3 £ wy Al AS CATCHWURDS Industrial law - registered organization - expenditure of funds - publication and distribution of pamphlet by executive of one branch to members ot another - whether bona fide - whether ulterior purpose - whether electioneering - subjective or objective test - power to order reimbursement. Conciliation and Arbitration Act 19u4 s. 141(1G> Scott v. Jess 11944) 3 F.C.R. 263 Tanner v. Maynes (1985) 63 A.L.R. 197 Ascot Investments Pty. Ltd. v. Harper (1981) 148 C.L.R. 337 Rejyek v. McElroy (1965) 112 C.L.R. 517 Jess v. Scott (Unreported Federal Court 23/7/86 Wiicox J.) Dugmore v. Porter (1982) 3 I.Rk. 418 Porter v. Duamore (1984) 3 F.c.R. 396 Austin v. Deloraine (1959) 1 F.L.R. 297 McLure v. Mitchell (1974) 24 F.L.R. 115 wordon v. Carroll (1975) 27 F.L.R. 129 &. v. Commonwealth Court of Conciliation and A Parte Barrett i1945) -6 C.L.R. 141 Foss v. Harbottle £1843] Z Hare dol Bairlev_ v. Krantz (1984) 55 A.O.R. 345 FEDERAL couRT o Fe AUSTRALIA AN REGISTERS LINDSaY JAMES TANNER V. H.J. DARRUCH, J.P. MAYNES, K.¥. HARVEY, M.J. G'SULLIVAN AND H. ARMSTRONG No. Vly ot 1385 GRAY J. MELBOURNE 24TH UCTOBER 1986 ——— a Pid 7 ea a IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY No. V 19 of 1985 wee www INDUSTRIAL DIVISION BETWEEN: LINDSAY JAMES TANNER Applicant and H.J.DARROCH, J.P. MAYNES, K.Y. HARVEY, M.J. O' SULLIVAN and H. ARMSTRONG Respondents JUDGE: GRAY J. DATE: 24TH OCTOBER 1986 REASONS FOR JUDGMENT This proceeding concerns the expenditure of the funds of an organization registered under the Conciliation and Arbitration Act 1904 ("the Act") on the publication and distribution of a pamphiet with the ironic title "Union Funds Misused". The issues yaised involve the application of principles found in the Full Court judgments in Scott v. Jess (1984) 3 F.C.R. 263 and Tanner a ereunan af whe a6 pn ee ene eg Hee a rei 2 we ' Yr os ON er mamapey m e Te en bey ~f ~2- v. Maynes (1985) 63 A.L.R. 197, and questions of the consequences which flow in the event that the funds of an organization are Found to have been misapplied. The Federated Clerks Union of Australia ("the Union") is an organization of employees, registered pursuant to the Act. The applicant is a member of the Union. The respondents are also members, and hold executive offices in the Victorian Branch of the Union. The respondent Darroch is the State Secretary, the respondent Maynes is the President, the respondent Harvey is the Vice-President, the respondent O'Sullivan is the Deputy President, and the respondent Armstrong is the Assistant State Secretary. Together, the respondents constitute the State Executive of the branch, which, by virtue of rr. 21(a) of the branch rules, is the committee of management of the branch. On 9th October 1985, the respondent Darroch reported to a meeting of the State Executive, which was attended by all the respondents except Mr. O'Sullivan. The minutes of the meeting record the report in the following terms: "C. & &.0. BRANCH: State Secretary reported to the Executive that he understood the Secretary of the C. & 5.9. Branch has sent a letter to each member of that Branch which falsely stated the approach of the Victorian Branch in relation to matters of affiliation to the A.L.P. and specifically the procedure which was followed in relation to A.L.FP. affiliation in this Branch. State Secretary said that he was arranging to obtain a copy of the letter. If the report he received is verified by the contents of the letter he recommended to wee may * an "ee aa me pe ee ee ee 5s - 3 - State Executive that action be taken to reply directly to the members who received the original communication. State Secretary was authorised to make preliminary enquiries and report to the next meeting of State Executive. - aes Resolved - That the report be received and a further report be provided to State Executive." Within days of this meeting, Mr. Darroch received a copy of the letter the subject of his report. That letter was signed by Ms. Callaghan, the Branch Secretary of the Central and Southern Queensland Branch of the Union, and addressed "Dear Member". The following passage appeared in it: "POLITICAL PARTY AFFILIATION Our position on political party affiliation is the same as that taken on TLC affiliation. i.e. it must be decided by way of a referendum of all financial members. You will decide. I raise the issue here as clearly members are confused over what occurred in Victoria. The officials of that Branch did affiliate to the ALP - but that affiliation covers that Branch only. The Branch was critical of what occurred in Victoria as the members were NOT given a say on the matter. We believe that on major issues such as this, 1t must be the members concerned, and ONLY the members concerned who must decide. At our Branch Council meeting of August 24 1985, our position was again clarified. The Council reaffirmed its long standing policy to hold a referendum prior to any affiliation to the Trades and Labor Council or a political party. We are committed to your Union remaining democratic." Mr. Darroch also received a copy of a publication entitled "The New Clerk", apparently a publication by branch officers of the Central and Southern Queensland Branch of the Union to the — i "he eS (e: sr - 4 - members of that branch. This publication included an article headed "Firm Policy on Any Affiliation". In the course of that article, the following passage appeared: ma ac "Recent events in other branches of the Clerks' Union have meant that the branch council of the C & SQ branch has had to adopt a view in relation ta affiliation to political parties. In Victoria and the Northern Territory, a unilateral decision was taken by officials of the Victorian branch and by national officials of the union, to affiliate those parts of the union to the Australian Labor Party." Shortly before 24th October 13985, Mr. Darroch received a copy of a further publication entitled "Clerks News". This was not an official branch publication, but was apparently produced by a group called "The Committee to Re-elect Bernadette Callaghan Team". At the time, elections were in progress in the Central and Southern Queensland Branch of the Union, and ballots were to be held for all of the positions in that branch. One item in the copy of "Clerks News" received by Mr. Darroch was headed "Affaliation to the TLC and Political Parties". _Tthe item included the following statement: "This branch does not make decisions in the same way as the Victorian branch or the national office when matters of vital importance are at issue. For example: . The affiliation of the Victorian branch to the ALP members in that branch were NOT given a say. The branch council made the decision. While this may have been in accordance with the rules, was it ain atcordance with democracy?" On 24th October 1985, Mr. Darroch produced a a written. | Wena oe - § - report to the other respondents as State Executive members. The report was in the following terms: "TO: STATE EXECUTIVE MEMBERS Iam now in receipt of another substantial publication entitled "Clerks News". This has apparently been posted to each Central and Southern Queensland Branch member. It is an eélectioneering publication. It repeats the Statements made by the C. & §.Q. Branch Secretary 8. Callaghan re the Victorian Branch. It is now obvious that: (a) if we are to refute the matter we need to send it to the members concerned. (b) if we fail to take this action, the untrue attacks on the Branch will continue. Because the material I now refer to is current, it is necessary to act now to have the necessary envelopes, printing etc., done. In the light of our earlier discussion where this possibility was raised, I will proceed unless you indicate opposition by Friday, 25 - 5.00 p.m." No communication was received from any other respondent by the Btated time. As a consequence, Mr. Darroch drafted a pamphlet. He showed the text of this pamphlet to the respondent Harvey, and perhaps to the respondent O'Sullivan. He then caused the pamphlet to be printed in black bold type on yellow paper, with the headings in large type. It 15 necessary to set out in full the text of this pamphlet. < ao star maar is - 6- "UNION FUNDS MISUSED About. $10,000 of branch funds (Union dues) have been fniets-* misused by the Central and Southern Queensland branch to | tell members where current branch officials stand on t Trades and Labor Council of Queensland and political affiliation. However, it fails to do so, but instead blatantly lies in order to attack the Victorian branch on these questions. The statements were in a letter dated September 20, 1935 sent to all members. The lie is the claim that the Victorian "members were not given a say on the matter" of ALP affiliation and that "This branch (C. & S.Q.) was critical of what occurred in Victoria" for that reason. The facts are that Victorian branch members had more than twelve months and two State Conferences to voice an opinion - after each member was advised by mail. The Victorian membership in May 1985 returned the Branch Executive and Council in Victoria with a 4 to 1 majority - 81% of the vote. Miss Callaghan, on the other hand, got a Majority of 382 (or 3%) in her last election. DECLARE YOURSELF! Miss Callaghan and her Executive do not say what their attitude is. They are either for or against Trades and Labor Council affiliation. They are either for or against ALP affiliation. Let them declare themselves and not hide behind the gimmick of a referendum. WHY DIDN'T THEY INCLUDE A REFERENDUM PAPER IN THE LETTER SENT GUT TO YOU? Because they would have had to declare their intention. The position of Miss Callaghan on these matters is very clear. As a member of the ALP she must support ALP affiliation. &s a friend of the extreme~left, both industrially and politically, she "owes" for their support in the last branch election and could be further indebted after the next. That's when the I.0.U. will be called up by the extreme-Left in Central and Southern Queensland. They want the Union's votes ta support their efforts to obtain and maintain control in Queensland. EXTREME LEFT Miss Callaghan and certain of her colleagues are ce -7F7- directly tied in with, and dependent upon the extreme-Left in the Australian political and industrial scene. She has allied herself with Bill Hartley who supports political terrorist regimes Like Colonel Gaddafi of Libya. Even most of the Left in Victoria don't support him. - She has joined an organisation promoted by Pat Clancy, now the ex-President of the Socialist Party of Australia (Moscow Communists). « In Queensland, she is allied with and supported by those who want to seize full control of the Labor Movement through the capture of the Australian Workers Union (AWU), Shop Distributive and Allied Employees Association (SDA) and other unions. CENSORSHIP OF MEMBERS' INFORMATION The Union has a National Journal which goes to approximately 90% of the members outside of the Central and Southern Queensland branch. The branch officials had defied the union''s policy and decision to prevent the branch members from receiving the Union journal and thus being informed of the Union's activity. Likewise they have stood over.employers to stop any contact with members on the job. Now they seek to create hostility towards rank and file members seeking to contact other members at home. Clearly the branch officials seek to impose censorship to deny members "their right to know" and judge for themselves. BUT THEY HAVE DONE A DEAL WITH THE EXTREME-LEFT - A REFERENDUM IN RETURN FOR SUPPORT IN THE ELECTION? THE RIGHT TO KNOW NATIONAL ACTIVITY What are the things members The National Union was in have a right to know? the forefront of - . BREAKAWAY EFFORTS - Since The Accord ~ the little group lied Central wage system with their way into office with cost of living 19% of the membership adjustments. voting for them, they have tried to act as a Strong opposition to Tax breakaway From the Union on Lump Sum which members have joined. Superannnuation. They hid therr real intent by falsely claiming "branch autonomy" to breach and defy Tax Summit - the rules. The National President opposing further . FINANCIAL MISMANAGEMENT - indirect TAX. the branch owes the Union wo roa, pert ee aa AIT Tne oo nots oe een nan cee ten eo yore ~ sae ~ eke ee fore mee ee se ee, ra - 8 - over $100,000 in union fees, Superannuation - plus other amounts totalling making sure we all share close to $200,000. in productivity. They try to cheat on fees by paying $100,000 less than Job Security - the Victorian branch while the fight against now claiming a similar anflation and membership. unemployment. « INDUSTRIALLY LIFELESS - The branch has done little or Youth Employment - nothing in its own branch The Union initiated its awards. major campaign last Ib has jeopardised other year - it has now been branches by refusing or taken up by the ACTU. failing to carry out its responsibility in Federal award areas. Its Equal Opportunity - communication with the The Central and Southern National Office is Queensland branch lags negligible, except (usually well behind - falsely) to provide a preoccupied with only cover-up through segments of Occupational "complaints" which don't Health and Safety and stand up. narrow aspects of the broad women's issues. . POLICY INITIATIVES - While the National body and its branches are in the forefront of the major matters which affect members' standards and conditions, the Central and Southern Queensland Branch has spent three years in "formulating branch policies" on issues already determined years agol! CAUGHT OUT! The Sunday Sun of October 6, 1985 quoted Branch Secretary Callaghan as admitting the Union was making a bid to affiliate with the Queensland Trades and Labor Council. This makes nonsense of her letter to members. Rather it clearly shows the letter was a "con job". - In a further attempt to mislead members she has tried to use the issue of work based child care. She attacks the Federal Treasurer Mr. Keating and claims that the issue of child care could be advanced. The Sunday Sun states: "She said this would happen if the Union was succesful en Mr. Darroch printed labels - 3 the Trades and Labor in a bid to affiliate with in her Councii"". Why dadn't she declare this "bid" letter to members? She also knows her statement in The Sunday Sun is not practical because the Government will not allocate additional money in this area. TTF ' =a - - RESTORE UNITY Central and Southern Queensland members must realise that the Union is hampered by the "dog in the manger" attitude of people in office for the first time. NATIONAL UNITY is essential to a viable Union. We had it for decades before the politically motivated group got into office on a minority vote. It can be restored by the Central and Southern Queensland branch being brought back into a united organisation. This requires UNIONISTS to be in office, not POLITICAL OPERATORS, promoting POLITICAL ISSUES in the hope of POLITICAL HONOURS being bestowed by the extreme-Left. Central and Southern Queensland members ought ta know that the attack on the Victorian branch and its members Similarly, the branch officials have sought is false. to disrupt the function of the Union Nationally, which affects all members in Australia. We have shown these office holders that, after two to three years of their unwarranted attacks, our patience is exhausted. These attacks should cease so that we can all turn our Full-time attention to resisting attacks by powerful employers on unionism in general, and this Union in particular. Federated Clerks' Union of Australia (Victorian Branch) 6th Floor, 53 Queen Street, Melbourne, 3000 Correspondence to G.P.0. Box 2467, Melbourne, 3001 Telephone: (03) 614 1933 Authorised by H.J. DARROCH, Secretary" obtained from the national office containing the names and addresses financial members of the of the of Union the Central and Southern Queensland Aranch pp - 10 - of the Union, so far as they were known to the national office. He then caused to be posted to each such financial member a copy of the pamphlet. On 7th November 1985, a further meeting of the State Executive of the Victorian Branch of the Union was held. The minutes of that meeting dealing with the relevant item are as follows: "CENTRAL AND SOUTHERN QUEENSLAND BRANCH OF THE F.C.U.: State Secretary referred to his memorandum of October 24, 1985, and addressed to State Executive members wherein he advised that he was in receipt of another substantial publication entitled "Clerks News". State Secretary pointed out that at the State Executive meeting on October 9, he had referred to a letter sent to each member of that Branch by the C. & §.Q. Branch falsely stating the approach of the Victorian Branch in relation to matters of affiliation to the A.L.P. and specifically the procedure which was followed in relation to the A.L.P. affiliation of this Branch. State Secretary said that this "Clerks News" had apparently been posted to each Central and Southern Queensland Branch member. State Secretary said that in his memo of October 24, he had pointed out that it was obviously an electioneering publication, and it repeated the statements made by the C. & 8.0. Branch Secretary B. Callaghan re the Victorian Branch. State Secretary noted that his memorandum stated that it was now obvious that: (a) if we were to refute the matter, we needed to send a response to the members concerned; (b) if we fail to take this action the untrue attacks on the Victorian Branch would continue. State Secretary said that he had pointed out that because the material referred to is quite current it was - li - necessary to act now to have the necessary envelopes, printing etc., done. State Secretary said that his memo continued that in the light of the earlier discussions of the State Executive members where this possibility was raised, he had indicated he would proceed with the -action~-outlined' « unless he received an indication from the Executive members opposing such a proposition by Friday, October 25, 1985, by 5.00 p.m. State Secretary said that he had not received any opposition and that he had obtained the labels from the National Secretary. State Secretary said that the cost of the labels would be reimbursed to the National Office. Resolved - That the action be endorsed and that the Executive expresses its regret that Certain members of the C. & 3.0. Executive launched these attacks on the Victorian Branch. Not only that, it is regreted that members of the C. & 5.0. had been Misled when they had been advised by officers of that Branch that the membership was approximately 22,500 with a high degree of financial status. However, when ballot papers were posted only 16,500 members were eligible to vote." The ballots in the elections for the Central and Southern Queensland Branch of the Union in fact opened on 4th November 1985. All positions in that branch were contested, and the Bernadette Callaghan team had a candidate for each position. In its amended form, the Rule to Show Cause in the present case sought orders that the respondents and each of them perform and observe the rules of the Union and of. the Victorian Branch by: "(i) treating as null and void and of no effect the resolution of the State Executive of the meee te y cw pee a "oo, Fi ee ee Capea -$ wets set cee ee ae va a a ae - 12 - Victorian Branch made on the 9th day of October 1985S and the 7th day of November 1985 respectively authorising the preparing, publishing and distribution out of the property, funds or resources of the Federated Clerks' - Union of Australia, the. publication. .entitled "UNION FUNDS MISUSED" published by the Federated Clerks Union of Australia, Victorian Branch, and identified in the exhibit "LT3" to the Affidavit of Lindsay James Tanner sworn the 18th day of December 1985 insofar as such costs related to copies of the publication distributed to members of the Federated Clerks' Union, Central and Southern Queensland Branch; (ii) by repaying to the Federated Clerks' Union of Australia, Victorian Branch, the costs so expended in relation to the preparation, publishing and distribution of the said publication to members of the Federated Clerks' Union of Australia, Central and Southern Queensland Branch." There were in evidence the rules of the Union, together with the rules of the Victorian Branch of the Union. It is necessary to examine the terms of some of the rules. Rule 3 of the rules of the Union is headed "Objects", and is as follows: "3. OBJECTS The objects for which the Union is established are by all lawful means - (a) to regulate the conditions under which ail members or persons entitled to become members of this Union may be employed; (b) to establish sections for the more effective protection of members employed in connection with different industries or sections of industries and to regulate the conditions under which members may transfer from one section to another section of the Union; (c) to advance and protect the social and economic anterests of all members and trade unionists generally by industrial, political, or other means, and to establish joint organisation and joint funds therewith; (ad) (e) (f) (g) (h) (i) (j) (k) (1) {m) (n) (0) (p) (q) {r) - 13 - to establish funds for the general conduct of the Union; to establish, maintain and/or contribute to the support of Labor Union journals, and in particular a journal of the Union; to generally uphold the rights of Labor; to establish and maintain a system under which equal pay and equal opportunities for the sexes will be provided in all occupations covered by this Union; to restrict or prohibit the working of overtime; to regulate and restrict the employers; claims to dismiss or refuse to employ or reinstate in employment; to secure preference of employment for members; to purchase, sell, mortgage, lease or otherwise deal with any land or other real estate; to assist members by financial or other means in such circumstances as may seem proper; to provide legal assistance for the Union and its members; to establish and/or support co-operative ventures generally; to amalgamate, affiliate or co-operate with other unions, organisations or bodies having any objects in common with the Union or able to assist 1t in the attainment of any of its objects, and to be represented thereon and to pay subscriptions and make donations thereto; to provide superannuation or other retiring benefits for officers and employees of the Union or of any Branch; ° to make donations to bona fide charitable purposes; to raise money by contributions, fines, - j4 - levies, donations, loans or otherwise for the futherance of these objects; (5) to do all such other things as may be necessary or convenient for the attainment of the abovementioned objects." _. .. Rule 12(1) provides for branches of the Union, including the Central and Southern Queensland and Victorian Branches. The rule contains a provision that all branches shall conform to the rules of the Union. Rule 12(2)(a) empowers branches to make rules for their own internal management, subject to the approval of the National Executive. Provisions are found in rule 12 which are designed to prevent branch rules from being inconsistent with the rules of the Union. Rule 15(1) provides: "(1) Unless otherwise directed by National Council or the National Executive, Branches may retain for the Maintenance thereof all monies received by them other than the sums hereinafter required to be forwarded to the Natironal Executive." Rule 37(3) provides: "(3) The funds of the Union may be disbursed for ordinary purposes by such officer or officers as may be authorised in that behalf and subject to such limitations as may be imposed. Funds may be disbursed for extraordinary purposes by decision of the National Council or National Executive." Rule 3 of the branch rules is in the same terms as rule 3 of the rules of the Union. Rule 13 of the branch rules provides for an annual State Conference, consisting of the members of the State Executive, the members of the State Council and delegates elected by districts and sections. Rule 15 - 15 - provides for a ballot on any question by the direction of the State Council or State Executive, or upon a petition signed by a certain percentage of the financial members of the branch. Rule 19 establishes the State Council, consisting" of the officers, councillors elected by sections and councillors elected by the whole of the membership of the branch. Rule 21 establishes the State Executive. Rule 22 is headed "Powers and Duties of State Executive". Sub-rule (a) contains the following provisions: "(a) The State Executive shall, subject to the review ef its actions by the State Council, have the care, control, custody, superintendence, Management and administration in all respects of the affairs, business, funds and property of the Union and without limiting the generality of the foregoing:- 6. It shall be responsible for all expenditure of the Union, and may incur all necessary expenditure for the proper upkeep and furtherance of the objects of the Union and it may pay all sums so incurred. 7. Subject to the provisions of Federal Rule 38, it may initiate, control and manage all actions, proceedings, claims, industrial disputes and other matters, appoint agents, solicitors or counsel to appear for and to represent the Union or any of its members in any arbitral, legal or other proceedings and any member of the State Executive may appear on Lehalf of the Union in any proceedings. 8. It may demand, sue for, recover and keep possession of all books, accounts and other property of the Union. Rule 33(a) of the branch rules provides: - 16- "(a) Subject to Federal Rule 15 all moneys received on account of entrance fees, contributions, fines, levies, donations or on interest on capital shall be disbursed only in furthering the objects as laid down in Rule 3." The issues which arise are whether the resolution of the State Executive of the Victorian Branch of the Union on 7th November 1985, endorsing the action of Mr. Darroch in producing and distributing the pamphlet "Union Funds Misused", and impliedly authorising the payment of the costs of such production and distribution, involved a breach of the rules, and in particular r. 33(a) of the branch rules, and if so, whether the remedy claimed, namely that the respondents be ordered to repay the costs of production and distribution of the pamphlet, could be granted. The principles to be applied in a case such as this are set out in Tanner v. Maynes (1985) 63 A.L.R. 197. At page 206, Evatt and Northrop JJ. adopted four principles, which had been set out in Scott v. Jess (1984) 3 F.C.R. 263, at pages 286-289, in the following terms: "(a) "It is proper, and perhaps necessary, for an organization to communicate with its members about the affairs of the organization and matters which may be of interest to the members. (b) "In the expenditure of the funds and the use of the resources of an organization, its objects and powers are to be interpreted broadly, so that any action which can fairly and reasonably be regarded as falling within those powers and objects will be valid. (c) "A power given to a person or persons by the rules of an organization must be exercised in good faith and for the purpose for which it is given, not for some ulterior of extraneous purpose. (d) "The funds and property of an organization may not validly be used to support one candidate or group of candidates in an election, or one point of view in a plebiscite, to the exclusion of another candidate or -17- other candidates or the opposite point of view, or to campaign against a candidate or candidates in an election or a point of view in a plebiscite."" Both Tanner v. Maynes and Scott v. Jess should be read; it is unnecessary to set out here in detail the discussion of the four principles and their application. For convenience, I shall refer to them by the letters by which they were designated in Tanner v. Maynes. In the present case, the effect of the portions of rules 22 and 33 of the branch rules, which are set out earlier, is to restrict the powers of expenditure of the State Executive to the area covered by the objects of the Union. The first argument of the applicant was that the powers of the State Executive did not extend as far as expenditure on communication by the State Executive of the Victorian Branch with members of the Central and Southern Queensland Branch. Mr. Strugnell, on behalf of the applicant, put strongly the existence of what amounted to an implied prohibition on communications directly with the members of one branch by the executive of another branch. Such an implied prohibition is very difficult to formulate; it is not difficult to think of circumstances in which the executive of one branch may wish to communicate with individual members of another branch. For example, a member may have transferred from one branch to another, and still owe money to the -first branch. Similarly, circumstances could be envisaged in which the interests of a branch may reasonably be advanced or protected by communication directly with the members generally of another Lee ep se eet eee Veo Tw, - 18 - branch. An example might be where one branch sought to have a particular point of view favourable to its interests supported or put forward on a federal governing body, by seeking to persuade another branch's members to support it through their representatives on the federal governing body. For these reasons, it cannot be the case that the rules of the Union contain an absolute implied prohibition on any communication between the State Executive of the Victorian Branch and the members generally of the Central and Southern Queensland Branch. The application of principles (a) and (b) could not rule out a power to communicate directly with the members of another branch. The cutcome of this case therefore depends upon the application of principles (c) and (d). The question is whether the power to communicate with the members of the Central and Southern Queensland Branch was exercised bona fide for the purpose for which it was given, and whether the pamphlet which was published amounted to electioneering, 50 as to take it outside the ambit of the normal power of communication. Counsel for the applicant argued that the circumstances of this case demonstrated a lack of bona fides on the part of the respondents or the pursuit by them of the collateral purpose of electioneering, and that, accordingly, principle (c) was aunfringed. The meeting of 9th October left the respondent Darroch to investigate a particular subject and report back to the State Executive. In the normal course, Mr. Darroch would " fy f - 19 - have done so; he would have presented a report to the next meeting, which would have decided what, if anything, to do about the subject. When the "Clerks News" arrived, it became apparent to Mr. Darroch+ that an- election-was.in progress, and that:..the Bernadette Callaghan team was contesting at least some of the positions within the Central and Southern Queensland Branch, This knowledge produced the hasty action which was taken. It was argued that the procedure which then followed, coupled with the terms of the pamphlet, led to the conclusion that the real purpose of publishing and distributing the pamphlet was to campaign against candidates who were members of the Bernadette Callaghan team in the Central and Southern Queensland Branch elections. or Mr. Darroch was the only one of the respondents to give evidence. His evidence was to the effect that the allegations made in the Central and Southern Queensland Branch about the Victorian Branch were inaccurate and were upsetting to him and to other officers of the Victorian Branch. It was true that no referendum of members of the Victorian Branch had been held on the issue of that branch's affiliation with the Australian Labor Party, but the question of affiliation had been a live issue through two State Conferences of elected persons, and the members had been notified of the issue in writing. On Mr. Darroch's evidence, it was the repetition of the inaccurate claims to members of the Central and Southern Queensland Branch which made a response necessary. Speed was needed in responding, so that wim Me ee SO pe MAL ae tere = SR Re ee ee te gt ee a wey = RT ye eer eee por we ng on ns, aa arn ay - ve 2 . te" the reply would be understood by its recipients in relation to Mr. Darroch did not believe that a request to the allegation. Queensland Branch officials to correct the Central and Southern the picture would bear fruit. Nor was action through the national office likely to be useful, as the Central and Southern Queensland Branch officials were believed to have frustrated the distribution of the national journal within their branch. As to the text of the pamphlet, according to Mr. Darroch's evidence, it Was necessary not just to refute the allegations but to show what kind of people were making the allegations. To hold the respondents to have acted without bona fides or for an extraneous purpose, it would be necessary to disbelieve Darroch, and to hold that the the sworn evidence of Mr. circumstances which surrounded the production and distribution of show him to have been perpetrating deliberate It the pamphlet falsehood in the witness box. onus of satisfying the Court that there has been an of principle (c) is borne by the party alleging reference to Ascot Investments Pty. is well established that the infringement such an Led. infringement. See the v. Harper (1981) 148 C.L.R. dess at page 287. In the present case, carries that onus. The standard of proof is, balance of probabilities, hut this is one of those cases in which the degree of satisfaction for which that standard of proof calls See; May vary because of the gravity of the allegation made. Rejfek v. McElroy (1965) 112 337, at pages 348-349, in Scott v. it is the applicant who of course, the C.L.R. 517, at page 521, and the'. ress - 21 - cases there cited. Whilst there are some aspects of the evidence of Mr. Darroch'that ''are unsatisfactory, I donot belireve-! that his-- evidence is generally untruthful. I accept that, in the context of the affairs of trade unions, to attack the other side, as well as refuting its allegations, is not unusual. The reasoning which was used to attack in the present case may be strange. In particular, it is hard to see how officers intending to provide members with a free choice on an issue by way of a referendum can be criticized as dishonest for not stating their own views. In addition, there is considerable use of the technique of guilt by association in the pamphlet. It must be remembered, however, that the Court-is not a censor of-the-publications of registered organizations. Provided that the officers of an organization act honestly, they will not be held to have infringed principle (c) because they attack their opponents in ways which others may decline to use. It must also be remembered that at least three of the respondents never saw the text of the pamphiet. On the evidence, their mental state was that they approved retrospectively a reply to an allegation about the Victorian Branch, which reply was in terms that they had not had drawn specifically to their attention. In some circumstances, persons in their positions may be held responsible for the lack of bona fides, or the improper purpose, of a single person. Mr. Tracey, however, expressly declined to argue that any of the respondents should be treated separately in the present case. The Court is Sa sae cme peer ew re age eee ee we ee Cee T -- -Y- "aahantacaiienanaemans cree eiienaeiien Y Stopes = we a oe a ae 5 left, therefore, with the sworn evidence of Mr. has failed to establish a lack of bona fides or the existence - 22 - inferences from the circumstances against In the result, the applicant of Darroch. an extraneous or improper purpose. Considerable argument took place as to whether principle (d) involved the application of a subjective or an objective test. Plainly, principle (c) involves a subjective test; the question is one of the motive or purpose with which a power has been exercised. Mr. Tracey, on behalf of the respondents, argued a breach of the that principle (d) was also subjective, i.e. rules only occurred if there was an intention on the part of the engage in electioneering. He relied on officials concerned to certain passages from the as yet unreported judgment of Wilcox J. in Jess v. Scott (delivered on 23rd July 1986). In that case, the Court dealt with a claim for repayment of monies by the National Council of the organization now known as the Amalgamated Metal Workers' Union, following the successful appeal from in Scott v. Jess (referred to above). At restraining orders 11-12 of the judgment, Wilcox g. referred to two pages qualifications on the power of the National Council and national officers to spend monies on communication with members. The first qualification involved principle (c). Having mentioned this, his Honour continued at page 12: "The second qualification is really but a particular application of the first: that it will not normally be proper for funds of an organization to be expended upon the support of, or upon opposition to, a candidate for office within the organisation. As Gray J io Vi t- fe t I - - 23 - pointed out in Scott v. Jess at p.288, the qualification cannot properly be stated in absolute terms. There may be cases in which it is permissible to expend union funds to advance the interests of a candidate. Gray Jd cited as an example a campaign within a particular branch to secure the election of a candidate from that branch to a federal office. ~- But,' generally, the expenditure of union funds in a campaign to support or to oppose a particular candidate or group of candidates is improper: see Scott viJess pp.270-272, 287-288, Tanner v Maynes at pp.205-206. It can be described as the pursuit of a collateral purpose. In the particular context of organizations registered under the Conciliation and Arbitration Act it can also be seen as breaching the requirement of "fair play" implied by 5.2 of that Act: see per Evatt and Northrop JJ in Scott v. Jess at p.272." At page 13, his Honour pointed out that there was no evidence that case of lack of good faith, or of the existence of ulterior or extraneous purpose. His Honour then continued: "The application of the second qualification depends upon the purpose for which expenditure was incurred. There is no evidence of subjective purpose but it is said on behalf of the applicant that a purpose to assist some candidates and to oppose others is to be inferred from the terms of the documents themselves. If, in relation to any particular document and upon a fair reading thereof, it appears that the substantial purpose for which it was printed and distributed was either to advance or to reduce the prospects in the then elections of any candidate or candidates, the second qualification applies. The printing and distribution of that document would be outside the powers conferred by the rules upon the National Council and the officers and the Court would be empowered to make an order under s.141(1G) for the rectification of the breach." er pee ee ee Gee ene ' ee me eee Sa epee eee 8 os ane Ve mrwner waptee cae ce me oe ate ae or _— Later in the judgment, his Honour identified the substantial purpose of each of the publications there in question. At page 32, his Honour said: "The critical question is the substantial purpose of those who made the communication. In the case of this s fda te a hetaicncmcraral tlie seein att bey apy = pe ee are ore ae v1 - 24 - document that purpose was the entirely proper purpose of making clear to members that an important public figure, the Prime Minister, neither supported nor opposed any candidates and that they should exercise their franchise without reference to any suggestion to the contrary." At page 34, with reference to another publication, his Honour said: "The purpose of this Newsletter was to inform members of the content of a press release issued by the Australian Council of Trade Unions stating Mr Hawke's position regarding union elections. It is true that, once again, the opportunity was taken to criticize those who had suggested that Mr Hawke did have a partisan position but this was plainly incidental." As to yet another publication, his Honour said at page 39: "In any event, as it seems to me, the substantial purpose behind the publication of the relevant parts of the newspaper was a valid one: -to inform the members of Mr. Hawke's position." On the basis of these passages, Mr. Tracey, counsel for the respondents, argued that principle (d) is a subjective one. The passages themselves are equivocal. Certainly there are phrases in them which do suggest strongly the application of a subjective test. There are others, however, which point in the other direction. Most importantly, the reference to breaching the requirement of "fair play" in the passage which I have quoted from pages 12 and 13. It is my firm view that principle (d) requires the application of an objective test. In other words, if, on a fair view of the publication in question, it amounts to - 25 - electioneering, its production and distribution will be beyond the power given by the rules, whatever may have been the subjective intent of those producing and distributing the publication. 'Principle :¢d) --has some: relationship to the law- which applies where there has been a breach of a fiduciary duty; a fiduciary agent will be liable if he or she profits from the trust, whatever the subjective intention of the agent. In addition, in Tanner v. Maynes at page 206, Evatt and Northrop JJ. described principle (d) as imposing "an absolute prohibition on the exercise of powers by officers of organizations". In my view in searching for the "substantial purpose" of each of the documents there in question, Wilcox J. in Jess v. Scott was doing no more than examining each document to determine whether, on a fair view of it, it amounted to an-electioncering publication, or whether any effect it may have in persuading prospective voters to form views as to how they should cast their votes was incidental to the thrust of its text. For the purposes of this case, therefore, I treat principle (d) as involving an examination of the pamphlet itself, and not of the motives or intentions of those publishing it. The application of principle (d) therefore depends entirely on an examination of the terms of the pamphlet concerned. This pamphlet may be analysed as follows. The first four sentences might be said to be in response to the allegations made against the Victorian Branch. The material under the next heading attacks Ms. Callaghan and the other officers of the Fee nn nn eres meinen tee remeniye pee eas ". 7~— aay Fi wp rere moe r ere see eqn se perenne - 26 - Central and Southern Queensiand Branch on issues vaguely related to the allegations made against the Victorian Branch. Under the heading "Extreme Left" Ms. Callaghan and some of her colleagues are attackedon: the grounds of-.-therr associations with certain... persons, an attack quite unrelated to the allegations made against the Victorian Branch. Under the heading "Censorship of Members' Information" there is a further attack, related to issues divorced from the allegations made against the Victorian Branch. The same is true of the material under the headings "The Right to Know" and "National Activity"; in the first place, the Central and Southern Queensland Branch officials are attacked about a number of issues of concern to the Union nationally; under the latter heading, the performance of the Union at the- national level is described. Under the heading "Caught Out" there is a return to issues which might be said to be related to the attack on -he Victorian Branch. The material which appears under the heading "Restore Unity" plainly tends to influence members of the Central and Southern Queensland Branch in the formulation of their voting intentions. Only one sentence, in the last paragraph, relates to the supposed attack on the Victorian Branch. Mr. Darroch's evidence was that he did not intend by this pamphlet to influence potential voters. Be that as it may, when read objectively, the pamphlet has that affect. It moves from a specific issue through a general attack to an exhortation. If an exhortation in those terms were directed only to the 774 wD? - 27 - officers of the Central and Southern Queensland Branch, there could hardly be complaint. It was directed, however, as far as possible to all financial members of that branch. The pamphlet was, on its .face, an electioneering pamphlet, and consequently - its publication and distribution to members of the Central and Southern Queensland Branch was outside the powers given to the State Executive of the Victorian Branch by the rules of the Union and of that branch. In circumstances such as this, the rules giving the State Executive control over the expenditure of the branch cannot be construed as giving power to spend money influencing the election of officers in another branch. There was, therefore, a breach of the rules. Mr. Tracey conceded that if &@ breach of the rules was found to have occurred, an order in terms of para. (i) of the orders sought could be made. In other words, he conceded that the Court could order the respondents to treat as null and void the resolution of 7th November 1985, endorsing the action of Mr. Darroch. His contention was, however, that the Court has no power under s. 141 of the Act to make the order sought in para. (ii), namely an order that the respondents repay to the Union expenditure which was authorised by that resolution. Because of this argument, it is important to look at the terms of the power which s. 141 gives to the Court. Sub-section (1G) of that section provides: "141(1G) An order under this section may give directions for the performance or observance of any of the rules of an organization by any person who is under — e o - 28 - an obligation to perform or observe those rules." In Gordon v. Carroll (1975) 27 F.L.R. 129, the secretary. of an-organization: had received monies to which he. was not entitled under the rules of that organization, as a result of purported decisions of a finance committee. The Australian Industrial Court ordered the secretary to repay those monies. The order was based largely on the decision of the Court that the rules contained implied terms obliging the secretary to repay. See especially pages 154-156 and 159-160. Such an approach must now be regarded as no longer good law. It cannot now be asserted that s. 141 of the Act gives to this Court power to enforce implied rules; or implied terms in the rules of an organization. See Dugqmore v. Porter (1982)--3 I.R. 418, at pages 421-2, Porter v. Dugmore (1984) 3 F.C.R. 396, at pages 407-408 and Scott v. dess (referred to above), at pages 282-284. Indeed, Mr. Strugnell did not attempt to rely upon the implied terms or implied rules approach. In the absence of any reliance on implied rules, the question is whether those who authorize expenditure not permitted by the rules of an organization (whether Ly reason of some express or implied limitation in those rules) can be ordered to repay such expenditure. It was common ground in the present case that there is no express rule in the rules of the Union, or of the Victorian Branch, which requires such repayment. - 29 - Mr. Tracey relied on three authorities, in support of the proposition that the Court has no power under 5s. 141 to order repayment. The first case was Austin v. Deloraine (1959) 1 "-FUG.RG* 29741 =- In that-case, an organizer of -a registered organization had received money on behalf of the organization, but had failed to pay it over to the trustees, to whom the rules gave the control of the funds. No express rule of the organization obliged the organizer to pay over the money. The Commonwealth Industrial Court, therefore, took the view that no breach of the rules was involved. It was true that the organizer owed money to the organization, but there could not be found in the rules any duty imposed on him to pay it over. In the absence of a breach of the rules, the question whether s. 141 of the Act gave the court power to order -repayment did not arise. --- - The second case relied upon by Mr. Tracey was McLure v. Mitchell (1974) 24 F.L.R. 115. That case concerned the secretary who was the subject of the proceedings in Gordon v. Carroll, already referred to. The Australian Industrial Court found that breaches of the rules had occurred in the making of payments. At page 118, Spicer C.J. and Dunphy J. in a joint judgment said: "These proceedings have been brought against the secretary alone and we are unable to discover any rule of the organization which he can be called upon to observe and perform in relation to the reimbursement by him of the moneys in question. More appropriate respondents to such an application would seem to us to be the members of the finance committee. They, however, apart from Mitchell, are not parties to these proceedings and an order against them under s. 141 would, in any event, seem of doubtful validity except in relation to the performance by them of their clear duty wet re en; srs . ete ~e 4, ore oe ve ramen won te we ree en - 30 - to report to the branch meetings in the future." At the most, this passage may be construed as a statement of doubt whether an order could have been made under s. 141 of the Act against the members of the finance committee, who authorised the payments concerned, if they had been parties to the proceedings. The third case relied on by Mr. Tracey was Gordon v,. Carroll itself. He drew attention to the fact that the court in Gordon v. Carroll had had resort to the theory of implied rule or implied term, as the basis for its decision to order repayment. In my view, none of these three cases can be said to constitute firm authority against the view that s. 141 gives the Court power, in an appropriate case, to order officials who have wrongfully authorised the expenditure of money to repay that money. As against the authorities to which Mr. Tracey referred, there must be cited authority of greater weight and, in some cases, more recent origin. In R. v. Commonwealth Court of Conciliation and Arbitration; Ex parte Barrett (1945) 70 C.L.R. 141, at pages 156-157, Latham C.d. said: "It is objected to the order of his Honour Chief Judge Piper that the order does not merely direct the observance of a specific detailed directions for the for example, the recognizing officers of the union. It power given by the section rule, but that it gives doing of certain,acts as, of certain named persons as is contended that the only is a power to direct the performance or observance of a particular rule without specifying the manner in which it is to be performed. In my opinion, this objection cannot be sustained. v Poeiraeianen ee oe we - 31 - There might be more to be said for it if the section for provided merely that the Court might "make an order But the the performance or observance" of the rules. t words of the section are "make an order giving directions for the performance or observance" of the rules., In my opinion, these words contemplate the giving of detailed directions for the doing of acts__or observance of forbearances which will constitute performance or observance of the rules." In the same case, at page 163, Dixon J. (as he then was) said: "The directions are "for," that is, "for the purpose of securing," the performance, which is active, or the observance, which is passive, of the rules of the organization." Further, on the same page, his Honour continued: "The directions which the Court may give must have for their object the securing of performance or observance But I do not think that the power is of the rules. restricted to specifically commanding compliance with in the exact obligation expressed by the rule or rules question in a given case." These passages suggest strongly that the Court is not limited to making orders which merely echo the terms of the rules, but is 141(1G) in the way which of able to frame its directions under s. will most appropriately secure the performance or observance the rules. already referred to, at page 270, 141(1G) In Scott v. Jess, Evatt and Northrop JJ., referring to the power under s. of the Act said: "The normal form of directions given by that order would be that the respondents to those proceedings perform and observe the rules of the organisation by treating the resolution so made as being void and of no effect. If - 32 - necessary, Similar directions would be given with respect to any actions taken or to be taken pursuant to the void resolution." The reference to "actions taken" is significant; it suggests that the Court has power to undo what has already been done. In the same case, at page 289, in my own judgment, I left open the question whether repayment could be ordered pursuant to s. 141 of the Act, or whether it is necessary to rely upon State law. Reference is made to the consideration in that passage of the manner in which the remedy may be chosen to suit the circumstances of the case, by analogy with claims against fiduciary agents who have profited from their positions. Finally, in Jess v. Scott, already referred to, at page 19, Wilcox J. said: "If that evidence demonstrates a breach of the rules of the union, occasioned by identifiable individuals and causing loss to the union, s141(1G) confers upon the Court ample discretionary power to make an appropriate rectification order." These authorities appear to me to establish the proposition that, once a breach of the rules is found to have occurred, the Court is empowered to give directions which will secure the performance or observance of the rules in some appropriate way. In the case where the breach involves the wrongful expenditure of monies, such an appropriate way is to order repayment. This is particularly so in a case where the expenditure is on an electioneering pamphlet, in contravention of principle (d). In such a case, repayment to the organization of monies spent in the ——~ - 33 - of such a pamphiet produces a production and distribution the position exactly as if the persons concerned had paid for out of their own funds, whichis the electioneering pamphlet course that they should have taken. It may be that it would be open to the organization itself to sue in a State court to recover its funds expended authority. Whether such an action would be the members of the relevant without proper brought would depend upon whether governing body were prepared to cause the organization to pursue that course. An individual member, attempting to enforce the entitlement of the organization in a State court, would almost certainly be met by a defence based on the rule in Foss v. Harbottie 1843 2 Hare 461. See Bailey v. Krantz (1984) 55 A.L.R. 345, at page 356. It is possible that an individual member might 141 of the Act to compel the members of the relevant rely on s. cause the organization to institute governing hody to proceedings. Where such proceedings would be instituted against the members of the governing body themselves, to compel a member to adopt such a course would be ridiculous. There is no reason why the process should not be cut short, to enable an individual member to rely on s. 141 of the Act to cause the defaulting officers to repay. Mr. Tracey conceded in argument that, if application resolution authorizing were made after the passage of a it expenditure, but before any actual expenditure had occurred, - 34 - would be open to the Court to restrain the expenditure. If this is so, it is difficult to see why the Court lacks power to recoup monies which have been expended in breach of the rules. For these reasons, the appropriate orders are that the respondents and each of them peform and observe the rules of the Union by: (i) treating as null and void and of no effect the resolution of the State Executive of the Victorian Branch of the Union made on 7th November 1985 authorising the expenditure of the funds and resources of the Union by the preparation, publication and distribution to members of the Central and Southern Queensland Branch of the Union of the publication - entitled -"Union Funds Misused"; (ii) repaying to the Union the costs of such preparation, publication and distribution. __. As yet, there is no precise evidence before the Court of the amount or amounts involved. It is appropriate to hear the parties on the question whether the order of the Court should specify a particular amount or particular amounts, and if so what those amounts should be. 5 a4 +) 7 3.1 Tie cr ANS & yr ow: ef 3 ons jor Selament ; ueelnofhas Honour ir — | | fag go Tene eee carat aedatadaed oye Ee aemeietieanhe ' a - Tr