyavailable.
Smarter regulation of the not-for-profit sector
Enhancing the legal options for NFPs
Recommendation 6.1
TheAustralianGovernmentshouldamendtheCorporationsActtoestablishaseparatechapterrelatingtonot-for-profitcompanieslimitedbyguarantee.Thisshould:
• embodytheprinciplesofproportionalityinrelationtoreporting,feesandcharges
• provideclearrulesonthedisposalofassetsintheeventofthecompanybeingdissolvedorrestructured,inadditiontotheproposedprohibitiononthepaymentofdividends
• includeaplainEnglishguide(ascurrentlyexistsforsmallandmediumscaleenterprises)
Aspartofthisprocess,theAustralianGovernmentshould,inconsultationwithstakeholders,examinewhetherthereareadditionalrequirementsthatareinappropriateorundulyrestrictivefornot-for-profitorganisationsthatshouldalsobeaddressed.
A national one-stop-shop for regulation and tax endorsement of NFPs
Recommendation 6.5
TheAustralianGovernmentshouldestablishaone-stop-shopforCommonwealthregulationbyconsolidatingvariousregulatoryfunctionsintoanewnationalRegistrarforCommunityandCharitablePurposeOrganisations.WhileultimatelytheRegistrarcouldbeanindependentstatutorybody,initiallyitshouldbeestablishedasastatutorybodycorporateororganintheAustralianSecuritiesandInvestmentCommission.
TheRegistrarwillundertakethefollowingkeyfunctions:
• registerandregulatenot-for-profitcompanieslimitedbyguaranteeandIndigenouscorporations,withastakeholderteamdedicatedtoIndigenouscorporations
• assesstheeligibilityofnot-for-profitorganisationsforCommonwealthtaxconcessionstatusendorsementandmaintainaregisterofendorsedorganisations
• registercross-jurisdictionalfundraisingorganisationsand/oractivitiesbynot-for-profitorganisations
• provideasinglereportingportalforpublicrecordcorporateandfinancialinformation.
• provideappropriateguidanceinrelationtogovernancematters
• investigatecompliancewithregulatoryrequirements
• providecomplaintshandlinginrespectoftheabovefunctions.
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Recommendation 6.4
ResponsibilityforendorsementforCommonwealthtaxconcessionalstatusfornot-for-profitorganisationsandmaintainingaregisterofendorsedorganisationsshouldsitwiththeRegistrarforCommunityandCharitablePurposeOrganisations.ToretainendorsementforCommonwealthtaxconcessions,endorsedorganisationsshouldberequiredtosubmitanannualcommunity-purposestatementtotheRegistrarwhichwouldbeaccessibletothepublic.
TheAustralianCommissionerforTaxationshouldhavetherighttoseekareviewofdecisionsoftheRegistrarinrelationtotheendorsementofnot-for-profitorganisationsfortaxconcessionalstatus.TheCommissionershouldalsohavethepowertoissueadirectivetotheRegistrarforthedis-endorsmentofanorganisationwheretherehasbeenabreachoftaxationcompliancerequirements.
Reduce compliance costs and improve ef fectiveness
Recommendation 6.2
Australiangovernmentsshould,throughtheCouncilofAustralianGovernmentsBusinessRegulationandCompetitionWorkingGroup,pursueharmonisationofstateandterritorybasedincorporatedassociationslegislation,withaninitialfocuson:
• aligningnot-for-profitorganisations’publiccorporateandfinancialreportingrequirements
• rulesonthedistributionofassetsonthedissolutionorrestructuringofanot-for-profitorganisation
• allowingnot-for-profitorganisationstomigratefromonelegalformtoanotherandtomovetotheCommonwealthjurisdictionwithoutoneroustransactioncosts.
Recommendation 6.3
Topromoteconfidenceinandreducethecompliancecostsassociatedwithfundraisingregulation,Australiangovernments,throughtheCouncilofAustralianGovernmentsBusinessRegulationandCompetitionWorkingGroup,should:
• agreetoandimplementmutualrecognitionandharmonisedfundraisingregulationacrossAustralia,throughtheestablishmentofmodelfundraisinglegislation
• supportthedevelopmentofafundraisingregisterforcross-jurisdictionalfundraisingorganisationsand/oractivities,tobeadministeredbytheproposednationalRegistrarforCommunityandCharitablePurposeOrganisations
• clarifytheresponsibilityforregulationoffundraisingundertakenthroughelectronicmediasuchastheinternet,andmovetoensureappropriateregulationofsuchmediumsincludingthroughCommonwealthlegislation.
Recommendation 6.6
TheRegistrarshouldimplementtheprincipleof‘reportonce,useoften’byprovidingasinglereportingportalandformforannualreportingoncommunity-purpose,governancearrangements,financialaccountsandfundraisingactivity.Australiangovernments,throughtheCouncilofAustralianGovernments,cansupportthisprincipleandsubstantiallyreducecompliancecostsfornot-for-profitorganisationsby:
• adoptinganddevelopinganimplementationstrategyfortheStandardChartofAccountsforreportingbynot-for-profitsinreceiptofgovernmentgrantsorservicecontracts
• expandingtheStandardBusinessReportinginitiativetoincludereportingrequirementsbynot-for-profits
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• encouragingtheiragenciestoutilisethegovernanceandfinancialaccountinformation(thatwillbelodgedwiththeRegistrar)tomeettheirorganisationlevel‘healthcheck’requirementsforcontractingpurposes.
Improving arrangements for ef fective sector development
Improving equity and ef fectiveness of tax concessions for philanthropy
Recommendation 7.1
TheAustralianGovernmentshouldadoptastatutorydefinitionofcharitablepurposesinaccordancewiththerecommendationsofthe2001InquiryintotheDefinitionofCharitiesandRelatedOrganisations.
Recommendation 7.2
Stateandterritorygovernmentsshouldrecognisethetaxconcessionstatusendorsementofnot-for-profitorganisationsattheCommonwealthlevel.Giventhedisparitiesbetweeneligibilityfortaxconcessionsacrossjurisdictions,stateandterritorygovernmentsshouldutilisesuchCommonwealthendorsementsindeterminingeligibilityfortheirjurisdictionalconcessions,andseektoharmonisetaxconcessionalstatusdefinitionsorclassificationswiththeCommonwealthovertime.
Recommendation 7.3
TheAustralianGovernmentshouldprogressivelywidenthescopeforgiftdeductibilitytoincludeallendorsedcharitableinstitutionsandcharitablefunds.ConsistentwiththeAustralianTaxationOfficerulingsonwhatconstitutesagift,paymentsforservicesshouldnotqualifyasagift.
Recommendation 7.4
Toencouragecost-effectivegiving,theAustralianGovernmentshouldexploreoptionstopromoteandsupportplannedgiving,especiallypayrollgiving.Specifically,theAustralianGovernmentshouldprovidefundingforanationalcampaigntopromotepayrollgivingandtheassociatedtaxbenefits.Aspartofthecampaign,governmentsshouldencouragetheestablishmentofpayrollgivingwithinalltheiragencies.
Developing a sustainable market for NFP debt
Recommendation 7.5
Australiangovernmentsshouldassistinthedevelopmentofasustainablemarketfornot-for-profitorganisationstoaccessdebtfinancingthrough:
• buildingbusinessplanningskillsfornot-for-profitorganisations,notablysocialenterprises(recommendations9.2and9.6)
• improvingfundingcertaintyforthosenot-for-profitorganisationsinvolvedinthedeliveryofgovernmentservicestoimproveloanviabilitybyimprovingclarityaboutfunding(recommendation11.1)andtheappropriatelengthofcontract(recommendation12.5)
• exploringoptionstoencourage(foralimitedperiod)communitydevelopmentfinancialinstitutionstodevelopappropriatefinancialproductsandservicesforthesector
• exploringoptionstomakebetteruseofthecorpusofphilanthropicfoundationsandtruststomakeloanstodeductiblegiftrecipientsandendorsedcharitableinstitutions.
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TheAustralianGovernmentshouldestablishanadvisorypanel,chairedbyTreasury,toconsideroptionsandassessprogressindevelopingasustainablemarketfornot-for-profitorganisationdebtproductswiththeaimofestablishingmainstreamfinancialproductsforinvestorswhoarewillingtoacceptalowerriskadjustedfinancialreturnforanaccompanyingsocialreturn.
Building sector capabilities to improve governance and enhance productivity
Recommendation 9.1
Informationandcommunicationtechnologyhasthepotentialtoenablemorecost-effectiveandhigherqualityhumanservices.Withdueconsiderationstoprotocolsforprotectingprivacy,inspecificserviceareas,Australiangovernmentsshouldexplorethepotentialforselectivesharingofclientinformationbetweenagenciesandnot-for-profitorganisationsandotherproviders,throughtheutilisationofenhancedinformationandcommunicationtechnology.
Recommendation 9.2
Stateandterritorygovernmentsshouldreviewtheirfullrangeofsupportforsectordevelopmenttoreduceduplication,improvetheeffectivenessofsuchmeasures,andstrengthenstrategicfocus,includingon:
• developingthesustainableuseofintermediariesprovidingsupportservicestothesector,includingininformationtechnology
• improvingknowledgeof,andthecapacitytomeet,thegovernancerequirementsfornot-for-profitorganisations’boardsandmanagement
• buildingskillsinevaluationandriskmanagement,withapriorityforthosenot-for-profitorganisationsengagedindeliveryofgovernmentfundedservices.
Recommendation 9.3
Australiangovernmentagenciesprovidingextensivegrantsto,orusingexternalagenciesfor,servicedeliveryshouldestablishevaluationprogramstoassesstheeffectivenessandactualcostoftheirprograms.Whererelatedtocommunityservices,theseevaluationsshouldbepostedwiththeCentreforCommunityServiceEffectiveness.
Addressing workforce issues
Recommendation 10.1
Australiangovernmentsshouldintroduceasystemof‘WorkingwithVulnerablePeopleChecks’thatprovidesforcheckstobeportablebetweenorganisationsforadesignatedtimeperiod.
Further,Australiangovernmentsshouldexplorethefeasibilityofdevelopingaconsistentnationalsystemallowingportabilityacrossstatesandterritoriesofpolicechecksandtheexchangeofinformationonpeopledeemedunsuitableforworkingwithvulnerablepeople,especiallychildren.
Recommendation 10.2
Inordertoensurethatnot-for-profitscansustaintheirworkforces,andaswagesareamajorfactorinthesuccessfulrecruitmentandretentionofstaff,Australiangovernmentspurchasingcommunityservicesneedtobasefundingonrelevantmarketwagesforequivalentpositions.Costingsneedtotakeintoaccounttheskillsetsrequiredtoperformthepurchasedservicesandbeindexedappropriatelytomarketwagegrowthwithinthatindustrysector.
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Recommendation 10.3
TheAustralianGovernment,inconsultationwithSkillsAustralia,shouldcommissiontheCommunityServicesandHealthIndustrySkillsCounciltoundertakeworkforceplanningforthecommunityservicessectorhavingregardtothecurrentandfutureworkforcechallengesarisingfromgrowingdemandandincreasingsupplyconstraints.
Stimulating social innovation
Recommendation 9.5
Australiangovernmentsshouldrequireallprograms(ofover$10million)deliveringcommunityservicesthroughnot-for-profitorganisationstosetasideasmallproportionoftheprogrambudget(forexample,onepercent)toaprogramrelatedsocialinnovationfund.Thefundshouldsupporttrialsofnewapproachestoservicedelivery,includingevaluationoftheircost-effectiveness.
Building sector capabilities to support innovation
Recommendation 9.4
TheCooperativeResearchCentreprogramshouldfacilitateapplicationsbycollaborationsofnot-for-profitorganisations(includinguniversities),governmentagenciesandbusinessesintheareasofsocialinnovationby:
• activelypromotingtheopportunitiesthatarenowavailable
• providingspecialisedadviceandfacilitationsupporttoorganisationsexpressinginterestbutlackingtheknowledgeandresourcestodevelopthepartnershipsrequired.
Recommendation 9.6
TheAustralianGovernmentshouldfundtheEnterpriseConnectprogramtoexpanditsspecialistservicestoanewCentrethatprovidesbusinessadvisoryservicestoorganisationsinvolvedinsocialenterpriseactivity.
Improving the effectiveness of direct government funding
Providing clarity over funding obligations
Recommendation 11.1
Australiangovernmentsshould,inthecontractingofservicesorotherfundingofexternalorganisations,determineandtransparentlyarticulatewhethertheyarefullyfundingparticularservicesoractivitiesundertakenbynot-for-profitorganisations,oronlymakingacontributiontowardstheassociatedcostsandtheextentofthatcontribution.
Australiangovernmentsshouldfullyfundthoseservicesthattheywouldotherwiseprovidedirectly(allowingforco-contributionsfromclientsandanyagreedcontributionsbyserviceproviders).Inapplyingthiscriterion,governmentsshouldhaveregardtowhetherthefundedactivityisconsideredessential,aspartofthesocialsafetynetoranentitlementforeligibleAustralians.
Recommendation 11.1
Australiangovernmentsshouldensurethatserviceagreementsandcontractsincludeprovisionforreasonablecompensationforprovidersforthecostsimposedbychangesingovernmentpolicythataffectthedeliveryofthecontractedservice,forexample,changestoeligibilityrules,thescopeoftheservicebeingprovided,orreportingrequirements.
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Recommendation 8.1
TheDepartmentsoftheTreasuryandFinanceandDeregulationshouldjointlyconductareviewintothefeasibility,thecostsandthebenefitsofrequiringvalueformoneyassessmentsforgovernmentprocurementtoconsidersignificantinputtaxconcessions.Suchareviewshouldbewide-ranging,includingthenot-for-profit andfor-profitsectors.
Ensuring appropriate independence
Recommendation 11.3
Australiangovernmentsfundingserviceprovisionormakinggrantsshouldrespecttheindependenceoffundedorganisationsandnotimposeconditionsassociatedwiththegeneraloperationsofthefundedorganisation,beyondthoseessentialtoensurethedeliveryofagreedfundingoutcomes.
Removing impediments to better value government funded services
Getting the model right
Recommendation 12.1
Australiangovernmentsshouldensurethattheychoosethemodelofengagementwithnot-for-profitsthatbestsuitsthecharacteristicsandcircumstancesoftheservicebeingdelivered.Inchoosingbetweenalternativemodelsofengagement,governmentsshouldconsiderthenatureoftheoutcomessought,thecharacteristicsofclients,andthenatureofthemarket.Inparticular:
• thereshouldbenopresumptionthatpurchaseofservicecontractingwillalwaysbethemostappropriatemodel
• wheregovernmentsareseekingthedeliveryofaclearlydefinedoutcomeandmarketsaregenuinelycontestablepurchaseofservicecontractingshouldremainthepreferredapproach
• wheretrulycompetitivemarketsdevelopandclientsfacerealchoiceintheservicesavailabletothem,governmentsshouldconsidermovingtoclientdirectedservicedeliverymodels.Thistransitionshouldbeconditionalupontherebeingappropriatesafeguardsinplacetoprotectandempowervulnerableclients(ortheircarers)inexercisingchoiceandensureanacceptableminimumlevelofservicequalityandprovision.
Recommendation 12.2
Whereamarketbasedapproachisnotfeasibleorappropriate,governmentsshoulduseothermodelsofengagement.Thismayinvolvegovernmentsenteringintoeitherextendedlifeorshorttermjointventures.
Extendedlifejointventuresshouldadoptaniterativeprocessthatwill:
• involveallpartiesinthedesignoftheprogram
• embedandfundanagreedevaluationprocess,informingprogramdesignandmodification
• regularlyreviewandrevisetheservicedeliveryapproachesinlightoffindingsfromevaluation,changingdemandsorenvironmentalconditions
• providelong-termorrollingfundingwithcapacitytoadjustfundinginlightofthemodifications.
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Recommendation 12.3
Australiangovernmentsshouldensurethatwhatevermodelofengagementisusedtounderpinthedeliveryofservicesitisconsistentwiththeoverarchingprincipleofobtainingthebestvalueformoneyforthecommunity.Indeterminingvalueformoney,governmentsshouldexplicitlyrecogniseanyindirectorwiderbenefitsthatprovidersmaybeabletogenerate.Anevidencebasedapproachshouldbeusedtoassessthenature,extentandrelevanceofthesetypesofbenefitsonacase-by-casebasis.
Recommendation 12.4
Australiangovernmentsshouldassesstherelativemeritsoftheleadagencymodelonacasebycasebasis.Thisshouldincludeanassessmentofthecoststonot-for-profitsofadoptingthisapproachincludinganyduplicationofreportingandaccountabilityrequirements,theadditionaltransactioncostsassociatedwithsubcontracting,andthepotentialforlossofdiversityamongproviders.
Improving procurement and management processes
Recommendation 12.5
Thelengthofserviceagreementsandcontractsshouldreflectthelengthoftheperiodrequiredtoachieveagreedoutcomesratherthanhavingarbitraryorstandardcontractperiods.
Extendedlifeserviceagreementsorcontractsshouldsetoutclearlyestablished:
• processesforperiodicallyreviewingprogresstowardsachievingaprogram’sobjectives
• conditionsunderwhichaservicemaybeopeneduptonewserviceprovidersoraprovider’sinvolvementisscaledbackorterminated.
Recommendation 12.6
Whenenteringintoserviceagreementsandcontractsforthedeliveryofservices,governmentagenciesshoulddevelopanexplicitriskmanagementframeworkinconsultationwithprovidersandthroughtheuseofappropriatelytrainedstaff.Thisshouldinclude:
• allocatingrisktothepartybestabletobeartherisk
• establishingagreedprotocolsformanagingriskoverthelifeofthecontract.
Recommendation 12.7
Australiangovernmentsshouldurgentlyreviewandstreamlinetheirtendering,contracting,reportingandacquittalrequirementsintheprovisionofservicestoreducecompliancecosts.Thisshouldseektoensurethatthecomplianceburdenassociatedwiththeserequirementsisproportionatetothefundingprovidedandriskinvolved.
Further,toreducethecurrentneedtoverifytheprovider’scorporateorfinancialhealthonmultipleoccasions,evenwithinthesameagency,reviewsshouldincludeconsiderationof:
• developmentofMasterAgreementsthatarefit-for-purpose,atleastatawhole-of-agencylevel
• useofpre-qualifyingpanelsofserviceproviders.
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Recommendation 12.8
TheDepartmentofFinanceandDeregulationshoulddevelopacommonsetofcoreprinciplestounderpinallgovernmentserviceagreementsandcontractsinthehumanservicesarea.Thisshouldbedoneinconsultationwithrelevantgovernmentdepartmentsandagenciesandserviceproviders.
Implementation of the proposed package of reforms
Recommendation 14.1
TheAustralianGovernmentshouldestablishanOfficeforNot-For-ProfitSectorEngagement,foraninitialtermoffiveyears.TheOfficewouldsupporttheAustralianGovernmentinitseffortsto:
• implementsectorregulatoryandotherreformsandtheimplementationoftheGovernment’sproposedcompactwiththenot-for-profitsector
• promotethedevelopmentandimplementationoftheproposedInformationDevelopmentPlan
• overseetheestablishmentoftheproposedCentreforCommunityServiceEffectiveness
• implementtheproposedcontractingreformsingovernmentfundedservices
• actasacatalystforthepromotionandfundingbygovernmentagenciesofsocialinnovationprograms
• facilitatetheestablishmentoftheadvisorypanelondevelopmentofanot-for-profitcapitalmarket
• facilitatestrongercommunityandbusinesscollaboration.
TheOfficeshould,throughtherelevantMinister,reportpubliclyonanannualbasisonitsachievements.
Recommendation 14.2
CompactsbetweenAustraliangovernmentsandthesectormustbesupportedbywelldocumentedplansofaction,includingatagencylevel,ifappropriate,andsupportedbypracticalmeasuresincludingmonitoringandevaluativeprocessesthatgiveconcreteexpressiontotheproposedrelationship.
Recommendation 14.3
Stateandterritorygovernmentsshoulddevelopapublicstrategyforimplementinggovernment-sectorreformsarisingfromthisreport.Priorityareasshouldincludemeanstoimprovegovernment-sectorengagement,enhancedriskassessmentandriskmanagementstrategies,contractdesign,effectivereporting,andevaluationmethods.
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6.9 disability carE and suPPortTheProductivityCommissionhasbeengivenaresearchbrieftoexaminethefeasibility,costsandbenefitsofreplacingthecurrentsystemofdisabilityserviceswithanewapproachwhichprovideslong-termessentialcareandsupportforpeoplewithsevereorprofounddisabilitieshoweveracquired.32TheReportwillbetitledDisability Care and Support,tobegininApril2010andreportbyJuly2011.33Thereportislikelytobeverysignificantforthosewithamissiontoassistsuchpersonsandtheircarers.
32 JointMediaReleasewithTheHonKevinRuddMPPrimeMinisterandTheHonJennyMacklinMPMinisterforFamilies,Housing,CommunityServicesandIndigenousAffairsandTheHonBillShortenMPParliamentarySecretaryforDisabilitiesandChildren’sServicesAustralianGovernmenttoConsiderNewApproachestoDisability,No.093,23/11/09http://assistant.treasurer.gov.au/DisplayDocs.
aspx?doc=pressreleases/2009/093.htm&pageID=003&min=njsa&Year=&DocType=
33 www.pc.gov.au/projects/inquiry/disability-support
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Administrator
Someoneappointedtoadministerordirecttheaffairsofanother,forexampleabusinessorcompanyinvoluntaryadministration,todeterminewhetheritshouldgointoadminstration,bewounduporcanresumetradingasnormal.
Appellant
Thepartywhohaslodgedtheappealinanappealcase
Charitable institution
Anorganisationwhichcarriesoutcharitablepurposesorholdspropertyintrustforcharitablepurposes
Charitable trust
Atrustwhichissetupforapurpose–beingarecognisedcharitablepurpose–ratherthanforthebenefitofaperson
Cy près scheme
Aschemedevisedbyacourttogiveeffecttoacharitablepurposewhentheintendedpurposecannotbefulfilled,becauseitisimpossible,impracticableorillegal.Forexamplepropertyleftinawilltobeusedforageneralcharitableintentionmaybeinadequateforthepurpose,oraninstitutiontoreceivethebenefitofacharitabletrustmaynolongerexist.Thecourtcandirectthefundsasnearaspossible(cyprès)totheoriginalintention.
Ex parte
Denotesanapplicationbroughtandheardbyacourtintheabsenceoftheopposingparty,e.g.whereamatterisurgent.
Fiduciary duties
Dutieswhichrequireapartytoactwiththeutmostloyaltytoanotherparty’s(theprincipal’s)interests(ortotheirjointinterestsinapartnership).The‘fiduciary’mustnot,withoutfullyinformedconsent:actinherorhisowninterestsiftheyconflictwithdutiestothe‘principal’;actaccordingtoadutytoanotherpersonifthatdutyconflictswithdutytothe‘principal’;orderiveabenefit(profit)frombeinginthefiduciaryposition.
Incorporated association
AnassociationincorporatedunderStateorTerritoryincorporatedassociationslegislation,e.g.theIncorporated Associations Act 1981(Qld).Anincorporatedassociationisrecognisedasalegalperson,likeacompany,andthereforecanholdproperty,cansueandbesued.
Injunctive relief
Aremedyintheformofaninjunction.Aninjunctionisanorderbyacourttoprohibitsomeonefromdoinganact(prohibitoryinjunction)ortorequiresomeonetodoanact(mandatoryinjunction).Theordercanbelimitedastotime(interimorinterlocutory)oritcanbepermanent(perpetual).
Interlocutory injunction
Aninjunctionorderedtomaintainthestatusquountilthemaintrial.
7.0 Glossary 7
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Insolvent
Unabletopaydebtsasandwhentheyfalldue.Anindividualinthissituationisbankrupt;acompanyorbusiness,isininsolvency
Liquidator
Thepersonwhoassumescontrolofacompany’saffairsinawindingup,inordertoascertainliabilities(debts),terminatecontractsliquidateassets,distributeavailablefundstopaycreditors,anddisposeofthebusinessleadingtodissolution.
Non-retained profits
Profitthatisdistributedinthefinancialyear,forexampleasadividendtoinvestors.Retainedprofitsareaccumulatedoveranumberofaccountingperiods,i.e.carriedforwardtothefollowingfinancialyear.
Pemsel
Pemsel’scase(Commissioners for Special Purposes of Income Tax v Pemsel )wasan1891Englishcasewhichbroughttogetherthelawonwhatwasacharitablepurpose,classifyingcharitableobjectsintofourcategories(thefourheadsofcharity):thereliefofpoverty,ageandimpotence;theadvancementofeducation;theadvancementofreligion;otherpurposesbeneficialtothecommunity.
Prima facie
Atfirstglance;onthefaceofit
Probate
Thegrantingoftherighttoadministerawill
Qualif ied Privilege
Inanactionfordefamation,qualifiedprivilegegivesprotectiontothepersonwhocommunicatedtheallegedlydefamatorystatement,ifheorshehadaninterestordutytomakethecommunication,andthepersonwhoreceivedthecommunicationhadaninterestordutytoreceiveit.Theprivilegeisnotavailableifthepersonmakingthestatementisdoingitmaliciouslyorforanimproperpurpose.
Respondent
Thepartywhohastoanswertoacase,e.g.inanappeal,thepartywhohastorespondtotheappellant’scase.Incivilcasesthepersonbringingthecase(i.e.suing)maybecalledtheplaintiffortheapplicantwhiletheotherpartymaybecalledthedefendantortherespondent.
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Trusts
Atrustisadeviceforensuringpropertyisheldforthebenefitofaparticularpersonorpersons,orforacharitablepurpose.Thetrusteeholdslegaltitletothetrustproperty.Thebeneficiaryhasabeneficial(orequitable)interestintheproperty,andthetrusteemustadministerthetrustpropertyforthebenefitofthebeneficiariesorthecharitablepurpose.
Ultra vires
Outsideofpowerorauthority–i.e.anactwhichisbeyondthepowerorauthorityofapersonorinstitutiontoperform,andthereforeinvalid.Somethinginlegislationcanalsobeultravires,forexamplesomethinginanActwhichisnotauthorisedbytheConstitutionorsomethinginaRegulationwhichisnotauthorisedbythegoverningAct.
Voluntary administration
Ifacompanyisinfinancialdifficultiesbutcouldbesaved,anadministratormaybeappointedtoinvestigateitsaffairsandrecommendtoitscreditorswhetheritshouldenteradeedofcompanyarrangement,bewounduporcanresumenormaltrading.
Wound up
Aformofadministrationwherealiquidatorassumescontrolandwindsupacompany’saffairstodissolvethecompanyasalegalentity.Theliquidatorinvestigatesthefinancestodeterminethedebts,convertsassetsintocashforpaymentofcreditors,terminatescontractsanddisposesofthebusiness.Awindingupcanbevoluntary(bymembersorcreditors)orcompulsory(bycourtorder).
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thE australian cEntrE for PhilanthroPy and nonProfit studiEsTheAustralianCentreforPhilanthropyandNonprofitStudies(ACPNS),locatedintheSchoolofAccountancyispartofQUT’sFacultyofBusinesswhichisinternationallyrecognisedforitshighqualityteachingandresearch.ACPNSbringstogetheracademicsandresearchstudentswithexpertiseinphilanthropy,nonprofitorganisations,andthesocialeconomy.This,combinedwithourstrongindustrylinksanduniqueandpracticalteaching,ensuresthatwestayattheleadingedgeofknowledge,providingourstudentswithateachingandresearchenvironmentthatisuptodateandrelevanttotheneedsofstudentsinterestedinpursuingcareersinthephilanthropicandnonprofitsectors.
Throughourresearchandteaching,ACPNSbringstothecommunitythebenefitsofteaching,research,technology,andservicerelevanttophilanthropicandnonprofitcommunities.
Goals of ACPNS
1. TeachingandLearning:ToensurethatQUTstudentsinphilanthropyandnonprofitstudiespossessaneducationthatenhancesthecapacityofthephilanthropicandnonprofitsector.
2.Research:Toadvanceandapplyknowledgegermanetothephilanthropicandnonprofitcommunityinordertoassistinthecreationofsocialcapitalandtoenhancecivilsociety.
3.Technology:Tobringthebenefitsofappropriatetechnologytothephilanthropicandnonprofitsector.
4.CommunityService:Tocontributetotheprofessionalism,effectivenessandinternationalreputationoftheAustralianphilanthropicandnonprofitsectorbyprovidingprofessionalserviceandcommentaryonissuesrelevanttophilanthropyandthenonprofitsector.
PilchconnEctWho or what is PILCH?
ThePublicInterestLawClearingHouse(Vic)Inc.(PILCH )wasestablishedin1994,andisanindependent,nonprofitcommunitylegalservicebasedinMelbourne.
PILCHseekstomeetthelegalneedsofindividualsfromdisadvantagedormarginalisedbackgrounds,andnonprofitorganisations.PILCHworkscreativelytomatchclientswithlawyerswillingtogivetheirserviceswithoutcharge.PILCHhasalsodevelopedareputationforwell-targetedlawreformandadvocacy,drawingonexperiencefromitscaseandreferralwork.
Sinceitsinception,PILCHhassuccessfullyestablishedarangeofinnovativeservicesincludingtheHomelessPersons’LegalClinic–anoutreachservicethathasnowbeenreplicatedinseveralstates.PILCH’scollaborateswithitscounterpartsinotherstates:PILCHNSW,Q-PILCH,JusticeNetSAandACTProBonoClearingHouse.
PILCH’scorefundingcomesfromitsmembers(privatelawfirmsofvaryingsize,theVictorianBar,theLawInstituteofVictoria,corporatelegaldepartments,communitylegalcentres,allVictorianuniversitylawfacultiesandothersinancillaryfields),plusagrowingnumberofindividualsupporters.
PILCHhasdevelopedintoaunique‘one-stopshop’forprobonoandaccesstojustice.
8.0 inforMation on contributinG orGanisations 8
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PilchConnect
PilchConnectisPILCH’sspecialistservicefornonprofitcommunityorganisations–formallylaunchedinNovember2008.PilchConnectprovidesfreeandlowcostlegalinformation,training,andlegaladvice(viaphone)toVictorianbasednonprofits.Italsomatcheseligible,publicinterestnonprofits,thathavemorecomplexlegalissueswithPILCHmemberlawfirms.PilchConnecthasalreadyundertakensignificantlawreformandpolicyworkatbothastateandfederallevel.
Bydevelopingasasector-basedhubofNFPlegalexpertise,PilchConnectsupportsexcellentstandardsofgovernanceandregulatorycompliancebynonprofitcommunityorganisationssotheireconomicandsocialcontributiontoAustraliaismaximised.Ineffect,PilchConnectis‘helpingthehelpers’bysupportingtheestablishmentandtheeffectiverunningofwell-governedcommunityorganisations.Inturn,theseNFPsprovidecrucialsupportandassistancetothelocalcommunitiesinwhichtheyoperate,includingservicestoclientsandmembers,promotingvolunteeringandcommunitywellbeing.
ThePilchConnectservicecurrentlyreceivesnogovernmentfundingandreliesonpilotfundingfromTheWilliamBucklandFoundationandtheLegalServicesBoardofVictoria.
PilchConnectworkswithpeakbodiessuchasVolunteeringVictoria,VolunteeringAustraliaandVCOSS.Inparticular,weenjoyaformalpartnershipwithAustralianCentreforPhilanthropyandNonProfitStudiesandaregratefultotheCPNSteam(inparticular,ProfessorMylesMcGregor-Lowndes)fortremendoussupportandencouragement!
thE australian charity law associationThereisanemergingneedforaccountable,charity-relatedlegalservicesinAustralia.Inrecognitionofandresponsetothis,theAustralianCharityLawAssociation(ACLA)wasestablishedin2009.ACLAisanonprofitpubliccompanyassociation,basedinNewSouthWales.
ACLAaimstoprovidelegaleducationthatislegitimate,targetedandrelevanttoallthosewhoworkwiththesectorincludingexternaladvisorsforcharities,in-houselawyersemployedbycharities,charityworkers,administratorsandeveninterestedmembersofthepublic.Intheprovisionofthiseducation,ACLAseekstoraisethestandardoflegalassistanceprovidedtocharities,andconsequently,bolsterthestrengthofthecharitablesectorasawhole.
ACLA’smeansofeducationincludecourses,seminarsandpublications.TheseeducationalprogramsareinformedbyACLA’smembersandaretargetedtoaddressthespecificneedsofcharitiesinAustralia.TheyalsoincorporateusefulinformationonthecurrentlegalissuesaffectingtheAustraliancharitablesector.
ThecurrentDirectorsoftheorganisationareClaireJones(SeniorAssociate,Prolegis),DrMylesMcGregor-Lowndes(Director,TheAustralianCentreforPhilanthropyandNonprofitStudies,QueenslandUniversityofTechnology)andAnneRobinson(SolicitorDirector,Prolegis).
TheHonourableSirAnthonyMasonACKBE(FormerChiefJusticeoftheHighCourtofAustraliaandnon-permanentJudgeoftheHongKongCourtofFinalAppeal)hasacceptedourinvitationtobetheAustralianPatronofACLA.
Inaddition,ourInternationalPatronisUniversityProfessorHarveyDale(Director,National
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CenteronPhilanthropyandtheLaw,NewYorkUniversitySchoolofLaw).
How you can get involved
InSeptember2010,ACLAwillbehostingaseriesofmasterclassesoncurrentcharitylawissues.TheseclasseswillbetargetedatthosewhoalreadypossessageneralknowledgeoftheAustraliancharitablesector.
FurtherinformationonthemasterclassescanbeobtainedbycallingACLACompanySecretaryJulieMcConnell:phone0294665222email [email protected]
Becomeamember.MembershipformsareavailableonrequestfromACLACompanySecretary,JulieMcConnell:[email protected]