Re Michael Patrick Jess v RJ Scott; JG Kidd; L Carmichael; G Campbell; RA Bruggy; W Martin; E Lipscombe; F Maurice; DA Beer; WR Arscott; F Mcgowan; RB Hawkes; G Harrison; RM Adamson; H Malcolm; P Johnson; JF Halfpenny; J O'Nei [1984] FCA 39 (2 March 1984)

FEDERAL COURT OF AUSTRALIA

Re: MICHAEL PATRICK JESS
And: R.J. SCOTT; J.G. KIDD; L. CARMICHAEL; G. CAMPBELL; R.A. BRUGGY; W.
MARTIN; E. LIPSCOMBE; F. MAURICE; D.A. BEER; W.R. ARSCOTT; F. McGOWAN; R.B.
HAWKES; G. HARRISON; R.M. ADAMSON; H. MALCOLM; P. JOHNSON; J.F. HALFPENNY; J.
O'NEILL; R. POINTER; M. TUMBERS; H. PEDEN; A.J. MARKS; B.R. BURNS; J.A.
VAUGHAN and M.K. HILL
No. 1 of 1984
52 ALR 393 / 8 IR 263 / 1 FCR 401
Industrial law

COURT

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
INDUSTRIAL DIVISION
Beaumont J.(1)

CATCHWORDS

Industrial law - Jurisdiction of the Court under s.141 of the Conciliation and Arbitration Act, 1904 - Implications in rules.

Industrial Law - Registered organisation - Rules - Observance and performance thereof - Application for summary dismissal of application - Use of organisation resources in support of candidate - Implicit limitation upon exercise of powers conferred by rules - Conciliation and Arbitration Act 1904 (Cth), s. 141. The applicant, a member of a registered organisation, sought orders under s. 141 of the Conciliation and Arbitration Act 1904 (Cth) for the performance and observance of the rules of the organisation by refraining from using or permitting any other persons to use the organisation's resources to support a candidate or groups of candidates in ballots for certain offices in the organisation, including using the resources to publish or distribute news-sheets to support a candidate or a group of candidates including further publishing or distributing news-sheets already published and an order for the repayment of resources used to publish news-sheets already published. There was no rule in the organisation's rules which proscribed the activities challenged. The respondents, being officers of the organisation, sought dismissal of the proceedings on the ground that no reasonable cause of action was disclosed, alternatively that a preliminary question of the court's jurisdiction to grant the relief sought be first determined.

Held: (1) In an application under s. 141 of the Conciliation and Arbitration Act (Cth) terms could be implied into union rules in proper circumstances and such implied terms could be the subject of directions pursuant to s. 141.

Kanan v. Hawkins unreported (Federal Court of Australia, Sweeney J., 14 September 1979); Gordon v. Carroll (1975) 27 FLR 129 at 144-146, 152-156, 159- 160; Valentine v. Butcher [1981] FCA 30; (1981) 51 FLR 127 at 136-137; Re Australian Postal and Telecommunications Union; Ex parte Wilson [1979] FCA 107; (1979) 28 ALR 330 at 336, applied; Dugmore v. Porter (1982) 3 IR 418 at 421, distinguished.

(2) The powers of management of the organisation's resources, which were alleged to have been abused by the respondents in their respective capacities, were powers which were conferred by the rules in respective terms.

(3) The relevant rules of the respondent organisation should be construed to mean that there was at least implicit in them the usual obligations that all such powers should be exercised bona fide for the benefit and in the interests of union members as a whole.

Ngurli Ltd v. McCann [1953] HCA 39; (1953) 90 CLR 425 at 438; Williams v. Hursey [1959] HCA 51; (1959) 103 CLR 30 at 100, referred to.

(4) The court had jurisdiction to entertain the application for relief under s. 141 of the Act.

HEARING

Sydney, 1984, February 23; March 2. 2:3:1984
NOTICE OF MOTION.

Motion for dismissal of an application as disclosing no reasonable cause of action and motion for preliminary determination of court's jurisdiction.

J. L. Trew Q.C. and J. McCarthy, for the applicant.

D. M. Ryan Q.C. and J. W. Shaw, for the respondents.
Cur. adv. vult.

ORDER

1. Declare that the Court has jurisdiction to entertain the application for relief under s.141 of the Act.

2. Dismiss the respondents' application for summary dismissal of the proceeding.

DECISION

In this proceeding under s.141 of the Conciliation and Arbitration Act, 1904, the applicant, as a member of the Amalgamated Metals Foundry and Shipwrights Union, seeks orders directing the performance of the rules of the Union. Specifically, he seeks the following relief:

"1. An order that the Respondents and each of them perform and observe the Rules of the Amalgamated Metals Foundry and Shipwrights Union ("the Organisation") by refraining from using or permitting any other person from using the Organisation's property, funds and resources to support or promote a candidate or group of candidates or to defeat a candidate or group of candidates in ballots for the following offices and positions of the Organisation:-

(a) State President, Queensland Branch,

(b) Regional Delegates to National Conference,

(c) National Organiser, Division 4.

2. An order that the Respondents and each of them perform and observe the Rules of the Organisation by refraining from publishing or distributing to members of the Organisation or causing to be so published of distributed out of the property funds and resources of the Organisation any newspaper, newsletter, pamphlet of similar publication which supports or promotes a candidate or group of candidates or which seeks to defeat a candidate or group of candidates in the ballots referred to in Order 1 hereof and, without limited the generality hereof, by refraining from publishing or distributing or further publishing or distributing the newsletters which are annexures "MPJ4" and "MPJ5" to the Affidavit of the Applicant sworn on 2nd February, 1984 and filed herein.

3. A declaration that the decisions, directions and resolutions of such of the Respondents who authorised the publication and distribution of the aforesaid newsletters for and on behalf of the National Council of the Organisation are in breach of the Rules of the Organisation and are accordingly void and of no force or effect.

4. An order that the 1st Respondent R.J. SCOTT and such other of the Respondents who authorised the publication and distribution of the aforesaid newsletters repay to the Organisation the costs incurred by the Organisation in the printing and distribution of such newsletters."

The first and second respondents are respectively the national president and secretary of the Union; the third and fourth respondents are its joint assistant national secretaries; the fifth to eighth respondents are its national organisers; the first to eighth respondents constitute its national administrative committee; the ninth to twelth respondents are its national trustees; and the thirteenth to twenty-fifth respondents are its national councillors.

Rule 6 of the Union's registered rules vests powers of management in the national council. So far as material, it provides:

"Powers of National Council

1. The National Council shall be the Committee of Management of the Union and shall subject to the powers and decisions of the National Conference and these Rules, have the care, control, superintendance and management in all respects of the affairs, business, funds and property of the Union and without limiting the generality of the foregoing it may:-

(a) interpret the Rules and enforce the general policy as decided by the National Conference;

(b) determine matters of policy not covered by Conference decisions;

(c) control and conduct the business and affairs of the Union while the National Conference is not in session;

(d) appoint the Editor of the Union Journal and manage and control the policy of the Journal;

(e) expend such monies as may in the opinion of the Council be necessary;
(f) . . .
(g) . . .
(h) ensure that Officers and Committees of the Union carry out the Rules, decisions and policies of the Union and impose penalties in accordance with these Rules;
(i) . . .
(j) control and supervise the work of the National Officers of the Union;"

Rules 15 and 16 deal with the holding of property by the trustees and their powers:

"Rule 15

Holding of Property and Legal Proceedings

1. All funds, investments and other property of the Union shall be vested in the National Trustees as joint tenants and be held by them in trust for the members of the Union.

Rule 16

Investments Committee and Powers of National Trustees

1. The National Trustees shall have power:

(a) To receive money or other property paid, delivered or conveyed to them as Trustees of the Union and to expend the monies without distinction between capital and income.

(b) To invest, sell, exchange or otherwise dispose of investments or other property of the Union and to deal with the funds of the Union including purchase or otherwise acquiring of property out of the funds of the Union."

Rule 22 deals with the expenditure of money for the furtherance of political objects, including the payment of expenses incurred by a candidate or a prospective candidate for election to parliament or other public office as defined. It is not suggested that this rule is relevant in this proceeding.

The respondents now move the Court for dismissal of the proceedings on the ground that no reasonable cause of action is disclosed; alternatively, they ask that the preliminary question of the Court's jurisdiction to grant the relief sought be now determined. For his part, the applicant seeks summary judgment against the respondent in the form of the relief sought.

In the circumstances, it is convenient that I deal now with the jurisdictional question. For this purpose, although not conceding the point, the respondents are prepared to have assumed against them that they have disseminated material designed to induce support for some candidates or to influence voters against other candidates in the election; and that some of the respondents have disseminated this material by using either the funds of the Union or the time and effort of paid employees of the Union or by otherwise using Union resources.

It is common ground that there is no rule in the Union rules which, in terms, proscribes the activities now challenged. Shortly stated, it is the respondents' contention that the Court lacks jurisdiction in the matter under s.141 because the applicant cannot make good one of the essential ingredients of the statutory provision in that he cannot point to either an express rule or something arising by necessary implication from the four corners of a rule which imposes upon the respondents an obligation to refrain from the activities now challenged. Whilst conceding the need to rely upon a relevant implication, the applicant submits that the jurisdiction of the Court under s.141 extends to the performance or observance of something implied from the rules; he further submits that a relevant implication should be made in the present case to the effect that the respondents should not apply Union resources for the impugned purposes.

Section 141, and its precursor, s.58E, is legislation designed to remedy the difficulties which arise under the general law in the enforcement of the rules of a trade union (see The King v. The Commonwealth Court of Conciliation and Arbitration; Ex parte Barrett [1945] HCA 50; (1945) 70 C.L.R. 141 at pp.156, 164); and in Barrett, it was decided that the jurisdiction of the Court is not limited to giving directions which "literally pursue" the terms of any of the rules (at p.174); rather, the Court is empowered to give any direction which is appropriate in the circumstances to ensure that the rules are carried out. But this goes only to the form of relief to be granted and in the present case the question is different, namely whether the conduct complained of constitutes on the one hand, a contravention of the rules or, on the other, (assuming the facts are established) merely a breach of a fiduciary or some other obligation having its source not in rules but in the general law and, specifically, in the doctrines of equity in this area.

In my view, the point now taken was decided adversely to the respondents by J.B. Sweeney, J. in Kanan v. Hawkins (unreported - 14 September, 1979). In an application under s.141 similar to the present case, his Honour ordered that the respondents "perform and observe the rules of the Australian Postal and Telecommunications Union by refraining from using the property, including the building owned by that Union and including any other resources and machinery and staff of the New South Wales branch of the Union to support, promote or defeat candidates or influence voters in the current election being conducted in the New South Wales branch of the Union".

His Honour said (at pp.3-5):

"I accept the decision stated in Short v. Wellings 72 C.A.R. 84 in a particular passage at page 87 where it was there stated by the then Court of Conciliation and Arbitration:

'The branch rules provide for the election of officers and members of its Committee of Management. Although there is no specific rule against the use of the resources and funds of the organization for the support of particular candidates at any such election, to use the property and resources of the branch for such a purpose would deny the right of such candidates as were not to be supported by the organization, its Committee of Management, its several authorities, its resources or funds, to the freedom and equality in their candidature to which the election rules imply they are entitled. The funds and resources of the organization belong as much to them and their supporters as to their opponents and theirs.'

A not dissimilar statement appears in a recent judgment of this Court in Lyons v. Deegan, delivered on 22 June, 1978. . . .

The position then, as I see it, is that although there is no express rule in the rules of the union forbidding the issue by a secretary of a pamphlet, such as the one in this case, or prohibiting the use of the machinery, funds and resources of the union in an election campaign, that such a prohibition is to be implied.

The fact that a free vote of members is important is to my mind emphasisied by the changes made to the Act, particularly that setting out the need to encourage the democratic participation of members in the affairs of an organization."

There is other authority which supports the approach adopted by J.B. Sweeney, J. In Gordon v. Carroll (1975) 6 A.L.R. 579, a Full Court of the Australian Industrial Court (Smithers, Woodward and St. John, JJ.), in an application under s.141 held that terms could be implied into union rules in proper circumstances and such implied terms can be the subject of directions pursuant to s.141 (at pp.593-4; 600-3; 606). A similar view was taken by Keely, J. in Valentine v. Butcher [1981] FCA 30; (1981) 51 F.L.R. 127 at pp.136-7; see also Re Australian Postal and Telecommunications Union; Ex parte Wilson [1979] FCA 107; (1979) 28 A.L.R. 330 per Sheppard, J. at p.336).

In response to these authorities, the respondents say that it would seem that the jurisdictional point they now take was not argued or at least not fully argued in those cases; they say, rightly, that Wilson did not involve s.141; and they rely upon some observations made by Northrop, J. in Dugmore v. Porter (1982) 3 I.R. 418. In Dugmore, Northrop, J. granted relief under s.141 but, in the course of his reasons, said (at p.421):

"The applicant relied upon an alleged implied rule of the branch that the members and officers of the branch would not engage in conduct giving effect to the OK card system, the implied rule arising from the fact that the Australian Industrial Court had declared that the old branch rr. 7 and 10 contravened s. 140(1) of the Act. Support for the view that the court would give directions for the observance of an implied rule was sought by reference to passages appearing in the judgment given in Gordon v. Carroll (1977) 27 F.L.R. 129. It is doubtful whether that case is authority for the proposition relied upon. In any event, there are great difficulties in accepting the concept of implied rules for the purpose of orders and directions being made and given under s.141 of the Act. Under the Act, the affairs of an organization are to be regulated by rules making provision for the matters specified in reg. 115 of the Conciliation and Arbitration Regulations, s. 132 of the Act. In addition the rules must make provision for the matters specified in s.133 and s. 133A of the Act. See also s. 134 of the Act. Section 140 contains specific requirements as to reules of organizations. Under s. 139(4) any alteration to the rules of an organization to which the consent of the Industrial Registrar is not required, do not have effect until, inter alia, the Registrar has certified that: '. . . in his opinion, the alteration complies with and is not contrary to the provisions of this Act, of the regulations or of an award and is not otherwise contrary to law and has been made in accordance with the relevant procedures laid down by the rules of the organization.' In these circumstances, there is much to be said for the view that the rules referred to in s. 141 of the Act must mean the rules of an organization which were in operation at the time the organization was first registered pursuant to the Act and as altered in accordance with s. 139 of the Act. This view is supported by s. 157 of the Act. See also McLeish v. Faure [1979] FCA 38; (1979) 40 F.L.R. 462. If this view is correct, there is no basis for the contentions made on behalf of the applicant."

These remarks were made obiter but, in any event, if by these observations his Honour meant no more than that a remedy under s.141 is not available where the source of the right sought to be enforced is the general law as distinct from the operation of the rules on their true construction, I would respectfully agree. In particular, I would agree that s.141 cannot be invoked in aid of an equity which exists independently of the operation of the rules on their true construction.

In the present case, the powers of management of the Union resources which are alleged to have been abused by the respondents in their respective capacities are powers which are conferred by the rules in express terms: some respondents are given power to manage the affairs of the Union (rule 6(1)); other respondents are appointed trustees of Union assets which are expressed to be held and applied by them "in trust for the members of the Union" (rule 15(1)).

In my opinion, these rules, as a matter of construction, should be construed to mean that there is at least implicit in them the usual obligation that all such powers shall be exercised bona fide for the benefit and in the interests of union members as a whole. In my view, such an obligation is derived from the meaning of the rules as a matter of their true construction: it is not derived from and does not have its source in any independent equity or any other right which may exist under the general law.

A useful analogy for this purpose may, I think, be found in the approach taken to the abuse of powers conferred on directors by the articles of association of companies. The general position was described by Williams, A.C.J., Fullagar, J. and Kitto, J. in Ngurli Ltd. v. McCann [1953] HCA 39; (1953) 90 C.L.R. 425 at p.438:

"But the powers conferred on shareholders in general meeting and on directors by the articles of association of companies can be exceeded although there is a literal compliance with their terms. These powers must not be used for an ulterior purpose. 'The term fraud in connection with frauds on a power does not necessarily denote any conduct on the part of the appointor amounting to fraud in the common law meaning of the term or any conduct which could be properly termed dishonest or immoral. It merely means that the power has been exercised for a purpose, or with an intention, beyond the scope of or not justified by the instrument creating the power', per Lord Parker in Vatcher v. Paull . . . 'The Court will not allow him' (that is the appointor) 'to interpret the donor's intention in any other sense than the Court itself holds to be the true construction of the instrument creating the power; and a literal execution of the power, with a purpose which it does not sanction, is regarded as a fraud on the power',. per Hatherley L.C. in Topham v. Duke of Portland . . . Voting powers conferred on shareholders and powers conferred on directors by the articles of association of companies must be used bona fide for the benefit of the company as a whole." (emphasis added)

The passage illustrates the distinction I have sought to make between a literal reading of the rules and the interpretation of the rules on their true construction: in the latter case, an obligation to use powers bona fide for the benefit of members as a whole may be found although not literally so expressed in the rules themselves.

Farwell, A Concise Treatise on Powers (1916) 3rd Ed. at pp.458-9, after referring to Lord Parker's observations in Vatcher v. Paull (1915) A.C. 372 at p.378, makes the point:

"It will be observed that the essential notion is disposition beyond the scope of the power, not breach of trust by the donee, though it is not unusual to speak of the donee of a limited power as being in a fiduciary position. His position is referable to the terms, express and implied, of the instrument creating the power and the implied obligation not to appoint for an ulterior purpose, and is not in truth founded, like the position of a trustee, upon a state of conscience imputed to him by Courts of Equity. But there is a strong analogy between the obligation imposed on the donee by the terms of the instrument creating the power and that imposed upon a trustee by the terms of the instrument creating the trust."

(See also Ford, Company Law (1982) 3rd Ed. at p.433.)

In Williams v. Hursey [1959] HCA 51; (1959) 103 C.L.R. 30, Taylor, J. dealt with a contention that the imposition by a union of a political levy was beyond power as follows (at p.100):

"These considerations do not, however, entirely solve the problem of the construction of the rules in question for there is considerable force in the assertion that a power to impose compulsory levies for general political purposes--with the necessary result that payment is a condition of continued membership--ought not to be taken as created by general words authorizing levies for the purposes of carrying out the general objects of a trade union. Such associations, of course, represent their members and the essence of their functions is to protect and further the industrial interests of their members. But, though the latter have a common interest in the betterment of their industrial conditions and relations, it by no means follows that they have common political interests. Indeed, it is said that the present case provides a classic illustration of the truth of this proposition. With this in mind it is then contended that if the widest effect be given to the general words of the relevant rules the result will be to convert a power to raise funds to protect and foster the industrial interests of members into a power to raise funds simply for the pursuit of political ends. This, however, is an over-statement for the use of the power for political ends alone would be to overstep the authority conferred by the rules. It must, I think, be conceded that assistance to one political party or another may reasonably be thought to be a legitimate method of serving the industrial interests of the members of a trade union and, that being so, it is impossible to deny to the rules in question the operation for which the Federation contends. I should add that I am not unmindful of the forceful reasons which led Burbury C.J. to the opposite conclusion but, in my view, the contention that the 'political levy' was beyond power must fail."

It is apparent from this reasoning that, here also, Taylor, J. was approaching the matter on the footing of the true construction of the rules as distinct from their literal meaning; and there is no suggestion that it was necessary or appropriate that any doctrines or principles of the general law should be invoked for the purpose of controlling any abuse of power: the matter was seen as resting on the true construction of the rules themselves.

In the present case, in my opinion, the rules relied on by the applicant, on their true construction, provide either explicitly or implicitly that the powers of management of the affairs of the Union shall be exercised and the assets of the Union shall be applied, for the benefit of members as a whole. It follows, in my view, that the proceedings may properly be seen as seeking directions for the performance or observance of those rules and thus within the jurisdiction of the Court.

I make the following orders:

1. Declare that the Court has jurisdiction to entertain the application for relief under s.141 of the Act.

2. Dismiss the respondents' application for summary dismissal of the proceeding.