COURT
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
WILCOX J

CWDS
  Administrative Law - Aborigines - Application for grant to support welfare
activities - Compromise of dispute over previous grant - Accountants' report
obtained pursuant to that compromise - Delay in obtaining report - Whether
delay deliberate in order to enable respondent to promote an alternative
agency - Concern by respondent that applicant not subject to democratic
control - Financial accountability - Concern about procedures for selection of
employees - Allegation that refusal of application not made in good faith -
Whether decision to refuse application was unreasonable.
  Aboriginal and Torres Strait Islander Commission Act 1989, s.18.
  Administrative Decisions (Judicial Review) Act 1977, s.5.

HRNG
SYDNEY, 19-20 August 1993
#DATE 1:9:1993
  Counsel for the Applicant:       N Francey and R Weaver
  Solicitors for the Applicant:    Smythe and Mallam
  Counsel for the Respondent:      J S Hilton and R T Beech-Jones
  Solicitors for the Respondent:   Australian Government Solicitor

ORDER
THE COURT ORDERS THAT:
    1. The Application be dismissed.
    2. The applicant pay to the respondent its costs of the
       proceeding.
Note:  Settlement and entry of orders is dealt with in Order 36 of the Federal
Court Rules.

JUDGE1
WILCOX J  This is a challenge to a decision refusing an application for a
grant of funds under s.18 of the Aboriginal and Torres Strait Islander
Commission Act 1989.  That section provides:
    "18.(1)  Subject to subsections (2) and (3), the Commission may, on
    such terms and conditions as it determines, make loans or grants of
    money to:
    (a)     the States, the Australian Capital Territory and the
            Northern Territory;
    (b)     State, Territory and local government bodies;
    (c)     Aboriginal or Torres Strait Islander corporations; or
    (d)     any other incorporated bodies;
for the purpose of furthering the social, economic or cultural development of
Aboriginal persons or Torres Strait Islanders.
    (2)  The Commission may not make a loan or grant to a body under
    subsection (1) if the loan or grant is of a kind that could be made to
    that body under section 15, 16 or 17.
    (3)  The Commission may not make a loan or grant pursuant to paragraph
    (1)(d) without the Minister's written consent."
2.  The Commission, referred to in the section, is the Aboriginal and Torres
Strait Islander Commission ("ATSIC"), a body incorporated by the Act:  see
s.6(1).  It is the respondent to this proceeding.  The decision under
challenge was made by the Commission's New South Wales State Manager, Geoffrey
William Scott, on 18 August 1993.
The facts
3.  The applicant, Western Districts Foundation for Aboriginal Affairs Ltd, is
a community based welfare organisation run from offices at St Marys, in outer
western Sydney.  The Foundation's Memorandum and Articles of Association
contain no limitation on the persons whom it may serve.  However, in practice
and as its name implies, the organisation gives priority to members of the
aboriginal community and especially those living in western Sydney and in some
parts of country New South Wales, notably the Wellington district.  The
Foundation assists its clients by providing material assistance (food
vouchers, payments towards electricity and gas bills and provision of clothing
and furniture), social support and counselling, including referral to
appropriate specialist agencies such as medical and legal services.  The
Foundation operates a truck which is used for the collection and distribution
of donated food, clothing, furniture and bedding.  Each Christmas, the
Foundation distributes food hampers, gives toys to children and holds a
Christmas party.
4.  Since its establishment in 1975, the Foundation has received continuous
government funding; initially from the Department of Aboriginal Affairs, more
recently from ATSIC.  At least in recent times, funding has been directed
towards the payment of the infrastructure costs, chiefly salaries and
equipment expenses, necessary to enable the Foundation to carry out its
welfare activities.  ATSIC has not provided funds for distribution to the
needy or for the purchase of toys or for the Christmas party.  These funds
have been obtained by donations or New South Wales government grants.  The
Foundation is a registered charity under State legislation administered by the
Chief Secretary of New South Wales.
5.  As I understand the position, ATSIC funding is generally allocated to an
organisation on a whole financial year basis.  But the money is paid
quarterly, subject to compliance by the grantee with the conditions of the
grant.
6.  The evidence about the matter is sparse, but it appears that in early 1993
a dispute arose between the Foundation and ATSIC concerning payment of the
final quarterly instalment of the 1992-1993 grant.  I gather that ATSIC
asserted, and the Foundation denied, that the Foundation had breached one or
more of the conditions of the grant. The Foundation commenced a proceeding in
this Court concerning the matter; but an agreement was reached with ATSIC and
the proceeding was discontinued.  The agreement was recorded in a letter of 28
April 1993 from the Australian Government Solicitor, acting for ATSIC, to
Smythe and Mallam, solicitors for the Foundation.  It provided that ATSIC
would pay $39,350 to the Foundation in two equal instalments, one within seven
days, the other by 31 May 1993; subject, amongst other things, to ATSIC
receiving a report regarding certain specified matters from auditors appointed
by it.
7.  The letter from the Australian Government Solicitor also referred to the
Foundation's application for a 1993-1994 grant of $226,449, which was then
under consideration by ATSIC.  The letter said that, in due course -
    "ATSIC will communicate to the Foundation its specific concerns
    regarding the constitution, management and operations of the
    Foundation and the Foundation will address each of these concerns by
    30 June 1993".
8.  Pursuant to this agreement, ATSIC appointed a firm of chartered
accountants, Duesburys, to undertake an investigation of the Foundation's
financial affairs.  The investigation did not proceed as rapidly as the
parties had envisaged when they made the 28 April agreement.  Apparently, it
was necessary, under government policy, for ATSIC to call tenders for the
work.  This caused a three week delay in selecting the firm to be appointed.
It was not until early June that Duesburys commenced an eight-day inspection
of the Foundation's records. Then there was delay in provision of the report.
The report is dated 8 July.  Apparently, it was not available to ATSIC until
then.
9.  In the meantime, ATSIC paid the Foundation the whole sum of $39,500
promised by the 28 April agreement.  The money was not paid in the two
instalments contemplated by the agreement because Allen Hedger, the Sydney
Regional Manager of ATSIC, realised that there would be a substantial delay
before the accountants' report was available.  He thought that the second
instalment should be paid before then.
10.  The Foundation submitted monthly reports for April, May and June 1993, as
required by the 28 April agreement.  ATSIC apparently found these
satisfactory.
11.  With the approach of the new financial year, the Foundation became
concerned about the fate of its 1993-1994 application.  Of course, the
Foundation's officers knew about Duesburys' investigation, but they had heard
nothing further.  On 24 June, Rodney Garmaise, the Foundation manager, spoke
to Peter Armstrong, Sydney Deputy Regional Manager of ATSIC.  Mr Armstrong
told him that the ATSIC councillors (apparently the Sydney Region councillors)
had rejected the Foundation's funding application on 20 June but that he, Mr
Garmaise, would have to speak to Mr Hedger for further information.  Mr
Garmaise did speak to Mr Hedger, on the following day, but Mr Hedger said he
could not give any details of the rejection until the matter had been reviewed
by the Australian Government Solicitor.
12.  Although there is no direct evidence on the matter, the case has been
conducted on the basis that the Sydney Region councillors reached an adverse
decision on 20 June but that this did not bind ATSIC. The Regional councillors
have a merely advisory role.  And, in the present case, a lot of information
became available after 20 June but before Mr Scott's final decision.  As he
recognised, he was obliged to take that information into account.  Neither
party places weight on the 20 June resolution.
13.  On 30 June, Smythe and Mallam wrote to Mr Hedger seeking information.
They received no reply.  They wrote again on 6 July.  On 8 July, Mr Garmaise
spoke to Mr Hedger.  Mr Hedger said that he still had not heard from the
solicitors.  Mr Garmaise asked for a copy of Duesburys' report but Mr Hedger
said this could be supplied only with the solicitor's approval.  On 9 July,
Smythe and Mallam wrote a further letter to Mr Hedger.  They pointed out the
effects of the funding uncertainty on the Foundation's work.  Still there was
no reply.
14.  On 19 July this proceeding was commenced.  The filed Application sought
review, under the Administrative Decisions (Judicial Review) Act 1977, of a
decision to -
    "refuse continuation of grant funding by the respondent, that decision
    having been made prior to 24 June 1993 and communicated by telephone
    to the Applicant on that day".
Although the Application did not so state, the reference was to the resolution
of the Sydney Regional councillors.
15.  The matter came before the Court for directions three days later, on 22
July 1993.  Counsel for ATSIC informed the Court that no final decision on the
application had yet been made.  Accordingly, with the consent of the
applicant, the directions hearing was adjourned until Friday, 30 July.
16.  On 23 July, Mr Hedger sent a letter to William May, Chairperson of the
Foundation, seeking information regarding numerous matters.  I will return to
the detail of the inquiries.  For the moment, it is enough to note that Mr
Hedger's questions concerned aspects of the constitution, structure and
membership of the Foundation; its accountability; and aspects of its delivery
of services.  The letter enclosed a copy of Duesburys' report.  Some questions
were directed to comments in that report.
17.  Mr Garmaise replied to this letter on 28 July.  He supplied answers to
many of the questions, but not all of them.
18.  On 30 July the matter again came before the Court.  Counsel for ATSIC
indicated that their client was considering Mr Garmaise's response and that no
decision had yet been made on the grant application.  The directions hearing
was again adjourned, this time till 12 August.
19.  On 11 August the Australian Government Solicitor sent to Smythe and
Mallam a document prepared by Mr Hedger and entitled "Statement of Reasons for
Recommendation".  The document concluded with a recommendation that the
Foundation's application for 1993-1994 funding be declined.  The letter from
the Australian Government Solicitor concluded:
    "I am instructed that the State Manager is minded to accept that
    recommendation and to adopt the Regional Manager's reasons as his
    Statement of Reasons under s.13 of the Administrative Decisions
    (Judicial Review) Act 1977 subject to receiving any further submissions
    (which should be received by 9.30 am tomorrow, unless your client
    requires further time to respond)."
20.  The Foundation decided not to comment directly on this draft.  When the
matter came before the Court on the following day, counsel for the Foundation
indicated that their client wished to amend the Application so as to complain
of the conduct of ATSIC, in connection with the decision-making process,
rather than the legal validity of a decision made before 24 July; that is to
say, the Foundation would rely on s.6 of the Administrative Decisions
(Judicial Review) Act rather than s.5.  Counsel accepted that, so far as they
were aware, no statutory decision had yet been made.  Counsel indicated that
the Foundation challenged the relevance of many of the matters raised by Mr
Hedger and wished the Court to rule on their relevance.  They pointed out the
difficulties that the Foundation was experiencing because of the uncertainty
about funding and pressed for the earliest possible hearing date.
21.  Because of the settlement of another matter, I was able to commence the
hearing on Thursday, 19 August.  In the meantime Mr Garmaise swore a further
affidavit, dated 13 August, dealing with the matters referred to by Mr Hedger.
Mr Hedger prepared a Supplementary Statement of Reasons for Recommendation in
which he commented upon Mr Garmaise's response.  This was referred to Mr Scott
who, on 18 August, made a decision adopting Mr Hedger's recommendation to
decline the application.  In endorsing his decision on the document prepared
by Mr Hedger, Mr Scott added the following handwritten notation:
    "In considering this matter I have taken into account both this
    statement of reasons and the attached supplementary statement of reasons
    for recommendation.
    Further that any one of the five reasons for recommendation at page 6
    would in my view constitute sufficient reason to decline funding to the
    applicant."
22.  The five reasons at page 6 were:
    "(1)    I am not satisfied that WDFAA is a body which is accountable
            to its members.  On the contrary, the directors have acted
            in an undemocratic manner in expelling members who sought to
            call an Extraordinary General Meeting to question actions of
            the Directors. It is not appropriate that ATSIC continue to
            fund such a body.
     (2)    I am not satisfied that there are proper and adequate
            procedures in place relating to the recruitment of staff to
            salaried positions in the WDFAA.  I consider it important
            that all members of the Aboriginal community have the
            opportunity to apply for such positions based on merit and
            that bodies who receive funding from ATSIC for their
            administrative overheads should allow that to occur and
            should be scrupulous in following proper procedures.
     (3)    I am not satisfied that WDFAA have in place adequate
            financial controls and accounting procedures, in particular,
            the controls over cash withdrawals and the personal use of
            official motor vehicles appear inadequate or non existent.
            Once again ATSIC should not fund an organisation which lacks
            adequate accounting controls.
     (4)    I am satisfied that, contrary to the terms of its 1992/93
            funding grant the WDFAA has not provided pertinent financial
            information specifically requested by ATSIC.
     (5)    I am satisfied that there is a significant overlap of
            services between the BAC and the WDFAA.  In my view the
            preferable way of dealing with the overlap and ensuring that
            ATSIC's funds are used to maximum benefit is to continue
            funding the BAC and cease funding WDFAA."
23.  Mr Scott's decision was received by the Foundation on 18 August.  When
the matter came before me for hearing on the following day, counsel for the
Foundation informed me that a decision had now been made and that their client
wished to amend its Application in a different way; so as to challenge that
decision.  Counsel for the respondent did not object to this course but they
sought particulars of the grounds of invalidity alleged by the Foundation.
Counsel for the applicant then mentioned a number of the grounds itemised in
s.5 of the Administrative Decisions (Judicial Review) Act.  It is unnecessary
to detail them all.  Most were subsequently abandoned.  In their final address
counsel for the Foundation limited themselves to two grounds: that the
decision to decline the application was made in bad faith (Administrative
Decisions (Judicial Review) Act, s.5(1)(e) and s.5(2)(d)) and was so
unreasonable that no reasonable person could have made the decision (s.5(1)(a)
and s.5(2)(g)).
The Statement of Reasons:  democratic control
24.  In order to appreciate the submissions of counsel, it is necessary to
refer to the matters referred to by Mr Hedger in his Statement of Reasons for
Recommendation, and his Supplementary Reasons prepared after seeing Mr
Garmaise's affidavit of 13 August.  These reasons were adopted by Mr Scott,
the statutory decision maker, in making his final decision.
25.  The first of the five matters mentioned by Mr Hedger concerned democratic
control.  On this matter he made the following findings of fact:
    "(i)    In July 1993 it came to my attention that certain full
            members of WDFAA had been denied rights provided for all
            such members in the organisation's constitution. ...
     (ii)   Specifically the WDFAA articles of association, Paragraph
            14, provide that 'Any Director or any three members may
            whenever they think fit convene an extraordinary general
            meeting.'...
     (iii)  The WDFAA appears to have received two written requests ...
            from members of WDFAA calling extraordinary general
            meetings.  In each case the board of WDFAA denied the
            requests for meetings and expelled the members responsible
            for calling the meetings from the WDFAA on the basis that
            their actions were 'detrimental to the Foundation'. ...
     (iv)   In response to ATSIC's request to specify how these members
            (sic) actions had been detrimental, WDFAA declined to
            provide any particulars. ...
     (v)    In my opinion it is inappropriate to fund an organisation
            which shows such a disrespect for its constitution and its
            members.  The board have acted in an undemocratic fashion in
            the face of criticism from the members."
26.  Two requisitions for an extraordinary general meeting were received by
the Foundation in April 1993.  The first, dated 2 April, was signed by four
persons, presumably members.  The requisition set out six proposed
resolutions.  The first resolution was for Mr May's removal as a director, the
second for the removal of the whole board of directors. The fourth resolution
called for an independent audit and the fifth for the removal of the existing
auditor.
27.  The second requisition, dated 19 April, also proposed resolutions
critical of the board of directors.  They included a resolution that Mr May
stand down immediately from his position as Chairperson and as a director of
the Foundation and a vote of no confidence in Mr Garmaise.  This requisition
was signed by six persons, again apparently members of the Foundation.
28.  The evidence does not reveal an immediate response to the first
requisition; except that it is clear that no extraordinary general meeting was
held.  It does reveal that, on 20 April, Mr May wrote to the six signatories
of the second requisition and to two other people, one at least of whom had
signed the earlier requisition, discussing the resolutions proposed by the 19
April requisition.  The letter stated:
    "In the considered opinion of the majority of the Board of Directors
    you are in breach of the constitution and the aims and objectives of the
    Foundation and detrimental to the organisation in accordance with
    Article 7(c)(I) and (II) of the constitution therefore your membership
    has been terminated forthwith".
29.  The letter stated that no extraordinary meeting would be called "due to
the motions being null and void because all issues have been addressed by the
board of directors". Each letter concluded with a notice to show cause within
seven days why the addressee's membership should not be terminated.
30.  It seems that none of the addressees responded to the letter.  On 12 May,
Mr May wrote to each of them notifying that their membership had been
cancelled as at that day because of failure to show cause.
31.  In his affidavit of 13 August, Mr Garmaise referred to these documents,
which he annexed to his affidavit.  He stated that he was informed by Mr May
that the application by these members for an extraordinary general meeting was
the fourth such application since 1992 and that two extraordinary general
meetings were called in response to the first two applications in 1992 at a
cost of about $2,500 to the Foundation.  He said that the "termination of the
memberships thereafter took place in accordance with the Foundation's
constitution".
32.  The evidence does not suggest that any of the earlier extraordinary
general meetings were requisitioned by any of the people who signed the April
requisition.  Neither does it disclose the nature of the resolutions
considered at the earlier meetings.
33.  In his Supplementary Reasons, Mr Hedger made the following comments on Mr
Garmaise's affidavit:
    "i)     In my view, reliance by members upon their rights under the
            articles of association of WDFAA to requisition an
            extraordinary general meeting should not be regarded as
            detrimental conduct, particularly when it is clear that the
            directors have failed to respond to those requisitions;
     ii)    In my view, the matters which the members sought to raise in
            their petitions of 2 April, 1993, and 19 April, 1993 were
            matters which appear to be important which should have been
            considered by all members of the Association.  The directors
            appear to be wanting to suppress open discussion of the
            conduct of the affairs of the Association;
     iii)   Contrary to Mr. Garmaise's affidavit, the letters sent to
            the members do not appear to rely upon any allegation that
            they acted in a manner detrimental to WDFAA by making
            repeated requisitions for extraordinary general meetings.
            In the letters addressed to the members concerned, supplied
            to me by WDFAA, this matter was not mentioned;
     iv)    The letter of 20 April, 1993 advised the members to whom it
            was directed that their membership had been terminated
            forthwith.  This advice appeared in the first paragraph of
            the letter, although it did not descend to specify the basis
            for this termination.  Then, in the final paragraph of the
            letter, the members were informed that they were being given
            the opportunity to show cause why their membership should
            not be terminated.  This is obviously confusing and one may
            infer that a concluded decision by the directors to expel
            these members was made in advance of any submission by the
            members as to why they should not be expelled;
     v)     ATSIC has still not been advised by the WDFAA of any
            acceptable basis for concluding that these members had acted
            in a manner detrimental to the interests of the Foundation."
The Statement of Reasons:  staff selection procedures
34.  The second of Mr Hedger's five matters of concern was the staff selection
procedures followed by the Foundation.  It appears that, at all material
times, there have been five directors of the Foundation and that they have
included Mr May as Chairperson and his daughter, Katie Church, as Secretary.
The funding application for 1993-1994 included a budget identifying seven paid
positions.  They included full-time positions of truck driver and trainee
welfare officer.  The currenttruck driver is Kevin Church, the husband of Mrs
Katie Church and son-in-law of Mr May.  Mr Church was appointed to the
position in March 1992.  According to some hearsay evidence in Mr Garmaise's
affidavit, to which no objection was taken, a notice concerning the position
was placed on the notice board of the Commonwealth Employment Service at
Blacktown.  A couple of days later, no application for the job having been
received, Mr May offered Mr Church the position on a part-time basis.  His
appointment was later confirmed by the board of directors. On 4 May 1992 the
board made the appointment a full-time position.
35.  The incumbent trainee welfare officer is Kellie May, a grand-daughter of
William May.  In his letter of 28 July, Mr Garmaise stated that Ms May had
previously acted as an unpaid assistant to Vera May during 1992 and was
permanently appointed to the paid position on 8 October 1992.  Applications
for the position were not called.  Vera May is a director of the Foundation.
She is said to be unrelated to William May.  The evidence does not disclose
the nature of her 1992 activities or her qualifications as a welfare officer.
36.  In addition to the seven positions referred to in the budget, the
Foundation occasionally employs David Church, Mr May's grandson, as "driver's
offsider for larger deliveries of charity goods".
37.  Mr Hedger commented on the Foundation staff selection procedures in this
way:
    (i)     I am concerned that proper and appropriate selection
            procedures have not been used in some instances where staff
            appointments have been made at the WDFAA.  This is of
            particular concern given the extent to which the funds of
            WDFAA provided by ATSIC are spent on wages and salaries. ...
     (ii)   The WDFAA has failed to satisfy ATSIC that
            legitimate/appropriate selection procedures were observed in
            the appointment of:
            *   Ms K. May to the position of Trainee Welfare Officer.
            *   Mr K Church as a full time driver for the organisation.
     (iii)  In respect of the appointment of Ms. K. May I note:
            (a) She is the grand daughter of Mr W. May, who is the
                chairman of the WDFAA.
            (b) The position of welfare officer was advertised in the
                Sydney Morning Herald on 3 October 1992.
            (c) Ms May was appointed to the position on 8 October 1992.
            (d) WDFAA have not responded to my request of July 23 1993
                to explain the process used to appoint Ms May to the
                position.
            (e) WDFAA have also failed to advise me as to whether any
                relative of Ms K. May was involved in the decision to
                appoint her.
     (iv)   In respect of the appointment of Mr Church, the WDFAA has
            failed to provide any information on the circumstances in
            which he was appointed.  Such information was requested in
            my letter to the organisation dated 23 July 1993.  I note
            that Mr Church is the son in law of Mr. W. May, who is the
            Chairman of WDFAA."
38.  Mr Garmaise commented in his affidavit that it was wrong to connect the
advertisement of 3 October with Ms May's appointment; the advertisement sought
a qualified welfare officer whereas Ms May was only a trainee.  It appears
that a qualified welfare officer was appointed on 29 December 1992.  On 25
March 1993 she resigned.  The position was re-advertised on 6 May 1993.  An
appointment has been made but, because of the uncertainty over funding, the
appointee has not yet commenced duties with the Foundation.  Mr Garmaise said
that Ms May was appointed to the position by the board.  He understood that Mr
May presided over the board decision.
39.  Mr Garmaise was unable to speak of 1992 events from his own knowledge.
He commenced employment with the Foundation only on 11 January 1993.
40.  In his Supplementary Reasons, Mr Hedger referred to the fact that his
letter of 23 July sought information from the Foundation concerning the number
of applicants for Ms May's position, the procedure invoked to fill the
position and whether any relation of hers was involved in the decision to
employ her.  He noted that the Foundation had still not stated how her
appointment was made, the procedures invoked or the specific people involved
in the decision to employ her. He also maintained his dissatisfaction with the
procedure adopted for the appointment of Mr Church as truck driver.
The Statement of Reasons:  financial control
41.  The third matter listed by Mr Hedger in his Statement of Reasons for
Recommendations was lack of adequate financial/accounting control.  He said:
    "(i)    I am not satisfied that there are adequate financial
            controls and accounting procedures governing financial
            matters of the WDFAA.
     (ii)   The WDFAA have been unable to provide details of financial
            security procedures used in relation to cash withdrawals
            from the WDFAA term deposit account held with the Advance
            Bank Ltd.(Account number 306832627).  Two withdrawals made
            from this account were for $10,017.50 and $10,189.18, made
            on 30 October 1992 and 6 November 1992 respectively.
     (iii)  The WDFAA has not complied with ATSIC's request to provide
            minutes of the Board Meetings approving the cash withdrawals
            disclosed at C (ii).  All that has been provided are
            extracts of a meeting of 7 June 1993 which refer to these
            withdrawals and assert that Board approval was given.
     (iv)   I note that Mr. W. May was the Chairman of the Board of
            Directors of WDFAA at the time of the cash withdrawals
            disclosed at C(ii) above and is currently the Chairman of
            the Board.  I also note that Mrs. K Church and Mrs. V May
            were board members at the time of these withdrawals and are
            current Board members.
     (v)    I am not satisfied that adequate control and security
            procedures were operated in respect of the cash withdrawals
            disclosed at C(ii).  Further I am not satisfied, based on
            paragraph (iv)(and contrary to the assertion made in the
            WDFAA letter of 28 July 1993 that 'All foundation
            transactions are conducted in a safe, secure manner') that
            the present Board will maintain adequate controls and
            security procedures for cash withdrawals.
     (vi)   The WDFAA owns two motor vehicles, and it informs me that
            employees have access to the vehicles for personal use.
            WDFAA also inform me that log books are not maintained for
            either of the vehicles.  This is unacceptable as ATSIC is
            funding an unknown amount of costs associated with personal
            travel in the WDFAA vehicles, by WDFAA employees and/or
            officers."
42.  In his affidavit of 13 August, Mr Garmaise commented that Mr Hedger
appeared to be concerned with two matters:  the amount spent on toys during
1992-1993 and use of the Foundation's motor vehicles.  In relation to toys, he
quoted from his letter to Mr Hedger of 28 July:
    "The amount spent on toys for the 1992/93 year was $41,253.44.  The
    apparent discrepancy you refer to in point (vi) arises from the cash
    payments that you note in your following question together with the
    amount for cheques numbered 427 - 432 inclusive totalling $5,406.10 for
    the provision of 'party food' for the children's Christmas parties.  A
    copy of our reconciliation sheet is annexed hereto and marked "F" for
    your information.  In response to your expressed concern regarding the
    cash purchase of toys copies of the invoices for those toys purchased
    for cash are annexed hereto and marked 'G'.
    I am however at a loss to understand why you consider it necessary to
    require us to undertake a full accounting of the distribution of those
    toys.  I note that none of the money expended on toys comes from ATSIC
    funding but is provided by our fund-raising efforts and other grants.
    The Foundation is currently being audited for our annual report to the
    Chief Secretary's Department, the body responsible for overseeing our
    operations as a charitable organisation.  We will happily provide a copy
    of that report, prepared at the Foundation's expense, when same is
    available.  We do not however consider that our administrative funding
    should be delayed pending its receipt since it covers an area which is
    not strictly within the compass of your Commission.
    The toys were purchased from a wholesaler who at the time offered the
    Foundation a 20% discount for cash payment.  Board approval was obtained
    at the time of the purchase and is noted in the copy of the minutes of
    the Board meeting of 7 June 1993 which is annexed hereto and marked 'H'.
    All Foundation cash transactions are conducted in a safe, secure
    manner."
43.  The attachments to the letter referred to by Mr Garmaise are confusing.
Annexure "F" is not a reconciliation sheet.  It is only an extract from a list
of December 1992 payments, apparently prepared by Ester Emslie, the
Foundation's sometime book-keeper.  The list includes five payments, totalling
$5,406.16, which (judging by the names of the payees) might reasonably be
assumed to relate to the 1992 Christmas party.  Annexure "G" consists of two
invoices, No. 11-12 for $10,091.54 and No.53 for $10,017.50.  The second
invoice bears a notation adding the value of the invoices ($20,109.04) with
the note "Both paid by cash - Taken from Advance Bank Term Deposits A/C
306832627 - A/C has seen (sic) been cancelled".  All the goods listed in these
invoices appear to be toys.
44.  Annexure "H" is not a minute authorising the cash transaction but merely
a note that Mrs Emslie wished the following information to be minuted:
    "The disbursements of money withdrawn from the fixed investment
    accounts between October and November, 1992 used mainly to purchase
    toys and food for the Christmas period.  The decision to withdraw
    these monies to purchase these items had been approved by the Board
    of Directors late last year."
45.  During the course of his cross-examination, Mr Garmaise said that "it
could be right" that Ms Emslie ceased her employment as book-keeper in
September 1992, but he said that he was not sure when she was there and when
she was not.  Annexure "H" to Mr Garmaise's letter contains a note concerning
the toys:
    "2. The following transactions took place during the months of October
        and November 1992 and it is brought to the attention of the Board
        that these should be included in the Minutes of the Meeting held
        during those months, or thereabouts.
        Investment accounts deposited with Advance Bank totalling
        $53,757.62 were withdrawn and used to purchase toys and food given
        away at Christmas time.  They represented the following accounts:
        No. 307349451              $10,039.31
           127622827                23,529.13
           306832627                20,189.18
       Plus withdrawal from St. George
        Bank, A/C 059015565          9,973.62
                 Total             $63,691.93
        The above amount was used to pay the following:
        1. Toys - $15,738.30       Ch.397 and 385
        2. Toys -  20,109.04       Adjustment made as no cheque was drawn
                                   for this.
                  $35,847.34       The account was closed and the cheque
                                   was paid directly to the supplier.
        The balance of the withdrawn amount was used to pay termination
        payments and group taxes relating to the payments."
46.  On the face of it, this note suggests a significant accounting omission.
Even accepting the adequacy of the evidence concerning the cash payment of
$20,109.04, according to this document only $35,847.34 was spent on toys as
compared with $63,691.93 withdrawn from bank accounts for the purpose, a
difference of $27,844.59.  The difference is said, vaguely and without
verification, to have been spent on "termination payments and group taxes".
47.  However, in fairness to the Foundation, I should record two points made
by counsel in relation to this document.  First, they pointed out that Mr
Hedger's letter of 23 July referred by number to seven invoices for toys.  He
gave the value of these invoices as $40,875.88.  Counsel suggested that this
letter constituted an acknowledgment that ATSIC was satisfied that $40,875.88
had been spent on toys.  On that basis, counsel said, there was be no omission
to account.  The only mystery was the source of the difference between the
revealed $35,847.34 and the expended $40,875.88.  However, this was not a case
of funds missing, rather the reverse.
48.  What counsel say about the letter of 23 July may be correct. The letter
is confusing.  I am uncertain whether Mr Hedger saw the invoices.  On the one
hand, his letter says:  "Our records indicate that the total value of toys
purchased during October and November 1992 was $40,875.88"; on the other, the
letter notes that Duesburys identified only $15,739 toy expenditure and asks
for confirmation of the correct amount and for the provision of original
invoices.  This apparent inconsistency was not resolved at the hearing.  I do
not know what is the position.  But it may be that ATSIC was satisfied that
the Foundation spent $40,875.88 on toys.
49.  Secondly, counsel said that, until the matter was raised in Court, nobody
complained about the adequacy of the information regarding termination
payments and group taxes.  So far as I can see, this is right.  Duesburys did
not comment on the matter.  I remain mystified about the precise disbursement
of the $63,691.93 withdrawn from the various bank accounts.  However,
particularly in the light of Duesburys' investigation, there is no warrant for
assuming that any funds have been misappropriated.  Nobody has ever alleged
misappropriation; indeed, Mr Hedger expressly disclaimed it in his
Supplementary Reasons.
50.  In his Supplementary Reasons, Mr Hedger set out his response to the
comments regarding financial control made by Mr Garmaise and the Points of
Contention filed in this case on behalf of the Foundation:
    "(i)    I note that in paragraph 2(c)(i) of the Points of Contention
            it is asserted that ATSIC should not take into account the
            adequacy of WDFFA's financial control and accounting
            procedures in respect of cash withdrawals which do not
            relate to ATSIC funding.  In my view, the purpose of ATSIC's
            funding is to assist bodies such as WDFAA, to provide a
            service that is consistent with their objectives and
            functions.  As such it is imperative that ATSIC should be
            satisfied that financial controls and accountability are in
            place.  In ATSIC's letter of 23 July, 1993, WDFAA was asked
            to provide specific documents and details relating to the
            cash transactions in question which the Commission
            considered necessary to enable it form (sic) a conclusion on
            whether adequate financial controls were and are in place.
            Further, in the letter of 23 July, 1993 WDFAA was asked to
            provide the minutes and resolutions of the meetings where
            authorisation was given concerning the cash withdrawals.
            Other than the minute referred to in paragraph 2C(iii) of my
            reasons of 11 August, 1993, WDFAA has still not provided the
            minutes and resolutions requested or any specific details of
            the security procedures followed for those transactions.  In
            my view the bald assertion that 'all cash transactions are
            carried out in a safe, secure manner' is not verified by any
            evidence".
The Statement of Reasons:  compliance with general conditions of grant
51.  The next point concerns the matter of compliance with the general
conditions of ATSIC funding for the 1992-1993 year.  In his Reasons for
Recommendation, Mr Hedger said:
    "(i)    The general conditions of ATSIC funding of the WDFAA for the
            1992/93 financial year required the WDFAA to provide
            financial and administrative reports and some other
            information to the Commission as requested:  Clause 5.2(b).
     (ii)   Specifically, in response to my written request of 23 July
            1993 the WDFAA has failed to provide the following:
            -   Monthly Accounts Statements for period 1 July 1992 to
                31 May 1993.
            -   Original invoices supporting the purchase of $40,253.44
                worth of toys.
            -   Evidence of receipt of goods worth $40,253.44.
            -   Details of the method of payment used in relation to
                the purchase of $40,253.44 worth of toys.
            -   A copy of the WDFAA response to a letter from the Chief
                Secretary's department dated 17 February 1993.
            -   Bank statements for the period 1 July 1992 to 31 May
                1993."
52.  Clause 5.2(b) of the General Conditions had no application to the toys.
That sub-clause empowered ATSIC, or its agent, to seek further information to
establish that "the grant monies" have been used for the approved project.  It
applies only to monies granted by ATSIC. As previously mentioned, the toy
monies were provided by others.  When the point was put to him, Mr Scott
conceded that the reference to cl.5.2(b) was mistaken.  Nonetheless, he
insisted that ATSIC had a legitimate concern with the expenditure of the toy
monies; the control of that expenditure bore upon the issue of the
Foundation's financial accountability.
53.  In relation to financial records generally, Mr Garmaise enclosed some
documents with his letter of 28 June.  He said that more detailed reports
would be available on completion of the yearly audit, currently under way.  He
referred to Duesburys' report.
54.  Duesburys' report is lengthy.  I do not propose to deal with it in
detail.  It contains a lot of useful information regarding the Foundation's
operations.  It concludes with the statement that, despite all its criticisms,
"the accounting records were of a sufficient standard to provide directors
with an adequate guide to the financial position, and adequate for the
management of WDFAA".
55.  However, the report's criticisms and qualifications were important.
First, Duesburys noted the absence of third party vouchers or receipts for
funeral benefit payments.  In 14 out of 22 cases, in the period of review,
there was no way of knowing whether the payments had been used as intended.
Secondly, there was little or no explanation of petty cash payments to welfare
recipients; similarly with assistance towards electricity and gas payments.
In this connection, Duesburys noted a major limitation upon their review:
they were refused access to the Foundation's welfare files on the ground of
client confidentiality. Duesburys could not satisfy themselves that the
persons who received payments were in fact welfare applicants; still less
could they check whether those people presented a genuine case of need.
Similar problems arose in connection with other forms of welfare assistance:
emergency travel assistance, Christmas food hampers, food vouchers, receipt of
distributed food and one payment of $350 for medical equipment (the
beneficiary being at Ulmarra on the New South Wales north coast).
56.  Duesburys referred to the Christmas toy issue; not only their difficulty
in reconciling the financial records, but also the lack of records regarding
distribution of the toys.  They said that it was not possible to form an
opinion whether they were distributed on the basis of genuine need.  They
referred to a complaint that some toys were sold en route to a country
destination, something admitted by Mr May who blamed a particular person no
longer associated with the Foundation. Duesburys said they had no evidence to
substantiate Mr May's explanation.  They also discussed perceived inadequacies
in the Foundation's stock records.  They suggested improvements to the present
system.
57.  In his Supplementary Reasons, Mr Hedger commented on Mr Garmaise's
response:
    "i)     As stated above, in my view, ATSIC must consider the overall
            operations of the Association, not just those matters it
            specifically funds.
     ii)    I took into account the information provided by Duesbury's
            (sic) in their audit, but their report raised concerns which
            motivated me to seek specific documentation and seek further
            explanation of the queries raised as set out in the letter
            of 23 July, 1993;
     iii)   WDFAA has still not provided the material requested in the
            letter of 23 July, 1993 set out in sub-paragraph (ii) of
            paragraph 2D of my recommendation of 11 August, 1993."
The Statement of Reasons:  delivery of services
58.  The final matter mentioned by Mr Hedger in his Reasons for Recommendation
was service delivery.  He said:
    "I note that the Blacktown Aboriginal Corporation (BAC) is providing a
    similar service to that provided by WDFAA.  In particular, the BAC
    provides the following types of services in the Blacktown region:
    -           Advocacy
    -           Family and individual support
    -           Emergency child care
    -           Employment referral
    -           Awareness programs for local Police and general community
    The WDFAA General Manager has asserted that BAC 'is a women's refuge and
    does not provide welfare assistance beyond immediate physical support
    and counselling to Koori (and presumably white) women.'
The Manager of BAC in a subsequent communication to ATSIC stated the
following:
    *       Mr Garmaise had rung wanting to know the composition of the
            Blacktown Aboriginal Corp. committee.
    *       At no stage did she state that the Blacktown Aboriginal
            Corporation was a Women's Refuge.  In fact she siad (sic)
            that BAC is a referral, advisory and resource centre.
Notwithstanding the different versions of events I have no reason to
disbelieve the Manager of BAC.  ATSIC have been funding BAC since and
including the 1991/92 financial year."
59.  Mr Garmaise responded to this material by referring to his letter of 28
July concerning his telephone conversation with Margaret Ryan, General Manager
of BAC.  His affidavit contained the statement that Ms Ryan said that her
organisation is a women's refuge and that it did not provide welfare
assistance beyond immediate physical support and counselling of women.  In his
Supplementary Reasons, Mr Hedger stated that he did not form his opinion on Ms
Ryan's statement "but on the basis of my knowledge, from perusing ATSIC's
files, of the activities of the Blacktown Aboriginal Corporation".  He said
that his conversation with Ms Ryan was merely to check the terms of the
reported conversation, as it seemed contrary to his understanding of the
position.
60.  The BAC files have been tendered in this case.  They reveal that BAC was
formed in 1991.  Initially, it seems, BAC's work was limited to the operation
of a women's refuge.  In October 1992, it sought ATSIC funds for a survey of
aboriginal women.  In April 1993, BAC made an application for an ATSIC grant
of $64,435 for welfare services. The sum of $27,235 was approved for the
period 1 May - 30 June 1993. For the year 1993-1994 BAC sought $168,475.  On
25 June, $82,083 was approved.
Bad faith
61.  As I have said, many points were initially raised by counsel for the
Foundation.  During the hearing, most fell by the wayside.  In the end,
counsel pressed only the matters of bad faith and unreasonableness.  The
essence of their argument on bad faith is that Mr Hedger and Mr Scott
determined that BAC should be the preferred supplier of welfare services in
western Sydney; accordingly, during the period May-August 1993, the two men
stalled a decision on the Foundation while building up the ability of BAC to
take the Foundation's place, and then refused the Foundation's application
because there would be a significant overlap between its services and those of
BAC.  Initially, counsel suggested that Mr Hedger and Mr Scott deliberately
delayed commissioning Duesburys.  However, following Mr Scott's evidence about
government tender requirements, this suggestion was abandoned. Nonetheless,
counsel maintained their criticism of Mr Hedger for his delay in apprising Mr
Garmaise of the content of Duesburys' report and thereby affording him a
chance to respond.
62.  I do not think there is any justification for the charge of bad faith
against Mr Hedger and Mr Scott.  I asked counsel to suggest a motive for Mr
Hedger and Mr Scott preferring BAC.  They responded that this would save
money, BAC's 1993-1994 application being for a lesser amount than that of the
Foundation.  This is a simplistic response.  If the Foundation is permanently
denied funding, it is likely that BAC will seek additional monies to equip it
to take over more of its work. Anyway, the task of Mr Hedger and Mr Scott is
not to save money, but to ensure that it is effectively expended.
63.  I am prepared to accept that Mr Hedger and Mr Scott were keen to foster
BAC.  They seem to have been impressed by the quality of its work.  They may
also have been influenced by doubts about the Foundation's long-term
suitability for funding and a perception that BAC could fill part of the
services gap that would be left if ATSIC terminated grants to the Foundation.
This suggestion was not put to Mr Scott in cross-examination.  But even it if
were so, I would not regard such a course of conduct as improper or bespeaking
bad faith; provided always that Mr Hedger and Mr Scott remained ready to
consider the Foundation's application on its merits.  The responsibility of Mr
Hedger and Mr Scott was not to any particular grantee organisation, but to the
public; to the people that the organisations were supposed to assist and to
the taxpayers, throughout Australia, who provided the funds available for
distribution.  If, in the first half of 1993, Mr Hedger and Mr Scott were
developing doubts as to whether the Foundation was a satisfactory grantee, it
was their duty to consider the available alternatives and to place some other
organisation in a position to take over some of the work, if a replacement was
needed.
64.  I think it unfortunate that there was a delay between ATSIC's receipt of
Duesburys' report on 8 July and its release to the Foundation on 23 July.  The
period involved was only 15 days, but they were 15 days at a critical time.
The report was delivered later than the parties had envisaged on 28 April.
The new financial year had already commenced and the Foundation was in the
difficult position of not knowing whether it would receive the funds it needed
to pay its staff.  Smythe and Mallam had twice written to ATSIC emphasising
the Foundation's difficulties.  Under the circumstances, I think that the
report should immediately have been delivered to the Foundation, with an
invitation to comment.
65.  However, whatever criticism may fairly be made about ATSIC's delay in
releasing the report, the delay does not establish bad faith. The withholding
of the report until receipt of legal advice and a thorough study of its
content is consistent with common bureaucratic caution in cases where
litigation is expected.  The important point is that, in due course and before
any decision was made, the report was released to the Foundation along with a
letter (Mr Hedger's letter of 23 July) putting a series of pertinent questions
about matters relevant to his consideration of the grant application.  The
Foundation was given a full opportunity to respond to these questions and
Duesburys' comments. Its response (the letter of 28 July) was taken into
account by Mr Hedger in formulating a draft recommendation.  This document
was, in turn, supplied to the Foundation for comment.  The Foundation chose to
make its comments in an affidavit of Mr Garmaise.  Even so, the comments were
analysed by Mr Hedger in the Supplementary Reasons he gave Mr Scott before he
made his ultimate decision.  I see nothing unfair about this procedure;
indeed, it is difficult to see how it might have been bettered.
66.  Of course, the adoption of a fair procedure does not negative bad faith
if a decision maker is in fact influenced by an improper motive.  But the only
improper motive here suggested is a determined preference for BAC; and of that
there is no evidence.
Unreasonableness
67.  Section 5(2)(g) of the Administrative Decisions (Judicial Review) Act
refers to "an exercise of a power that is so unreasonable that no reasonable
person could have so exercised the power."  This ground adopts the judge made
rule often referred to as "Wednesbury unreasonableness":  see Associated
Provincial Picture Houses Limited v Wednesbury Corporation (1948) 1 KB 223 at
230.
68.  To say that a decision is unreasonable, in the sense of s.5(2)(g), is to
say more than that it is wrong.  In Bromley London Borough Council v Greater
London Council (1983) 1 AC 768 at 821 Lord Diplock rephrased Wednesbury
unreasonableness as referring to "decisions that, looked objectively, are so
devoid of any plausible justification that no reasonable body of persons could
have reached them".  In Re W (an Infant) (1971) AC 682 at 700 Lord Hailsham LC
remarked:
    "Not every reasonable exercise of judgment is right, and not every
    mistaken exercise of judgment is unreasonable.  There is a band of
    decisions within which no court should seek to replace the individual's
    judgment with his own."
69.  It follows from the above that I would not be justified in finding that
unreasonableness was established simply because I concluded that, if I had
been in Mr Scott's place, I would have not declined the application; but
perhaps taken some other course, such as approving the grant subject to
stringent conditions.  I would have to hold that Mr Scott's actual decision
was irrational.
70.  I cannot say that Mr Scott's decision was irrational.  I think Mr Scott
had good reasons to believe that the proper course was to decline funding
until the Foundation put its house in order.  It is true, as counsel say, that
ATSIC has power to attach conditions to grants.  But Mr Scott was entitled to
conclude that this was not a realistic alternative course of action.
Conditions sufficient to meet the concerns expressed by Mr Hedger would
necessarily be comprehensive and detailed.  They would need to deal with the
constitution, membership and management of the organisation as well as its
financial and stock control systems and staff recruitment procedures.  The
preparation of such conditions would be a major task, involving detailed
consultation with the Foundation and its advisers.   The task would take time
and impose substantial burdens on ATSIC resources; not least because of the
antagonism existing immediately prior to 18 August and the parties'
differences of opinion as to what fell within ATSIC's legitimate area of
concern.  ATSIC has Australia-wide responsibilities.  There must be a limit to
the resources it can commit to one grantee organisation.
71.  Counsel for the Foundation emphasised Mr Hedger's error in treating their
client's failure to account for the toy expenditure as a breach of cl.5.2(b)
of the General Conditions of Grant.  As Mr Scott adopted Mr Hedger's reasons,
it may be assumed that he fell into the same error.  I do not think this
matters; Mr Scott was undoubtedly correct in asserting that nonetheless ATSIC
was legitimately concerned with the issue.  ATSIC makes grants each year to
numerous organisations. The evidence does not disclose the number; but it must
be a figure of several dozens, perhaps even hundreds.  Without a major
expansion in its resources, creating a substantial new bureaucracy, it would
be impossible for ATSIC to supervise the day-to-day financial dealings of all
its grantees.  Yet it is essential that grants be managed honestly and
intelligently, and used only for stipulated purposes.  Mismanagement of grants
will quickly erode the public and political support vital to the maintenance
of assistance programs for disadvantaged aborigines.  As a practical matter,
it seems to me, ATSIC has no choice other than to limit its grants to
organisations of established financial integrity and competence.  Because
ATSIC basically must trust its grantees, it is entitled to insist that they be
beyond financial reproach.  If there is any reason to believe that a
particular organisation may not meet this stringent test, that reason is
relevant to the question whether ATSIC should make further grants to it.  It
does not matter whether the concern arises in relation to ATSIC grants or
funds supplied by someone else.
72.  Another matter put by counsel in relation to unreasonableness concerned
the overlap with BAC.  They argued that it was unreasonable for Mr Scott to
decide that this matter alone would be a sufficient reason to decline the
application.  I have some sympathy for this submission.  If none of the other
matters noted by Mr Hedger existed, it would seem harsh for ATSIC to withdraw
funding from the Foundation because there was an overlap between its services
and those now provided by a recently formed organisation.  Moreover, I wonder
at the extent of the overlap, at least in geographical terms.  As I understand
the situation, BAC's operations are confined to the Shire of Blacktown.  The
Foundation operates over a much wider area than this. If funding is
permanently withdrawn from the Foundation, and unless there is a major
expansion in the reach of BAC, many Koori clients are likely to be left
without assistance.
Severability of the reasons
73.  If the decision of Mr Scott depended upon the cumulative effect of the
five reasons adopted by him, the matter just mentioned would be critical to
the result of this case.  If I thought that Mr Scott's view about overlap was
outside the bounds of rationality, I would have to set aside his decision and
remit the matter for reconsideration; I could not be sure that, absent that
irrational element, he would have reached the same conclusion.  But Mr Scott
stated that he would have regarded any one of the five grounds as requiring
refusal of the application.  He said so when he made the decision on 18
August.  He said so again in the witness box.  I accept that this was, and is,
his position.  In that situation, unless he can be stigmatised as unreasonable
in relation to each of the five grounds, the refusal itself is not
unreasonable.
74.  I leave aside the fourth matter, non-compliance with grant conditions,
which involves the application of cl.5.2(b) of the grant conditions.  It is,
in my opinion, impossible to fault Mr Scott's decision in relation to any of
the first three matters.  I will deal with each of them briefly.
75.  The first matter relates to the structure and democratic control of the
Foundation.  Mr Scott said in his evidence that democratic control is an
essential prerequisite to ATSIC funding.  The grant sought in 1993-1994 was a
substantial sum, to be paid from public funds.  Mr Scott's approach was far
from irrational; indeed, I agree with it.  It would, in my opinion, be
indefensible for substantial monies to be paid to an organisation not amenable
to the control of its members, with the risk that the monies would be
disbursed in the interests of a controlling minority rather than the
membership at large. This particularly applies where the organisation is one
in which members who complain about the directors, manager and auditor are
expelled without apparent justification on vaguely stated grounds.  Mr Scott
was entirely justified in deciding that, at least until the Foundation
reformed its constitution and structure so as to ensure effective control by
the members, there could be no further ATSIC grant.
76.  The situation is similar in relation to financial control. There is no
reason to believe that anyone connected with the Foundation has been
dishonest.  Nonetheless, the Foundation's financial accountability leaves much
to be desired.  It is sufficient to refer to the continuing mystery about the
toy transactions and the matters mentioned by Duesburys.  As I have said,
ATSIC has no real option but to limit its grants to organisations of
demonstrated financial integrity and competence.
77.  The third matter, the method of selection of staff, might be regarded as
something of lesser import.  I do not think that it is. Once again, we are
concerned with public money.  It would be destructive of public confidence in
ATSIC, and public support for its work, if it were seen to grant funds to
nepotistic organisations.  Ms Kellie May and Mr Kevin Church may be competent
employees; nobody has suggested otherwise.  But there must have been many
people in western Sydney, especially in a high unemployment year like 1992,
anxious, and qualified, to obtain employment as a trainee welfare worker or
truck driver.  Those people were given little or no chance of competing for
these positions. Instead, the jobs were given to two close relatives of the
Chairperson and Secretary.  I think that Mr Scott was justified in concluding
that the absence of fair and impartial selection procedures was fatal to the
Foundation's grant application.
Orders
78.  It follows from the above that the Application must be dismissed.  Having
regard to the nature of the contending parties, under some circumstances I
would consider leaving each party to bear its own costs.  I have in mind a
case where there was a difference, on arguable grounds, upon a matter of law,
but I determined that ATSIC's position was correct.  But the present case is
very different to that.  Counsel for ATSIC asked that any dismissal of the
proceeding carry an order for costs in favour of their client.  This attitude
was influenced by what they called the Foundation's unwarranted attack on the
good faith of ATSIC and its officers, Mr Scott and Mr Hedger.  I agree that
the attack was unwarranted.  The attack having failed, the Foundation should
bear ATSIC's costs of the proceeding.  I will so order.
79.  Counsel for the applicants submitted that, if the proceeding was
dismissed, I should indicate the concerns the Foundation needs to address in
order to make its future grant applications acceptable.  I gather that this is
not an entirely academic question.  Apparently, some funds remain available,
even for 1993-1994; and counsel for ATSIC assured me that any future
application would be considered on its merits.
80.  I do not think I ought to accept counsel's invitation; at least not in
the terms they state.  It is for ATSIC to determine what circumstances make an
application eligible for acceptance.  Any view I express cannot bind ATSIC.
81.  Nonetheless, with some hesitation, I have decided to make some
observations.  I make them for what they may be worth.  They do not form part
of my decision or bind anyone.  My comments are offered only in the hope that
they may assist in resolving the problems between the parties that this
litigation has exposed.  I am concerned by the possibility that, if the
Foundation does not acceptably reorganise its affairs, there will be a
permanent denial of funding to the Foundation to the disadvantage of its
welfare clients, people who are not to blame for what has occurred.  My
comments refer only to what I consider the minimum reforms of the Foundation's
affairs.  What I mention may not be enough; that is for ATSIC to determine.
82.  First, it seems to me that two inter-related structural questions require
to be addressed.  I have already mentioned that the Foundation's Memorandum
and Articles do not restrict the reach of its activities, either
geographically or by limiting benefits to members of the aboriginal community.
Although the matter is not at the forefront of this dispute, the open-ended
nature of the Foundation's charter is obviously a point of contention between
the parties.  I can understand the Foundation's desire to be free to assist
all who enter its doors. But such a situation must make it difficult for ATSIC
to ensure that its money is spent most effectively.  It seems to me that a
body like ATSIC needs to be able to target its expenditure to a particular
community; knowing that it will be used only for those people.  It ought not
be exposed to a situation where money intended for people in one geographical
area ends up in another, where there may be another agency in operation.  This
could lead to undesirable competition between agencies and duplication of
services in the second district whilst the people in the first area are
inadequately served.
83.  The evidence suggests that the Foundation's assistance to the Wellington
district stems from the personal associations of some directors with that
district.  This seems to be an unsatisfactory reason for Wellington being
targeted for care.  I would suggest, as the first step, that the Foundation
define its geographic area of operations; an area that may be justified by
reference to practical, rather than personal, considerations.  I think the
Foundation should also address ATSIC's concern that its work be directed to
the aboriginal community. It may be difficult to make this an absolute rule.
Perhaps it would be enough to amend the Memorandum and Articles so as to
require that service to the aboriginal community be the Foundation's primary
object, allowing assistance to non-Koori people only when this is incidental
to work amongst aborigines.
84.  Secondly, it seems to me that, following decisions about the Foundation's
area of operation, steps need to be taken to obtain and maintain democratic
control.  Possibly, there should be a membership drive throughout the selected
geographic area; the greater the membership within that area, the easier it
will be for the Foundation to argue that it represents the area's aboriginal
community.  The members expelled in May 1993, and any others who were expelled
or forced to resign because of differences with the board of directors, ought
to be restored to membership.
85.  Whether or not there is a membership drive, there ought to be a general
meeting of members at which elections are held for all elective positions.  If
the existing office bearers are returned in such elections, well and good; it
will be seen that they have the confidence of the majority of the members.  If
not, they will be replaced by members more congenial to current member
sentiment.  In either case, the principle of democratic control will be
vindicated.
86.  The second major area of reform is that of financial and stock control.
These are matters on which the Foundation should obtain its own expert advice.
Duesburys' report will provide a useful beginning.  Any new system should
include a mechanism whereby independent accountants, such as the Foundation's
auditors, can periodically satisfy themselves that those receiving welfare
payments are people presenting a genuine welfare case.  It is not acceptable
for investigating accountants to be denied access to welfare files on the
basis of client confidentiality.  I agree that the privacy of individual
clients must be preserved.  But I see no difficulty about allowing members of
the audit team to have access to welfare files if those members have first
given an undertaking not to divulge any information about particular clients.
Client confidentiality is important in many areas; medical and legal practices
come readily to mind.  Yet the need for confidentiality does not prevent
investigations into alleged medical over-charging or solicitors' trust account
dealings.
87.  Finally, I think that there need to be guidelines regarding the
recruitment of employees - with requirements that positions be advertised,
applicants interviewed and a selection made by a panel that excludes anybody
related to an applicant.
88.  There may be other matters needing attention.  But it seems to me that if
all the above steps are taken, the Foundation will have laid the basis for a
credible new funding application.
89.  The formal order I make is that the Application be dismissed with costs.