Federal Court Upholds Union Rule Requiring Branch Contributions

OUTCOME: Allowed

FEDERAL COURT OF AUSTRALIA

[APPELLANT] v [APPELLANT] [2001] FCA 1149 INDUSTRIAL LAW – rules of [NAME] require [NAME] to pay proportion of contributions already collected to National Council – whether rules impose conflicting duties on officers of the [NAME] – whether the rules impose conditions that are oppressive, unreasonable or unjust. Workplace Relations Act 1996 (Cth), ss 3(g), 187A(c), 196(c), 209.

[COMPANY] v [NAME] (1981) 54 FLR 129, cited. [NAME] v [NAME] (1986) 12 FCR 197, cited. [NAME] v [NAME] (1991) 32 FCR 581, cited.

[APPELLANT] v [APPELLANT] & ORS N 551 of 2001 [NAME] [APPELLANT] 23 AUGUST 2001

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY N 551 OF 2001

BETWEEN: [APPELLANT]

APPLICANT

[APPELLANT] OF ORDER: 23 AUGUST 2001

[APPELLANT]

THE COURT ORDERS THAT:

1. The [APPELLANT] take all steps, within her power, necessary to cause to be paid out of the funds of the [NAME] of the Textile Clothing and Footwear Union of Australia ("the Union") to the applicant, on behalf of the National Council of the Union, an amount equivalent to twenty per cent of all contributions, other than entrance fees and commissions, collected or received by the [NAME] between 1 April 2000 and 31 December 2000. 2. [NAME] sign all necessary cheques or instruments that may be necessary to facilitate the payment referred to in order 1.

3. The applicant have liberty to apply in relation to these orders on three days' notice. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY N 551 OF 2001

[APPELLANT]

APPLICANT

AND: [APPELLANT] [APPELLANT] [APPELLANT] [APPELLANT]

JUDGE: [NAME]: 23 AUGUST 2001

PLACE: [APPELLANT] FOR JUDGMENT

the proceedings 1 The applicant is the National Secretary of the Textile Clothing and Footwear Union of Australia (the "Union"), elected to that position most recently in 2000. The [APPELLANT] is the Secretary of the [NAME]. The third [APPELLANT] is one of two [NAME] of the [NAME] and has filed a submitting appearance. The fourth [APPELLANT], so I was informed, was to replace the second [APPELLANT] as the other trustee of the [NAME] shortly after the hearing in this matter. The fourth [APPELLANT] was, without objection, added as a party to the proceedings at the hearing, apparently in anticipation of her taking up office as a trustee. 2 The first, second and fourth respondents were represented at the hearing by Mr [NAME]. I refer to them collectively as "the respondents". [NAME] and Mr [APPELLANT] appeared for the applicant. 3 The applicant seeks an order pursuant to s 209(1) of the Workplace Relations Act 1996 (Cth) ("the Act") giving directions for the performance or observance of r 53A of the registered Rules of the Union ("the Rules"). The insertion of r 53A and other alterations to the Rules were certified by the Deputy Industrial Registrar pursuant to s 205(1) of the Act on 16 February 2001 and took effect on that date. 4 Rule 53A provides as follows: "53A – [NAME] OF OUTSTANDING CAPITATION FEES (a) Notwithstanding the other provisions of these rules (including rules 51(e) and 53), the Secretary of the [NAME] shall, not later than 5pm on the [NAME] occurring 7 days after this rule takes effect pursuant to section 205 of the Workplace Relations Act 1996, take all necessary steps to cause to be paid out of the [NAME] funds to the National Secretary on behalf of the National Council an amount equal to 20% of the contributions (other than entrance fees and commissions) collected or received by the [NAME] from members of the [NAME] between the 1st April 2000 and the 31st December 2000. (b) The [NAME] of the [NAME] shall sign all necessary cheques and/or instruments that may be required to facilitate the payments prescribed in subrule (a) of this rule. (c) Any payment made pursuant to this rule shall be in satisfaction of any capitation fee which became or becomes payable by the [NAME] pursuant to rule 53 of these rules in respect to the June, September and December quarter in the year 2000." 5 It will be seen that s 53A(a) refers to r 53. That rule, which deals with capitation fees, was altered as from 16 February 2001. Rule 53, in both its old and new forms, is set out later in this judgment (see [13], [15]). The National Council referred to in r 53A is the supreme governing body of the Union and has the management and control of the Union: r 22(a). 6 The orders sought by the applicant mirror the language of r 53A. They are as follows: "1. An order that the [APPELLANT] take all necessary steps to cause to be paid out of the funds of the [NAME] to the Applicant, on behalf of the National Council of the Union, an amount equivalent to 20% of all contributions, other than entrance fees and commissions collected by or received by the [NAME] between 1 April 2000 and 31 December 2000.

2. An order that the Second, and/or the Third and/or the Fourth Respondents sign all necessary cheques and/or instruments that may be necessary to facilitate the payment required by Order 1."

legislation 7 Section 209 of the Act relevantly provides as follows: "209(1) A member of an [NAME] may apply to the Court for an order under this section in relation to the [NAME]. … 209(7) Where the Court, in considering an application under this section, finds that the whole or a part of a rule of the [NAME] concerned contravenes section 196 or that the rules of the [NAME] concerned contravene that section in a particular respect, the Court may, by order, make a declaration to that effect. … 209(9)In this section: … 'order under this section' means an order giving directions for the performance or observance of any of the rules of an [NAME] by any person who is under an obligation to perform or observe those rules." 8 The respondents contended, inter alia, that r 53A contravenes s 196(c) of the Act and that, accordingly, a declaration to that effect should be made pursuant to s 209(7) of the Act. Section 196(c) is in the following terms: "The rules of an [NAME]: … (c) shall not impose on applicants for membership, or members, of the [NAME], conditions, obligations or restrictions that, having regard to the objects of this Act and the purposes of the registration of organisations under this Act, are oppressive, unreasonable or unjust."

background 9 The Union is a product of the amalgamation of two unions that took place in 1992. The Union has Branches in all Australian States. Its current membership, so I was told, is about 20,000. The Union's registered office is in [APPELLANT]. 10 Until about December 2000, the Union had a national office staff of five. According to the applicant's uncontradicted evidence, the staff were all retrenched in December 2000 as a result of the [NAME]'s refusal to pay capitation fees to the National Council. Rule 53A was the response of the National Council to that refusal. 11 The conflict between the National Council and the [NAME] apparently relates to a resolution passed by the National Council on 23 August 2000 authorising the applicant, as National Secretary, to take the necessary steps to create a federation with the [NAME]. That resolution was rescinded on 4 April 2000 but the dispute concerning capitation fees in respect of the period 1 April to 31 December 2000 remains. The evidence suggests that the amount in dispute is between $270,000 and $300,000.

capitation fees 12 There was initially some confusion at the hearing concerning the form of the Rules governing capitation fees prior to the alteration of r 53 on 16 February 2001. The position became clearer as the result of the tender of r 53 in its old form (that is, the form it took from 1992 until its alteration on 16 February 2001). 13 The old r 53, so far as relevant, provided as follows: "(a) In each financial year, each [NAME] shall remit to the National Council by way of capitation fees such percentage, not exceeding thirty per cent (30%) as is determined by the National Council at its annual meeting in the immediately preceding financial year of the contributions (other than entrance fees and commissions) collected or received by [NAME] from members of each [NAME]." 14 It is common ground that capitation fees were initially set in 1992 but that, for some unexplained reason, the National Council did not thereafter determine the capitation fees at its annual meeting each year. Rather, each [NAME] paid its capitation fees apparently (although this is not entirely clear) by reference to the percentages determined in 1992. I infer from the evidence that the [NAME] regularly paid to the National Council capitation fees at the rate of twenty per cent of the contributions collected or received by it (other than entrance fees and commissions), until it ceased to do so in respect of contributions collected or received during the period from 1 April 2000 to 31 December 2000. 15 The new r 53 relevantly provides as follows: "(a) National Council shall fix from time to time a capitation fee being the percentage or percentages, not exceeding thirty per cent (30%), of the contributions (other than entrance fees and commissions) collected or received by [NAME] from members of [NAME]. (b) The National Council may fix different capitation fees in respect to different [NAME]."

the rules 16 Reference should be made to some of the other Rules referred to in argument. 17 The [NAME] is required to receive all moneys and to pay them to the credit of the Union (r 29(c)(iii)), issue receipts (r 29(c)(iv)) and keep books of account (r 29(c)(v)). The National Secretary also has power to require inspection of all books and other documents in connection with the conduct of any [NAME] (r 29(c)(xviii)). 18 Subject to the control of members of [NAME] in meeting assembled, a [NAME] has power to conduct and manage the affairs of [NAME] (r 38). The duties of the Secretary of a [NAME] include the following (r 41(c)): "(ii) arrange and organise the conduct of the business and correspondence of [NAME]; … (vi) have custody of the financial records and produce them for inspection at all reasonable times when requested by the President or the Committee of [NAME]; … (xiii) subject to any direction of the Committee of [NAME], appoint, engage, control and dismiss such clerical and other staff as may be necessary for the conduct of the affairs of [NAME]; (xiv) with a Trustee of [NAME], sign all cheques; (xv) administer the work of [NAME] in accordance with these Rules and with the directions and decisions of the [NAME]; (xvi) be the Officer to sue and be sued on behalf of [NAME]." Rule 41(e) provides as follows: "The Funds and property of [NAME] shall be vested in the [NAME] of [NAME] who shall deal with the same as directed by resolution of the Committee of [NAME]." 19 The funds and property of the Union consist of, inter alia, any moneys paid to the National Council by Branches by way of capitation fees or for other purposes as required by decisions of the National Council (r 50(a)(ii)). All funds and property of the Union are vested in the Union (r 50(b)). 20 The funds and property of a [NAME] consist of, inter alia, the amount of entrance fees, subscriptions, fines and levies collected by [NAME] less so much as is payable by [NAME] to the National Executive by way of capitation fees or otherwise (r 51(a)(ii)). All funds and property of a [NAME] are vested in the [NAME] (r 51(b)). All cheques and other instruments for the withdrawal of any funds of a [NAME] from any bank or other account must be signed by the Secretary and one of the [NAME] (r 51(d)).

THE APPLICANT'S SUBMISSIONS 21 The applicant contended that r 53A should be given effect according to its clear terms. It is expressed to apply notwithstanding any other provisions of the Rules. It requires the Secretary of the [NAME] to "take all necessary steps" to cause to be paid out of [NAME] funds an amount equal to twenty per cent of the contributions collected or received by the [NAME] between 1 April 2000 and 31 December 2000. The rule assumes neither that the procedure contemplated by the old r 53 has been complied with nor that capitation fees in respect of the relevant period are due to the National Council. Rule 53A(a) merely requires the Secretary of the [NAME] to take the necessary steps to cause payment to be made of a sum equivalent to twenty per cent of the contributions already collected by [NAME] during that period. The [NAME] are required, pursuant to r 53A(b), to sign a cheque or other instrument to facilitate the payments. Rule 53A(c) is simply designed to ensure that the [NAME] does not become liable to pay capitation fees twice in respect of the same period.

reasoning 22 Mr [NAME] on behalf of the respondents did not dispute that r 53A had been validly certified. Nor did he dispute that the [NAME] has sufficient funds out of which the payment contemplated by r 53A can be made. He also accepted that the [NAME] collected or received contributions during the relevant period and, indeed, elicited from the applicant in cross examination an estimate that twenty per cent of those contributions amounts to approximately $270,000 to $300,000.

construction issues 23 Mr [NAME] advanced a number of arguments concerning the construction of r 53A in opposition to the relief sought by the applicant. He also relied on these arguments to support the respondents' claim to a declaration under s 209(7) of the Act that s 53A contravenes s 196(c). 24 First, he submitted that r 53A(a) purports to impose obligations on [NAME] that are impossible for her to fulfil, since the funds and property of [NAME] are not vested in her, but in the [NAME] of the [NAME]. Moreover, so it was argued, the rule is unclear when it refers to [NAME] taking "all necessary steps" to procure a particular result. Mr [NAME] submitted that if the requirements of r 53A are impossible of performance, no order can be made under s 209 of the Act. Further, any rule imposing obligations impossible to carry out should be regarded as oppressive, unreasonable or unjust. 25 In my view, r 53A(a) cannot be read as imposing an obligation on [NAME] to take all necessary steps, whether or not within her power, to cause the relevant amount to be paid to the National Council. Rule 53A itself recognises, in sub-rule (b) that the [NAME] must participate in the process by signing all necessary cheques or other instruments required to facilitate payment (see r 51(d)). In context, it seems to me that r 53A(a) contemplates that [NAME] must take all necessary steps within her power to cause the amount to be paid. These steps would include either drawing a cheque herself or directing staff to do so (r 41(c)(ii), (vi), (xiii), (xv)), signing the cheque (r 41(c)(xiv)) and forwarding the cheque to the National Secretary (r 41(c)(ii), (xv)). Since r 53A(a) applies notwithstanding any other rule, [NAME] would be obliged to comply with r 53A(a) rather than any inconsistent direction given to her, for example, by the [NAME]. Any such direction would not be given in conformity with the Rules. 26 When I put this construction of r 53A(a) to Mr [NAME] he stated that he did not wish to argue against it and, indeed, indicated that it met the [APPELLANT]'s concerns on this aspect of the case. For his part, Mr [NAME] agreed that any order made in the proceedings should be framed so as to require only that the [APPELLANT] take the necessary steps within her power to cause the required payment to be made. 27 Secondly, Mr [NAME] pointed out that the introductory words to r 53A(a) ("Notwithstanding the other provisions of these rules…") are not replicated in r 53A(b). It follows, so he argued, that the [NAME] might find themselves in a position of conflict with the [NAME] if it directs that available funds be allocated to some purpose other than payment to the National Council (see rr 38, 51(c)). The [NAME] might therefore be unable to perform the duties imposed on them by r 53A(b). 28 In my opinion, the entirety of r 53A is intended to be subject to the introductory words in r 53A(a). Subrules (a) and (b) are plainly closely interrelated. Subrule (b) imposes an obligation on the [NAME] to sign cheques or other instruments required to facilitate the payments prescribed in sub-rule (a). The intention of the rule read as a whole, particularly having regard to the factual matrix, is that payment of the amount prescribed in subrule (a) is not to be frustrated by the operation of any other rule that otherwise might curtail or qualify the obligation imposed by r 53A(b) on the [NAME]. The construction propounded by Mr [NAME] would effectively nullify the rule if the [NAME] continued to oppose paying the funds to the National Council. That cannot be what was intended. 29 On this construction of r 53A, there is no question of the [NAME] facing conflicting duties under the Rules. Their obligation is to comply with the requirements of r 53A(b). Nor can there be any question of the [NAME]' fiduciary duties to [NAME] members somehow being inappropriately modified (as Mr [NAME] seemed to suggest). The fact that the [NAME] owe fiduciary duties to members is not inconsistent with their conforming to the requirements of valid rules of the Union. 30 Thirdly, Mr [NAME] submitted that r 53A is drafted on the false assumption that, at the date the rule came into effect, the [NAME] was obliged to pay capitation fees pursuant to the old r 53. If the drafter did make such an assumption, so it was argued, it is likely to have been incorrect, since the National Council did not pass the annual resolutions required by the old r 53. As I followed the argument, Mr [NAME] contended that the fact that r 53A had been drafted on a false assumption as to the [NAME]'s legal obligations to remit capitation fees supported the proposition that r 53A imposes obligations that are oppressive, unreasonable or unjust. 31 In my view it is clear that r 53A is not drafted on the assumption that the [NAME] is legally obliged to pay capitation fees in respect of the period 1 April 2001 to 31 December 2001. The obligations imposed by r 53A are framed by reference to "an amount equal to 20% of the contributions...collected or received" by the [NAME] during the period. This formula assumes nothing except, perhaps, that contributions were in fact collected and received by [NAME] during that period. The formula employed in r 53A is also apt to ensure that the amount due to the National Council is readily quantifiable. 32 Nor does r 53A(c) make the assumption identified by Mr [NAME]. Sub-rule (c) ensures that any payment made to the National Council pursuant to r 53A is in satisfaction of any capitation fee which became or becomes payable in respect of the relevant period. As Mr [NAME] submitted, r 53A(c) is designed to avoid the [NAME] being liable to pay capitation fees twice in respect of the same period.

oppressive, unreasonable or unjust? 33 Mr [NAME] next submission was that r 53A imposes on members of the Union obligations that are "oppressive, unreasonable or unjust" within s 196(c) of the Act. As I have noted, Mr [NAME] invited the Court to make a declaration to that effect, pursuant to the power granted by s 209(7) of the Act. 34 The principles governing the application of what is now s 196(c) of the Act were stated by [NAME] J in [COMPANY] v [NAME] (1981) 54 FLR 129. His Honour said this in relation to the predecessor of s 196(c), namely s 140(1)(c) of the Conciliation and Arbitration Act 1904 (Cth) (at 165): "[ADDRESS] has no authority generally to supervise the content of the rules or to require that the rules comply with what those constituting the court might see as preferable, desirable or ideal. To put the matter differently, it is for the members, or those entrusted by the members in that regard, to decide the content of the rules. The function of this Court is to determine, in accordance with ordinary judicial procedure, whether some provision or provisions of the rules adopted by, or on behalf of, the members can properly be described not merely as undesirable but as oppressive, unreasonable or unjust." In [NAME] v [NAME] (1986) 12 FCR 197, at 205-206, the [ADDRESS] explained the position as follows: "The starting point of any s 140 case is the right of an [NAME] to choose its own rules and internal structures, within the framework provided by the Act. … The primary justification for the existence of a rule of an [NAME] is simply that the [NAME] has adopted that rule. It is then necessary to apply s 140(1)(c) to the particular provision, measuring its effect. The Act assumes that the rules of an organization may impose conditions, obligations or restrictions which are not oppressive, unreasonable or unjust. The mere imposition by the rules of conditions, obligations or restrictions is not evidence that those conditions, obligations or restrictions are oppressive, unreasonable or unjust. Their effect must be examined, in the particular circumstances of the [NAME], and by reference to both the objects of the Act, and the purposes of the registration of organisations under the Act." 35 The contention that r 53A is oppressive, unreasonable or unjust was based primarily on the respondents' suggested construction of the rule. It was said that r 53A is too unclear to be capable of enforcement and, in any event, leaves the respondents in a position of uncertainty should the [NAME] continue to oppose payment to the National Council of an amount equivalent to twenty per cent of contributions during the relevant period. I have already addressed and rejected the respondents' submissions on the construction of r 53A. 36 Mr [NAME] contended that, independently of the construction issues, r 53A is oppressive, unjust or unreasonable because it imposes a retrospective obligation on the [NAME]. He did not dispute that rules of a union can be expressed to operate retrospectively: cf [NAME] v [NAME] (1991) 32 FCR 581. His submission, as I understand it, is that the [NAME] is entitled to expect that the procedures laid down by the Rules will be adhered to. 37 The authorities require the question posed by s 196(c) of the Act to be answered having regard to the particular circumstances of the case. In the present case, the circumstances include the fact that the [NAME], including the [NAME], have acted for a considerable period on the basis that a proportion of contributions collected or received each year are to be paid to the [NAME]. There was no suggestion that the figure of twenty per cent of contributions adopted by r 53A departed from the long established practice followed by the [NAME]. Moreover, s 53A is expressed to operate only in relation to contributions actually collected or received by the [NAME] during the relevant period. These circumstances suggest that s 53(a) does not impose obligations that can be characterised as oppressive, unjust or unreasonable. 38 In considering the application of s 196(c), it is also necessary to take into account the objects of the Act. These objects include ensuring that registered organisations are able to operate effectively (s 3(g)), and encouraging "the efficient management of organisations" (s 187A(c)). The applicant gave unchallenged evidence not only that staff had been retrenched, but that the Union has been placed in "a serious financial position" and is "seriously limited in the service it can provide to its members at the national level". Nor was he challenged on his evidence that it was the failure of the [NAME] (the largest [NAME]) to adhere to the practice of paying a proportion of contributions collected as received by it that had created the difficulties. In view of this evidence, it is difficult to say that r 53A imposes obligations that are outside the objects sought to be achieved by the Act. Indeed, it is at least open to conclude that the rule advances the objects I have identified. 39 I should add this observation. Mr [NAME] accepted in argument that it was open to the National Council to adopt a rule achieving the objective sought by r 53A provided the rule was "properly drawn". The respondents' objection, as he put it, was that the rule was not so drawn. While recognising that a failure to follow appropriate procedures may be a source of injustice in a particular case, Mr [NAME] comments rather suggest that there is nothing oppressive, unjust or unreasonable in the objective sought by r 53A. 40 Finally, Mr [NAME] submitted that, in exercise of my discretion, I should decline to grant relief to the applicant. In substance, however, the only matters relied upon to support this submission were those I have already rejected. In my opinion, no reason has been put forward for withholding relief to the applicant.

conclusion 41 The applicant has made out his case for relief under s 209(1) of the Act. The following orders should be made:

1. The [APPELLANT] take all steps, within her power, necessary to cause to be paid out of the funds of the [NAME] to the applicant, on behalf of the National Council of the Union, an amount equivalent to twenty per cent of all contributions, other than entrance fees and commissions, collected or received by the [NAME] between 1 April 2000 and 31 December 2000. 2. [NAME] sign all necessary cheques or instruments that may be necessary to facilitate the payment referred to in order 1.

3. The applicant have liberty to apply in relation to these orders on three days' notice. 42 I have limited order 2 to [NAME] since, as I understand the position explained at the hearing, the second [APPELLANT] is no longer a trustee of the [NAME]. If there is any difficulty about the form of this order, the applicant may take advantage of the liberty to apply to the Court. 43 Mr [NAME] sought deferral of the orders for six months. No evidence was put forward to support this contention and no substantial reason given for taking this course. I see no justification for deferring implementation of the orders. I certify that the preceding forty-three (43) numbered paragraphs are a true copy of the Reasons for Judgment herein of the [NAME].

Associate: Dated: 23 August 2001

Counsel for the Applicant: [redacted]

Solicitor for the Applicant: [redacted]

Counsel for the First, Second and Fourth Respondents: [redacted]

Solicitor for the First, Second and Fourth Respondents: [redacted]

Date of Judgment: 23 August 2001