Hillig v Darkinjung [2006] NSWSC 494

New South Wales Supreme Court

CITATION : Hillig v Darkinjung [2006] NSWSC 494

HEARING DATE(S) : 19 and 24 May 2006

JUDGMENT DATE : 24 May 2006

JURISDICTION : Equity

JUDGMENT OF : Austin J

EX TEMPORE JUDGMENT DATE : 05/24/2006

DECISION : Interim injunctions refused; limited undertakings given to court

CATCHWORDS : CORPORATIONS - interim injunctions sought by administrator appointed under Aboriginal Land Rights Act to protect aboriginal land council's interest in assets - administrator purports to remove directors while application is pending - discretionary considerations in preliminary hearing

LEGISLATION CITED : Aboriginal Land Rights Act 1983 (NSW), s 242 Corporations Act 2001 (Cth) Part 5.3A

Peter Hillig in his capacity as Administrator of Darkinjung Local Aboriginal Land Council (P/A) Darkinjung Pty Ltd (ACN 107 719 522)(D1/R1) Jeffrey John Bradford (D2/R2) PARTIES : David Pross (D3/R3) Greg Flanders (D4/R4) George Alexander Watts (D5/R5) Michael Stuart Jones (D6/R6)

FILE NUMBER(S) : SC 2842/06

COUNSEL : D A Smallbone (P/A) S Epstein SC (D/R)

SOLICITORS : Patrick Woods & Company (P/A) Norton White Melbourne (D/R)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

AUSTIN J

WEDNESDAY 24 MAY 2006

2842/06 PETER HILLIG IN HIS CAPACITY AS ADMINISTRATOR OF DARKINJUNG LOCAL ABORIGINAL LAND COUNCIL V DARKINJUNG PTY LTD JUDGMENT (Ex tempore; revised 24 May 2006) 1 HIS HONOUR: On the afternoon of Friday, 19 May 2006, I was approached by counsel in an urgent corporations duty matter. The plaintiff, Mr Hillig, in his capacity as administrator of the Darkinjung Local Aboriginal Land Council, sought urgent ex parte relief against a company called Darkinjung Pty Limited, and various individual defendants, the principal relief being either the appointment of a receiver or provisional liquidator, or injunctions to restrain the defendants from dealing with or disposing of assets or money. 2 By amendment, during the course of the application, an additional order was sought that the individual defendants be required to serve affidavits on the plaintiff's solicitor answering inquiries that had been made by Mr Hillig's letters of 10 and 18 May 2006. 3 Mr Hillig relied on his affidavit of 19 May 2006. I formed the view that the evidence presented in that affidavit and the accompanying exhibit did not provide a sufficient basis to warrant immediate ex-parte orders. 4 In reaching that conclusion, I was influenced, in part, by evidence indicating that the parties to the present proceeding were already in litigation on various fronts, and I was concerned that to intervene on an ex parte basis might disrupt the forensic balance in an entirely inappropriate way. Further, I took into account the fact that, on the evidence, it did not appear that there was any immediate threat over the ensuing few days to the substance of the assets that were the subject of Mr Hillig's concern. 5 Since, however, there did appear to me to be a degree of urgency in the matter, I granted abridgement of service to 1pm on Sunday, 21 May, and brought the matter back before me on the afternoon of 23 May. 6 On that occasion, the defendants appeared by Senior Counsel and submitted that there should be a further adjournment. The hearing on 23 May was principally occupied by endeavours to reach a satisfactory short-term interlocutory regime so as to preserve the status quo pending the further hearing of the application for interim orders. 7 Further evidence was provided by Mr Hillig in his second affidavit dated 20 May 2006 and in an affidavit by an employee of Mr Hillig's firm, Phillip Newman, dated 22 May 2006, which will assist the court when the interlocutory application is fully addressed as to the orders that will be appropriate to be made. 8 An additional affidavit by Mr Hillig dated 23 May 2006 and entitled his third affidavit was also filed in court yesterday afternoon. That affidavit deposed to some steps that had been taken by Mr Hillig on the previous afternoon, intended to have the effect that the defendant directors of Darkinjung and various other subsidiary companies would be replaced by Mr Hillig. Mr Hillig purported to achieve that result by exercising his powers as administrator of the Land Council, which is the sole shareholder of Darkinjung. 9 The intervention by Mr Hillig in this fashion has quite substantially complicated the designing of an appropriate short-term interlocutory regime pending further hearing of the matter. 10 After discussion with counsel for the parties, I have decided that the appropriate course is to adjourn the interlocutory applications and the proceeding to 2pm on Monday, 29 May 2006. In those circumstances the question of the appropriate interim interlocutory regime is directed towards such a regime for the period of days between now and then. Although the orders of the court will be expressed to operate until further order, in case it is not possible to hear the interlocutory applications fully on 29 May or for some other reason, the extension of that interlocutory regime might seem to be the appropriate course at that stage. 11 The task for the court in designing such a short-term interlocutory regime is very much an exercise to be performed on the balance of convenience. There are a number of matters that weigh in the balance in this case. The first matter, and in my view an important one, is that in proceeding number 41363/2005 in the Land and Environment Court of New South Wales - one of the other proceedings to which I have referred (although I note that not all the parties to the present proceeding are parties to that proceeding) - the Land Council and Darkinjung have both been restrained by orders of the court from entering into any transaction, purchase, investment or other dealing with any of the proceeds of a sale of land to a Mirvac company in excess of $30,000 without, first, giving five business day's notice in writing to the Minister for Aboriginal Affairs of New South Wales, who is the first respondent in this proceeding, of the details of the proposed transaction, purchase, investment or other dealing. 12 Senior counsel for the defendants has informed the court of his clients' offer to give the court an undertaking in the same terms on behalf of each of the present defendants, except that the undertaking will be expressed to prevent transactions, et cetera, in excess of $30,000 in total during the period from now until midnight on 29 May 2006. That modification seems to me to overcome an objection made on behalf of Mr Hillig to the terms of the Land and Environment Court order; namely, that while it applied to each transaction in excess of $30,000, there was nothing in the order that would prevent multiple transactions of $30,000 or less over a short period of time. The position, therefore, is that concern about dissipation of assets by any of the defendants will be addressed in the immediate short term by that undertaking. 13 An alternative form of order was handed up by counsel for Mr Hillig today. It was an injunction in more specific terms that would not be limited to transactions of a value in excess of $30,000 but would allow the transfer of funds to be made by the defendants to Mr Hillig in his capacity as administrator. I am not persuaded that in the short term it is necessary to extend the substance of the restraint on the defendants beyond what they have offered by way of undertaking modelled on the existing Land and Environment Court order. 14 Counsel for Mr Hillig submitted, in effect, that the assets that may be under the de facto control of the defendants are all trust assets held for charitable purposes, and it would be a breach of trust for any of the defendants to purport to use those assets for the purpose of defending proceedings brought against them personally or for any other litigious use. But the court is not being asked today to make an order that would condone conduct that might otherwise be in breach of trust. All I propose to do, with the modification I have described, is to bring into this court an existing set of constraints that operate with respect to transactions above a certain value. If transactions above or below that value are entered into in breach of trust, that outcome will no doubt have consequences, but it is not an outcome that I deal with today. 15 I think it is appropriate to retain the wording of the Land and Environment Court order so far as notification to the Minister is concerned, in view of the Minister's existing involvement. 16 So far as concerns Mr Hillig's application to permit transfer of funds to him, the evidence before me, particularly in his second affidavit, shows that there is a developing need for funds for the purposes of the administration. Mr Hillig says in that affidavit that there are numerous complex issues affecting the Land Council, particularly in its relationship with what he calls the "DLALC Trust", of which Darkinjung is the trustee. He says there is an urgent need for action because the Trust controls substantially all of the Land Council's funds. He has approached Darkinjung, as trustee, for $400,000 in funding to fund the immediate day-to-day activities of the Land Council and has received only $29,950, with an explanation that $30,000 is the limit of funding that could be received at any one time as a result of the undertakings that the trustee had given. This was presumably a reference to the order of the Land and Environment Court. Mr Hillig also says that the Land Council employs nine staff and he requires funding to meet their wages and other costs. I was informed from the Bar table that funding for that purpose will run out on about Friday, 2 June, although Mr Hillig's evidence is not quite so specific. It seems to me unnecessary for the interim regime that I am establishing until 29 May to address that issue. 17 Mr Hillig's proposed orders include orders that the administrators of subsidiary companies of Darkinjung - namely, Darkinjung Housing Pty Limited, Darkinjung Funeral Fund Pty Limited and Darkinjung Projects Pty Limited - be joined as the seventh and eighth defendants and that they be restrained from taking any further step in the administration of those companies. 18 The administrators of those companies are voluntary administrators under Part 5.3A of the Corporations Act, not like Mr Hillig himself, who is an administrator under the Aboriginal Land Rights Act 1983 (NSW). Administrators under the Corporations Act are required to prepare a report for creditors within a very short time frame so that the creditors can make decisions as to the future of the companies concerned. Mr Newman's evidence indicates that there has been some disagreement between himself and representatives of the company administrators at the first meetings of creditors, that have already occurred. The second meetings of creditors are scheduled for 8 and 9 June 2006. It was submitted on behalf of Mr Hillig that there is a concern that a deed of company arrangement will be put in place for each of those companies which will prejudice the interests of the Land Council. The injunctive relief sought would prevent the company administrators from discharging their statutory duties and, in particular, prevent a report from being presented to the creditors in the manner required by Part 5.3A. Assuming the court has the jurisdiction to make such an order, it would only do so if there were very clear grounds. It is undesirable that such an order be made on, effectively, an ex parte basis. 19 I think the correct course with respect to the company administrators is to allow a further interlocutory process to be filed for orders joining them as defendants and for injunctions against them, and for directions to be made that the interlocutory process be served on them and made returnable on Monday, 29 May. In my view, the case has not been made out for injunctions to issue against the company administrators on an effectively ex parte basis. 20 Mr Hillig also seeks an order requiring each individual defendant to provide an affidavit along the lines sought in the interlocutory process, that is to say, an affidavit answering the inquiries made by Mr Hillig's letters of 10 and 18 May 2006. In my view, such orders ought not to be made. 21 The requests for information in Mr Hillig's letters relate to matters going beyond what it would be reasonable to expect any individual defendant to recall from unaided memory. The letter of 10 May 2006 sets out information required in more than three pages comprising 12 individual items. The matters upon which information is sought are in some cases very specific, and it would be necessary for a person seeking to reply to consult the books and records of at least Darkinjung and perhaps also its subsidiaries. 22 In my view, a claim to the relief sought by Mr Hillig is incompatible with his collateral assertion that those individual defendants who are directors have been validly removed from their positions as directors by virtue of Mr Hillig's actions on Monday. To make the orders sought by Mr Hillig would be to require the individual defendants to do things that, if he is right with respect to Monday's actions, they no longer are empowered to do. It seems to me arguable that Mr Hillig's actions on Monday were ineffective. I regard them as unwise and inappropriate, given that he had, on the previous Friday, made an application for the control of Darkinjung and the trust assets to be placed in the hands of a receiver or provisional liquidator. I have expressed my view about his action both yesterday and today. Apart from the difficulties that it creates in terms of designing an appropriate short-term interim regime and, I assume, a medium-term interim regime, the action is bound to raise a dimension of disputation additional to the range of disputes that already exist between the parties. 23 Senior counsel for the defendants informed me yesterday that an application would be made to set aside the purported removal of the defendants as directors and the purported appointment of Mr Hillig in their place, and he asked me to make that application returnable on Monday, 29 May. I have encouraged Mr Hillig to reconsider the position, even suggesting that steps be taken, or that an undertaking be given, so as to reverse the purported steps taken last Monday. He has declined to take up that suggestion. 24 I have no view as to whether there is a sufficient ground for setting aside the action taken by Mr Hillig last Monday, but even a brief perusal of the evidence suggests that there is some basis for argument to challenge the validity of what has been done. 25 There is another matter to be weighed in the balance of convenience. Mr Hillig has offered the usual undertaking in damages, but he has, during the course of submissions, drawn the court's attention to his position as administrator, and in particular s 242 of the Aboriginal Land Rights Act. Although the form of undertaking he now offers is not expressed to be subject to that section, counsel for Mr Hillig informed the court today that in offering the undertaking he would not waive any rights that might arise under that section or otherwise. Section 242(2) says that an Act or omission of (inter alios) an administrator does not subject the administrator personally to any action, liability, claim or demand if the act or omission was done, or omitted to be done, in good faith for the purpose of executing this or any other Act. 26 If that section applies to the undertaking in damages, it substantially qualifies the utility of the undertaking. The undertaking is regarded by the court as a significant factor in the balance of convenience. It enables the court to ask the question whether the appropriate course, on balance, is to restrain the defendants and leave them to assert a claim for damages against the plaintiff pursuant to the undertaking should the restraint prove to be unwarranted, or to decline to restrain the defendants and leave the plaintiff to assert a claim for damages in the ordinary course. The removal of the utility of the undertaking in damages distorts that equation. 27 Since there are other factors that I regard as quite compelling and pointing against the making of the orders sought by Mr Hillig today, I do no more than to note the difficulty that is created by the limitation to the undertaking that he wishes to assert, so that the matter can be considered in a more thorough manner should further injunctive relief be sought. 28 Finally, I should note that Mr Hillig's proposals today do not, as senior counsel for the defendants has pointed out, include any proposed undertaking, even up to 29 May 2006, not to call upon any banks or owner parties to pay funds of Darkinjung across to Mr Hillig or any other undertaking that would constrain him in whatever course of action he chooses to pursue as administrator, or in the capacity he now claims to have as director of Darkinjung and other entities. That means that the proposed orders that Mr Hillig has put to the court are lopsided and would not, in my view, adequately serve to preserve what I consider to be the proper status quo until the further hearing on 29 May. 29 For all these reasons, I shall not accept the submissions made on behalf of Mr Hillig to make the orders he proposes. I shall accept the proffered undertaking of the defendants, bearing in mind that even with the modification I have mentioned, it does not constitute any significant departure from the existing order of the Land and Environment Court. 30 I shall adjourn the proceedings to Monday, 29 May 2006, at 2pm, including the interlocutory application. 31 I shall make orders to permit Mr Hillig to make an application with respect to the company administrators, if he wishes, made returnable at that time, and to permit any of the defendants to make an application with respect to Mr Hillig's actions of Monday afternoon, also made returnable at that time. 32 This short-term interlocutory regime is far from perfect. It does not purport to address the question of what will happen if, between now and Monday, Mr Hillig seeks to assert rights as director of Darkinjung, or any of the relevant subsidiaries. It would be premature for the court to anticipate any such action. But since my concern is to preserve the status quo as best I can pending a further hearing, I shall grant liberty to both parties to apply, on 24 hours notice. 33 The only appropriate order for costs, in my opinion, is that costs be reserved. **********