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Federal Court of Australia |
Last Updated: 25 January 2000
Lawrence v Fry 2000 [FCA] 4
INDUSTRIAL RELATIONS - observance of rules - federal and state registered unions - management committees - common membership and officers - dispute involving officers - State Branch of Federal union administering State union - entitlement to membership - entitlement to membership contributions - ownership of bank accounts and other property - lease of premises - questions of fact.
Workplace Relations Act 1996 s 209
Conciliation and Arbitration Act 1904 s 139(4)
Industrial Arbitration Act 1912 (WA)
Federal Court of Australia Act 1976 s 23
JEFFREY PAUL LAWRENCE v EUGENE LESLIE FRY, TERENCE JAMES LOCKWOOD, BENEDICHT KUNO HUGI, NORMAN CHARLES WEBB, JOHN CLIFFORD CARR, WENDY MAE LEE KONG, PENG KOK CHEAH, LYNETTE ANNE SHAW, MERLE SELBY TAVERNER, ERNEST JAMES WELSH, FEDERATED LIQUOR AND ALLIED INDUSTRIES EMPLOYEES' UNION OF AUSTRALIA, WESTERN AUSTRALIAN BRANCH OF WORKERS
NG 189 of 1998
FRENCH J
21 JANUARY 2000
PERTH
IN THE FEDERAL COURT OF AUSTRALIA |
|
WESTERN AUSTRALIA DISTRICT REGISTRY |
THE COURT ORDERS THAT:
1. The Applicant within fourteen days to submit a minute of proposed orders in accordance with these reasons and to obtain an appointment for further submissions if final orders cannot be agreed.
2. There be liberty to apply in writing on the question of costs.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA |
|
WESTERN AUSTRALIA DISTRICT REGISTRY |
JUDGE: |
FRENCH J |
DATE: |
21 JANUARY 2000 |
PLACE: |
PERTH |
Introduction
1 These proceedings, commenced by way of an Application for an Order to Show Cause under the Workplace Relations Act 1996, concern the affairs of the Western Australian Branches of Federal and State unions concerned with the liquor and allied industries. In particular they centre on a dispute between the Federal union and officers of its State counterpart who also held office in the Federal union. The dispute centres on the question of who is a member of which union, which union has the entitlement to income from membership contributions, the ownership of bank accounts and a lease of premises in Perth. The applicant, Jeffrey Lawrence, is the Joint National Secretary of the Australian Liquor, Hospitality and Miscellaneous Workers Union (LHMU). That union is the product of an amalgamation, in 1992, of two federally registered unions, the Federated Miscellaneous Workers' Union and the Federated Liquor and Allied Industries Employees Union. The eleventh respondent, The Federated Liquor and Allied Industries Employees Union of Australia, Western Australian Branch, Union of Workers (State LTU) is a State union registered in Western Australia.
2 The other respondents were at all material times members of the Committees of Management of the State LTU and of the State Branch of the Federal LTU and subsequently on the Management Committee of the State Branch of the Liquor and Hospitality Division of the LHMU. That Division, albeit part of an amalgamated entity, was the structural reflection in that entity of the old Federal LTU.
3 The fifth respondent ceased to be a member of the Committee of Management of the State LTU in May 1997. The seventh respondent is now deceased. The other respondents who are members of the Branch Committee of the State LTU were also members of the Committee of the WA Branch of the Hospitality Division of the LHMU until July 1998, save for Fry who resigned with effect from 28 February 1998. He held office as Secretary of both the State and Federal Branches and also, at one time, was the Joint National President of the LHMU. The history of this dispute is long and convoluted. The time and energy that has been devoted to it is a sad distraction from the core objects of both bodies.
Factual Background - Formation of the State Branch of the Federal LTU
4 The events leading to these proceedings stretch back to 3 October 1966 when Eugene Leslie Fry commenced employment as a union organiser for the State registered union known as the Western Australia Hotel, Club, Caterers, Tea Room and Restaurant Employees' Industrial Union of Workers (HCC). In 1968 Fry was elected president and in 1970, secretary of the union.
5 Early in 1973 discussions took place between the HCC and the Federal union, known as the Federated Liquor and Allied Industries Employees Union of Australia (the Federal LTU) about the formation of a State Branch of the Federal LTU in Western Australia. A plebiscite of members of the HCC was held in October 1973, or thereabouts, on the proposition that the HCC amalgamate with the Western Australian Barmaids and Barmen's Union of Workers, Perth (the BBU) and form a State branch of the Federal LTU. The plebiscite was carried 3,292 votes in favour and 450 votes against. Workers were also asked whether they wished their conditions to be covered by the Federal Hotel Workers' Award or to remain under the State Hotel Workers' Award. They voted to stay with the State Award by 1,711 votes to 761. No explanation was offered for the numerical discrepancy between the number of votes on the two questions. The HCC was the largest of the three State unions at this time. As at 31 December it had 5,095 members, the BBU had 1,250, while the HCC (Goldfields) had 203. The HCC covered all persons in the hospitality industry except hotel bar staff who were covered by the BBU. The HCC (Goldfields) covered all persons in the hospitality industry within twenty miles of the Kalgoorlie GPO.
6 In November 1973, Fry attended the Federal Council meeting of the Federal LTU at Hobart where there was further discussion about the formation of a State branch comprising the three State Unions.
7 On 22 February 1974, there was a meeting in Perth between representatives of the Federal LTU, the HCC, the BBU and the HCC (Goldfields). The meeting is minuted as though the formation of a State branch of the Federal LTU was already agreed. Fry and Elsie Ryan were elected Federal councillors representing the State branch. Fry was to be secretary for the Committee of Management of the State Branch. This was evidently a transitional arrangement. There was discussion about the banking arrangements and it seems to have been agreed that the three State Unions bank accounts should be closed and transferred to one account. Fry wanted to continue with the R & I Bank, the WA State Bank. However there was reference made to an old Council decision that union banking was with the Commonwealth Bank. The matter does not appear to have been further debated. That record may be taken as indicating a consensus that the three State branches would close their bank accounts. The new single account was with the R & I Bank in the name of the WA Branch of the Federal LTU.
8 On 26 July 1974, and pursuant to the decision reflected in the minutes of meeting of 22 February, the Federal Committee of Management of the Federal LTU resolved to alter the rules of the organisation. Branch Rule 5(3) was amended to specify the holders and occupiers of various offices in the State Branch and Fry was named as Secretary-Treasurer. Rule 6 was amended to provide that the representatives of the Western Australian Branch, until their successors were elected, would be Elsie Ryan and Eugene Fry. Provision was also made in an amendment to Federal Rule 6 for the elections for the Western Australian Branch representatives on the Federal Council to be held simultaneously with the elections for the Western Australian Branch offices. Federal Rule 9 was amended so that all persons who were, at 22 February 1974, financial members under their respective Rules, of the BBU, the HCC and the HCC (Goldfields) would be deemed to be members of the WA Branch of the Federal LTU with the same continuity and length of membership as they had in their respective State Unions. The rule changes were certified by the Industrial Registrar pursuant to s 139(4) of the Conciliation and Arbitration Act 1904 on 29 July 1974. The HCC continued to operate as a separate entity as evidenced by minutes of a meeting of its executive held on 21 August 1974.
Factual Background - Formation of the State LTU and Co-location with the Federal LTU
9 On 7 November 1974, the HCC, the BBU and the HCC (Goldfields) amalgamated into a new State Union, the Federated Liquor and Allied Industries Employees Union of Australia, Western Australian Branch, Union of Workers (the State LTU). The State LTU was registered under the provisions of the Industrial Arbitration Act 1912(WA). Fry became its inaugural secretary. He continued to hold office as Branch Secretary of the WA Branch of the Federal LTU. From the time that the State LTU was established it shared office premises with the State branch of the Federal LTU, the latter having very little industrial coverage in Western Australia and no coverage in the hospitality industry. Its rules were modelled on those of the State branch of the Federal LTU at the time. As at 31 December 1974 the State LTU had 8,835 members.
10 Initially the State Branch of the Federal LTU had shared the offices of the HCC at 468 Murray Street, Perth. There had been no formal documentation of this arrangement. No rent was charged for the use of the premises. In October 1978, the State LTU resolved to move to new offices at 214 St George's Terrace, Perth. That move was effected in December 1978. The State LTU was the lessee of the new premises. From 5 February 1984 the State LTU and the State Branch of the Federal LTU moved to common office premises at 172 St George's Terrace, under a lease in the name of the State Branch of the Federal LTU for a term of five years expiring on 5 February 1989. After 5 February 1989 both the State LTU and the State Branch of the Federal LTU remained in the premises on a monthly basis until December 1989 at which time the State LTU moved to office premises at 167 St. George's Terrace, Perth. A dispute had arisen between the State LTU and the Federal LTU relating to access to these premises and over property and assets generally following a change in control of the State LTU in December 1989. Further reference to this dispute is made below. In 1991 the State LTU again moved premises to 22 St George's Terrace, Perth. The State Branch of the Federal LTU remained at 172 St George's Terrace until about August 1990. At that time it moved to an office at 61 Thomas Street in Subiaco where it remained until March 1994. In March 1994 the State LTU and the amalgamated successor to the State Branch of the Federal LTU, namely the State Branch of the Liquor and Hospitality Division of the Australian Liquor, Hospitality and Miscellaneous Workers' Union (LHMU), moved into common office premises at 251 Adelaide Terrace. The State Branch of the Liquor and Hospitality Division of the LHMU will be referred to in these reasons as the State Branch of the LHMU.
Factual Background - Management and Membership Forms - State LTU and Federal LTU 1974-1989, 1993
11 From 1974 until December 1989, the State LTU and the State Branch of the Federal LTU had committees of management which were constitutionally distinct, although they were, with two exceptions, identical in composition. The two management committees met at the same premises and immediately after one another although their meetings were separately minuted. The constitutional coverage of the State LTU was about the same as that of the Federal LTU although the former covered some 2,000 tea attendants employed in the State Public Service which were not covered by the Federal LTU. Award coverage was predominantly under State awards. The continuing dominance of State awards was, according to Lawrence, "the result of specific forbearance by the Federal Union regarding the extension of Federal award coverage in Western Australia". An example was litigation before the Australian Industrial Relations Commission in 1988 which was conducted primarily by the Federal LTU to resist Federal award coverage in Western Australia for reasons of industrial policy. This related to Federal award coverage of the Burswood Casino.
12 Between 1974 and 1989, and after 1993, until the events leading to the present dispute, members of the State LTU were treated as members of the Federal LTU and vice versa. The State LTU made sustentation payments to the Federal LTU and its federal successor, the LHMU. According to Fry, the last major sustentation payment was made on 14 June 1997 for the quarter ended 30 September 1996. A common audit of the books and accounts of each organisation was conducted and a single report lodged with the Western Australian Industrial Relations Commission and the Australian Industrial Relations Commission.
13 In 1974 there was an application card apparently used for persons applying for membership of the State LTU, although it was in form an application for membership of the HCC. The card was headed up "The Hotel, Club, Caterers, Tea Room and Restaurant Employees' Industrial Union of Workers, Perth, WA" and entitled "APPLICATION FOR MEMBERSHIP". The reverse side bore columns to allow subscription payments to be recorded. This type of card was designated in the agreed bundle of documents in these proceedings as Type 1. There was also a card headed "Federated Liquor and Allied Industries Employees' Union of Australia, Western Australian Branch" and entitled "MEMBERSHIP REGISTRATION". This type of card was designated Type 2 in the agreed bundle. It was, in my opinion, properly to be regarded as an application card for membership of the Federal LTU. It made no reference to "Union of Workers", the designation used to identify a union as a State registered union in Western Australia. According to Fry, this card was used to rectify an absence of BBU membership records. That union, he said, had no membership cards but simply issued receipts for subscription payments. The HCC on the other hand had been using cards for years (T58). New cards were produced in 1974 using the name of the State Branch of the Federal LTU. But on Fry's evidence it seemed they were to be used for BBU members only. By way of example, one Elsie Ryan signed such an application card on 16 April 1974. She had been a member of the BBU for more than fifteen years prior to that time (T58). The only people signed up on these cards were bar attendants because that was the limit of the coverage of the BBU. At the time Mrs Ryan signed her card the State LTU had not been registered. But on Fry's evidence, he was simply preparing proper records to support that process of state registration.
14 It was put to Fry in cross-examination that there was nothing in the Type 2 card signed by Mrs Ryan and like cards signed by others to indicate anything apart from an application for membership of the State Branch of the Federal LTU. He replied:
"Except to say that my understanding is the cards were printed for the purpose of getting records for the state registrations." (T59)
The cards were printed for the BBU at the time. It was "for the purposes of the application for registration of the State organisations in the State Commission". As with other elements of Fry's testimony, there was a disparity between what he claimed to be the real position and what the written record showed. When pressed he agreed there was nothing in the Type 2 cards to indicate anything other than that the persons signing them were applying for membership of the Federal LTU. In my opinion, the Type 2 forms were designed for membership of the Federal Union and persons signing them and paying the relevant subscriptions were accepted and became members of the Federal LTU. Fry's explanation for their use in terms of the need to create a record of BBU membership is improbable.
Factual Background - Fry Loses Control of the State LTU - July 1989
15 In July 1989, a new Branch Management Committee was elected for the State Branch of the Federal LTU. The incumbent Branch President and Organiser, Bill Baxter, was defeated by Susan Fee who also captured his position as an organiser. Although in the ordinary course an election would have been held for the State LTU at the same time, it was deferred pending the finalisation of negotiations about an amalgamation between the State LTU and the Western Australian Bakers and Pastry Cooks Union.
16 When elections for the Committee of Management of the State LTU were eventually held in December 1989, Baxter and his supporters were successful. Baxter became secretary of the State LTU. Consequently, Fry had lost office as secretary although he remained as secretary of the State Branch of the Federal LTU. A dispute ensued between the two Unions which is referred to below. Fry was asked in cross-examination, whether in his capacity as secretary of the State Branch of the Federal LTU following the Baxter coup, he needed still to recruit members for the Federal LTU. He replied, "very few" but agreed that Type 2 cards were used for that purpose.
Factual Background - Membership Application Cards State LTU - 1989-1993
17 Between 1989 and 1993 the State LTU recruited members using its own form of membership application card. There were three types of cards used by the State LTU during this period that Fry was out of office, ie from 1989 until 1993. Two of these cards, designated Type 3A and Type 3B in the agreed bundle of documents, were headed up "Federated Liquor and Allied Industries Employees Union of Australia, Western Australian Branch, Union of Workers (Registered under the Western Australian Industrial Relations Act 1979)". One card, Type 3A, was entitled "APPLICATION FOR MEMBERSHIP" and was in the form of a request by the applicant to be enrolled as a member of the State LTU. The reverse side bore a number of columns to record subscription payments. The second card, Type 3B, was not in the form of an application but bore the endorsement:
"I hereby agree to become a member of the [State LTU] and pledge myself to comply with the rules of the Union and with any amendments to or additions made to such rules from time to time."
This card also contained columns on the reverse for recording subscription payments. When Fry recovered office as secretary of the State LTU in 1993 he resumed generally using the Type 2 cards up until April 1997 when he arranged for the printing of a new card for the State LTU, designated Type 6. For completeness it may be noted that the Type 4 card headed, "Federated Liquor and Allied Industries Employees Union of Australia (Registered under Australian Conciliation and Arbitration Act)" is conceded by the respondents to be a Federal LTU card. The card designated Type 5, headed up "Federated Liquor and Allied Industries Employees Union of Australia, Western Australian Branch", was also in my opinion a card for membership of the Federal LTU or its successor, the LHMU, via the State Branch of its Liquor and Hospitality Division.
Factual Background - Dispute between the State LTU and the State Branch of the Federal LTU - 1989
18 At the time that Fry lost office as secretary of the State LTU, the State LTU and the State Branch of the Federal LTU occupied common office premises at 172 St George's Terrace, Perth under a lease in the name of the State Branch of the Federal LTU. As noted above, the lease had been for a term of five years expiring on 5 February 1989 but the two organisations had continued in occupation on a monthly tenancy. Following Baxter's election as secretary of the State LTU it appears that he denied access to the premises to Federal Branch officials. Locks were changed and security guards were hired. A meeting of the Federal Management Committee of the Federal LTU held on 15 December 1989, at which Mr Fry was evidently not present, the General Secretary reported that the newly elected committee of the State LTU had taken over possession of the Federal LTU's branch office and were refusing access. He also reported that difficulties existed over bank accounts of the Federal LTU's State Branch. The bank froze those accounts which led to problems in the payment of employees and officials of the Branch. Fry had requested the Federal LTU's Management Committee to authorise him to take whatever legal proceedings were necessary to gain access to the Branch offices. As a result a resolution was passed by the Federal Management Committee authorising him to "take all steps including legal proceedings, necessary to protect the rights, assets and funds of the Federation and the interests of its officials, employees and members."
Factual Background - Proceedings in the Supreme Court between State LTU and the State Branch of the Federal LTU - 1989/1990
19 Legal proceedings ensued in the Supreme Court in action number 3324 of 1989. The plaintiffs were the Federal LTU and Fry. The defendants were the State LTU, William Baxter and Damian Clark. Mayne Nickless Ltd which was providing the security services was also named as a defendant. In the event it appears, from a subsequent report by Fry to the Federal Council of the Federal LTU, that the institution of the Supreme Court proceedings, and a claim for interlocutory relief, led to undertakings being agreed upon which the General Fund Account of the Federal LTU was to be available for the payment of wages to clerical staff and for rent, telephones and other general office outgoings.
20 In an affidavit sworn in the Supreme Court proceedings on 18 December 1989 Fry described the leasing arrangements with respect to 172 St George's Terrace, Perth and the subsistence of the monthly tenancy since February 1989. He referred to a General Bank account of the Federal LTU held with the R & I Bank at 853 Hay Street, Perth which the Federal LTU had had since prior to the registration of the State LTU in November 1974. Rental and outgoings in relation to the premises had been paid from the General Account at the Bank by the Federal LTU. Fry said in his affidavit that:
"Most, if not all, of the property such as the furniture and equipment and documents which were located at the premises on or about 11 December 1989 were acquired since 1974. All the property acquired since 1974 has been acquired by use of the funds of the [Federal LTU]. The vast majority of the property on the premises therefore belongs to the [Federal LTU] and not the [State LTU]."
21 His affidavit also described events on 11 and 12 December 1989 involving denial of access to the Branch offices, changing of locks, removal of property and membership cards and the presence of Mayne Nickless Ltd security guards at the premises. In a supplementary affidavit sworn on 21 December, Fry stated that, on the morning of that day, he had found on the premises minute books and two boxes of membership cards which he had not been able to locate when he searched them previously. A further supplementary affidavit sworn on 20 December in reply to an affidavit sworn by Baxter denied that the moneys in the General Fund Account with the R & I Bank were the property of the State LTU. He said:
"The said general account at the branch of the Rural and Industries Bank at 853 Hay Street, Perth was first opened in or about July 1974 before the [State LTU] became a registered organisation. The account was opened in the name of the [Federal LTU]. I was involved in the opening of the account. Since that time there have been various changes of signatory to the account. There was never any closure of the account by the [Federal LTU] nor an opening of the account by the [State LTU]..
.
.
I had been unaware that the name of the [State LTU] had ever been on the account until I was informed by Chris Murray the Accountant at the Bank just recently that there had been a card for a change of the signatories for the account lodged with the name of the [State LTU] on it. I believe therefore that at some time prior July 1989, the name of the [State LTU] was written on the form lodged for the change of signatories by an oversight. I have always been a signatory to the said account so I must have signed the form for the change of signatories without noticing the name of the Union on the form was wrong."
The affidavit exhibited a copy of what Fry described as "a form of the [Federal LTU's] membership cards referred to in the previous paragraph". This was a membership card in the form designated Type 2, to which reference has been made above. That is a membership card for the State Branch of the Federal LTU. In so saying it is not suggested that the State Branch had any legal identity distinct from that of the Federal body of which it was part.
22 It was put to Fry in cross-examination in these proceedings, that at no time in the Supreme Court litigation did he say anything to suggest the Type 2 card could properly be seen as belonging to the State LTU. He said "No. I didn't see any point." He believed at the time that all of the property including membership cards and everything else was the property of the Federal Union. He denied that he had subsequently changed his mind about that position. As to the general account he said:
"It was my belief at the time that the bank account to which moneys were received from members, whether they were state members or deemed to be federal members, was paid into - and it was from that bank account all expenditure was paid, including the purchase of property, and it was my belief on that basis that the money was in the federal account, it had some ownership in that federal account, and property bought from that federal account over the years was property of the federal body. Now, on that basis the affidavit was sworn accordingly."
23 At one point in his cross-examination Fry temporised about the ownership of the bank account. He referred to a telephone conversation with a bank officer on 12 December 1989 which had indicated that, according to the bank's ledger and records, the State LTU, identified by the words "Union of Workers" in its description, was the account holder. He said:
"...it's my belief it was the federal account; maybe it wasn't."
It was put to him that he was confident enough in his recollection to assert on 18 December 1989 that it was the Federal Union that owned all the relevant property and not the State Union. In reply he said:
"On the basis of the bank account, yes, but I may have been wrong."
The alleged conversation with a bank officer which raised that possibility, on Fry's evidence, took place on 12 December. The affidavit asserting, without qualification, that the General Account funds were those of the Federal LTU was sworn on 18 December. Fry also referred in his evidence to having, in 1993, sighted a 1990 letter from the Bank to the accounting firm Deloittes. The letter evidently concerned the bank accounts and their various balances apparently for audit purposes. It referred to accounts which included reference to the words "Union of Workers". The letter was not in evidence. In cross-examination Fry accepted that Deloittes had been retained by those who controlled the State LTU between 1989 and 1993 to inquire into the finances of that Union. He agreed also that there was nothing in the bank's response that differed from what he claimed to have been told earlier by one of its officers. In the event, the evidence could not be relied upon to lead to a conclusion one way or the other about the ownership of funds in any bank account. The evidence led nowhere.
24 There was other evidence offered by Fry in cross-examination by reference to minutes of a special meeting of the Committee of Management of the State LTU held on 23 September 1981 which created various benefits payable to members in particular circumstances including by way of legal assistance and other support in relation to worker's compensation, Liquor Act prosecutions, use of ambulances, compensation for unpaid unemployment arising because of personal accident, funeral benefits and unpaid long service leave. Resolutions in the minutes referred to the establishment of a benevolent fund for members, the secretary being authorised to open an Investment Savings Passbook account with the Rural & Industries Bank for that purpose. The secretary was also authorised to withdraw an amount of $25,000 from a General Fund Account and transfer it into a Reserve Fund Account and further withdraw an amount of $50,000 from the Reserve Fund Account and place it in a Fixed Deposit with the Rural & Industries Bank. Fry said that the minutes seemed to suggest, since they referred to a State LTU meeting, that the transfer of the moneys referred to were all from State LTU accounts. When he had sighted those minutes again in 1993 it led him "... to a further conclusion that possibly the bank may have been right". (T85) In relation to the affidavit he had sworn in 1989 he said he had not forgotten that those minutes were there but they were not available for him to review and refresh his memory. In my opinion however, this was an ex post facto justification for a position that it now suits Fry to adopt. In my view there was never any doubt in Fry's mind in 1989 when he swore the affidavits in the Supreme Court about the ownership of the funds in the General Account at that time.
Factual Background - Fry Demands Return of Federal LTU Property - December 1989
25 On 18 December Fry wrote to the State LTU and to Baxter and Clark in terms drafted by solicitors Dwyer Durack on his instructions. The letter, which was a letter of demand on behalf of the Federal LTU, said inter alia:
"I hereby demand that you and all your servants or agents vacate the premises immediately and immediately return to the Federal Union and its Officials and Employees and Agents all the property that was on the premises on 11 December 1989."
In cross-examination Fry agreed that the property over which he was asserting control on behalf of the Federal LTU included membership cards, receipt books and bank accounts, desks, filing cabinets and correspondence files. He was not concerned to draw any distinction between membership cards or application cards directed to the State LTU because as far as he was concerned they were cards that were "used and deemed to be used by both organisations" (T 273).
26 In a report to the Federal Council of the Federal LTU in 1990, Fry referred to Baxter's attempts to get around undertakings given to the Supreme Court by arranging for the State LTU to open a new post office box in a Perth suburb and for mail to be diverted to that box and any moneys received to be paid into a new bank account opened by the State LTU. At the same time and taking advantage of the worsening dispute between the State Branch of the Federal LTU and the State LTU, employers were discontinuing payroll deduction of members' contributions which Fry saw "...as an attempt to destroy the financial base of both the Branch and the State Union". There was a meeting between Fry, the general secretary and Baxter in Melbourne on 7 February 1990 in an attempt to resolve the dispute between the two Unions. In the event, although initially it appeared agreement might be possible, no lasting resolution emerged.
27 Early in 1990, Fry and Baxter had made a detailed list of all the property at the office premises at 172 St George's Terrace, Perth. The property, according to Fry, comprised filing and storage cabinets and furniture from the former HCC and BBU, furniture and cabinets obtained from the purchase by the State LTU of certain employment agencies and other furniture and office equipment purchased by the State LTU since 1974. Additionally, according to Fry, since the inventory was done the State LTU had purchased a computer (in 1990) and a photocopier (in 1994). The list said to have been prepared with Baxter was annexed by Baxter to an affidavit sworn by him on 9 August 1990 in the Supreme Court proceedings. It was not identified by Fry in his evidence in these proceedings as having been used in those proceedings. However, in his affidavit of 17 August 1990, in support of an order for release from undertakings given earlier that year in the Supreme Court, he said, in reference to Baxter's affidavit and the property list exhibited to it:
"The chattels listed in the inventory marked "WTB" of Baxter's Affidavit are, except for a few items which belong to the Bakers Union, the property of the [Federal LTU]. The items listed on the schedule as being assets on location owned by the Bakers Union and also the items numbered 172, 188, 207, 209, 213 and 227 belong to the Bakers Union. The property which belongs to the Bakers Union has been removed by the Bakers Union. I have been informed by the auditor for the [Federal LTU] that the written down value of the chattels at the premises, other than those which belong to the Bakers Union, was, as at May 1989, around $55,531."
Factual Background - The State LTU Moves to Subiaco - 21 May 1990
28 A Management Committee meeting of the State Branch of the Federal LTU held on 21 May 1990 decided to rent office accommodation at 61 Thomas Street, Subiaco in the same building as the Miscellaneous Workers' Union. Because the undertakings given to the Supreme Court had precluded the State Branch of the Federal LTU from removing property from the location at 172 St George's Terrace it was sought to persuade the State LTU to release the State Branch from those undertakings. No agreement could be reached and the matter was taken back to the Supreme Court which made orders on 24 September 1990 permitting the State Branch of the Federal LTU to remove property, records, documents and papers from 172 St George's Terrace, Perth to the new address.
Factual Background - Baxter Office Declared Void - January 1990
29 In the meantime, on 19 January 1990, an application had been made in the Western Australian Industrial Relations Commission to have Baxter's election as secretary/treasurer of the State LTU declared void. The application was successful, an order to that effect being made by Sharkey P. on 19 September 1990. A new election for the position of secretary/treasurer of the State LTU was ordered. The State LTU was directed to appoint a member of the State Union Management Committee as an acting secretary and it appointed the president to that position.
Factual Background - Funds Belonging to Federal LTU - 1990
30 Fry's report to the Federal Council in 1990 referred to the removal of some $11,000 by the State LTU from the safe in the office of the State Branch of the Federal LTU in December 1989. The funds had not been returned. A sustentation payment of $28,832 to the Federal body from the State Branch of the Federal LTU had not been honoured as payment of a cheque in that amount was stopped by the bank. The recoverability of the amount was in doubt. Fry advised the Federal Council that this amount together with payment of legal costs in respect of proceedings in the WA Supreme Court and other moneys paid to that date on behalf of the State branch of the Federal LTU would be reimbursed to the Federal body as early as possible.
31 In April 1990, the State Branch of the Federal LTU opened a General Fund Account with the Commonwealth Bank. It appears also, from records of the State LTU that in about September 1991 it opened a new account with the ANZ Bank and in May 1992 a further account with the National Australia Bank, the latter being used until November 1993.
32 During the period 9 December 1989 to June 1993, Fry continued to submit financial returns to the Deputy Industrial Registrar of the Australian Industrial Registry in respect of the State Branch of the Federal LTU. Thus on 12 May 1993 he submitted a letter attaching the audited financial statements of the State branch for the financial year ended 31 May 1992. The auditor's certificate was included with the letter. The auditor's report to members mentioned the existence of a dispute with a "former officer of the Union regarding ownership of Union assets". The letter stated that at 31 May 1992 those assets, recorded in the Union's balance sheet, amounted to $1,601,688. Union receipts of $12,914 removed from the Union's premises were also said by the auditors to be the subject of the dispute. Subsequent returns indicated that the dispute had been resolved and continued to record disputed amounts as property of the State Branch of the Federal LTU without qualification.
Factual Background - Formation of Federal LHMU - August 1992
33 On 3 August 1992 the Federal LTU and the Federated Miscellaneous Workers' Union of Australia amalgamated to form the Australian Liquor Hospitality and Miscellaneous Workers' Union ("the LHMU"). Under the rules of the newly formed LHMU, as they then stood, there was to be a transitional period of six years during which time it would operate with two divisions, namely the Liquor and Hospitality Division and the Miscellaneous Workers' Division (Rules 11 and 12). These divisions would be reflected in the State branches (Rules 11(c) and 12(c)). Federal and State Branch transitional executives were formed consisting of the governing bodies of both divisions (Rule 9).
34 The national officers of the LHMU were to be its Joint National Presidents, Joint National Secretaries and Joint Assistant National Secretary (Rule 14(a)). The Transitional National Executive was charged with the responsibility of determining phased implementation of a national uniform membership dues and sustentation fees structure and other matters to give effect to the integration of the two organisation.
Factual Background - Registered Rules of the LHMU
35 The registered rules of the LHMU relating to the powers and duties of the Joint National Secretary and the Divisional Branch Secretary as they stood in March 1998 included the following set out in Section 1 entitled "Rules of the Amalgamated Union":
"Rule 14 National Officers(b) The duties of the National Officers shall be as follows:
(i) JOINT NATIONAL SECRETARIES: Each Joint National Secretary shall perform the following duties...:
A Joint National Secretary shall properly care for the books, records and property of the Union. A Joint National Secretary may institute legal proceedings for the recovery of any of the Union money or assets. A Joint National Secretary shall be the general custodian of the property of the Union. At a Joint National Secretary's requirement any member or officer of the Union shall yield up to a Joint National Secretary any property held by such member or officer.
A Joint National Secretary shall take all reasonable steps to carry out the objects and rules of the Union and the decisions of the Transitional National Executive.
Between meetings of the Transitional National Executive a Joint National Secretary shall have the general control and conduct of the business of the union...
Rule 15 - Duties of the Transitional National Executive with respect to future union structure and organisation
(a) Prior to a date four years from the date of amalgamation, the Transitional National Executive shall determine the following matters:
(b) The decisions of the Transitional National Executive in relation to the above matters shall be implemented in consultation with the Divisions and Branches of the Union, and in particular the restructuring of the union shall be implemented by a date six years from the date of amalgamation.
(e) In addition to those matters specified in (a) of this rule, the Transitional National Executive shall establish a timetable for the election of all officers in accordance with Rule 35 - Elections...
Rule 16 - General Powers and Duties of the Transitional National Executive
The Transitional National Executive shall be the committee of management of the union and shall have the general conduct and control of the business of the union and without limiting the foregoing, such powers shall include:-
(a) The management of the affairs of the union;
(d) The enforcement of the rules of the union;
(g) To demand or cause to be made an audit of the books and accounts of any branch or division and for that purpose take possession of all property, books, bank books, documents and correspondence from any branch or office thereof.
(i) Without limiting the generality of the foregoing, the power to take all such steps as are necessary to ensure that the amalgamation is fully effective including by taking all steps to effect the transfer as required by law of any property, or interests therein, charge, shares, or any other asset to the amalgamated organisation...
Section 5
3 Elections and terms of Office
(a) Prior to 1 January 1998, the Transitional National Executive shall take all such steps as are necessary to make arrangements for the holding of elections for all offices and sectional positions (subject to the final number of sectional positions being determined by no later than the end of January, 1998) to be filled under the 1998 rules, including the appointment of a national returning officer and branch returning officers...
Section 3 - Branch Rule 8
Rule 8 - Duties of Branch Secretary
The Branch Secretary shall attend all meetings of the Branch, and keep correct minutes of the proceedings of the Branch. He shall receive all moneys on account of entrance fees, contributions, fines, levies, donations and from any other source. He shall pay over all moneys to the bank. He shall keep account of all receipts and expenditure, and all moneys received on account of entrance fees, contributions, fines, levies, donations and moneys from any other source. He shall keep such accounting records as correctly record and explain the transactions and financial position of the Branch including such records as are prescribed by the Act. He shall keep the accounting record in such a manner as will enable accounts and statements to be prepared from them in accordance with the Act. He shall keep the accounting records in such a manner as will enable the accounts of the Branch to be conveniently and properly audited in accordance with the Act. He shall keep accounting records on an accrual basis. He shall act as Accounting Officer as defined by the Act. He shall issue all summonses and notices to members in danger of being unfinancial by the next meeting night. He shall issue all summonses for Special Committee or Special Meetings of the Branch. He shall conduct all correspondence, and keep a copy of same; all correspondence shall be addressed to the Branch Secretary. He shall keep a true and correct account between the Branch of the Union and its members.
Once a year the Secretary shall submit a balance sheet signed by the Auditor showing the income and expenditure for the year ending 30 June and the amount of assets in hand. He/she shall deliver up all the books, paper if he/she is called to do so by the Council or Branch. He/she shall be expected to faithfully attend to all matters concerning the well being of the Union and its members.
The Branch Secretary shall forward to the Divisional General Secretary at the Head Office of the Division on or before the fourteenth day of January and July in each year returns showing the number of members of the Branch that have contributed or paid in advance for any period of the half-year ending December and June, and the total number of members on the rollbook; the names, addresses and register numbers of all members who joined the Branch during the half-year, date of becoming members, and stating if by clearance card, and from which Branch or organisation clearance card is granted; the names, addresses and register number of members who have left the Branch and by what means (clearance card of resignation); he shall prepare and forward to the Registrar of Trade Unions all returns required by law; he shall forward to the Divisional General Secretary a copy of every balance sheet within fourteen days after its adoption. The Branch Secretary shall forward each July to the Divisional General Secretary a report of the activities of the Branch and matters of interest to the Union or Division, that same may be collated and forwarded to the Branches..."
36 Lawrence explained in his evidence that on and from 3 August 1998 it was expected that a new structure would be in place as a result of elections conducted under the Rules. In all States (except New South Wales) there would be a single integrated branch. It would be necessary, pending the election, to establish a roll of members eligible to vote in the elections. The compilation of the roll would require the utmost care. Many of the members eligible to vote were casual and part-time employees. Many were employed in contract cleaning and catering activities in various capacities. The rules were changed between March and December 1998 following organisational integration. This appears from the certified copies of the Rules as at 9 October 1997 and 17 December 1998 exhibited to affidavits sworn by Lawrence on 18 June 1999.
37 From 3 August 1992, Fry held the positions of Liquor and Hospitality Divisional Branch Secretary (referred to hereafter as "Secretary of the State Branch of the LHMU") and Joint Secretary of the State Transitional Branch Executive of the LHMU. On 20 September 1993, Fry wrote to employers in the liquor and hospitality industry on behalf of the LHMU advising them of the amalgamation and the consequent coming into existence of the LHMU. The letter stated:
"In December 1992 pursuant to Union Rationalisation Policies of the Australian Council of Trade Unions, negotiations were held for the Liquor and Hospitality Division of this Union to take over the operation of...[the State LTU]."
The letter also advised of the fact that on 1 June 1993 the State LTU had resolved, by its Management Committee, that the Liquor and Hospitality Division of the WA Branch of the LHMU should conduct the administrative and other affairs of the State LTU. Ms Ronnie Meade had been appointed to carry out general organising duties on behalf of the State LTU. The letter went on:
"Point 8 of the signed "Memorandum of Agreement" between the parties provides for the handover to the Liquor and Hospitality Division of this Union all records and property of the State LTU. This has now been done." (sic)
Cross-examined on the letter, Fry was asked whether it was true that the State LTU had resolved for the LHMU to conduct its administrative and other affairs. He said:
"My understanding is that there was some resolution adopted at that time by the majority faction of that committee - on that committee." (T79)
Asked if he had not sent the letter to many "significant players" in the liquor and hospitality industry, he said he could not recall. Asked about the provision in the memorandum of agreement for the hand over of all records and property of the State LTU he acknowledged that a memorandum of agreement had been signed but denied that it was ever implemented. He said the Federal Union took control of the State LTU's property. Fry's evidence on the issue was again at odds with the plain and unequivocal terms of his correspondence. A suggestion that the letter may not have been widely circulated in the industry is negatived by its terms, by the absence of any convincing reason for sending it to the Brighton Hotel alone and by the statement that the information in it had been conveyed to the WA Hotels and Hospitality Association.
Factual Background - Fry Regains Control of the State LTU and Becomes Joint National President of the LHMU - December 1993/August 1994
38 In December 1993, Fry succeeded in being elected to his former office as secretary of the State LTU. Elected with him was a new Committee of Management. At this time there had been some discussion between the LHMU and the State LTU about possible amalgamation between them. That discussion however did not bear fruit. It was Fry's evidence, which was not contested on this point, that from December 1993 until the conclusion of the six year transitional period in July 1998 the Committees of Management of the State LTU and the State Branch of the LHMU were, for the most part, identical. Management Committee meetings of the State LTU and the State Branch of the LHMU were held at the same premises immediately after one another and separately minuted.
39 In August 1994, Fry was elected as Federal President of the Liquor and Hospitality Division and Joint National President of the LHMU. According to his evidence, although the State LTU and the LHMU operated as distinct legal entities with separate Committees of Management, members were treated as members of both and the assets were treated as the assets of both Unions. The lease over their common premises at 251 St George's Terrace, Perth was held by the State LTU until 14 January 1995 when it was assigned to the LHMU. It was assigned back to the State LTU on 14 October 1997 in circumstances which will be referred to later. Membership contributions, according to Fry, were treated as income of both the State LTU and the Federal LTU and subsequently the LHMU. The State LTU made sustentation payments to the Federal LTU and then the LHMU. The last of these is said to have been made on 14 June 1997 for the quarter ended 30 September 1996.
40 Certain decisions affecting the State Branch of the Federal LHMU were taken at meetings of the State LTU committee which comprised virtually the same people as were members of the committee of the LHMU Divisional Executive. So on 22 February 1994 a resolution was passed authorising the President and the Secretary/Treasurer of the State LTU (Fry) to execute a tenancy agreement under the seal of the State LTU with the owners of the building located at 251 Adelaide Terrace, Perth for a term of five years commencing on 14 March 1994.
Factual Background - State LTU Acquires Federal LTU Funds - May 1994
41 On 3 May 1994, the Committee of Management of the State LTU approved and endorsed a memorandum of agreement between the State LTU and the State Branch of the LHMU. The terms of the memorandum of agreement set out in the minutes of the meeting of 3 May 1994 are as follows:
"DeclarationThe parties hereby agree and declare as follows -
1. That all Chattels and Property identified in the Writ of Summons are the property of and shall remain the Property of the State LTU, and;
2. That all monies standing credited in the various accounts described in the Writ of Summons are in accounts in the name of the State LTU and are the Property of the State LTU.
3. That with few exceptions all Membership Cards held are those of the State LTU and not those prescribed by the Registered Rules of the Federal Union.
4. That whilst the State LTU has no legal relationship with the Federal Union, however, the State LTU acknowledges a commitment to endeavour to progress a fair and equitable amalgamation with the Federal Unions State Counterpart (State LHMU) through on going discussions and negotiations.
Agreement
The parties hereby agree and determine as follows -
5. That appropriate action be taken to disburse the Funds held by the Bank of Western Australia Ltd into agreed accounts in the name of the Federal Union for general operational purposes only, provided that an amount of $800,000.00 shall be retained in a Term Deposit, subject to Paragraph 7 hereof.
6. That the Funds held by United Credit Union Ltd shall remain the property of the State LTU.
7. In the event that no formal amalgamation proceedings have commenced by not later than the 30th September, 1997, between the State LTU and the State LHMU, the parties shall arrange at that time for the $800,000.00 Term Deposit identified as the property of the State LTU to be invested in the name of the State LTU."
42 The minutes of the meeting of the State LTU's Committee of Management held on 3 May 1994 showed the meeting commenced at 7.50pm and closed at 8.55pm. It was followed at 9.10pm by a meeting of the Management Committee of the State Branch of the LHMU separately minuted. The persons present at each meeting were identical save that Mrs M.S. Tavener, shown as a member of the Committee of the State LTU, was not present at the meeting of the Committee of the State Branch of the LHMU. The minutes of that meeting record that it was informed that the Management Committee of the State LTU held earlier had adopted a resolution approving of a proposed agreement outlining a Scheme of Arrangement to allow the use of some of the funds held by the State LTU for operational purposes. A copy of the proposed memorandum of agreement is said to have been distributed to committee members and that after due consideration a motion carried in the following terms:
"That the Memorandum of Agreement, as distributed to Members (and incorporated in this resolution) is hereby endorsed and approved.Accordingly the Divisional President, Secretary-Treasurer and Trustees are hereby authorised to take all necessary action to implement the Scheme of Arrangement contained in the Agreement and are further authorised to reach agreement in respect to the Bank Accounts proposed in Paragraph 5 of the Agreement."
The resolution then set out the text of the memorandum of agreement in terms identical to those in the minutes of the meeting of the Committee of Management of the State LTU earlier that evening. It does not appear, from the evidence, that any specific notice of the intention to propose the memorandum of agreement was in the agenda sent to members. Although there was some equivocation by Fry in cross-examination, it seems more likely than not that he was the author of the memorandum of agreement. He agreed that the content of the resolutions passed on 3 May 1994 was never communicated to any Federal officer of the Union in the form set out in the minutes. When it was put to Fry that it was not communicated in any form, he said:
"Well, I am certain there would have been some report in some form subsequent to sorting out the finances of the - in Western Australia. I mean, there might have been something in the Federal Council report somewhere." (T108)
Federal Council reports produced in evidence made no mention of the agreement purportedly entered into on 3 May 1994. Acknowledging that he took no deliberate steps to send the terms of the memorandum of agreement to any Federal officer of the Union he said:
"Like other matters, I assumed that the State LTU was - there was no obligation of the State LTU to forward anything to the Federal office. The Divisional Branch operated as a separate identity. It - to my knowledge it wasn't done other than advice that - to Michael Bolland or - at the time that the problems of the accounts were resolved and no doubt I would have told him that the accounts had been set up in the name of the Branch."
Fry accepted that it was possible that his duties as Branch Secretary to the State Branch of the LHMU would oblige him to make such a significant issue known to Federal officers. It was put to him that the reason he wanted to keep the agreement a secret pro tem was so that he could take advantage of it in the event that someone stood against him at the LHMU elections, nominations for which closed on 4 May 1994. He could say that the State LTU was separate and distinct from the LHMU and could retain and hold on to the position that he had been elected to in the State LTU and also take the property of the LHMU with him. He denied that the agreement of 3 May 1994 had any connection with the closing of nominations for the LHMU elections. I do not accept Fry's evidence in this respect. His behaviour as a senior officer of both the Federal and State organisations was, in the circumstances, extraordinary. Its most probable explanation is in terms of a device to protect his own position in the event that the position in the Federal union came under challenge.
43 No member of the committee apart from Mrs Shaw was called to give evidence about the resolution of 3 May 1994 or on any other matter. When Mrs Shaw was cross-examined about the meeting of 3 May 1994 she had no recollection of a draft of the agreement ever having been given to her for consideration prior to the actual meeting. To the extent that she had any discussions about it, they were discussions she had informally with Fry. She did not think that at the time she voted on the memorandum of agreement there was actually any document setting out the agreement before her. She said:
"I don't remember if it was written down and put in front of us or whether it was discussed or on the agenda and then verbally discussed or handwritten notes or what. I can't remember." (T 203)
She also admitted to substantial reliance upon information from Fry in relation to anything to do with finance. There appears to have been little discussion at the meeting about the proposed agreement.
44 Fry was asked in cross-examination whether there was any discussion at either the State LTU or LHMU Branch committee meetings about the marked departure that the agreement represented from what the Federal LTU had contended was the position with respect to its property in the Supreme Court litigation in 1989. In response Fry said that they had formed a view that the bank had been correct in saying that the accounts were in the name of the State LTU as the bank continued to maintain that that was the position. Absent litigation of the matter to determine who owned the property, they accepted the Bank's position that these were LTU accounts. The bank had evidently put interest from some of the funds on fixed term deposit. There were, according to Fry "...a whole heap of fixed term deposits, a whole heap of accounts that hadn't been correctly balanced in terms of what they should be, so the total amount of money was ascertained and it was agreed that - we determined that they were the property of the State LTU and that we accessed the funds on that basis, as I understand it, from memory, and set up fresh accounts with new balances for operational purposes in the name of the Divisional Branch". I have already concluded that there was never any doubt in Fry's mind in 1989 when he swore his affidavits in the Supreme Court proceedings about the ownership of the funds in the General Account at that time. I do not accept his evidence in cross-examination on this point. The so-called agreement had all the hallmarks of a crude asset strip, to the magnitude of at least $800,000.
Factual Background - Meetings of State LTU and Federal LHMU Committees 1996-1998
45 Meetings of the Committee of Management of the State LTU and meetings of the Committee of Management of the State Branch of the LHMU were held thereafter, although in the case of the State LTU they were less frequent and of fairly brief duration. A timetable of meetings conducted after 3 May 1994, as emerges from the minutes in evidence, is as follows:
State LTU LHMU
1994 1994
12 July 12 July
1 November (special) 1 November (special)
1995 1995
-- 2 May (special)
-- 19 June
7 August 7 August
1996 1996
19 February 19 February
-- 29 April
20 May 20 May
9 September 9 September
-- 22 October
16 December 16 December
1997 1997
28 July --
-- 1 September
13 October 13 October
1 December 1 December
1998 1998
12 January 12 January
2 February 2 February
-- 9 March
6 April --
20 April 20 April
7 August --
5 October --
As was submitted for the applicant, the relative lack of frequency and duration of the State LTU committee meetings supported the inference that it was a subordinate entity. Until the end of 1997 payment for attending meetings was on the account of the State Branch of the LHMU. It appears from the affidavit of David Kelly, who examined the financial records, that the entry on the relevant documents was "The Liquor Hospitality and Miscellaneous Workers Union, Liquor and Hospitality Division, Western Australian Branch Management Meeting Fees". It was only in 1998 that this description changed to the "Federated Liquor and Allied Industries Employees Union of Australia, Western Australian Branch Union of Workers Management Committee meeting fees".
46 Counsel for the applicant also pointed to other indicators of the subordinate position of the State LTU. These included the payment of all Telstra accounts through the LHMU, PAYE payments made to the Australian Taxation Office in respect of a PAYE account in the name of the LHMU and invoices from SGIO Insurance identified as being for employer's indemnity insurance in the name of the LHMU dated 13 October 1997. The level of non-compliance of the State LTU with its own rules was also indicative. The Committee of Management was required by the Rules to meet at least once in each month. The secretary was required to conduct all correspondence and keep a copy of same. He was also required to submit a balance sheet duly signed by the auditor on half yearly meeting nights. No such general meetings appear to have ever occurred. There was no minuted record of any appointment of an auditor being made as required under Rule 18. The Rule 21(c) contributions for membership are required to be paid in accordance with a determination of the Committee of Management, subject to the approval of the members at a general meeting. There is no evidence that any determination was approved by any general meeting of members as required by the Rules. Fees had never been set in accordance with the Rules. As was submitted for the applicant, this also undercuts the weight of any disparity between the federal minimum contribution rate and that purportedly set by the Branch as an indication that members were not members of the Federal union.
Factual Background - Fry's Report on State LTU Finances - November 1994
47 In a report to the Divisional Federal Council meeting of the LHMU held in Queensland in November 1994, Fry said under the heading "STATE LTU FINANCES":
"On taking control of the State Registered Union on the 30/11/93 the Divisional Branch inherited a completely bankrupt and debt ridden organisation. Membership records had not been kept in a satisfactory condition and financial records were virtually non-existent with missing bank records, cheque books, tax records, income and expenditure records. No proper audit had been conducted since 1989 with no returns as required lodged with the State Industrial Relations Commission. No Occupational Superannuation Payments and Group Tax had been paid for some time. It was clear the State LTU would not be restored in the short term as a viable organisation."
The report also went on to assert that various items of State LTU property removed from the Union offices in December 1989 were still missing and might still be in the hands of Baxter. The report made reference to the move into new offices in February 1994. No reference was made, however, to the "agreement" of 3 May 1994. In affidavit evidence, Fry explained his description of the State LTU as "completely bankrupt and debt ridden" as a reference to the fact that the State LTU had consistent legal debts as a result of protracted litigation among members of the Committee of Management. He had at the time received bank records for the State LTU and received accounts for its legal fees. And although, according to Fry, the State LTU had a steady income stream from members' contributions it was all being used to pay outstanding legal fees. The non-disclosure of the "memorandum of agreement" of 3 May 1994 is all the more extraordinary in the light of this report to the Federal Council of the LHMU of which Fry was a Joint National President.
48 The business of the Committee of Management of the State LTU between May 1994 and 1997 concerned resolution of outstanding claims against the union by Baxter, the finalisation of an industrial agreement with the Burswood Casino and enterprise bargaining agreements with the Hospitality Training Group (WA) Inc and the Main Roads Department, the latter in relation to tea attendants employed by that department. At the meeting held on 20 May 1996 new contribution rates for members were determined. The three meetings of the State LTU committee held in 1997 focussed, for the most part, on the same issue as the meetings in the preceding two years.
49 In the meantime the LHMU and MWD Divisions of the Federal Amalgamated Union were operating in Western Australia as distinct entities. There had been no amalgamation of their State registered counterparts in Western Australia as had happened in other States. Each had separate offices and organising staff. Lawrence said he had made numerous attempts to resolve differences between the two divisional branch bodies in Western Australia. Draft agreements designed to produce an operational integration of the divisional branches had failed to produce results. This he attributed to a want of co-operation on the part of Fry and his divisional committee. In that respect it is unnecessary for me to make any findings.
Factual Background - Lawrence and Carr Raise Membership and Finance Issues with Fry - 1997
50 Lawrence became concerned about the financial and membership position of the Western Australian Branch of the LHMU after a visit by the Assistant National Secretary, Chris Christodoulou in May 1997. The purpose of Mr Christodoulou's visit to Perth was to speak to members of the LHMU employed by the Sizzler chain of restaurants concerning an industrial agreement being negotiated between the Sizzler chain and the LHMU. He attended at workplaces in Perth in company with organisers employed by the LHMU. He expressed concern subsequently to Lawrence about LHMU organisers, Ronnie Meade and Kathy Denny, handing to employees membership application cards for the State LTU. The Sizzler employers were not members and the organisers were trying to recruit them. When Christodoulou asked why these cards were being used and not application forms for the LHMU, he was told that the WA office had no LHMU application forms. Lawrence checked the position with respect to the supply of federal union application forms with his counterpart, the Joint National Secretary, Jeff Carr, who had personally supervised the dispatch of thousands of LHMU application forms to Fry.
51 Lawrence denied suggestions in cross-examination that at the time the LHMU was seeking to "poach" State LTU members in a manner that could be regarded as hostile by the State LTU. He denied that they were in competition for members. There is no evidence that the LHMU was seeking to poach members from the State LTU. Given the reality of colocation and de facto operation as a single organisation, there seemed to be little point in that kind of competition. Lawrence was also asked whether he was aware by mid 1997 that there were moves afoot by people involved in the LHMU to take over the State LTU through its electoral processes. (T15) He was aware that a person called Bill Luck had nominated for the position of secretary of the State LTU. Lawrence had had a conversation on 4 November 1997 with Helen Creed, who is now the secretary of the WA Branch of the LHMU and a National Vice President. In a note of that conversation (X-4) the words "target LTU members" appear. It was put to Lawrence that the note concerned a conversation about targeting members of the State LTU to become members of the LHMU instead. Lawrence said it was a reference to "what was clearly the position, that the LHMU would seek to enrol everybody within its constitutional coverage...". While accepting that the LHMU and the State LTU had separate legal identities, Lawrence saw them as, in a practical sense, part of the one organisation. (T20)
52 It may well have been the case that Lawrence and others in the LHMU were concerned about Fry and his conduct as Secretary of the State LTU. They had good reason to be. If it were the case that they were supportive of a challenge to Fry that does not go to the question of ownership of disputed property and membership income nor to the obligations of officers of the National Union under the rules. Nor does any suggestion that they were seeking to recruit State LTU members.
53 At a meeting of the Committee of the State Branch of the LHMU on 13 October 1997 at which Fry was present, a resolution was passed that the lease of the premises, presently held by the LHMU on assignment from the State LTU, be assigned back to the State LTU with effect from 14 October 1997. Fry said in answer to questions put in cross-examination that "there was a desire of people at this point in time, which is 1997, to restore the lease back to the position it was in in 1994". (T117) The "people" referred to were those on the Management Committee. Asked what benefit there was to the Federal Union from the passage of this resolution, Fry admitted that there was none. He also said that it was "to protect the position of the State registered union". (T118)
54 On 1 December 1997 the Committee of Management of the State LTU passed a complementary resolution authorising the President and Fry to execute an assignment of the lease to the State LTU. Fry did not convey the contents of the resolution to Federal officers of the LHMU. As far as he was concerned, the question of leasing premises was a matter for the State organisation. He did not tell Lawrence of the resolution.
55 Fry's expressed rationale for the resolution was that if amalgamation negotiations between the LHMU and the State LTU had not reached a conclusion by 3 July 1998, when completion of the federal amalgamation was contemplated, then the State LTU would need to continue in existence. He denied that his move was to provide him with a personal escape hatch, saying that he had intended to retire shortly in any event. Whatever the motives, the resolution was extraordinary and reflected a significant failure by Fry and others on the Committee of the State Branch of the LHMU to recognise and act in accordance with their responsibilities as office holders of the LHMU. If there were unresolved issues clouding the relationship between the two legally distinct organisations, then those governing them ought not to have assumed offices with such clear conflicts of duty attached to them.
56 This rather surreal detachment from the responsibilities of his federal office is heightened by Fry's failure to attend the meeting of the Federal Council of the LHMU held in Perth in November 1997. He said he was fighting an election that week against people that had been put up against him. This was a reference to Mr Bill Luck who was contesting the office of secretary of the State LTU. Fry said however, in his oral evidence, that he did not take the view that the national body was involved. There was no tension between him and other elements of the national body (T130). It is significant that neither Fry nor any member of the Committee of the State Branch of the LHMU attended the Council meeting or dinner in Perth.
57 Having regard to the need to progress the full integration of the State LTU and the WA Branch of the LHMU, Jeff Carr from the LHMU's Federal office wrote to Fry on 21 November 1997. He expressed concern about the membership roll of the Western Australian Branch of the LHMU, fees charged to members which were at variance with the federal scale and the use of State LTU membership application cards. He also expressed concern about the property and funds of the Branch as returns to the Industrial Registrar for the financial year 1996/97 had not been filed. Carr requested that Fry produce to him as a matter of urgency:
"(a) A complete roll of all financial members of the Western Australian Branch of the Liquor and Hospitality Division including their residential and work addresses;(b) A copy of the membership application cards for all members admitted to membership in the last 4 years;
(c) Copies of all the minutes of meetings of your Divisional Branch Committee of Management in the last 4 years. This is in any event, a requirement of the Rules with which you have not complied;
(d) Complete details of all current property funds and assets held by the Branch including account numbers and the location of such accounts, the signatories thereto, the current balances and the purpose for which they have been established."
Fry replied on 4 December promising a response to the correspondence shortly, taking into account the information being sought and the fact that he would be absent from the office for some of the week commencing 8 December.
58 No reply having been received by 21 February 1998, Lawrence and Carr wrote jointly to Fry requiring production of the documents and information which had been sought by Carr. In so doing they invoked the registered rules of the LHMU and the authority conferred upon them as Joint National Secretaries. According to Fry, he had sent a copy of Carr's letter to members of the Committee of the State Branch of the LHMU. He disputed the proposition that he was just buying time in the way he dealt with the letter. In my opinion, however, Fry was playing for time. It would not have suited him then to have come to light either the assignment of the lease or the 1994 transfer of LHMU funds to the State LTU.
59 Meetings of the Committee of the State Branch of the LHMU were held on 1 December 1997 and 12 January 1998 at which Fry was present. The minutes record no reference to Carr's letter of 21 November 1997. At the meeting held on 12 January 1998 the Committee determined that the National Wages and Classification Structures approved by the Transitional National Executive of the Union on 23 October 1997 be adopted by the WA Branch to operate from 1 February 1998. Fry agreed in cross-examination that he stood to gain substantially from this resolution. His weekly rate of pay would have doubled. (T130)
60 In the event, Fry resigned his office as Divisional Branch Secretary of the LHMU on 31 January 1998, effective on and from 28 February 1998. The effect of this timing was that he took the full benefit of the resolution passed on 12 January 1998 to implement the new wages and conditions structure. His entitlements on retirement included payment for 201.5 weeks as retiring allowance, payable at the ordinary weekly wage applicable as at 28 February 1998. His reason for resigning, he said, was that he had been told by Helen Creed that she had personally lodged Bill Luck's nomination against him at the State LTU elections. Fry said in evidence, "I wasn't going to stay around and be batted around any more". (T134)
The Present Proceedings
61 The present proceedings were instituted in the New South Wales District Registry of this Court on 11 March 1998 by the filing of a Proposed Rule to Show Cause why the then named respondent, Fry, should not perform and observe the rules of the LHMU in various respects. The history of the proceedings thereafter is set out in my reasons for decision on a proposed amendment to the Rule which were published on 11 November 1998. As a result of that ruling the present application, which is brought under s 209 of the Workplace Relations Act, seeks orders for the delivery up by the First to Tenth Respondents of all property and assets of the LHMU, including membership records and correspondence and papers in the possession or control of the respondents. It requires the First to Eleventh Respondents to treat as null and void the resolution of 13 October 1997 purporting to assign the lease at 251 Adelaide Terrace, Perth to the Eleventh Respondent and seeks an order that the Eleventh Respondent transfer the interest in that lease back to the LHMU. Orders are also sought that the Eleventh Respondent refrain from holding itself out as a branch of the LHMU using the name "Liquor and Hospitality Union" in connection with any publication distributed by it to any employer and/or employee. Additional orders are sought with respect to the use of telephone and facsimile numbers previously operated as the telephone and facsimile numbers of the LHMU and that the respondents take all such steps as may be necessary to transfer to the WA Branch of the LHMU records of membership and income from such membership from all members whose membership income was treated as income of the WA Divisional Branch of the LHMU in the period July 1996 to June 1997 and since, including moneys derived from the bank account number CBA General Fund Number (06 6009) 10056942. An ancillary order that the respondents take all such steps as are necessary to give effect to these orders is also claimed.
62 Various consent orders as between the applicant and the first to seventh, eighth and eleventh respondents were made on 15 April 1998, 5 May 1998 and 12 June 1998.
63 Particulars of the property claimed were handed up at the hearing of the action and are as follows:
"1. All membership records held by the Eleventh Respondent (including the records of membership purportedly in the name of the Eleventh Respondent which members were recruited since April 1997).2. The persons which the Applicant claims are properly to be treated as members of the LHMU are all those persons for whom membership cards exist except those persons for whom records of membership exist purportedly in the name of the Eleventh Respondent which members were recruited since April 1997.
3. All income derived from the membership referred to in paragraph two (2) above and continuing.
4. The property described in the schedule of property referred to in the auditors depreciation schedule dated 30 June 1997 (attached to the Affidavit of Mr Fry dated 16 April 1999 at pages eight six (86) - eighty nine (89).
5. All receipt books, correspondence, and any other documents relating to the membership and membership records referred to in paragraph two (2) above."
Relevant Rules of the LHMU
64 The transitional rules of the LHMU which, in effect, operated for the six year period from 1992 to 1998 have been referred to already insofar as they relate to the powers and duties of the Joint National Secretaries and the Divisional Branch Secretaries. In addition, the 1998 Rules include Rule 49(c) which deals with union property and provides as follows:
"(c) Any union property or funds in the name of a Branch or Branch Secretary or held by an officer or member whether expressed to be in the name of the union or the Branch or not, shall be held on trust by that person for and on behalf of the union. Officers and/or members shall account for such property and funds in accordance with the rules and/or law. Upon a demand being made by the Branch Secretary, subject to the National Council or National Executive or National Secretary, upon any member or officer of the Branch holding such property or monies to deliver up such property or monies to the union, the member shall comply forthwith."
A similar provision was to be found in Rule 33(c) of the Transitional Rules of the Amalgamated Union which preceded the 1998 Rules, albeit the provision for demand was not made explicit.
General Conclusions
65 In my opinion from at least 1993 onwards the State LTU and the State Branch of the LHMU operated for the most part as one organisation albeit with distinct legal identities conferred by the respective State and Federal statutes under which they were registered. It involves no undermining of their respective corporate existences to recognise that there may be an administrative arrangement between them which involves one organisation being, in effect, the operational member of what might loosely be described as a joint venture or partnership or perhaps generically, a symbiotic relationship. So much was made explicit in Fry's letter to the hospitality and liquor industry on 20 September 1993 where he spoke of the State LTU's resolution that the WA Branch of the LHMU should conduct its administrative and other affairs and that the records and property of the State LTU be handed over to the LHMU. Contrary to Fry's statement in evidence that the agreement was never implemented, his letter said "This has now been done". In his report to the Divisional Federal Council meeting of the LHMU in November 1994 Fry referred to the Divisional Branch as "...taking control of the State registered union on the 30/11/93". It was the Divisional Branch which "inherited a completely bankrupt and debt ridden organisation". Apart from Mrs Shaw's evidence there has been no evidence from any other member of the Management Committee of the State LTU to gainsay the inferences which flow from Fry's own testimony. That testimony is to be found more reliably in what he wrote in correspondence and reports to which reference has been made than in the oral testimony given in these proceedings. By course of conduct and on Fry's evidence, by explicit agreement, the LHMU had assumed responsibility for the administration, property and income of the State LTU. Fry's manipulation of membership figures, bank accounts and the lease arrangements to which reference has been made, seem for the most part intended to serve his own purposes. This did not affect the reality of the relationship between the LHMU and its State counterpart.
66 The genesis of the relationship between the two bodies is to be found in that between the State LTU and the Federal LTU dating back to 1974. It was then that the Rules of the Federal LTU were amended so that all persons who were, at 22 February 1974, financial members under the respective Rules of the HCC, the BBU and the HCC (Goldfields) were deemed to be members of the State Branch of the Federal LTU. Branch Rule 28 of the Federal LTU was amended so that all debts of the BBU, the HCC and the HCC (Goldfields), including liabilities to pay superannuation to officers, were to be paid by the State Branch of the Federal LTU as if the expenditures had been incurred by the State Branch. Upon the amalgamation of the three State unions to form the State LTU and Fry's role as Branch Secretary of both with common Management Committees, the administrative relationship became closer. It was fractured for a time during the ascendancy of Baxter and his supporters and successors in the State LTU from 1989 to 1993, but ultimately resumed in the way that I have outlined, albeit with the Federal LHMU in 1993. Returns lodged with the Federal Industrial Registrar were consistent with the operations of the State unions having in effect been taken over by the Federal LTU.
67 The issue of non-compliance with the Rules of the LHMU by Fry and the Committee of the State Branch of the LHMU is in a sense incidental to the relief sought in this case which really relates to identification of the entitlement to membership records, money in the bank and leaseholder rights to the union premises. It is to those specific issues in the light of my general conclusions that I now turn.
Membership and Bank Accounts
68 In an affidavit sworn by the President of the State Branch of the LHMU, Terence Lockwood, on 30 March 1998 in answer to the Rule to Show Cause, particulars were disclosed of three bank accounts held by the Branch showing total balances of $30.26, $1,153.54 and $1,780.20 respectively. He filed an affidavit listing a total of twenty one persons who he said were treated as current members of the Branch. He also said there were no items of property under the custody and control of the State Branch of the LHMU. This information was, as Lawrence demonstrated in material exhibited to his affidavits, dramatically at odds with information supplied by Fry in his capacity as Secretary of the State Branch of the LHMU.
69 In the ballot that took place in April 1992 relating to the amalgamation of the two federal unions, all financial members of both unions received a ballot paper. A return provided by the Australian Electoral Commission stated that in the case of the WA Branch of the Federal LTU (as it then was) 772 papers issued of which 310 were returned. Statutory returns lodged by Fry with the Australian Industrial Registrar's office also told a story of membership quite different from that now advanced by him. A return filed on 3 May 1995 for the State Branch of the LHMU for the year ended 30 June 1994 included his own statement that the number of members as at 30 June 1994 was 1,096. The return for the following year showed membership of 1,256. In that year (1994/95) the members' funds stood at $1,384,404 after deducting liabilities from total assets of $1,653,570 at 30 June 1995. For the period ended 30 June 1996 the return, which was lodged on 10 September 1997, showed assets of $1,657,438 and net assets of $1,350,589. The number of members was not specifically stated but membership contributions reflected a small diminution from the previous year.
70 Sustentation payments made by the WA Branch to the Federal Office of the LHMU were also consistent in their amounts with a membership in the vicinity of 1,000. On 14 June 1997 an amount of $4,997.68 was paid. A return accompanying that cheque showed $35,697 in membership contributions received in the quarter ended September 1996. Based on a membership fee of $156 per annum at the time, the number of financial members of the WA Branch would have been about 900.
71 In relation to membership application cards, it is submitted for the applicant that membership records in contention fall into two broad categories. The first is the category of members admitted to the LHMU, the second is that of members admitted to the State LTU. The first category includes all persons who were on the roll for the 1992 ballot. It also includes members who were on the roll of voters for the 1998 amalgamation ballot. I accept those submissions. Lockwood had certified that 202 persons were members of the LHMU for the purposes of that ballot notwithstanding his affidavit in these proceedings claiming only twenty one members. The persons so admitted to the LHMU were admitted prior to April 1997.
72 In 1997, Fry had devised and printed a new membership card with a view to enrolling persons in the State LTU only. This is the card designated as Type 6 in the agreed bundle of documents. It was headed up "Federated Liquor and Allied Industries Employees' Union of Australia, Western Australian Branch, Union of Workers". It is only the words "Union of Workers" that distinguish the heading from that of the cards used for the former Federal LTU which subsequently mutated into the Liquor and Hospitality Division of the LHMU (see Type 5). It was those words which distinguished the State LTU cards used during the Baxter period, 1989-1993 (Type 3A and 3B). Type 2 were Federal LTU cards with the same heading as Federal LHMU cards.
73 In my opinion, having regard to the substance of the administrative relationship between the State and Federal unions, all membership cards, other than the Type 6 cards relate to the Federal LTU or the LHMU. I am not persuaded by the argument that the claimed federal cards provide for information about categories of employment relevant only to the fee structure of the State LTU. In my opinion the designation "Union of Workers" on the cards is a far more telling indication of whether or not a State union is involved. Nor am I concerned about departures from the form prescribed under Federal Rules or that the contributions made by employers at times were in accordance with State LTU rates. Those issues do not conclude the question of membership. The rate of contribution from employers was no doubt in response to directions they receive from time to time. Kelly observed that until November 1997 all payroll deductions and dues were paid into an account in the name of the LHMU. It was only from 28 November 1997 that Fry redirected the dues to accounts in the name of the State LTU. Further redirection was apparently made following orders made by this Court in April 1998. The income stream from the current members identified by those cards belongs to the LHMU. As to those signed up on Type 6 State LTU cards between April 1997 to July 1998, the applicant makes no claim in these proceedings. It should be noted that all receipts issued appear to have been issued in the name of the Federal LHMU. The cards themselves however appear to have been paid for from LHMU funds and are therefore the property of the LHMU - see the affidavit of David Kelly at par 24.
74 On the question of the various bank accounts in issue, their ownership appears already to have been largely resolved in favour of the LHMU by the consent orders previously made in these proceedings. The accounts were the subject of detailed examination by David Kelly, whose affidavit is in evidence. In my opinion, the accounts designated FED in Kelly's affidavit are plainly the properly of the LHMU. Any moneys paid into the new LTU accounts opened by Fry in 1997 are also the property of the LHMU save for such subscriptions as may have come from those members who were signed up on Type 6 cards after April 1997. There is a question whether the motor vehicle purchased by Fry in July 1996 for some $26,000 from funds in the account designated by Kelly "FED 3" would have remained the property of the LHMU. Of this Fry said in his affidavit that the account was originally opened in January 1971 by the HCC for the purpose of providing officials in the use of their own motor vehicles for union purposes money for the maintenance and replacement costs of such vehicles. A special executive meeting of the HCC held on 2 December 1970 had established the fund and authorised the opening of a separate bank account for that purpose. Fry, who was present at that meeting, claimed that payments into the fund were in accordance with a formula and a rate determined and varied from time to time and that some officials requested regular withdrawals from the fund while others used the fund as a savings mechanism. He claims that the amount of $26,199 withdrawn from the fund on 10 July 1996 to the credit of himself for the purchase of a new motor vehicle was taken from an accumulated balance in the fund of $113,204.28. At the present time I am unable to make any concluded finding in relation to the ownership of the motor vehicle as this depends upon the entitlement of the officers to access the fund in the way asserted by Fry.
Proposed Orders
75 As foreshadowed in closing addresses, I propose, on the basis of the findings I have made, to set out draft orders subject to submissions by the parties and subject to such ancillary orders as they may consider necessary. The draft orders I propose are as follows:
1. It is hereby declared that all the membership records relating to the Federated Liquor and Allied Industries Employees Union of Australia, Western Australian Branch held by the Respondents or any of them are the property of the Australian Liquor, Hospitality and Miscellaneous Workers' Union.
2. It is hereby declared that all persons who were on the roll in Western Australia for the April 1992 ballot relating to the formation of the Australian Liquor, Hospitality and Miscellaneous Workers' Union together with such persons who were on the roll for the 1998 ballot relating to that amalgamation for whom current membership cards exist are members of the Australian, Liquor, Hospitality and Miscellaneous Workers' Union.
3. It is hereby declared that in addition to the persons referred to in the preceding order all persons for whom current membership cards exist relating to the Federated Liquor and Allied Industries Employees' Union of Australia, Western Australian Branch are entitled to be treated as members of the Australian Liquor, Hospitality and Miscellaneous Workers' Union.
4. It is hereby declared that the Australian Liquor, Hospitality and Miscellaneous Workers' Union is entitled to the membership contributions payable by the abovementioned persons.
5. It is hereby declared that the following items are property and assets of the Australian Liquor, Hospitality and Miscellaneous Workers' Union:
(i) all membership records (and all copies thereof) in the possession or control of the respondents;
(ii) all correspondence, records, files, notes, memoranda, cheque books, invoices, statements of account and books of account (and all copies thereof) in the possession or control of the respondents;
(iii) the property described in the Schedule of Property referred to in the auditor's depreciation schedule dated 30 June 1997 (attached to the affidavit of the First Respondent sworn 16 April 1999 at pp 86-89).
6. It is hereby ordered that the First to Tenth Respondents and all of them treat as null and void the resolution carried by the Divisional Branch Committee of the Liquor and Hospitality Division of the Australian Liquor, Hospitality and Miscellaneous Workers' Union dated 13 October 1997 which purported to transfer the interest in the lease on the premises at Level 13, 251 Adelaide Terrace, Perth, WA to the Eleventh Respondent.
7. The Eleventh Respondent shall forthwith transfer the interests in the lease on the premises at Level 13, 251 Adelaide Terrace, Perth, WA to the Australian Liquor, Hospitality and Miscellaneous Workers' Union.
76 If the parties wish to recast these orders in a way that can be agreed between them or to seek additional or alternative orders, then I will entertain a minute along those lines subject to its consistency with the findings which I have made. I have proposed no draft orders in relation to telephone and facsimile numbers operated by the State LTU which were previously operated as the telephone and facsimile numbers of the State Branch of the LHMU. If that is still a live issue, however I will entertain an application for orders to be made in that respect. The orders proposed flow from my findings which are underpinned by the failure of Fry as an officer of the LHMU and other members of its State Branch Committee to discharge their duties in accordance with the Rules of the LHMU from time to time. The orders rely also upon the general provisions of the Federal Court of Australia Act 1976 and in particular s 23 thereof. Such directions which are made to the eleventh respondent are in aid of those orders.
I certify that the preceding seventy-six (76) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice French. |
Associate:
Dated: 21 January 2000
Counsel for the Applicant: |
Mr J. W. Nolan |
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Solicitor for the Applicant: |
Steve Masselos & Co |
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Counsel for the Respondents: |
Mr T.H. Offer with Mr M. D. Cuerden |
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Solicitor for the Respondents: |
Fiocco Hopkins Nash |
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Dates of Hearing: |
23, 24, 25 June 1999 |
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Date of Judgment: |
21 January 2000 |
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