Se) CATCHBWORDS "4 Bel a Me = bad (65) a ina ci nl bot fQ Ww) nd mn jes >) > Pw mr Mm mm tyfe Ascot ( Allen 3 Austr c Ltd c.L.R.199 Austyalian Pastal and Telecommunications Tnion, Ex warte Wilson (1979) 28 A.L.R. 230 Barlowe's Nominees Pry.itd. v. Boodside (Lakes Entrance) 911 Co.N.L, (1968) 121 C.L.R.483 H £19587 1 9.5.686 H n Ltd. £19673 Ch.252 M 19278) 60 C.L.R. 150 p (1983-84) 51 A.L.P.5as Precey ve. S.Millis & Co,Ltd, (19293 1 Ch.77 Povident Internaticnal Corooration v. Internatioral Leasing Corporat £19693 LN.S.WLR. 424 Punt v. Symons & Co,Ltd, £19923] 2 Ch.£06 Scot*® 7. Tass («mreporcted, 3 October, 1984) CAT SS. Short v. Wellings (1972) C.A.R.34 AVR. Stevens v. Keogh (1946) 72 C.L.R.1 CORAM: Spender J. BRISRANE ; 14 June, 1985 2 IN THE FEDERAL COURT OF AUSTRALIA ) ) QUEENSLAND DISTRICT REGISTRY ) QLD. G8 of 1984 ) INDUSTRIAL DIVISION ) BETWEEN : LEONARD EDWAPD ARED GREGORY IOHN PAV, CANRENCE JOHN TSPNED, PRT PRIAN Stipe fer. LESLIE ROMALD LEE, ROY LESLIE LINCOLN, BOMALD LYNALD BARDEN, RONALD JAMES DOTTEP and JOKRM CHAPLES EENUACLL™ K Aprliczants ANDI: BRUGHTE WILLIAMS, ALLAN MoPAIL, ChAPENCE POYWEDER, GREGORY TON, HENPY ASPLIN, STUAPT. 6 CROSBY, DAYID PEARCE, MEE VYN DALE, PETEP THOMSON and 7CHN BENSPETER Respondants MINUTE OF OPDEP . SIDCE MAKING ORDEP: Svender J. LATE OF OPE? : 14 dune, 19at SIHEPE MANS : Brisbane THE COUPT APNEPS THAT: Tne rule to show cause be discharged. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. a IN TRE FEDRPAL CoMeT "r auepear za QUESMELAND DISTRICT PECTSTPY OLD QB of 1984 ee INDUSTRIAL DIVISTON BETWEEN: LECNARND ED JOHN DAY, © ! RE OND ENC AND: GPEGORY MERTON, HENSY ASPEN, STUAPT CROSEY, DAVID BERPCE, MEPVYN KENDALL, PETan THOMSON TNEPETED and JOHN HT Respondents CORAM: Spender J. DATE: 14 June, 1985 REASONS FOR JUDGMENT The question these proceedings raises can be stated thus: . Unsuccessful candidates ina union election, after the election is concluded, apply for an electoral inquiry under s.159 of the Conciliation and Arbitration Act 1904, ("the Act"). The Industrial Registrac, under ¢s -160, grants the applicaticn, waich alleges manifold irregularities, and refers the matter to the Court. Can the Branch Committee of Management, the body having effective control of the businesce of the anion, properly commit union resources for tlegal representation of the respondents at 'the anaduicy, the union tb' ib ing separately Leonard Edward Wacd, Gregory John Ray, Lawrence John Turner, Ersian Stuart Lee, Leslie Donald Lynald Barden, Ponald James Potter and John Charle Penhallurick ("the applicants") sought a rule nisi directed to Hughie Williams, Allan McFaul, Clarence Rohweder, Gregery Mewton, Henry Asplin, Stuart Crosby, David Pearce, Mervyn Kendal Thomson" and John Hinspeter ("the resvondente") seeking to challenge the validity of two resolutions purportedly carried by the Branch Committee of Management of the Queensland Branch of the Transport Workers' Union of Australia. hearing the parties an ja tH | foe ct y » pat cr fe Loy us. oO Qa cr t~ c =] tog he cr Db ow rnPD) O rs)jay 1bct or ordered that the respondents show cau made under s.141 of the Conciliation and giving directions that the respondents observe the rules of the Transport Workers' Union of Australia and that the respondents, and each of them, treat as null, and void and of no force or effect the following resolutions purportedly carried by th Branch Committees of Managenent of the Teansport Workers' Union of Australia, Queensland Branch, namely:- , (2) the resolution of 20 October 19983 - That 'Lhe Branch Committee of Management endores payment for legal casts vertsinine to the 19°? election challenge; and : (ii) A vesolution of 19 April 194 - That cheque number 695172 dated 17 Cetaober ~ 1983, made payable to Macroszan Douglas for an amount 2£ $17,596.10 be forthwith cancelled and Macrossan Douglas be requested to destroy such cheque and that in ite place the branch secretary within five days fron today's date cause a further cheque far $17,556.10 in payment of that fiem's account dated 13 Qztober 1983." This is the return of that rule. Aan attenuated history of + ¥ his matter i w w in) th ce] Pa) hr fe) FH a I An election was conducted under s.170 of ot +5" wD Conciliation and Arbitration Act 1994 for ai large number of ' in positions in the Queensland Branch of the Transport Worker Union of Australia ("the Union"). Nominations opened on 9 November, 1982 and the poll close on 3 March, 1983 and was declared on 10 March, 1983. On 11 May, 1983 the Industrial Registrar, pursuant to s.151(1)} of the Act, on the application of four of the present applicants and one other, referred to the cr Court an application claiming that there had been irregularities in or in connection with those elections. ee Pursuant to 35.145 of the Act, an electoral inquiry was xtended ove O Q 5S lay c a er oe p o ha y ia ct Sy fi nh fe BR Q Cy eed ct cr yr » cT a co Pp ia " s g S re i) each represented by senior and junier counsel. The solicitors for the then respondents were Messrs. Macrossan Douglas. In addition, an officer of the Transport Workers' Union Australia On 14 October, 19°83, Fitcgerald J. declared th ii) » pay Qo OQ cr e DLay Ih QOp te a ay c ct is)D [e] th ct a m re] is] uw fs er P 13] bm] n g o Pn fay mn o 0) ry Ie On 21 October, 1983, Fitcgerald J. made orders for new elections to be held in accordance with s.1465A of the Act and my fu mM a ss p {B ty in rh o mS la ied t ty ia] t~ p a po Et, o rh fe) th th v. Q 1Bve] 1D mS pa ing the results of the new elections. His Honour observed, at p.595:- "Tt was not in dispute, that, even in the absence of an express provis2o0n in an organization's rules, ther is an implicit prohibition uxyon the use of the. resources or funds of an organization to support one candidate in an election in circumstances where they have heen denied ar will be denied to another candidate." He concluded that there had been such use and, for that reason, made the orders I have indicated. mn The new elections did net result ina decisive victory n for either tean. Mr. Ward defeated Mr. Williams for the position of Branch Secretary of the Union, and Mr. Williams defea ur 0) a ian Nard for the pasitioen of § tecretary of the Brisbane Sub-Branch of the Union. This latter position was honorary.Tne balance of power in the Prsnch Committees of Management, which has the effective cortrol of the a iy a au airs of the. Union, was held by supporters of Mr. Williams. On 15 March, 198¢, the Branch Committee of Management by a vote of 8 to 5 £fesa in 1p fa v int 3) Yr =. lia that yr. Williams be appointed a Branch Organicer and that branch organisers renor cr ct fe) the Brisbane fub-Branch m iD cy a tary on all matters. Qn 22 Ma I's i) iy . Neaves J. granted a rule nisi calling on Mr. Williams and other to show cause why orders should not be made which would have the ts] effect of restraining them from giving effect to the resolutions of 15 March, 1984; he granted an interim injunction. On 29 May, 1984, Neaves J. discharged the rule to show cause and dissolved the interim injunction. The present application challenges the validity of two resolutions of the Branch Committee of Management, the first made on 20 Actober, 1983 and the second on 19 April, 1984, It is not disputed by the respondents that the purpose of those resolutions was to use the funds of the Union to pay the legal costs of the respondents to the electoral inquiry by Fitzgerald J. Shortly put, the argument of the applicants is that it is contrary to the rules of the Union for the Branch Committee of Management to authorise the payment of the legal costs of th members of the Williams/McPanl team at that electoral inquiry from the funds of the Union. $.141 of the Act relevantly provides:- zc @f an organization may apply to the an order under this section in respect (1G) An order under this section may give directions for the performance or chservance of any of the cules of an organization by any person who is undec and obligation to perform or chserve those rules. (1H) The Court has jurisdiction to, hear and determine an application under sub-section (1) but, before making an order under this section, the Court shall give any person against whom the order is sought an opportunity of being heard. Fach of the applicants is a wember of the Transport Werkers' Union of Australia, which is an organisation of employees registered pursuant to the Act. There is a branch af the Union known as the Queensland Branch which is itself divided into nine sub-branches, one of the sub-branches heing the Brisbane Sub-Branch. It is necessary to refer to some of the rules of the —_— bee ~~ ee - ~ eee eee — - peoemesc oo A. The objects of the Union i clude "to promote and faociec n the best industrial interests of all members in any matter " Rule 2 provides that the objects of the Union shall be, inter : alia,:- ist financially and otherwite persons ' who have been endoczed by the Australian i Labor Party to hecome members of the ' Commonwealth and State Parliaments. ' {i} To give power to Pranches to take whatever ! steps they may deer necessary to assict ; members financially in cases of accident, sickness, death, distress or unemployment. (j) Te assist merbers injured in the course of their employment to obtain compensation for the loss sustained as a result of such injuries. (k) To assist dererndants of members tilled in the course of their employment to obtain compensation for loss sustained. (1) To permit Brarches to afford assis t | members along with oather assistance t¢ obtain their ovmnm homes. G Rule 5 provides that, subject to the Act, the supreme control of the Union is vested in the Federal Council. There is a Federal Committee of Management and, when the is not assembled in meeting, subject to the Pules, the Federal Committee of Management is invested with executive powers for the purpose of determining any matters affecting the interests of the Union or its members or any business submitted to it (through the office of the Federal Secretary) in writing by a S&ranch. (Sub-rule 24(a)), ~ es - re - ~~ - = we er ee cr ee er eee B. For the purpose of assisting the Federal Council to centrol and manage the Union, a Branch may be constituted in each state and territory vhere 109 or more members reside. (Sub-rule 5(g)). Each branch elects on a triennial basis a Branch Committee of Management. This hody is given extensive powers, Rule 30 provides, in pact, ~ " Rranch Committee of Management - Constitution and Powers BRANCH COMMITTEE OF MANAGEMENT AND OFFICERS (a) Each Branch shall in accordance with these Rules elect a Committee of Management to be known as the Branch Cormittee of Management which shall, subject to these Rules, have control of all business of the Union within the area over which it is constituted to operate. Each Eranch Committee of Management shall consist of a Branch President, Branch Vice-President, Branch Secretary, two Trustees and not less than seven and not more than eleven Committeemen. (ad) Without limiting its powers in any way each Branch Committee of Management shall have poweer to:- (ii) Vote and expend any money that ma necessary in connexion with the busine the Branch; (e) All paid officers, Organizers and employees of a Branch shall be subject to - the control and direction of the Branch Committee of Management as expressed through the Branch Secretary." Be) ¥ ess a rhD "0 mmirire of Management may establish sub-branches within the state or territory svithin which the Sub-cule 32(d)(1ii) provides:- ~ Branch Trustees shall i (iii) Subject to direction o a Sub-rule 38(e)(v) provides:- "Rach Branch shall contr 2 ol the funds available to it for the purpose of payment of contributions to the Federal Council and far both ordinary an extraordinary purposes by resolutions of the Branch Committee of Management. * It is not challenged that in the minutes of the Branch Committee of Management, there is no resolution which expressly authorised the provision of legal assistance for the Williams/McPaul team in the electoral inquiry conducted before Fitzgerald J. Th Oo th fe in + [2] Hy ct Lom 1) two resolutions with which this application is concerned, that of the 20 October, 1983, was passed by a Branch Committee of Management, the composition of which was different from the composition of the Branch Committee of Management which passed the second resolution in question on 9 April, 1984, the new election ordered by Mr. Justice Pitzgerald having occurred in the meantime. Net werent eee: een Cem tt —— we 19, Mr. og. Murdoch of Counsel, who appeared for the applicants, conceded that his case did not depend on there being prior authorisation by the Branch Committee of Management far ct lay [0] engagement of Messrs. Macrossan Douglas before the representatio they provided at the electoral inquiry. It is his submission that the Branch Committee of Management did not have power to pass resolutions of the kind in question; the vayment to which the resolutions are directed could neither be authorised in advance, o¢ subsequently ratified. In contesting the validity of the cesolutions of the Branch Committee of Management seeking to pay the legal expenses of the Williams/McPaul team in the 1983 electoral inquiry out of the organisation's funds, the applicants submitted that the organisation's rules, express and implied, did not permit the use of the organisation's funds for such a purpose. In short, they assert that the resolutions under attack are beyond power. Mr. Grove appeared for the Transport Workers' Union of Australia at the electoral inquiry and Messrs. Macrossan Douglas and counsel briefed by them appeared for Mr. Williams and a series of other individual members of his team. The subsidiary submission was, if the Branch Committee of Management did have the power to resolve as they did, it was net a hbeona fide exercise of that power. In this respect, attention was directed to the fact that the first resolution, on 20 October, 1983, was given one day before the orders by Mr. Justice Fitzgecald directing new elections and making interim orders for the holding of positions prior to those elections. wees eee a wee —_ wees - ee re eee - —_ _ 11, It was submitted by the applicants that, while the Branch Committee Oo f Management has wide powers in relation to the conduct af the business of the Pranch, the authorities estab that the sponsorship of particular candidates in a Union elec as) is no part of that business; likewise, it was said, support for La] those individual candidates in litigation arising out of a Union election is no business of the Branch. It was said that the electoral inquiry was plainly 1 fee ct v WQ w cr i oO io] as between cival groups of election candidates, and there was nothing tao suggest that provision of legal representation to the respondents at that inguiry could be regare > pe ed a limitimate business of the members of The interests of the members lay with th: appearance of the organisation, which was represented and represented separately. The submission was that the resources of the Union are to be used for the benefit of the members as a whole and not for the benefit of particular individuals or officials, and the rules must be taken by implication to preclude the selective use of the funds of the Union to aid one group of members of the Union, the respondents, ina matter arising under 5.141 of the Act and not another group, the applicants. The same principle, it was said, applies bath to the conduct of the ballot as well as to the litigation hetween candidates arising out of the ballot. 12. Most of the decided cases are cases that have been decided in relation to conduct that occurred either prior to or during an election. No authority was referred to which specifically dealt with litigation arising out of an election. Mr. Murdoch submitted that the principle for which the applicants contend is an extension of the principle that appears inter ali o from Short ov. Hellings (1972) C.A.P.84 - rar where the Court (Kelly C.J., Foster and Kirkby JJ.) said at op.87-88:- "It must be plain that the cbiects of the organization can only be carried out in accosdance with its rules. The branch in respect of its affairs is further limited, in the attainment of the objects of the organization by it, by the branch rules. The branch rules provide for the election of officers and members of its Cormittes of Management. Although there is no specific rule against the use of the resources and funds of the organization for the suppert of varticular candidates at any such election, to use the property and resources of the branch for such a purpose would deny the right of such candidates as were not to be supported by the organization, its Committee of Management, its several authorities, its resources or funds, to the freedom and equality in their candidature to which the election rules imply they are entitled. The funds and resources of the organization belong as much to them and their supporters as to their opponents and theirs. It cannot be denied that the provisions of the Act and the regulations are directed to the end of having the management and control of the affairs and transactions of an organization repesed in a democratically and freely elected body of executive and administrative officers. So far as the organization is concerned every member, qualified under its cules, has the right to stand for election to an office. To allow the resources of the organization to be used in a campaign for his defeat would be a denial of that fundamental right. It would enable the existing executive, in whose hands the resources of the organization lie, to use those resources to defeat all opposition to, or criticism of, its will. It could result in a complete tyranny and a permanent denial of the democratic nature of the organization, which the Act and the regulations are calculated to ensure." a a ee RE RE ARS oe Me. Murdoch, in the course of argument, accepted that there might he circumstances in which Union funds could be used to pay the legal costs of respondents toa an election inquiry. It may be acceptable if the Union agreed to pay both sides. Tne applicants submitted that the resolutions in this case were not passed bona fide, based on a reasonable belief that it was for the benefit and the interests of the members of the Union as a whole. Shortly put, the case for the applicants was that the respondents included people who had their own legal expenses from the inquiry to pay, they had the numbers on the Branch Committee of Management and used them to get their expenses paid. aS Mr. McMurdo ef counsel, who appeared for the respondents, submitted that the Branch Committee of Management had power to pass the resolutions in question, that power deriving from sub-rule 30(d)(ii); it was properly open to the Branch Committee of Management to determine that the expenditure in question was in pursuit of the general objects set out in Rule 2 of the Union. In support of the primary submission it was said that the members of the Queensland Branch of the Union could properly be said to have had a real interest in the electoral inquiry being contested in the normal manner by the respondents having legal representation at it. Further, the application for an electoral inquiry alleged a large number of irregularities set out in some fourteen paragraphs. The ground on which Mr. Justice Fitzgerald declared the elections void was based on but two of 14. those grounds. In particular, allegations which were not the subject of determination by his Honour included allegations that persons unknown recorded more than one vate, that persons unknown had recorded votes which they were not entitled to record, that persons unknown had interfered with ballot papers to produce a higher vote for one sub-branch organiser in the Ipswich District in comparison with the seven branch organisers in the Brisbane District, and that some members had received two sets of ballot papers while other members had received incomplete sets of ballot papers. Those questions, it was said, were such that it was in the interests of the Branch members of the Union generally to see that those claims were properly investigated in the course of the inquiry and, to that end, pay for the legal representation of the respondents. It was submitted that this was not a case where a section of Union members had received preferential treatment: there was no evidence to suggest that the applicants had asked for the costs of their representation at the inquiry and been refused or, alternatively, if they were to so apply, they would be refused by the Branch Committee of Management. This was to say that, pace Short v. Wellings (supra), the Branch Committee of Management was not conferring a particular advantage on the respondents to the electoral inquiry which was not available to the other party to that inquiry. In support of this, reference was made to earlier disputes between the parties where the costs of both sides, if I may I use that expression, were paid out of Branch funds. i ce - er ee 15. It was further said that the electoral inquiry involved areal question of law of quite general importance, viz., the nature of an "irregularity" for the purpose of s.165 of the Act. His Honour in that case concluded that conduct which does not meet either of the descriptions of irregularity in s.165(4) might nonetheless constitute an irregularity for the purposes of s.165. His Honour considered and rejected the submission by the counsel appearing for the respondents at the electoral inquiry that a beeach of the rules is not an irregularity unless it is a breach "whereby the full and free recording of votes by all persons entitled to yrecord votes, and by no other persons, ory a correct ascertainment or declaration of the results of the voting is, or is attempted to he, prevented or hindered."In his Honour's conclusion, he distinguished and doubted the correctness of Re Australian Postal and Telecommunications Union: Ex parte Kilson (1979) 28 A.L.R.330. This consideration, it was said, was a quite independent matter but one which entitled a Branch Committee of Management to conclude that representation for the respondents to the inquiry concerned with that question was a matter properly within the business of the Branch Committee of Management. The ordering of new elections, it was said, is a discretionary matter and would certainly involve extra costs to the members of the Queensland Branch. Some of the persons who were respondents to the electoral inquiry were persons against whom no irregularity was suggested other than their being a member of a team. It was accepted that, although the Branch was not represented at the inquiry, that did not mean that the Branch 16. nembers were not able to derive benefit from the representation of the respondents, it being pecceived that there was some value to the Branch members in the respondents being represented. It was, therefore, not a purpose extraneous to the good management of the business of the Union to fund that representation. - On a question of bona fides, it was submitted that, the onus being on those who allege the absence of good faith to establish it, the evidence was quite insufficient to enable thar onuc to be discharged, particularly having regard to the disclosure that was made to the Branch Committee of Management at all material periods. Important to the resolution of these conflicting assertions are the factual circumstances in which Mr. Williams retained Messrs. Macrossan Douglas, and how the matter was dealt with at the various meetings of the Branch Committee of Management. Frank Reginald George Garrett; in the electoral inquiry, swore an affidavit on 21 October, 1983, dealing with what occurred at the meeting of the 20 October, 1983. He referred to Mr. Williams producing towards the end of the meeting an account for payment from Messrs. Macrossan Douglas & Byrne, solicitors, for an amount in excess of $17,000 and saying to the meeting words to the following effect:- 17. "T have here for payment an account from Macrossan, Douglas, solicitors, which IT have paid, and I want the Branch Committee of Management to endorse my action. I discussed this matter with the Federal Secretary in Melbourne when the election enquiry application was filed, and he advised me to refer the matter to the Union's solicitors, and the Union would accept responsibility for payment. Some of you people may not be on the Branch Committee of Managenent next month, - I'm not saying that you won't be, but there's a possibility that you won't be, and I don't want to be left with this," indicating the account which he had in his hand. his affidavit Mr. Garrett swore:- And later "Allan McPaul, the present Industrial Officer of the Union, then stated that he (McPaul) was present when the Federal Secretary, Ivan Hodgson, told Williams that the Union would pay the legal expenses of the Williams/McPaul team in the current Application by John Penhallurick and others for an election enquiry." He continued:- "I then asked whether the action taken by John Penhallurick and others, was against the Williams/McPaul team or against the Union, and Hughie Williams said 'No, the action is against all elected oafficers'." In a letter dated 30 November, 1983, under the hand of in I. Hodgson, the Federal Secretary of the Transport Workers' Union of Australia, addressed to "ALL MEMBERS FEDERAL COUNCIL, Re Inquiry into QLD Branch Elections, Federal Court of Australia Affidavit by F. Garrett, No.Q2 of 1983", Mr. Hodgson said:- 18. "Please find attached copy of affidavit of Frank Reginald George Garrett an officer of aur Qld.Branch. This document was tendered to the Federal Court of Australia on 21st October 1983. Please be advised that at no time did I (Federal Secretary) advise the Qld.Branch Secretary ta refer the matter to the union's solicitors and at no time did I authorise expenditure of the union's = -funds to pay any accounts to any legal firm in respect of this mattec. Indeed I da not have the authority to do so." This matter, not unnaturally, was the subject of vigorous cross-examination of Mr. Williams before me. His account, notwithstanding the letter of Mr. Hodgson, was that, shortly after the May meeting of the Federal Council in Canberra, he spoke to Messrs. Macrossan Douglas, who were the solicitors for the Union in respect of Queensland matters. He says that he spoke to the solicitors not on his personal behalf but on behalf of the Union. In the course of his evidence, Mr. Williams said:- "At a meeting of the Federal Council in Canberra, ... the federal secretary, during a recess, showed me a note - it may have been a copy of a telex - indicating that a challenge had taken place and certain conversations took place between the federal secretary and myself, together with the Queensland branch president, Mr. Henry Asplin, Mr. Stewart Crosby of Toowoomba Queensland, and with Mr. Allan McPaul. A statement was made to me by the federal secretary strongly indicating to me that upon my return to Brisbane that I should go and see the umnion's solicitor. I did as he suggested and brought all relevant matters back to the branch committee of management. At the immediate next branch committee of management meeting, at all branch committee of management meetings after, they were endorsed by the branch committee of management, and all affidavits and all copies of correspondence were stamped with the branch committee of management stamp and signed hy the then president, Mr. Rod Newton, and that is why I acted." 19. Mr. Hodgson was not called as a witness. Having given considerable attention to this aspect of the evidence, I am satisfied on all of the material there was such a discussion as Mr. Williams alleges and that that was the basis of his instructing Messrs. Macrossan Douglas. It may be that Mr. Hodgson's remarks were construed by these to whom they vere made other than as he had intended. I am satisfied that on the material there was no concealment of the fact that the basis on which Messrs. Macrossan Douglas were retained by Mr. Williams was not in any personal way, but as State Sécretary of the Queensland Branch (as he was then) and on behalf of the elected officials of the Union whose elections were challenged. I am of the view that there was no absence of good faith on the part of Mr. Williams and others on the Branch Committee of Management in respect of these resolutions, even though there was a measure of personal interest by some of those members in the resolutions that were passed by the Branch Committee of Management. The minutes of the Branch Committee of Management are illuminating. In the minutes of the meeting of 16 June, 1983, this entry appears:- matters arising from the minutes From Macrossan Douglas 27th May, 1983 Telex from Federal Secretary 27th May, 1983 From State Sec. to Fed Secretary Bist May, 1983 From Macrossan Douglas 14th June, 1983 e: Application for Election Inquiry - Advising hearing - Tuesday, 9.30 am 3ist May, 1983 Re: Hearing Re: Election Inquiry - enclosing copies of thirty-one Affidavits. Moved G. Thies 'That H. Williams' report be adopted.' Seconded J. Hinspeter and carried." (These thirty-one affidavits were filed on behalf of the applicants for the electoral inquiry.) The minutes of the meeting on 21 July, 1983, as part of June, ™ rr) Memo to All Organisers from State Secretary 13th July 1983 In the x] oy fe] er of amounts passed for of the previous meeting on 16 1983, record:- Re: Federal Court Challenge to 1982/1983 T.W.U. Elections minutes of the meeting of 18 August, 1983, in payment, the minutes record:- "Moved D. Barden, seconded A. McPaul 'That Accounts, as presented, be passed for payment.' Carried " 21. The amounts passed for payment at that meeting are set out ina schedule to those minutes, Which include at page 2 an item:- "Macrossan Douglas - advices in relation to 1983 Elections $2434.84 I vegard this as significnt evidence, preceding as it does the first resolution questioned here. In the minutes of 15 September, 1983, in the Correspondence section, there is noted:- From Macrossan Douglas Re: 1983 Election Inquiry ~- to State Sect. matter listed for hearing in 30th August, 1983 Federal Court from 4th to 7th OQctober." The next meeting was on 20 October, 1983, at which the first resolution the subject of attack was passed. Prior to that meeting, by letter dated 13 October, 1983, Messrs. Macrossan Douglas had rendered an account for an amount slightly in excess of $17,000. That account is addressed to the Branch Secretary, Transport Workers' Union of Australia, Queensland Branch, Room 13, Trades Hall, Brisbane, as is the covering letter, and each of them is headed "Re 1983 Election Inquiry". The account, which includes outlays to senior and junior counsel, commences:-~ 22. "To our professional charges herein acting on your behalf in relation te this matter doing all work necessary and incidental to resisting the application for an election inquiry including in particular the following:-" whereupon various matters are itemised. - The respondents submitted but without elaboration that there was no jurisdiction in the Court to give directions for the performance of or observance of, or alternatively that there was no scope for, implied rules in the affairs of an organisation registered pursuant to the Act. Mr. McMurdo referred to the judgment of Neaves J. in Ward & Ors. v. Williams & Ors. (unreported, 29th May, 1984), where his Honour cites Dugmore _v. Porter & Ors. (Northrop J. unreported, 17th December, 1982): cf. Gordon v. Carroll 1975 6 A.L.R. 579 at 602-3; Re Penhallurick (1983) 51 A.L.R. 589 at 595; Jess _v. Scott (Beaumont J. unreported, 2 March, 1984); Porter v. Dugmore (Full Court unreported, 2 April, 1984). In the light of the judgments of Evatt, Northrop and Gray JJ. in Scott v. Jess (unreported, 5 October, 1984), the proper question is not whether the Court has power to direct the performance of implied rules, but rather of determining the limitations of any particular power granted by the rules of an organisation. Dvatt JJ. of the nw Ww In Alien v. Townserd (1977) 31 F.L.R. 431, Northrop and al 483 et seq, give a valuable analysis of the nature power conferred by rules of an organisation. "In our opinion, members of the committee of management of an organization, a branch of an organization or a sub-branch of a branch of an organization owe a fiduciary duty to members of the organization, to members within the branch and to members within the sub-branch as the case may be. Members of committees of management are to be compared with directors of incorporated bodies being companies incorporated under legislation such as the Companies Acts of the States of Australia. The courts have developed principles of law of general application regulating the manner in which directors of companies are required to exercise powers conferred upon them. Subject to necessary adaptations, similar principles of law should apply to regulate the exercise of powers conferred upon members of a committee of management of an organization or of a branch of an organizaticn or of a sub-branch of a branch of an organization. There are many similarities between organizations and legal persons incorporated under the Companies Acts. Within organizations, the committees of management constitute the managing group. The duty imposed upon directors of a company incorporated under the Companies Acts and the duty. imposed upon members of a committee of management are but aspects of the application of a wider principle of law applicable where persons have a discretion in the exercise of powers. The relevant principle is stated in Millis v. Mills (1938) 60 C.L.R. 150. In that case a resolution passed by the directors of a company to increase the voting power of one of the directors but which was believed by the directors to be in the best interests of the company was challenged, unsuccessfully, on the basis that one of the directors thereby derived some benefit. Dixon J. said: 'Directors of a company are fiduciary agents, and a power conferred upon them cannot be exercised in order to obtain some private advantage or for any purpose foreign to the power. It is only one application of the general doctrine expressed by Lord MNorthington in Aleyn v. Belchier (1758) 1 — ~ een At 24, Fden 122, at p.138; 28 E.R. 634, at p.637: 'No point is better established than that, a person having a power, must execute it bona fide for the end designed, otherwise it is corrupt and void.' Upon the facts of the present case, or at all events upon the expressions used by Lowe J. in stating nis findings, it may be thought that a question arises thether there must be an entire ~ exclusion of all reasons, motives or aims on the part of the directars, and all of them, which are not relevant to the purpose of a particular power.' The application of the general equitable principle to the acts of directors managing the affairs of a company cannot be as nice as it is in the case of a trustee exercising a special power of appointment. It must, as it seems to me, take the substantial object the accomplishment of which formed the real ground of the board's action. If this is within the scope of the power, then the power has been validly exercised. But if, except for some ulterior and illegitimate object, the power would not have been exercised, that which has been attempted as an ostensible exercise of the power will be void, notwithstanding that the directors may incidentally bring about a result which is within the purpose of the power and which they consider desirable': (1938) 60 C.L.R. at pp.185-186." The effect of that analysis in that officers of an organisation are under a duty to exercise powers conferred on them by the rules of the organisation bora fide for the purposes for which the powers are conferred. This fundamental principle applies, of course, not only to officers of arganisations. In the light of the above, the principles developed by the Courts in relation to the exercise of powers by directors of companies have a present utility. _ ew me: ee ee +. ee ee 25. In Mills v. Milis (1938) 60 C.L.P. 150, Dixon J., (as he was then) said at p.1&5:- "Directors of a company are fiduciary agents, anda power conferred upon them cannot he exercised in order to obtain some private advantage or for any . purpose foreign to the power." . That directors must exercise their poweers bona fide is just another way of saying that the power must be used for the purpose for which it was conferred: Australian Metropolitan Life Assurance Co.Ltd. v. Ure (1923) 233 C.L.R. 199 at 217, per Isaacs J.; and see Provident International Corporation v. International Leasing Corporation £19691 1N.S.W.R. 424 at 436, per Helsham J. In Harlowe's Nominees Pty.Ltd. v. Woodside (Lakes Entrance) O11 Co.N.~L. (1968) 121 C.L.R. 483, Barwick C.d., McTiernan and Kitto JJ. at p.493 said:- "Directors in whom are vested the right and duty of deciding where the company's interests lie and how they are to be served may be concerned with a wide range of practical considerations, and their judgment if exercised in good faith and not for irrelevant purposes, is not open to review by the courts." A director "could take advantage of the power to benefit himself if such a benefit was incidental to a bona fide exercise of the power but he could not use the power ostensibly to benefit the company but really to benefit himself ...": Ngqurli v. McCann (1953) 90 C.L.R.425, per Williams A.C.J., Fullagar & Kitto JJ., at p.440. 26. That case was one where the purpose of the directors in issuing shares was to preserve their own control of the management: similar vitiating purpose was found to exist in Punt v. Symons & Co.Ltd. £1903] 2 Ch.506; Piercy v. S.Mills & Co.Ltd. (19203 1 Ch.77; and Hoag v. Cramphorn Ltd. £19673 Ch.254 at 267.7 By way of a comprehensive summary of a director's duty, Gibbs J. (as he was then), in Ascot Investments Pty.Ltd. v. Harper (1981) 148 C.L.R.337, said at 348-9: "The directors are bound to exercise their discretion bona fide in what they consider to be in the interests of the company, and not for any collateral purpose, but subject to that qualification their discretion is absolute and uncontrolled: In re Smith & Fawcett Ltd. £1942] Ch.304, at pp.3065-308); Charles Forte Investments Ltd. ov. Amrwanda (£19643 Ch.240, at pp.252-254, 260-261); Australian Metropolitan Life Assurance Co.Ltd. v. Ure (1923) 33 C.L.R. 199 at pp. 205-206, 217-220, 223). This rule is an application of the general principles governing the exercise by directors of their powers; those principles are discussed in Ngurli Ltd. v. McCann (1954) 90 C.L.R. 425, at pp-438-440). The cases cited establish that the onus of proving that the directors in refusing registration did not act in good faith in what they considered to be in the interests of the company lies on those who challenge their decision." On this exegesis, the many cases concerned with allegation of improper use of the resources of unions in the context of elections are but instances of the application of the fundamental principle that officers have a duty to exercise conferred powers bona fide for the purpose for which the poweers are conferred. rn ee re Sern rer errr _—ee ee ee 27. The difficulty, both in company law and in industrial law, frequently lies in applying the principles to the particular facts. It is clear that in some cases a controlling body of a union may properly provide out of union funds the costs of legal representation: see Hill v. Archbold £1968] 1 Q.B.686 and Srevens vw. Keogh & Ors. (1946) 72 C.L.R.1. The fact that that representation was to be provided to persons who had a real and personal interest in the provision ef such funds is a circumstance which has to be looked at carefully but fairly, but certainly does not determine the propriety of any such payment. In Hili v. Archbold, £19687 1 Q.B. 686, Lord Denning M.R. said at pp.695-696:- "The other point is whether the payment of the costs is permitted by the rules of the union. Mr. Hill has pointed out, and it is admitted, that there is no specific provision in these rules to authorise the payment. Nevertheless, all associations have power to do everything which is fairly. incidental to achieving their objects. For instance, this very union has power to employ and pay officials, although there is nothing specific on the point. They can pay them pensions and do everything which a good employer would do for his servants, even though the rules say nothing about it. So also it seems to me that when a servnt is involved in litigation which arises out of his work with the union, it is within the power of the union to help him in his litigation." 28. And per Danckwerts L.d. at 699:- "Though no express provision is contained in the rules of the union for the application of funds for supporting servants or officials of the union who find themselves engaged in litigation, it is in my view perfectly clear that that is fairly - ancillary to the management of the union and its business. In my opinion the executive were fully justified in providing for the costs of the two officials in the present case which they incurred in the actions brought by them, even though the result of those actions was that they were unsuccessful." In Stevens v. Keogh (1946) 72 C.L.R.1, the High Court (Starke, Dixon, McTiernan and Williams JJ., Latham C.J. dissenting) held that payment by the Police Association of New South Wales of the costs of a libel action brought by a police officer against the Commissioner of Police was not ultra vires or beyond the poweres of the Police Association: see per Starke Jd. at p.23, Dixon J. at pp.23, 27-8, McTiernan J. at p.30, and Williams J. at p.36. In the facts of the present case, proper regard has to be given to the existence of self interest by some of the members of the Branch Committee of Management; notwithstanding that consideration, the Court should not lightly conclude that the resolutions were not made bona fide, in the sense explained earlier in these reasons. It is clear from the extracts of the minutes previously set out that the question of authorisation by the Brisbane Committee of Management of the payment of legal costs of the respondents to the electoral inquiry preceded that 29. inquiry and 1n no way depended upon, or was a consequence of, the results of that inquiry. Nor, in my view, can it properly be concluded that there has been demonstrated an attitude to exoend , funds of the union in a partisan way favouring one group while at the same time denying another. ~ I am not satisfied that the resolutions in question were beyond the praper power of the respective Branch Committees of Management. For the above reasons, the rule to show cause is discharged. I will hear the parties on costs. ' oe one, fb sin Lye = . acoment herein of His Nanour