FEDERAL COURT OF AUSTRALIA

Health Services Union v Jackson (No 4) [2015] FCA 865

THE COURT ORDERS THAT:

1.    The respondent pay the applicant $926,990.30 as compensation for damage suffered by the applicant resulting from the contravention, by the respondent, of Schedule 1B of the Workplace Relations Act 1996 (Cth) and the Fair Work (Registered Organisations) Act 2009 (Cth).

2.    The respondent pay the applicant $67,912 as money had and received by the respondent for the use of the applicant.

3.    On or before 2 September 2015 the applicant file written submissions relating to any further amounts claimed by it by way of costs and interest.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

THE COURT ORDERS THAT:

1.    The third cross-respondent pay the cross-claimant $411,635.86 as compensation for damages suffered by the cross-claimant resulting from the contravention by the third cross-respondent of Schedule 1B of the Workplace Relations Act 1996 (Cth) and the Fair Work (Registered Organisations) Act 2009 (Cth).

2.    On or before 2 September 2015 the cross-claimant file written submissions relating to any further amounts claimed by it by way of costs or interest.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

1    There are two proceedings before the Court. It will be convenient to refer to them as “the Victorian proceeding”, (VID 1042 of 2013), and “the New South Wales proceeding”, (NSD 1501 of 2013). On 24 March 2014 I ordered that the two proceedings should be heard concurrently.

2    Initially, in the Victorian proceeding, the applicant (“the HSU” or “the Union”) sought orders that Ms Jackson pay to it some $280,000, together with interest and costs.

3    These claims arise from two matters. The first is referred to in the pleadings as the “Toomey Pegg matter”. Toomey Pegg is a firm of solicitors. The HSU alleges that, acting in breach of duty and without authority, Ms Jackson retained Toomey Pegg to provide legal services to the HSU on her instructions thereby incurring a liability, on the part of the HSU, for legal fees totalling $34,725.

4    The second claim in the Victorian proceeding related to what was referred to as “the NHDA transfers”. The acronym referred to the National Health Development Account which, it is alleged, Ms Jackson opened and operated as the account holder. The HSU alleged that, between February 2004 and May 2010 Ms Jackson, acting without authority and in breach of duty, caused a total of $246,500 to be transferred from the funds of the Victoria No 3 Branch of the HSU to the NHDA. The HSU sought to recover this amount.

5    Ms Jackson cross-claimed in the Victorian proceeding for wages said to be due to her as National Secretary of the HSU between 2012 and 2014 during which period she was on sick leave. This cross-claim was dismissed by operation of a self-executing order which I made on 15 August 2014.

6    The New South Wales proceeding was commenced by Mr Robert Elliott who was National Secretary of the HSU from 1996 to 2002. In this proceeding Mr Elliott sought orders for payment in lieu of untaken annual leave and long service leave, declarations and compensation for contravention of s 90(2) of the Fair Work Act 2009 (Cth) (“the Act”), imposition of pecuniary penalties payable to Mr Elliott pursuant to the Act and the Long Service Leave Act 1992 (Vic) and an award of damages for breach of contract.

7    The HSU cross-claimed against the former President of the HSU, Mr Michael Williamson, and Ms Jackson alleging that, acting without authority, and in breach of duty, they had caused the HSU to enter into an agreement with Mr Elliott pursuant to which he was paid remuneration and superannuation benefits totalling $414,985 to which he was not entitled. The HSU sought interest and costs in respect of its cross-claim.

8    In April 2014 Mr Elliott discontinued his claim against the HSU and the cross-claim against Mr Williamson was stayed by order of the Court. Following these developments the only remaining claim being pressed in the New South Wales proceeding was that of the HSU against Ms Jackson.

9    Once it was ordered that the two proceedings were to be heard concurrently a consolidated statement of claim was filed by the HSU and a defence was filed by Ms Jackson.

10    In February 2015 the HSU sought and was granted leave to amend its consolidated statement of claim. These amendments related to the NHDA payments and saw the making of some additional claims.

11    The amendments to the NHDA claim pleaded, in the alternative, that the expenditure of funds from the NHDA account was unauthorised and otherwise improper. The NHDA claim was also increased to $284,500 to account for additional transfers made between February 2004 and October 2010.

12    The additional claims arose out of investigations, undertaken by the HSU, into the expenditure of Union funds by, or on behalf of, Ms Jackson. They related to cash drawings on Union accounts and purchases made on credit cards issued to Ms Jackson which were paid for by the Union.

13    Two further claims were also made. One was that Ms Jackson had been paid twice in respect of accumulated leave entitlements. The other related to what was said to be the payment to her of an unauthorised honorarium of $63,000.

14    Following a series of adjournments, the trial was fixed to commence on 29 June 2015. When the proceedings were called on that morning counsel appearing for Ms Jackson advised the Court that she had filed a debtor’s petition under s 55 of the Bankruptcy Act 1966 (Cth) (“the Bankruptcy Act”). A document which certified the appointment of a trustee of her estate was sent to the Court by the solicitor who had been acting for her. The solicitor advised the Court that, as a result of Ms Jackson’s bankruptcy, he would shortly file a notice of ceasing to act for her. Such a notice was filed.

15    The HSU made an application, under s 58(3) of the Bankruptcy Act for leave to take fresh steps in and continue the proceedings. I granted that application on 3 July 2015: see Health Services Union v Jackson (No 3) [2015] FCA 694.

16    The trial eventually commenced on 7 July 2015. Neither Ms Jackson nor her trustee appeared.

17    As a result, the evidence relied on by the HSU was not challenged.

18    The evidence substantially supported the claims made by the HSU. Although the Union pressed all of its broad claims, it modified some parts of some of them with the result that lesser amounts of compensation were sought.

19    Multiple causes of action were relied on in respect of most of the areas of expenditure. Some were advanced in the alternative. In the event, it has not been necessary to deal with all of the causes of action pleaded by the HSU. I have, for example, upheld a series of claims, made by the HSU, following findings that Ms Jackson had contravened s 287 of the Fair Work (Registered Organisations) Act 2009 (Cth) (“the FWRO Act”). In most, if not all of those instances, the HSU had strongly arguable cases that she had also contravened ss 285 and 286 of that Act.

The Health Services Union

20    The claims made by the HSU relate to events which occurred between 2003 and 2012. During this period the structure of the HSU changed from time to time and Ms Jackson held a variety of offices. In order to understand the evidence it is first necessary to say something about the organisation of the Union and the offices occupied by Ms Jackson.

21    At all relevant times the HSU was a registered organisation under Commonwealth industrial legislation. Until 30 June 2009 the relevant Act was the Workplace Relations Act 1996 (Cth). Thereafter, the FWRO Act applied.

22    Throughout the period the Union was governed pursuant to registered rules. Ultimate authority rested with the National Council and, between meetings of that Council, the Union’s affairs were in the hands of a National Executive. The rules made provision for a number of federal offices including a National President and a National Secretary.

23    The national entity was made up of a number of branches which were organised on a geographic and occupational basis. Each branch had a Committee of Management and branch officers including branch secretaries.

24    During the relevant period there were a number of material changes to the branch structure. At the start of the period there were, relevantly, four branches in Victoria, identified as the Victoria No 1, No 2, No 3 and No 4 Branches and a single branch in New South Wales. There was, as well, in New South Wales, a State registered union.

25    During 2008 and 2009 the Victoria No 1 Branch became dysfunctional. It was placed in the hands of an administrator pending elections: see Re Health Services Union (2009) 187 IR 51.

26    On 24 May 2010 Fair Work Australia certified some changes to the HSU Rules whereby the Victoria No 1 Branch, the Victoria No 3 Branch and the New South Wales Branch merged to become the HSU East Branch.

27    Further instability followed within the merged branch such that, in 2012, an administrator was appointed to the HSU East Branch and, in the same proceeding, to the State registered New South Wales Union: see Brown v Health Services Union (2012) 205 FCR 548 (Flick J). The Court ordered that there should be a demerger of the HSU East Branch and the reconstitution of the New South Wales and the Victoria No 1 and Victoria No 3 Branches. The period of administration commenced on 8 June 2012. The demerger was subsequently effected by rule change.

28    Ms Jackson held offices at both the National and Branch level over a long period.

29    In 2002 Ms Jackson was the National Assistant Secretary of the Union. Between 2004 and 2007 she was the Senior National Assistant Secretary. She became Acting National Secretary in December 2007. Between 23 January 2008 and 24 May 2010 she was the National Secretary. She again became the incumbent of this office on 23 December 2010 and continued to hold it until the end of the relevant period.

30    In 1997 Ms Jackson had become the Secretary of the Victoria No 3 Branch. She continued to hold this position until 22 January 2008. On the latter date she had to relinquish the office because she had become the National Secretary and the rules provided that she could not hold both offices simultaneously. Following a rule change, she resumed the office of Branch Secretary on 13 May 2008 and held it until the creation of the HSU East Branch on 24 May 2010.

31    Ms Jackson was the Executive President of the HSU East Branch from 24 May 2010 until 21 June 2012 when she was removed from office pursuant to an order of the Court: see Brown v Health Services Union (2012) 205 FCR 548 at 604 (Flick J).

32    It will be necessary to return later in these reasons to deal, in greater detail, with the HSU Rules which applied, at various times, to Councils of the Union and those which applied to the offices held, from time to time, by Ms Jackson.

The FWRO Act

33    At the start of the relevant period registered organisations, such as the HSU, were regulated by Schedule 1B to the Workplace Relations Act 1996 (Cth). This legislation was superseded, with effect from 1 July 2009, by the FWRO Act. Relevantly, the terms of the legislation did not change. It will, therefore, be convenient to refer to the provisions of the FWRO Act as if they had application at all relevant times.

34    The HSU was an employee association registered under the FWRO Act: see s 26. As a registered organisation it became a body corporate: see s 27(a).

35    The affairs of registered organisations are regulated by the FWRO Act. The FWRO Act prescribes “standards” which are designed, inter alia, to ensure that registered organisations “are representative of and accountable to their members, and are able to operate effectively …”: see s 5(3)(a).

36    Registered organisations must be regulated by rules which contain provisions stipulated in the FWRO Act: see s 140(1). Among the matters for which the rules must provide are:

“(ix)    the manner in which the property of the organisation is to be controlled and its funds invested; and

(x)    the yearly or other more frequent audit of the accounts; and

(xi)    the conditions under which funds may be spent …”

See s 141(1)(b).

37    By s 149(1) of the FWRO Act it is provided that:

“(1)    The rules of an organisation must provide that a loan, grant or donation of an amount exceeding $1,000 must not be made by the organisation unless the committee of management:

(a)    has satisfied itself:

(i)    that the making of the loan, grant or donation would be in accordance with the other rules of the organisation; and

(ii)    in the case of a loan—that, in the circumstances, the security proposed to be given for the repayment of the loan is adequate and the proposed arrangements for the repayment of the loan are satisfactory; and

(b)    has approved the making of the loan, grant or donation.”

38    Section 149(5) of the FWRO Act provides that, for the purposes of the section, “an organisation includes a reference to a branch of an organisation.”

39    Section 190 makes it an offence for an organisation or branch to use, or allow to be used, “its property or resources to help a candidate against another candidate in an election under this Part for an office or other position.” This provision is framed sufficiently broadly to prohibit the expenditure of the funds of one union to support a candidate in an election in another union and to prevent such support being given to candidates for election for a branch office in another branch in the same organisation.

40    Section 237 of the FWRO Act requires that an organisation must lodge with the Fair Work Commission each year a statement providing details of “each loan, grant or donation” which exceeds $1,000 and which have been made by the organisation in the immediately preceding financial year.

41    Part 3 of Chapter 7 of the FWRO Act deals with the accounting and auditing obligations which fall on registered organisations.

42    Section 242 provides that these obligations apply to reporting units. An organisation may constitute a single reporting unit. If, however, it is divided into branches then, normally, each branch will be treated as a separate reporting unit.

43    Obligations under the Part are imposed on “designated officers” of reporting units. Such an officer is one “who, under the rules of the reporting unit, is responsible (whether alone or with others) for undertaking the functions necessary to enable the reporting unit to comply with this Part.”

44    Section 252 requires each reporting unit to maintain accurate financial records and to do so in such a manner as will facilitate auditing as required by other provisions in the Part.

45    Annual financial reports must be prepared by each reporting unit. Such reports must be presented in accordance with Australian Accounting Standards: see s 253(1). Sections 253(2) and (3) provide that:

“(2)    The general purpose financial report must consist of:

(a)    financial statements containing:

(i)    a profit and loss statement, or other operating statement; and

(ii)    a balance sheet; and

(iii)    a statement of cash flows; and

(iv)    any other statements required by the Australian Accounting Standards; and

(b)    notes to the financial statements containing:

(i)    notes required by the Australian Accounting Standards; and

(ii)    information required by the reporting guidelines (see section 255); and

(c)    any other reports or statements required by the reporting guidelines (see section 255).

(3)    The financial statements and notes for a financial year must give a true and fair view of the financial position and performance of the reporting unit. This subsection does not affect the obligation for a financial report to comply with the Australian Accounting Standards.”

46    Section 255 provides for the promulgation of reporting guidelines for the purposes of s 253. Such guidelines applied in each financial year starting on or after 1 November 2004 until 17 October 2014. Clause 11 required disclosure of balances of certain items of expense, including grants, donations, employee benefits paid to office holders or employees, and fees and allowances paid to persons in respect of their attendances at conferences or other meetings. Clause 14(c) required disclosure of the total amount of employee benefits paid to office holders. The term “employee benefits” was defined as “all forms of consideration given by the reporting unit in exchange for services rendered by holders of office or employees”: see clause 28. Under clause 26(c), the committee of management statement was required to be signed by a “designated officer”.

47    The financial reports of each reporting unit must be audited annually: see s 257(1). The auditor is empowered to seek information and explanations from any designated officer or employee of the reporting unit and such person is obligated to respond: see s 257(2) and (3). It is an offence for an officer or employee to hinder or obstruct an auditor or to fail to comply with the request for information: see s 258(1).

48    Section 265(1) of the FWRO Act deals with financial reports to members of organisations. It provides that:

“(1)    A reporting unit must provide free of charge to its members either:

(a)    a full report consisting of:

(i)    a copy of the report of the auditor in relation to the inspection and audit of the financial records of the reporting unit in relation to a financial year; and

(ii)    a copy of the general purpose financial report to which the report relates; and

(iii)    a copy of the operating report to which the report relates; or

(b)    a concise report for the financial year that complies with subsection (3).”

49    Section 266(1) provides that the full report must be presented to a general meeting of the members of the reporting unit within six months of the end of the financial year to which the report relates. Within two weeks after the general meeting a copy of the report must be lodged with the Fair Work Commission: see s 268.

50    Part 2 of Chapter 9 of the FWRO Act deals with the duties of officers in relation to the financial management of organisations.

51    Sections 285, 286 and 287 impose obligations on officers of organisations in relation to these matters. These sections provide that:

“285    Care and diligence—civil obligation only

(1)    An officer of an organisation or a branch must exercise his or her powers and discharge his or her duties with the degree of care and diligence that a reasonable person would exercise if he or she:

(a)    were an officer of an organisation or a branch in the organisation’s circumstances; and

(b)    occupied the office held by, and had the same responsibilities within the organisation or a branch as, the officer.

(2)    An officer of an organisation or a branch who makes a judgment to take or not take action in respect of a matter relevant to the operations of the organisation or branch is taken to meet the requirements of subsection (1), and their equivalent duties at common law and in equity, in respect of the judgment if he or she:

(a)    makes the judgment in good faith for a proper purpose; and

(b)    does not have a material personal interest in the subject matter of the judgment; and

(c)    informs himself or herself about the subject matter of the judgment to the extent he or she reasonably believes to be appropriate; and

(d)    rationally believes that the judgment is in the best interests of the organisation.

The officer’s belief that the judgment is in the best interests of the organisation is a rational one unless the belief is one that no reasonable person in his or her position would hold.

286     Good faith—civil obligations

(1)    An officer of an organisation or a branch must exercise his or her powers and discharge his or her duties:

(a)    in good faith in what he or she believes to be the best interests of the organisation; and

(b)    for a proper purpose.

(2)    A person who is involved in a contravention of subsection (1) contravenes this subsection.

287    Use of position—civil obligations

(1)    An officer or employee of an organisation or a branch must not improperly use his or her position to:

(a)    gain an advantage for himself or herself or someone else; or

(b)    cause detriment to the organisation or to another person.

(2)    A person who is involved in a contravention of subsection (1) contravenes this subsection.”

52    Each of these provisions is a civil penalty provision.

53    A person will be “involved” in a contravention of ss 286 and 287, inter alia, if he or she has “been in any way, by act or omission, directly or indirectly, knowingly concerned in or party to the contravention”: see s 284(c). Subject to one qualification ss 285, 286 and 287 operate in addition to, and not in derogation of, any rule of law relating to the duty or liability of a person because of his or her office or employment in relation to an organisation or a branch and do not prevent proceedings being taken against the person for breach of such duties: see s 291. The qualification is that s 291 does not apply to s 285(2) “to the extent to which it operates on the duties at common law and in equity that are equivalent to the requirements of subsection 285(1)”.

54    If a person contravenes a civil penalty provision (including ss 285, 286 and 287) the organisation concerned may apply to the Court for compensation for any damage which has “resulted from the contravention”: see ss 307(1), 310(3) and 338. Any compensation orders made by the Court must specify the monetary amount of any compensation awarded. Additional orders may be made under s 308.

The Corporations Act

55    The Union also pleaded causes of action founded on provisions of the Corporations Act 2001 (Cth) (“the Corporations Act”).

56    Sections 180 and 181 of the Corporations Act impose on directors and officers of corporations care and diligence and good faith duties which are similar to those imposed by ss 285 and 286 of the FWRO Act respectively. The duty imposed by s 181 of the Corporations Act differs in terms from that imposed on union officials by s 286 because s 181(1)(a) requires directors and officers to exercise their powers and discharge their duties “in good faith in the best interests of the corporation”. It may be, however, that the same subjective element (“what he or she believes”) which appears in s 286(1)(a) is imported into s 181(1)(a): see, for example Westpac Banking Corporation v Bell Group Limited (in liq) (No 3) (2012) 44 WAR 1 at 169 (Lee AJA). See also Carr AJA at 525 who agreed with the analysis of the trial judge whose reasons are relevantly reported at the Bell Group Limited (in liq) v Westpac Banking Corporation (No 9) (2008) 39 WAR 1 at 575-583. Section 182 of the Corporations Act imposes on officers and employees of corporations the same constraints as those imposed on officers or employees of an organisation by s 287(1) of the FWRO Act.

57    Although trade unions cannot be registered under the Corporations Act (see s 116), ss 180, 181 and 182 regulate the conduct of directors and officers of “corporations”.

58    A “corporation” is defined to include “any body corporate (whether incorporated in this jurisdiction or elsewhere)”: see ss 9 and 57A(1)(b). By operation of s 27 of the FWRO Act, the HSU is deemed to be a body corporate. A person “who makes, or participates in making, decisions that affect the whole, or a substantial part, of the business of the entity” is an “officer”: see s 9.

59    The Court may make an order, under s 1317H of the Corporations Act which requires a person to compensate a corporation if the person has contravened provisions, including ss 180, 181 and 182, and damage has resulted from such a contravention. The Court’s order must specify the amount of the compensation.

The HSU Rules

60    The supreme governing body of the Union was the National Council: Rule 21. It was required to meet annually: Rule 22(a). The powers of the National Council included the fixing of the remuneration and terms and conditions of employment of “the Officers of the Union”: Rule 21(c). Prior to 24 May 2010 the Rules provided that one of these “Officers” was the National Secretary who was to be a full time paid officer: Rule 19. The Rule was amended, with effect from that day, to provide that it was for the National Council to determine, from time to time, whether the office of National Secretary was to be a full time paid office. The Rule in its amended form applied for the remainder of the relevant period.

61    Provision was made, in the Rules, for a National Executive comprising the National Officers, including the National Secretary, and the Branch Secretaries of each Branch: Rule 26.

62    The National Executive had a general power, subject to certain qualifications, to conduct and manage the affairs of the Union and could exercise the powers of the National Council between its meetings: Rule 27(a). Meetings of the National Executive were to be held when decided by the National Council or the National Executive or if considered necessary by the National Secretary in conjunction with the National President: Rule 28(a).

63    The powers and duties of the National Secretary were dealt with in Rule 32. They included being the registered officer with power to sue and be sued on behalf of the Union and to control and conduct the business of the Union between meetings of the National Executive.

64    Rule 36 dealt with the funds and property of the Union. Rule 36(b) provided that:

“The funds and property of the Union shall be controlled by the National Council and the National Executive both of which shall have power to expend the funds of the Union for the purposes of carrying out the objects of the Union and all cheques drawn on the funds of the Union shall be signed by two officers of the Union and at least one Trustee. For the expenditure of the funds of the Union on the general administration of the Union and for purposes reasonably incidental to the general administration of the Union, the prior authority of the National Council or the National Executive shall not be necessary before cheques are signed or accounts paid.”

65    Rule 36(g) gave effect to the requirements of s 149(1) of the FWRO Act relating to the approval of loans, grants or donations exceeding $1,000.

66    Rule 35 provided for the appointment of a national auditor and Rule 35A gave effect to the requirements of s 265(1) of the FWRO Act relating to the provision of financial reports to members.

67    Under the Rules Branches were declared to be “the basic unit of the Union.” By Rule 44 the Branches of the Union “shall be completely and absolutely autonomous within the ambit of these Rules, and shall be responsible for their own Government and administration.”

68    The management and control of the affairs of each Branch was in the hands of a Branch Committee: Rule 49(a). Each Branch had officers, including a Branch Secretary: Rule 50(a). The Branch Committee consisted of the officers of the Branch and not less than five nor more than 15 ordinary members who were elected from time to time: Rule 51.

69    The powers and duties of the Branch Committee were dealt with in Rule 52. The powers included the fixing of the remuneration and terms and conditions of employment of officers of the Branch and the taking of any action which, in the opinion of the Committee, was in the interests of the Branch: Rule 52(e), (l).

70    By Rule 56 (Rule 57 from 24 May 2010) the Branch Secretary was to be “the chief executive officer of the branch” and was to “have charge of the general conduct, administration and business, of the branch.” Among the Branch Secretary’s specific powers were powers to:

“(b)    receive or cause to be received all moneys on behalf of the branch and issue receipts and pay all moneys received by him/her on behalf of the Branch into such bank … or any other financial institution as the Branch Committee may from time to time decide;

…

(d)    prepare and present to each meeting of the Branch Committee an up-to-date financial statement and when called upon to do so by the Branch Committee, produce all relevant books;

…

(j)    hand his/her successor, on the latter’s election, all moneys and property held by him/her on behalf of the Branch;

(k)    subject to any direction of the Branch Committee appoint, engage, control and dismiss such clerical and other staff as may be necessary for the conduct of the affairs of the branch;

(l)    prepare returns required by the Industrial Relations Act 1988 (sic);

…”

71    Rule 59 (Rule 64 from 24 May 2010) provided for the appointment, by the Branch Committee, of a branch auditor.

72    Rule 60 (Rule 65 from 24 May 2010) dealt with the funds and property of the Branch. Relevantly it provided that:

“(a)    The funds and property of a branch shall consist of –

(i)    any real or personal property of which the branch by these rules or by an established practice not inconsistent with these rules, has, or, in the absence of any limited term lease, bailment or arrangement would have, the right to custody, control or management;

…

(c)    All cheques drawn on the funds of a branch shall be signed by the Branch Secretary (or in his/her absence the Branch Assistant Secretary) together with any two members of the Branch Committee.

(d)    For the expenditure of the funds of a branch on the general administration of the branch and for purposes reasonably incidental to the general administration of the branch, the prior approval of the Branch Committee shall not be necessary before such cheques are signed or accounts paid.”

73    Rule 60(e)/65(e) gave effect to the requirements of s 149 of the FWRO Act relating to the provision of loans, grants or donations of more than $1,000 from the funds of a branch.

74    Rule 60(c) was amended on 24 May 2010 and renumbered 65(c). It provided that:

“All cheques drawn on the funds of a branch shall be signed by the Branch Secretary (or in his/her absence the Branch Assistant Secretary or, in the HSU East Branch, one of the Deputy General Secretaries) together with any two members of the Branch Committee.

75    Mention should also be made of the provisions of Rule 68(a) (Rule 75 from 24 May 2010). It provided that:

“Should any member of the Union lose any part of his/her salary or wages or be required to work overtime in consequence of his/her having been engaged on the business of the Union or his/her branch under instructions from the National Executive or his/her Branch Committee, the National Executive or his/her Branch Committee, as the case may be, shall may good all such loss or shall remunerate the member at his/her rate of salary for the time occupied by him/her whilst so engaged. Reasonable out-of-pocket expenses shall be allowed [to] members engaged on Union or branch business.”

76    Under Rule 29 elections for national and branch offices of the Union were to take place every four years commencing in 2006.

THE NHDA TRANSFERS

77    In the course of 2003 a dispute arose between the Victoria No 3 Branch of the HSU (of which Ms Jackson was the Branch Secretary) and the Peter MacCallum Institute. The dispute related to what were said to be underpayments of wages to employees who were, or were entitled to be, members of the Branch. A settlement was negotiated. One of the terms of settlement was that the Institute would pay $250,000 to the Union. The Union, for its part, undertook not to pursue the Institute for penalties for breaches of the relevant Award. The money was duly paid into an account maintained by the Branch. This occurred in September 2003.

78    On 4 December 2003 Ms Jackson opened a Commonwealth Bank of Australia (“CBA”) account entitled “National Health Development Account.” She intimated, in the relevant authority, that the account was held by an unincorporated association. She did not name that association but certified, as the chairperson or chief officer of the association, that authority had been given for the opening and operation of the account “by resolution passed at a legally constituted meeting of the Committee Members of the Association.” Ms Jackson nominated herself as the only person authorised to obtain information relating to the account and to endorse cheques drawn on it.

79    Despite what she told the bank, Ms Jackson asserted, in her Defence, that “the NHDA was a (sic) nothing more and nothing less than a bank account.”

80    Between February 2004 and October 2010 a series of payments was made from Branch accounts into the NHDA account. These payments totalled $284,500.

81    In her Defence Ms Jackson claimed that these transfers had occurred pursuant to three resolutions of the Branch Committee of Management.

82    The first of those resolutions was said to have been adopted in 2004. In paragraph 66 of her Defence Ms Jackson said that:

“In early 2004 the BCOM discussed what should be done with the windfall ‘Peter Mac money’ and resolved it should be earmarked as a discretionary fund to be spent over time to advance the industrial and political interests of the Vic 3 Branch and the Union more generally (Fund) and authorised Jackson to spend that money at her discretion for the purposes specified in the resolution, including an amount of $4,000 that she was authorised to spend on her own personal expenses …”

(“the 2004 resolution”).

83    The date of the meeting on which the resolution was said to have been carried was not identified. Nor was there any evidence as to who had moved and seconded the purported motion.

84    Although Ms Jackson claimed that this resolution was recorded in the minutes of the Branch Committee of Management, no such minute was in evidence. There is reason to doubt that any such resolution was passed in “early 2004” (if at all). Ms Jackson claimed that the NHDA account had been opened in order to implement the resolution. As already seen, the account was opened on 4 December 2003. Furthermore, Ms Jackson left Australia later in December and did not return until March 2004. The first transfer from the Branch account into the NHDA account occurred in February 2004 whilst Ms Jackson was overseas.

85    There were two later resolutions of the Branch Committee of Management on which Ms Jackson relied. In 2008 the Committee resolved that:

“HSU Vic 3 Branch fund the NHDA up to $90,000 per annum for the next three years.”

(“the 2008 resolution”).

86    In 2010 the Committee of Management resolved that:

“HSU Vic 3 Branch fund the NHDA up to $90,000 for the next financial year.”

(“the 2010 resolution”).

87    In her Defence Ms Jackson admitted that, at the time of transfer into the NHDA account, all of the monies were funds of the Branch but she denied that, following the transfer, the funds continued to be subject to the control or management of the Branch Committee of Management. She further asserted that she regarded all of the monies transferred from the Branch account to the NHDA account as “monies that she was obliged to spend in accordance with the [Committee of Management] approval.” In an affidavit, filed by her in the proceedings, she repeated this assertion saying:

“I say that every transfer of money to the NHDA account and every expenditure of monies by me out of the NHDA account was within the [Committee of Management] approval …”

88    The use to which monies which were transferred from the Branch account to the NHDA account were put throws some light upon Ms Jackson’s understanding of what constituted the advancement of the industrial and political interests of the Branch and the Union. In her affidavit she deposed that monies held in the NHDA account had been expended by her for a range of purposes including:

    making contributions to candidates in various union elections;

    contributions to various ALP electoral candidates or for other ALP purposes;

    the funding of “political/industrial project work”; and

    the funding of litigation “where the interests of the Union were at stake”.

Despite this deposition Ms Jackson did not plead, in her Defence, that she had applied the funds in the NHDA account for the purposes identified in the 2004 resolution or for any of these specific purposes.

89    Ms Jackson sought to explain why it was necessary to devote Union funds for such purposes. In a lengthy but illuminating passage in her affidavit she deposed that:

“The basic factional distinction within the ALP is the distinction between ‘the Left’ and ‘the Right’. That distinction has a long history but became all-consuming in the 1950s and 1960s and reflected the broader geo­political struggle for and against Communism and Socialism.

Under the Rules of the ALP voting on things connected with the acquisition and exercise of power within the ALP and within government when the ALP is in office at a State or Federal level, for example votes to determine who will be pre-selected for a safe ALP seat, turns on the votes of affiliated Unions where the votes of those Unions is weighted according to the number of members.

It is true that Unions only exercise 50% of the total voting power within the ALP and that the other 50% may be exercised by the members of the ALP. However, for many years, the membership of the ALP has been disengaged (including as a consequence of branch stacking where the ‘branch stacked’ members typically have no interest in participating in ballots of members and it is rare for the votes of members of the ALP to be determinative (a rule proved by the occasional exceptions, for example Martin Pakula's challenge to Simon Crean in the preselection for the seat of Hotham).

Some unions, for example, the ANF (‘the Nurses’), the CPSU, the AEU (‘the Teachers’) and the NTEU (the tertiary education union), choose not to be affiliated to the ALP.

Some smaller unions are affiliated to the ALP but do not actively engage in ALP politics. However, most of the big unions are affiliated to the ALP and participate actively in the factional politics of the ALP.

Union affiliation to the ALP occurs at the State level. Affiliated Unions will usually have an allegiance to either the Left or the Right and allegiance that is determined by history and the political allegiances of the person or persons who have practical control over the Union. Affiliated Unions typically deploy their ALP votes as part of a factional block arranged and or directed by the factional leaders.

The ‘factional warlords’ are the factional leaders who can arrange and coordinate the votes of a group of affiliated unions from time to time or more generally. The position is complicated. Some unions are blindly loyal to a factional warlord, others have a looser allegiance and will sometimes pursue their own agendas and may allow federal considerations to withhold support in a particular circumstances.

The main Right unions were and remain the AWU, TWU, SDA (the ‘shoppies’), NUW (the old Storemen and Packers) and HSU (Vic 1 and Vic 3, and then HSU East Branch). The main Left unions were the AMWU (the ‘Metal Workers’), the CFMEU, CEPU (including the ‘Plumbers’ and the ‘Electricians’) and United Voice (the old ‘Miso’s’).

In unions with autonomous branch rules, the Left/Right division can occur within the union, with some autonomous branches aligning with the Left and some with the Right. That was the case with the HSU. Historically the HSU was a Left union. NSW, Vic 1 and Vic 3 each shifted its alignment to the ALP Right over time. Tasmania No 1 (Chris Brown) and Victoria No 2 (Lloyd Williams) and Vic No 4 (Rosemary Kelly) were always aligned with the ALP Left. Nationally, the HSU was regarded as Right union because the overwhelming majority of its members were in Branches that were aligned to the Right. In Tasmania, the HSU is a left union.

As at September 2011 the Right in Victoria was called ‘Centre Unity’ and had a series of sub-factions each headed by a factional warlord. Bill Shorten, Stephen Conroy and David Feeney were those factional warlords. Shorten had the unwavering support of the AWU (his hand picked successor, Cesar Melham), Conroy had the unwavering support of the TWU, David Feeney had the support of the HSU Vic 1 and Vic 3 branches. The SDA and NUW, the other main Right unions were inclined to support Feeney but tended to act with a greater degree of independence driven by Federal considerations.

For many years there has been an agreement or understanding in both NSW and Victoria that has seen the available parliamentary seats ‘divided’ up between the Left and the Right. Generally speaking, the Right does not contest ‘Left’ seats vice versa. When a safe ALP seat that ‘belongs’ to the Right becomes vacant there will usually be a candidate selected by the Right factional warlords who will receive the votes of the Right unions in the POSC pre-selection ballot and thus be preselected.

Occasionally there is a contest between the factional warlords of the Right as to who should be the Right’s candidate for preselection to fill a ‘Right’ vacancy in a safe ALP seat or a viable spot on the Senate ticket. In this context the broader deal may [be] compromised and a Right factional warlord will form an alliance of convenience with the Left in return for some quid pro quo. That occurred in Centre Unity in (sic) when Shorten and Conroy joined with the Left's Carr to freeze out David Feeney.

Left-Right factional warfare will occur if the Left seeks to take over a branch or division of a union that ‘belongs’ to the Right or vice versa. However, there can also be factional warfare within the Left or Right factions. Thus, in the 2009 election for the No 1 Branch there was a three cornered contest between candidates supported respectively by Conroy, Shorten and Feeney.

One cannot be a factional player within the ALP without money. Factional contests for control of a branch of a union are invariably vicious affairs that ultimately sound in an election contest with competing candidates backed by the respective factions. It costs a large amount of money to post an election mail-out to the members of a branch. It costs money to print flyers and undertake advertising. There are a myriad of costs associated with conducting a successful election campaign in a contested union election.

Moreover, a factional player also needs alliances with ALP politicians. Such alliances serve a variety of purposes including the legitimate purpose of ensuring that the union has an ear in government so that legitimate objections to government policies or decisions (for example, whether or not a laundry function in a public hospital will be outsourced) can be advanced effectively. Supporting ALP politicians, whether at the local, State or Federal level involves contributing money to assist with the cost of their election campaigns and the various other expenses associated with standing for office – often including the need to pay for branch memberships of groups of people organised by the candidate or one of their factional supporters. In this context ethnic communities become significant, as do the people who can marshal support within an ethnic community.

In short, one cannot be an ALP factional player without access to a fighting fund, and without the need to deploy funds in a manner that is kept secret and ignores disclosure obligations because the funds are being deployed in circumstances that ‘must’ be kept secret. There is a ‘code of omerta’ that is implicitly recognised by participants in the ALP factional system – one must never get caught doing things that will cause public embarrassment and one must never talk publicly of things that will cause negative publicity for the ALP or an ALP government. Breaking of this code can have very bad consequences for the individual. People know that and usually do not want to be associated with the person who is airing the dirty linen lest they make themselves a target by association.”

90    These disarmingly frank disclosures explain a great deal about Ms Jackson’s conduct as a Union official. She emerges as an active participant in factional politics both within the union movement and in the party political environment. She saw it as entirely proper for the Branch Committee of Management, of which she was a member, to pay substantial sums of members’ money into a bank account which she alone controlled. She had chosen an ambiguous title for the account and represented (falsely) that she was the chairperson or chief officer of a non-existent unincorporated body which had authorised her to open the account. Once the funds were in the account she expended them, at her discretion and in secrecy. The members were told very little about the purpose of the payments from the Union accounts and nothing about the expenditure of those funds once they were in the NHDA. Ms Jackson appears to assume that the expenditure of members’ funds to advance factional causes would, in some way, be beneficial to them. She does not explain how or why this would be so. How, for example, would members of her Branch benefit from their money being used secretly (and, probably, unlawfully) to fund the election campaigns of candidates in other branches or other unions? How could the use of Branch funds for “branch stacking” in a political party assist the members?

91    Another feature of Ms Jackson’s approach to being a “factional player” who was a participant in “factional warfare”, which also had a bearing on other claims made by the HSU in these proceedings, is the blurring of the distinction between personal and Union interests. The strengthening of the position of the factional warrior who holds a Union office is assumed to advance the interests of the Union and its members. This mindset readily evolves into a pervasive sense of entitlement, on the part of the office holder, to utilise the Union’s resources to advance his or her personal interests.

92    Under the Rules the funds were the property of the Branch prior to their transfer to the NHDA account. If, as Ms Jackson claimed, the NHDA account was nothing more nor less than a bank account which she controlled and operated for the benefit of the members, the transferred funds should have been accounted for in annual financial reports provided to the members. This was not done. When, belatedly, the Branch auditor, in 2009, queried payments from a Branch account into the NHDA, Ms Jackson provided a response. The auditor recorded the information which was given to him:

“Amounts are paid at the discretion of Kathy, no invoice or supporting documentation to support amount being paid.

NHDA is the National Health Development Account. All branches contribute to this account for research/campaign purposes … The payments are made at the discretion of the Branch Secretary or when the National Office requests it …

Based on discussion with Branch Secretary, Kathy Jackson, she confirmed that the amount of $45,500 was authorised by her for payment into the NHDA.”

93    The auditor apparently accepted this explanation at face value. He does not appear to have taken the view that, once the transfer had occurred, the funds remained the property of the Branch. They were not included in the Branch accounts. In those circumstances it is surprising that the monies were not treated, for accounting purposes, as a grant or donation to the NHDA under s 149(1) of the FWRO Act or as employee benefits paid to Ms Jackson.

94    As time went on, as will shortly be seen, Ms Jackson regularly drew on the NHDA account for personal discretionary spending thereby emphasising that she treated the money, in that account, as being available to her for whatever purpose she deemed appropriate.

95    Ms Jackson did not dispute the HSU’s allegation that, between February 2004 and October 2010, $284,500 was transferred from Branch funds to the NHDA.

96    The bank statements for the NHDA were in evidence. They disclosed the following deposits:

97    For most of these transactions the statements record that the transfer was made from the Union’s Victoria No 3 Branch account using Netbank. Although the last two transfers were recorded as having come from the Victoria No 3 Branch account, that Branch had ceased to exist on 24 May 2010.

98    Other relevant evidence came from a long-standing member of the Branch Committee of Management. Ms Olga Gountras was a member of the Committee between 1994 and 2009. During this period she attended about 100 meetings of the Committee. Ms Gountras had never heard of the NHDA. She had no recollection of the 2004 resolution having been passed, although she conceded that she had missed meetings between 25 April and 30 June 2004 whilst she was overseas. The Committee was told, on occasions, that the NHDA funds were a “health fund contribution”. Ms Jackson had never advised, at any meeting at which Ms Gountras had been present, that she (Ms Jackson) had transferred or was proposing to transfer Branch funds into an account which Ms Jackson alone controlled.

99    Over the relevant period all of the monies transferred from Branch accounts into the NHDA were expended by Ms Jackson. The bank statements provide some insight into the manner in which and the purposes for which Ms Jackson used funds drawn from the NHDA account. There were, for example, a large number of cash withdrawals from automatic teller machines. The HSU invited the Court to draw inferences about the purposes for which the funds were drawn. The first cash withdrawal following the first transfer of $80,000 into the account on 27 February 2004 occurred early in the following month. Ms Jackson was in the United States at the time. She withdrew US$500 from a machine in Las Vegas. She remained in the United States for some weeks. During this time she made a series of further withdrawals from cash machines. A further cash withdrawal was made at Heathrow Airport late in March. Similar withdrawals occurred on later overseas trips undertaken by Ms Jackson and some withdrawals occurred on the eve of her departure on those travels. The Union invited the Court to infer that Ms Jackson used this money for private purposes whilst she was on holidays. On other occasions large cash withdrawals were made and, within a short period, deposits of similar amounts were made into other accounts controlled by Ms Jackson. Again, the Union invited the conclusion that these cash withdrawals were used to satisfy various personal financial obligations of Ms Jackson.

100    The Union submitted that an analysis of the expenditure from the NHDA account showed that it fell into seven broad categories. They were:

    deposits into Ms Jackson’s personal accounts ($102,300);

    expenditure on Ms Jackson’s divorce settlement ($102,000);

    withdrawals just prior to her embarking on holidays ($55,900);

    expenditure during holidays ($8,387);

    personal retail expenditure ($8,084);

    other small cash withdrawals ($27,480); and

    political expenditure (approximately $82,000).

The HSU’s analysis is substantially supported by bank statements and other documentary evidence. For reasons which I will shortly explain it is not necessary to deal with each item of expenditure from the NDHA account.

101    When, on 24 May 2010, the Victoria No 3 Branch amalgamated with other Branches to form the HSU East Branch, Ms Jackson became the Executive President of the new amalgamated Branch and held this office until she was removed on 21 June 2012. At the time of the merger Ms Jackson was required under the Rules (see Rule 48B(f)) to cause all funds of the Victoria No 3 Branch to be transferred to the new HSU East Branch. She did not transfer any of the funds then standing to the credit of the NHDA account to the new Branch. These funds were retained in the NHDA account and were supplemented by two further payments from an account which continued to be held in the name of the Victoria No 3 Branch after the merger. On 27 May 2010 $12,000 was transferred and a further $6,000 was transferred on 13 October 2010. The HSU contended that these payments had been made by or at the direction of Ms Jackson. In her Defence she admitted this allegation even though the No 3 Branch no longer existed at these times. What is, however, uncontroversial is that, after the merger of Branches in May 2010, Ms Jackson continued as the sole signatory to the NHDA account and that she made multiple withdrawals from it for domestic and other purposes.

102    When the HSU East Branch was dissolved, by order of the Court in 2012, Flick J ordered that persons holding offices in the Branch (including Ms Jackson) were to transfer to the Administrator all property of the Union in their possession: see: Brown v Health Services Union (2012) 205 FCR 548 at 604 (Flick J). Ms Jackson did not transfer any of the funds held in the NHDA account to the Administrator. On the contrary, she continued to make withdrawals from the account until it was entirely depleted in 2013.

103    Ms Jackson’s conduct strongly suggests that she believed that, once monies were transferred, at her direction, from Branch accounts into the NHDA account, they became her funds which were available to her to be expended in her unfettered discretion or in the exercise of a discretion fettered only by a requirement that she spend the monies on what she perceived to be the broadly expressed purposes identified in the 2004 resolution.

104    The HSU submitted that the 2004 resolution had not been adopted by the Branch Committee of Management. It further contended that, even if such a resolution had been passed, it did not authorise the transfers made by Ms Jackson. It accepted that the 2008 and 2010 resolutions had been carried but submitted that they did not authorise any of the subsequent transfers. The Union further submitted that each of the transfers had been made without the informed consent of the Committee and that they constituted a grant or donation to the account of Ms Jackson and were a related party transaction which had not been disclosed to the members.

105    Ms Jackson admitted in her Defence that each of the transfers had been made by or at her direction. She denied that the Branch Committee of Management had not approved the making of each transfer, that it had not been informed of any interest which she had in the NHDA account, that it had not passed a resolution authorising the making of a donation or payment to the NHDA account or to her and that the Committee had not been informed that the transferred payments constituted a related party transaction.

106    The precise terms of the alleged 2004 resolution were not in evidence. The paraphrased version of the resolution which appeared in Ms Jackson’s Defence did not authorise the creation of an account which was to hold funds which had been transferred from a Branch account but which were not to be treated thereafter as Branch funds for accounting purposes. Nor did the resolution authorise Ms Jackson (or anybody else) to establish an account entitled the NHDA or to transfer funds from Branch accounts into the NHDA account. The purported authority giving Ms Jackson unfettered discretion to spend $4,000 of Union money “on her own personal expenses” constituted the authorisation of additional remuneration for Ms Jackson. She did not, however, apparently regard it as such because it was not disclosed, once drawn down by her, as part of her income for tax purposes. Moreover, Ms Jackson was the only person authorised to operate the account. In a practical sense any transfer to the account, at least to the extent of $4,000, constituted a “grant” to her. There was, however, nothing in the resolution to record that the Committee of Management had satisfied itself that the making of the grant was in accordance with the Rules as required by s 149(1)(a)(i) of the FWRO Act and the Union Rules made to give effect to it.

107    The 2008 and 2010 resolutions were even less specific. They did no more than provide that the Branch fund the NHDA up to a particular amount during a particular period. The NHDA was the name of an account not a body corporate or unincorporate. A decision that the account be funded could have meant no more than that money should be paid into it. The resolutions did not, in terms, authorise Ms Jackson (or anyone else) to transfer Branch funds to the NHDA. Even if such authority could be implied, having regard to Ms Jackson’s powers under the Rules as Branch Secretary, she could only act to implement the resolutions if the relevant payment could be made consistently with those Rules.

108    Minimal details were provided to the Committee of Management about the NHDA and expenditure made from it. Ms Jackson did not assert, in her Defence, that she had informed the Committee about details of the account such as its purported status as the operating account of an unincorporated association of which she was the chairperson or chief officer or that she was the sole signatory authorised to operate the account. Nor does it appear that she ever advised the Committee of Management that she held a credit card that enabled her to draw down cash from the account at whim. No invoices were raised before amounts were transferred from Branch accounts to the NHDA. No financial statements were provided to the Committee relating to the expenditure of funds from the NHDA. The auditor was falsely advised by Ms Jackson, in 2009, that all Branches contributed to the account “for research/campaign purposes” and that the payments might be made out of the NHDA account if requested by the National Office of the Union.

109    Ms Gountras’s evidence confirms that little, if any, information about the NHDA account was ever given to the Committee. On at least one occasion the Committee was misled when the members were advised that monies paid into the account were for a health fund contribution.

110    The Union’s contention that the Branch Committee of Management had not given informed consent to the transfer of funds into the NHDA should be accepted.

111    Ms Jackson did not, in her Defence, contest the allegations that the payments were related party transactions or that the Branch’s financial statements over the relevant period had not identified any related party transactions.

112    The HSU contended that Ms Jackson had contravened s 287(1) of the FWRO Act and s 182 of the Corporations Act by improperly using her positions as Branch Secretary of the Victoria No 3 Branch and Executive President of the HSU East Branch to gain an advantage for herself or others.

113    The constraints imposed on officers and employees of corporations by s 182(1) of the Corporations Act are applied by reference to an objective standard. Impropriety “consist[s] in a breach of the standards of conduct that would be expected of a person in [the particular] position by reasonable persons with knowledge of the duties, powers and authority of [that] position … and the circumstances of the case …”: Doyle v Australian Securities and Investments Commission (2005) 227 CLR 18 at 28.

114    In their joint judgment in R v Byrnes (1995) 183 CLR 501 at 514-5, Brennan, Deane, Toohey and Gaudron JJ said that:

“Impropriety does not depend on an alleged offender’s consciousness of impropriety. Impropriety consists in a breach of the standards of conduct that would be expected of a person in the position of the alleged offender by reasonable persons with knowledge of the duties, powers and authority of the position and the circumstances of the case. When impropriety is said to consist in an abuse of power, the state of mind of the alleged offender is important …: the alleged offender’s knowledge or means of knowledge of the circumstances in which the power is exercised and his purpose or intention in exercising the power are important factors in determining the question whether the power has been abused. But impropriety is not restricted to abuse of power. It may consist in the doing of an act which a director or officer knows or ought to know that he has no authority to do.”

(Emphasis added).

115    It is, therefore, possible for a director to act improperly even if the director has no intention of acting dishonestly or otherwise than in the best interests of the company: see Chew v R (1992) 173 CLR 626 at 640 (Dawson J), 647 (Toohey J).

116    The approval of the withdrawal of a corporation’s funds and the making of such withdrawals by a director or officer who lacks the authority to make them and the subsequent application of such funds for the personal purposes of the officer constitutes a contravention of both ss 181 and 182 of the Corporations Act: cf Re Wan Ze Property Development (Aust) Pty Ltd (2012) 90 ACSR 593 at 601-2 (Black J).

117    There is no material difference between the provisions of s 182 of the Corporations Act and s 287 of the FWRO Act. The same principles should apply to the construction and application of both provisions.

118    During the period in which it operated, the NHDA account received a series of credits of funds drawn from the Victoria No 3 Branch account. Each of these transfers was effected by Ms Jackson or by someone else at her direction. The propriety of each of these transactions is to be assessed at the time at which they occurred. The transfers occurred as part of a course of conduct in which Ms Jackson engaged. The transactions occurred over a period exceeding five years. At the time each transfer occurred (apart from the first) Ms Jackson can be taken to have known how the money, previously in the account, had been expended and the reporting and accounting treatment (or lack of it) of that expenditure. This knowledge will inform any objective assessment of the efficacy of each of the transfers.

119    On each occasion Ms Jackson well knew that the funds drawn down from the Branch account were the property of the Union. She either knew or should have known that the payments to an account controlled solely by her had not been authorised by the Branch Committee of Management. What, according to her Defence, the Committee had agreed was that the “windfall ‘Peter Mac’” money, which was held in a Union bank account, would be “earmarked as a discretionary fund”. It was “to be spent over time to advance the industrial and political interests of the … Branch and the Union more generally …” She had, according to her narrative, been authorised to “spend that money at her discretion” for those purposes. In addition, $4,000 of the “earmarked” money could be spent “on her own personal expenses …” I note, in this context, that, although Ms Jackson’s rendition of the purported 2004 resolution contained provision for a one off payment of $4,000 to her from the “windfall ‘Peter Mac’” money, elsewhere in her Defence (at paragraph 120) she asserted that the resolution provided for her to “spend an amount of $4,000 per annum on her personal expenses” (emphasis added).

120    The purported resolution did not authorise the establishment of an account of the kind which Ms Jackson established and in which the transferred funds were no longer to be regarded as funds of the Branch. Nor did it authorise the establishment of an account which was not subject to the reporting and auditing requirements of the FWRO Act or the Union Rules. As Branch Secretary Ms Jackson knew, or should have known, that, had the “earmarked” Branch funds been, as they should have been, in a Branch account, albeit one separately created for the purpose, it would have been necessary for all payments into the account and payments out of it to have been accounted for and audited. This would have required Ms Jackson to report and justify all of the payments out of the account. She would, for example, have had to explain to the Branch Committee of Management why it was she withdrew large cash payments whilst overseas on holidays or in anticipation of them. She would have had to attempt to justify expenditure for unlawful purposes such as the funding of election campaigns in the Branch, other Branches of the Union and in other Unions. This she plainly did not wish to do. Rather, she wished to advance her own interests, both personal and political. If the funds in the NHDA account were not, as Ms Jackson claimed, the funds of the Branch, each of the transfers to the NHDA account from Branch funds constituted a grant. Under Rule 60(e) such grants could not be made unless they had first been approved by the Committee of Management.

121    The creation of the NHDA account and the payment of Union funds into it by Ms Jackson were improper within the meaning of both s 182 of the Corporations Act and s 287 of the FWRO Act. Ms Jackson had no authority to deal with Union funds in this way. I readily infer that Ms Jackson well knew this when she created the NHDA account and paid successive sums into it. At the very least she ought to have known that she lacked authority of the Union to so act.

122    Each of the payments resulted from the improper use, by Ms Jackson, of her positons as Branch Secretary or Executive President. None of the payments was authorised in accordance with the Rules. In each case s 287 of the FWRO Act was contravened.

123    The Court has a discretionary power, under s 307 of the FWRO Act, to order a person who has contravened a civil penalty provision, such as s 287, to pay compensation to an organisation when damage results from the contravention. A similar power is conferred by s 1317H of the Corporations Act in respect of contraventions of civil penalty provisions in that Act.

124    Ms Jackson should be ordered to pay $284,500 to the HSU, by way of compensation, for damage caused to it by reason of her contraventions of s 287.

125    The Union advanced alternative causes of action on the assumption that the transferred funds remained the funds of the Branch while in the NHDA. These claims emphasised the failures to account to the members for the expenditure from the fund and the unauthorised nature of that expenditure. It is not necessary, having regard to my principal findings, to pursue these alternative claims.

CASHED CHEQUES

126    Between July 2007 and May 2010 at least 38 cheques were drawn on the Victoria No 3 Branch account authorising payment in cash. The total of the amounts drawn, using these cheques, was $239,837. A further $19,900 was drawn from the HSU East Branch account using two “cash” cheques between 24 May 2010 and 30 June 2010.

127    Ms Jackson signed each of the 40 cheques. None of them was countersigned by two other members of the Branch Committee as required by Rule 60(c). Five of the cheques were signed by Ms Jackson between 4 February 2008 and 19 May 2008. During this period Ms Jackson was not the Branch Secretary.

128    The amounts for which the cheques were drawn ranged from $500 to $12,000. Twenty of the cheques were presented on the eve of Branch Committee of Management meetings.

129    At each meeting of the Committee Ms Jackson gave $100 in cash to each of the members attending. These usually numbered 10 or 11. She retained the rest of the cash herself. Once in Ms Jackson’s hands the expenditure of these monies was not reported in the Branch’s financial returns or audited by the Branch auditor.

130    In her Defence Ms Jackson admitted that she had used funds from this “kitty” for personal purposes. Specifically, she admitted that:

    $4,500 drawn using a cashed cheque dated 19 May 2008 formed part of a cash deposit into a credit union mortgage account operated by her and her then husband on 29 May 2008;

    $7,500 drawn using a cashed cheque dated 24 December 2008 was used to fund a $5,000 cash deposit on the same day into the mortgage account; and

    $3,000 of $6,000 drawn using a cashed cheque dated 29 September 2009 was paid into a personal account of Ms Jackson in the CBA on the same day.

131    On 3 July 2008 the Branch Committee of Management passed a resolution in these terms:

“That the honorarium and training/conference allowances to be paid up to $9500 per meeting to the [Branch Committee of Management], this would be paid in cash at every meeting that was attended.”

(“the 2008 resolution”).

A further resolution, in the same terms save that the amount stipulated was $9,800, was passed by the Committee on 24 February 2010 (“the 2010 resolution”).

132    The HSU contended that neither of these resolutions authorised any of the withdrawals which had occurred between July 2007 and May 2010.

133    In her Defence Ms Jackson admitted that the 2008 resolution did not authorise the payments made prior to 3 July 2008 but she denied that it did not have effect thereafter.

134    In seeking to justify the withdrawals made before the 2008 resolution was carried she pleaded that:

“Jackson says that years prior to 2008, and before any of the cash cheques identified as referable to ‘honorarium and training/conference allowances’, the [Branch Committee of Management] approved the payment of such amounts to the branch committee of management who, by agreement, in turn, donated all but $100 of the amount referable to them back to the union for use as discretionary funds, which amounts were retained by Jackson in a metal box and referred to as the ‘Kitty’ for use by her at her discretion, to advance the industrial and political interests of the Branch and the Union.”

(“the pre-2008 resolution”).

135    The pre-2008 resolution which was said to have supported the practice was not in evidence. Ms Gountras had no recollection of any such resolution ever being passed by the Committee of Management.

136    Ms Gountras did recall that the Branch Committee of Management had approved the payment of sitting fees of $100 cash per member per meeting. Such payments were made at meetings which she had attended between 2007 and 2009. She was, however, adamant that no additional money had been paid to her and then handed back to Ms Jackson as a “donation” to the Union. She deposed that:

“As to what happened in reality, it would be wrong to say that at a BCOM meeting I was given a large sum (say $400 or $800) and donated all but $100 back to the Branch or to a ‘kitty’. There was no such arrangement or any similar arrangement that I was party to or aware of. I never donated any money to the Branch. I never saw any sum of cash being distributed at BCOM meetings, other than the $100 sitting fee to each person present. I never saw, or was told about, any BCOM member making such donations or receiving anything other than the $100 sitting fee. I did not know of any kitty that Ms Jackson refers to.

The true arrangement when Ms Jackson was branch secretary and sitting fees were reinstated was simple: each BCOM member received a $100 sitting fee for each BCOM meeting attended.”

137    The two remaining cheques were drawn following the Branch amalgamation that produced the HSU East Branch in May 2010. At the time these cheques were drawn Ms Jackson was not the Secretary of the Victoria No 3 Branch. The funds and property of the former No 3 Branch had become the property of the new Branch. Ms Jackson was not the Secretary of that new Branch. In her defence Ms Jackson sought to justify these withdrawals as follows:

“Upon the amalgamation taking effect, Mr Williamson, as General Secretary of the HSU East Branch and the HSUeast, gave Jackson lawful instructions to

(a) continue conducting the financial affairs of the old Vic 3 Branch portion of HSU East Branch/HSUeast on a “business-as-usual” basis until such time as the necessary merging of accounts and accounting functions for the three amalgamating branches had been finalised; and

(b) continue using her existing Union credit cards as her ongoing Union credit cards to meet work related expenses incurred by her.

Williamson had authority to give that direction and Jackson was authorised thereby.”

There was no evidence that any such instruction had been given to Ms Jackson by Mr Williamson.

138    Under Rule 68 of the Branch Rules the Branch Committee of Management of the Victoria No 3 Branch had power (until the dissolution of the Branch in May 2010) to authorise payment of Branch funds to compensate Committee members who had incurred expense in attending Committee meetings. The Branch Committee of Management did not, however, have power, under the Rules, to authorise the making of payments to Committee members so that those Committee members might “donate” those monies to the Union or the Secretary in order that such funds could be disbursed at the discretion of the Branch Secretary. To the extent that any of the pre-2008, 2008 or 2010 resolutions purported to authorise these additional drawings, they were ultra vires the Rules.

139    In any event, I do not accept that Branch Committee of Management members were paid cash sums in excess of $100 at any of the Branch meetings. This is confirmed by Ms Gountras’s evidence. There were, therefore, no donations made by Branch Committee of Management members to the “kitty”. Ms Jackson simply kept this additional cash with the intention of using it as she wished.

140    There was no obstacle, under Rule 68, to expenses being paid in cash to Branch Committee of Management members. Ms Jackson could, therefore, have drawn cash from Branch accounts using appropriately endorsed and signed cheques. None of the 40 “cash” cheques bore the necessary number of authorised signatories. Ms Jackson herself had no authority, under the Rules, to sign the cheques used to draw cash between 23 January 2008 and 19 May 2008 and between 24 May 2010 and 30 June 2010.

141    Twenty of the 40 cash withdrawals did not coincide with Branch Committee of Management meetings and I infer that none of the cash produced by these withdrawals was paid to Branch Committee of Management members.

142    Apart from the amounts paid to Branch Committee of Management members, each of the withdrawals was unauthorised. They were improper for this reason and because the cheques used to make the drawings were not countersigned by two Branch Committee of Management members other than Ms Jackson and were, in some instances, signed by Ms Jackson when she was not Branch Secretary.

143    It was Ms Jackson’s duty, under Rule 56(d), to prepare and present an up-to-date financial statement to each meeting of the Branch Committee of Management. She was also required to prepare the returns which had to be presented in accordance with the FWRO Act. The cash withdrawals were falsely recorded in the general ledger of the Branch under headings such as “honorarium”, “professional development” and “conference/seminar” expenses.

144    Some, at least, of the withdrawals were undertaken by Ms Jackson with the intention of using the funds for personal purposes. The temporal proximity of the withdrawals from Branch accounts and deposits into personal accounts which Ms Jackson admitted had occurred, strongly supports such an inference.

145    Ms Jackson was responsible for each of the withdrawals. She retained the bulk of the cash to be used at her discretion. She thereby used her positions, as Branch Secretary of the Victoria No 3 Branch or as Executive President of the HSU East Branch, improperly to gain an advantage for herself (and, in some instances, her former husband) and thereby contravened s 287 of the FWRO Act. She also contravened s 182 of the Corporations Act.

146    The HSU is entitled to be recompensed for the losses it sustained because of Ms Jackson’s contraventions.

147    In order to calculate the Union’s losses as a result of these contraventions by Ms Jackson it is necessary to make allowance for that part of the cash withdrawals which was likely to have been paid by way of attendance fees to members of the Branch Committee of Management. Those calculations have been made in the following table:

148    A compensation order in the sum of $238,937 should be made.

THE $63,000 HONORARIUM

149    On the eve of the amalgamation of the Victoria No 3 Branch with other Branches to form the HSU East Branch, the Branch Committee of Management of the Victoria No 3 Branch passed a resolution which, purportedly, authorised the payment of $63,000 to Ms Jackson. On 23 March 2010 the Committee resolved that:

“The BCOM also reminded the Secretary that she had not claimed the $21 000 honorarium that she has been entitled to for the past 3 years, and she should arrange payment. The BCOM also noted that the Secretary should be paid the full $21 000 honorarium in total, for this financial year, not pro rata, regardless of the date of amalgamation as a sign of thanks and appreciation for her service to health professionals.”

150    The amalgamation took effect on 24 May 2010.

151    On 30 June 2010 Ms Jackson wrote a cheque for $63,000 on an account operated by the HSU East Branch. The cheque was made payable to her. She signed it. It was countersigned by one but not two members of the HSU East Branch Committee of Management.

152    At the time that the resolution was passed by the Committee of Management of the Victoria No 3 Branch Ms Jackson was not an employee of that Branch. She had not been since January 2008 when she assumed duties as National Secretary of the Union. As National Secretary she held a full time paid office under the Rules and her remuneration was fixed by the National Council: see Rules 19 and 21(c).

153    A question immediately arises as to the authority of the Branch Committee of Management of the Victoria No 3 Branch to adopt the relevant resolution. Although it had broad powers to manage and control the affairs of the Branch, to fix the remuneration of the officers of the Branch and to take any action which was in the interests of the Branch (Rules 49(a), 52(e) and 52(l)), it had no express powers to grant honoraria to Branch or National Officers. It is to be borne in mind that, during the period to which the payment of the honorarium related, Ms Jackson was an officer, but not an employee, of the Branch. In the absence of any express provision, in the Rules, for the making of payments to honorary office holders, Ms Jackson had no entitlement to this additional remuneration: cf Guinness PLC v Saunders [1990] 2 AC 663 at 690.

154    Ms Jackson sought to justify her transfer of HSU East Branch funds to herself on a number of bases. The first was that “there had been a history of honoraria being paid to persons in respect of their unpaid offices under the Rules, both to national officers and senior branch officials, without any challenge to the lawfulness of the resolutions of the National Council in relation to the National Officers and or the relevant BCOM.” Whether or not such a practice existed (and there was no evidence of it before the Court) such a practice could not be the source of the relevant authority. Ms Jackson next contended that, “in conferring [the] honorarium, the Victoria 3 Branch BCOM acted reasonably and within its authority”. That authority was said, by her, to be derived from Rule 68. That Rule provides for the recompense of Union members who lose part of their salary or wages by being engaged on Union business. Ms Jackson had lost nothing during her period as National Secretary. She had the benefit of a salary, fixed by the National Council at $173,331.16 per annum.

155    Ms Jackson next pleaded that she was “entitled to full time remuneration under the Rules by virtue of holding office.” No such entitlement is conferred by the Rules.

156    Ms Jackson also sought to defend her position by contending that she was a disinterested beneficiary of the largesse of the Branch Committee of Management. This defence is unsustainable. The Committee of Management of the Victoria No 3 Branch had no authority, under the Rules, to authorise the payment of the honorarium. As a result Ms Jackson had no authority to pay herself the $63,000 from the funds of the amalgamated Branch using a cheque which had not been signed by the required number of Committee of Management members. Ms Jackson either knew or ought to have known that the Rules did not authorise the passing of the resolution, her giving effect to it and the manner in which she did so. Even had she been disinterested (which I doubt) in relation to the process whereby she acquired these monies, those processes were tainted with impropriety.

157    Ms Jackson acknowledged that the cheque which she signed was drawn on the HSU East Branch account after the amalgamation had occurred. She asserted that she was, nonetheless, entitled to pay herself the honorarium by reason of the instructions allegedly given to her by Mr Williamson at the time of the amalgamation (see above at [137]). Even had Mr Williamson given the “business-as-usual” direction, he did not and could not authorise the specific transaction in his capacity as General Secretary of the amalgamated Branch.

158    In her Defence Ms Jackson also pleaded that, even if the honorarium had been paid in breach of the Rules, the HSU did not suffer any loss “because even if [Rule 65(c)] had been complied with, the payment would still properly have been made.” This assertion must fail because it assumes the validity of the Branch Committee of Management’s resolution. For reasons already given that resolution was ultra vires the Rules.

159    Again Ms Jackson improperly used her positions as Branch Secretary and Executive President to gain an advantage for herself. As a result, the Union suffered the loss of $63,000.

160    A compensation order should be made in that sum.

THE ELLIOTT MEMORANDUM

161    Mr Robert Elliott was the National Secretary of the HSU between 1996 and 2002. In 2005 he became an employee of the Victoria No 1 Branch. Between 2007 and 2010 he worked for the Victoria No 3 Branch as a consultant.

162    In early 2010 the proposed merger between the New South Wales Branch and the Victoria No 1 and No 3 Branches was in contemplation. Branch officials from each of these Branches had gathered in Sydney. On 25 February 2010 the Branch Committees of Management of the New South Wales Branch and the Victoria No 3 Branch endorsed the merger.

163    In the course of that day Mr Elliott told Mr Williamson that he (Mr Elliott) needed to be “looked after” following any merger. Mr Elliott said he wanted a contract to work for the new HSU East Branch. He wanted to be paid $150,000 per year. Mr Williamson responded that it was too late for such a contract to be entered into because all the branches had voted to merge. Mr Elliott then told Mr Williamson that the Victoria No 1 Branch Committee of Management was yet to vote and that the members of that Committee would not vote on the merger until Mr Elliott had been “looked after”. Mr Williamson reluctantly agreed to enter into a contract but made it a condition that Ms Jackson had also to sign on behalf of the Union. What became known as the “Elliott Memorandum” was quickly prepared and executed.

164    The manner in which the agreement was prepared, negotiated and signed is not entirely clear. At some time, later on 25 February 2010 a written agreement was prepared. Ms Jackson deposed that, as she was passing Mr Williamson’s office on that day, he called her in and invited her to sign the document. She read, considered and signed it within five minutes. She said that she thought, at the time, that she was signing as a witness.

165    The contract was termed a “Memorandum of Agreement”. It identified the parties as being Mr Elliott and the Union. It recited that they intended to create a binding legal agreement between them. The terms of that agreement were:

“Term of agreement

1.    This agreement shall commence on the coming into effect of the HSU Branch created by the amalgamation of the Victoria No 1, Victoria No 3 and NSW branches of the HSU (HSU East”) and will operate for 4 years from the date.

Salary and superannuation

2.    Rob Elliott shall be employed by the HSU at an initial annual salary of $150,000 per year

3.    On the 1st October of each year that the agreement is in operation the annual salary paid shall be adjusted by a percentage amount equivalent to the consumer price index change for the preceding year to the 30th June.

4.    The HSU shall pay a sum equivalent to 9% of Rob Elliott’s salary to a superannuation fund nominated by him.

Nomination to HESTA Board

5.    The HSU shall continue to nominate Rob Elliott to be one of the HSU’s nominee directors to the board of the Health Employees Superannuation Trust of Australia (“HESTA”). Rob Elliott shall retain all and any directors’ fees or associated payments paid in respect to his role as HESTA director.

Duties

6.    Rob Elliott is employed to provide strategic and policy advice, counsel and support and consultancy to HSU East on:

•    National health and community services policy issues

•    Superannuation matters and retirement incomes policy

•    Corporate governance and rules matters

•    National industrial relations policies and direction

Accumulated entitlements

7.    Rob Elliott shall be credited all unused sick leave and annual leave accumulated in his employment with the Victorian Nos 1 and 3 branches since his resignation from the position of National Secretary of the HSU. Additionally Rob Elliott shall be credited with 1.71 weeks of long service leave for every year since his resignation from the office of National Secretary of the HSU and will be credited 1.71 weeks long service leave for every year of the operation of this agreement.”

There was also a “Non-compete” clause. The agreement was signed by Mr Elliott and “on behalf of the HSU”. Ms Jackson signed as:

“National Secretary Health Services Union

Branch Secretary, Victoria No 3 Branch Health Services Union

Executive President Nominate, HSU East”.

and Mr Williamson as:

“National President, Health Services Union

Branch Secretary, Health Services Union NSW Branch

General Secretary Nominate, HSU East”.

Adjacent to each of the signatures was the date: 25 February 2010.

166    After this agreement was signed an appendix was added. Relevantly, the appendix provided that:

“The parties acknowledge that although the agreement is one for the employment of Rob Elliott his role will be in effect one of consultant to the Branch.

As such his time will be costed at $2000 per day so that, in any given year, Rob Elliott shall be available to the union for 75 days per year.

Rob Elliott will be based in Melbourne and work from the Melbourne offices of HSU East.

The parties shall agree the pattern of hours or days in which Robert Elliott shall be available to do work for the HSU; for example whether on the basis of regular weekly hours, in blocks of days or weeks, or a combination of the two.”

The appendix was signed, on the same day, by Mr Elliott, Ms Jackson and Mr Williamson. Ms Jackson and Mr Williamson purportedly signed in the same capacities in which they had signed the original agreement.

167    This contract was particularly beneficial to Mr Elliott. At the time the memorandum was signed Mr Elliott was receiving $442.24 per day for his work with the Victoria No 3 Branch. The memorandum increased his daily rate to $2,000. That salary was to increase annually with movements in the consumer price index. Mr Elliott was not required to work to obtain the remuneration provided for under the contract. He was only required to be available to work for up to 75 days per year. Accumulated and proposed long service leave and payment in lieu of sick leave and annual leave were to be paid at the new rate of $2,000 per day.

168    Another curious feature of the agreement was that the provisions relating to the appointment of Mr Elliott to the board of the HESTA Superannuation Fund and his right to retain director’s fees required decisions of the National Council or the National Executive of the Union. Neither Mr Williamson nor Ms Jackson had power to confer these entitlements.

169    The HSU East Branch came into existence on 24 May 2010 and continued in existence until it was dissolved by order of this Court on 8 June 2012. An administrator was appointed on 21 June 2012: see Brown v Health Services Union (2012) 205 FCR 548 at 602-614 (Flick J).

170    In the course of his administration the administrator raised questions relating to the employment and payment of Mr Elliott. In November 2012, whilst investigations were still in progress, Mr Elliott asserted that the administrator had repudiated his contract and accepted that repudiation as terminating the contract. Despite the administrator advising Mr Elliott that his employment had not been terminated, Mr Elliott commenced the New South Wales proceeding in this Court. That proceeding was ultimately settled. It was a term of the settlement that the Union pay $40,073 to Mr Elliott.

171    The HSU contended that Ms Jackson had misused her positions in the Union to gain an advantage for Mr Elliott or to cause detriment to the Union. It contended that she had executed the memorandum without authority, that she had done so in breach of the financial governance procedures and that she had purported to bind the Union to make excessively generous payments to Mr Elliott by way of remuneration and other conditions of employment.

172    Ms Jackson denied each of these allegations. It will be convenient to deal with them separately.

173    Ms Jackson sought to justify her execution of the Elliott Memorandum on a number of bases. She asserted that:

    In executing the memorandum she was acting for and on behalf of the Victoria No 3 Branch and Mr Williamson was acting for and on behalf of the New South Wales Branch.

    “The execution of the Elliott Memorandum … was the business of the Victoria No 3 Branch and the NSW Branch as branches that were in the process of amalgamating.”

    “… she occupied the office of Secretary of the Victoria No 3 Branch and, after amalgamation, was to occupy the office Executive President of HSU East Branch …”

    She “genuinely believed that she had power and authority, as Branch Secretary of the Victoria No 3 Branch, one of the three amalgamating branches, to execute the Elliott Memorandum.”

174    Each of these defences must be rejected. They fail because Ms Jackson had no authority, in her capacity as Secretary of the Victoria No 3 Branch, to fix the terms and conditions of employment of Mr Elliott as an employee of the, yet to be created, HSU East Branch. This power rested exclusively with the Committee of Management of the new Branch which had yet to be formed: see Rule 52(e).

175    For the same reasons Ms Jackson did not have power to execute the memorandum as Executive President nominate of the HSU East Branch.

176    Ms Jackson did not dispute that she lacked authority to enter into the contract, on behalf of the HSU, in her capacity as National Secretary. Ms Jackson did not report the execution of the contract or the contents of the memorandum to either the National Council or the National Executive of the Union.

177    Ms Jackson sought to defend her position on the additional ground that the HSU East Branch or the State registered union, known as HSU East, had later ratified her conduct. There is no evidence to support her claim of ratification by the HSU East Branch once it was formed. The State registered union was an entity separate from the HSU and could not, even if it had wished to do so, ratified Ms Jackson’s conduct as an officer of the HSU. In any event, there was no evidence that it had done so.

178    Under the HSU’s Financial Governance Procedures, the National Secretary was authorised to make and/or commit to expenditures within the context of normal operations.  The National Secretary was also authorised to make expenditure up to $10,000 provided it was within the annual budget and reported to the Finance Committee as soon as practicable.  If not within the annual budget, prior approval by the Finance Committee was required.  The procedures required that expenditure over $50,000 must be approved by the National Executive prior to the expenditure being incurred, or, in urgent and unforeseen circumstances, jointly by the National Secretary and the National President, provided that such payments shall be immediately reported to the members of National Executive by email and to the next meeting of the National Executive following the expenditure.

179    The Elliott Memorandum did not deal with a normal operating expense of the Union. The appointment of Mr Elliott was not part of the systematic, repetitive and continuous business of the union.  Further, there was no evidence that the financial commitments, made to Mr Elliott, had been provided for in the Union’s budget. The terms of the memorandum were not reported by Ms Jackson to the Finance Committee.  It was not approved by the Finance Committee.  The circumstances in which the memorandum came into existence were neither urgent nor foreseen. Mr Elliott remained employed in the Victoria No 3 Branch and his future employment by the new Branch could have been considered once it had been formed.

180    The terms and conditions of employment of Mr Elliott provided for in the memorandum were significantly more beneficial to him than those which had previously obtained when he was working for the Victoria No 3 Branch. Whether or not these new terms and conditions were “excessive” need not be determined by the Court. Suffice it to say that, had it been a valid contract, the HSU would have been committed to providing Mr Elliott with benefits in excess of $1 million over the four year life of the contract. Such a commitment would have imposed considerable demands on the finances of the Union and, to that extent at least, would have constituted a detriment to it.

181    Once the Branch was formed Ms Jackson kept no records of the days and times that Mr Elliott worked, if, indeed, he did any work.

182    Ms Jackson used her position as an officer of the HSU improperly to gain an advantage for Mr Elliott and, in doing so, caused detriment to the organisation.

183    The Union is prima facie entitled to compensation for the losses incurred by reason of Ms Jackson’s conduct.

184    The Union claimed a total loss of $432,725.09. This figure was made up as follows:

    Mr Elliott’s salary between 24 May 2010 and 3 December 2010 - $80,769.36 plus superannuation of $7,269.23. These payments were made by the HSU East Branch.

    His salary of $262,499.58 plus superannuation of $7,528.92 paid between 4 December 2010 and 31 August 2012. These payments were made by the New South Wales State registered union pursuant to a resolution of the HSU East Branch on November 2010 that “the payment of wages and employment entitlements will as an administrative convenience be undertaken by HSU East on behalf of both entities”. Further an earnings report covering the period of July 2011 to August 2012 recorded “the earnings of Elliot paid by the New South Wales Registered Union”.

    His salary of $31,730 plus superannuation of $2,855 paid between 1 September 2012 and 16 November 2012. These payments were made by the Victoria No 3 Branch.

    The settlement sum of $40,073 paid by the Union to settle Mr Elliott’s claim.

185    Mr Neil Bowker has, since February 2013, been the Finance and Services Manager of the Victoria No 3 Branch. He examined the financial records of the Branch both before and after the merger with the New South Wales and Victoria No 1 Branches. These records confirmed that Mr Elliott had been paid a total of $88,038.59 (inclusive of superannuation) in the period between 25 May 2010 and 3 December 2010. The Union contended that the references in the payslips and pay records to the ‘Health Services Union – Victorian No 3 Branch’ and to the ‘Health Services Union – Health Prof’ should be interpreted as a reference to the merged branch, i.e. the HSU East Branch. This is because, at that time, the Victorian No 3 Branch had ceased to exist.

186    The Union contended that the New South Wales State registered union had paid Mr Elliott’s salary and superannuation entitlements between 4 December 2010 and 31 August 2012 as agent for the Union. It claimed that it had sustained the loss as principal. In the alternative, the Union contended that, on the distribution of the combined assets of the State registered union and the branch in August 2012, it had suffered loss consisting of the diminution in the net equity of the amalgamated branch available for distribution.

187    The State registered union had not sought reimbursement from the HSU at the time of the trial. The HSU did not, therefore, sustain a loss to the full extent of the amounts paid by the State registered union to Mr Elliott. It did, however, suffer some indirect financial loss. This occurred in the course of the demerger of the HSU East Branch in the latter part of 2012.

188    An issue arose in the course of the demerger as to the appropriate distribution of the financial assets of the Branch to the three Branches which were to resume their separate existences. The administrator sought the advice of accountants. The accountants constructed a consolidated profit and loss statement for each of the demerging entities over the period during which the HSU East Branch existed. An attribution process was applied which produced the following assessed notional net asset/liabilities on demerger at 30 June 2012 as follows:

    The State registered union - $1,258,938 (assets).

    The New South Wales Branch - $33,300 (assets).

    Victoria No 1 Branch - $1,439,913 (assets).

    Victoria No 3 Branch - $1,111,995 (liabilities).

The total assets on demerger were, therefore, $1,620,156.

189    During the existence of the HSU East Branch, the Branch and the New South Wales Union were not treated as separate entities for accounting purposes. The financial affairs of the Branch were largely incorporated within the State registered union’s ledger. Having examined the accounts the accountant recommended (and the administrator accepted) that the $1,620,156 should be allocated as follows as between the various entities:

    The State registered union - $126,656 (7.81%).

    The New South Wales Branch - $3,500 (0.22%).

    Victoria No 1 Branch - $1,142,212 (70.50%).

    Victoria No 3 Branch - $347,788 (21.47%).

92.19 % of the available funds were thus allocated to the balance sheets of Branches of the HSU.

190    The HSU argued that, had the unauthorised payments not been made to Mr Elliott by the State registered union, the total sum disclosed by the balance sheet would not have been $1,620,156 but $1,890,184.50 (that is $1,620,156 plus $262,499.58 salary plus $7,528.92 superannuation). It contended that it should be entitled to claim 92.19% of the difference between the two figures, that is, 92.19% of $270,028.50 or $248,939.27.

191    I accept this submission. Had the unauthorised expenditure not been made the amount divided between the State and Federal entities would have differed materially and an additional $248,939.27 would have been available to the Federal entity. Had there been any evidence to suggest that Mr Elliott had made any productive contributions to the Union during the relevant period I would have been minded to discount this sum when calculating compensation. There was, however, no such evidence.

192    Mr Bowker’s researches disclosed that the Victoria No 3 Branch had again paid monies to Mr Elliott between 1 September 2012 and 16 November 2012. $34,585 was paid by way of salary and superannuation.

193    Ms Jackson’s actions in relation to the execution and giving effect to the Elliott memorandum constituted a misuse of her position as National and Branch Secretary. She contravened s 287 of the FWRO Act and s 182 of the Corporations Act. As a consequence of Ms Jackson’s actions in relation to the memorandum, the Union:

    paid Mr Elliott $80,769.36 in salary and $7,269.23 in superannuation from 24 May 2010 to 3 December 2010.

    would have been entitled to an additional $248,939.27 on the date of the demerger had the State registered union not made payments to Mr Elliott from 4 December 2010 to 31 August 2012.

    paid $31,730 in salary and $2,855 in superannuation to Mr Elliott between 1 September 2012 and 16 November 2012.

    paid $40,073 to settle Mr Elliott’s claim.

194    The Union thereby suffered loss. A compensation order of $411,635.86 should be made.

THE TOOMEY PEGG MATTER

195    Between 2009 and 2011 a delegate of the General Manager of Fair Work Australia conducted an investigation into various matters relating to the HSU. Following his investigation the delegate formed provisional views that the Union and certain of its officers had contravened provisions of the FWRO Act and the Rules. On 14 December 2011 the delegate signed and despatched three letters. Two of them were addressed to Ms Jackson in her capacity as National Secretary of the Union. The first of the letters addressed to Ms Jackson raised allegations that the Union had contravened provisions of the FWRO Act. The second contained allegations that Ms Jackson had, herself, contravened provisions of the FWRO Act and of the Rules. The third letter was addressed to Mr Williamson. The delegate sought a response from Ms Jackson and Mr Williamson to each of the allegations levelled against them by 20 January 2012. He sought a response from the Union by 27 January 2012.

196    Ms Jackson promptly reported the receipt of the delegate’s letter relating to the Union to national officers. She did not, at the same time, advise them that she too had received a letter containing allegations relating to her conduct. The National Executive convened on 19 December 2011 to consider its response to the allegations against the Union. The Executive resolved to engage lawyers to prepare a draft response to the delegate’s queries. Ms Jackson said nothing about having received a separate letter relating to her conduct.

197    On 21 December 2011, in the course of a discussion with Mr Brown, then Acting National President, and another national officer, Ms Jackson said that she had received a letter from the delegate raising allegations against her. She did not, however, say anything about retaining lawyers and she dismissed the allegations as being trivial.

198    The National Executive met again on 12 January 2012 to consider the Union’s response to the delegate’s letter. During a break in the meeting Ms Jackson told Mr Brown that she was also a subject of the delegate’s investigation and that she might need separate legal representation. Ms Jackson did not, however, so advise the National Executive.

199    On 14 January 2012 Ms Jackson decided to retain lawyers. She contacted Mr John Trew QC who was, at the time, a consultant to a firm of solicitors, Toomey Pegg. On 17 January 2012 Ms Jackson, or someone acting on her behalf, sent to Toomey Pegg some 250 pages of material by way of instructions. The material included the allegations, a copy of the Union Rules and a draft statement by Ms Jackson. On 18 January 2012 Ms Jackson formally retained Toomey Pegg to act for her at the HSU’s expense. The firm immediately sought an extension of the 20 January 2012 deadline for a response. This extension was asked for on the ground that Toomey Pegg had only recently received a very lengthy draft statement prepared by Ms Jackson and that time was required to prepare a detailed response.

200    Toomey Pegg undertook work on Ms Jackson’s response between 18 and 24 January 2012. On the latter day Ms Jackson attended the firm’s offices for a conference.

201    The National Executive also convened on 24 January 2012. Ms Jackson attended the meeting. She did not advise the meeting about the receipt of the delegate’s letter relating to her conduct. Nor did she advise that she had retained lawyers, at the Union’s expense, to act for her. The meeting gave further attention to the Union’s response to the allegations made against it.

202    Toomey Pegg continued to perform work for Ms Jackson between 25 and 31 January 2012.

203    On 31 January 2012 the firm raised an invoice relating to the work undertaken by it up to that time.

204    On 3 February 2012 Ms Jackson’s response was delivered to the delegate. The firm had completed its work.

205    On 7 February 2012 Toomey Pegg sent a second and final invoice to Ms Jackson.

206    The sums claimed in the two invoices totalled $40,882.16.

207    The Finance Committee and the National Executive met again on 17 February 2012. Ms Jackson was present at both meetings. She did not inform either gathering that she had retained Toomey Pegg to prepare her response to the delegate. Nor did she report that the Union had received invoices from Toomey Pegg.

208    The Toomey Pegg invoices remained unpaid in early March 2012. A further invoice was raised. Ms Jackson forwarded that invoice to Mr Brown. Mr Brown, in turn, forwarded it to members of the Finance Committee.

209    At a meeting, held on 15 March 2012, the Finance Committee examined the invoices and determined to refer the question of whether or not they should be paid to the next meeting of the National Executive.

210    That meeting occurred on 29 March 2012. Ms Jackson told the meeting that her decision to retain Toomey Pegg was reasonable in the circumstances. She proposed a resolution ratifying her decision to retain the firm and authorising the payment of the invoices. The meeting did not accept this proposal. Instead, it adopted a resolution which stated that the retainer was unauthorised, that the Union did not accept any liability to pay the fees sought by Toomey Pegg and that payment should not be made.

211    The invoices remained unpaid in November 2012. Toomey Pegg then issued a letter of demand which was accompanied by a “without prejudice” offer to resolve its claim. Ms Jackson was asked by those acting for the HSU to provide any information which might assist the Union in defending the claim. She provided no such information. At that point the Union accepted that it did not have a good defence to the claim and resolved to settle the matter on the terms proposed by Toomey Pegg. The Union paid Toomey Pegg $34,725 to resolve the dispute.

212    The HSU contended that Ms Jackson had misused her ostensible authority as National Secretary to commit the Union to pay Toomey Pegg’s fees. She had neither sought nor obtained the approval of the National Executive to retain the firm or pay its fees.

213    Ms Jackson sought to defend herself against the Union’s claim under this head on a number of bases.

214    The first was that she had raised the prospect of her seeking independent legal advice at a meeting of national officers on 11 January 2012. She asserted, that, during the meeting, she told the officers that she had received a letter from the delegate, that she considered it appropriate for her to seek legal advice separately from that being obtained by the Union and that, when she raised these matters, no one at the meeting raised any objection. There was no evidence to support Ms Jackson’s claims. The evidence went no further than that, after the meeting, Ms Jackson had had an informal discussion with another national officer, Mr Hill. He asked her whether she had received a letter from the delegate containing allegations against her. She said that she had received such a letter and that she was going to respond to it. She said nothing about engaging lawyers.

215    I do not accept that Ms Jackson provided the national officers’ meeting with the information to which she refers in her Defence. She does not claim that the national officers provided her with authority to retain Toomey Pegg and, in any event, those officers had no power to grant such authority. Had Ms Jackson wished to obtain authority she could have done so on the following day when the National Executive met. She did not do so.

216    In her Defence Ms Jackson also placed reliance on Rule 32(n) of the Union’s Rules which provides that the National Secretary shall “control and conduct the business of the Union” between meetings of the National Executive. This general power does not avail Ms Jackson. She retained Toomey Pegg in her own interests, not those of the Union. There was no need for her to do so between meetings of the National Executive. She had had the opportunity to obtain the necessary authority during meetings of the National Executive on 19 December 2011 and 12 January 2012 but had not done so. She could have advised the National Executive of her decision to engage Toomey Pegg when next it met, on 24 January 2012. She did not do so.

217    Ms Jackson next relied on delegations contained in the Financial Management Policy and Procedures (“FMPP”) which had been adopted by the National Executive prior to the relevant events.

218    Clause 2.1 of the FMPP provided that:

“The National Secretary is authorised to make and/or commit to expenditures within the context of normal operations and consistent with any policy or program direction issued by the National Executive or National Council.”

Ms Jackson contended that her decision to retain Toomey Pegg at the Union’s expense was made “within the context of normal operations”. This contention must be rejected. The requirement that Ms Jackson should respond to various allegations of misconduct, raised by the delegate was anything but “normal”. On the contrary it was abnormal. Ms Jackson well knew, at the time at which she engaged Toomey Pegg, that the National Executive had authorised the engagement of other solicitors to act for it in dealing with the allegations to which the delegate had invited a response from the Union and, inferentially, to be responsible for the payment of the fees incurred. The National Executive had convened meetings which had, as their exclusive purpose, the consideration of the Union’s response to the delegate. The issues under consideration and, in relation to which, legal advice was being obtained fell well outside any concept of the normal conduct of Union business.

219    Ms Jackson also sought to rely on clause 3.1 of the FMPP. That clause read:

“The National Secretary is authorised to make expenditure up to $10,000 on items or services of an extraordinary nature provided it is within the annual budget. Where such expenditures occur, they must be reported to the Finance Committee as soon as practicable and to the National Executive at its next meeting.”

Reference should also be made to clause 3.2 which provided that:

“Expenditure over $10,000 but less than $50,000 on items or services of an extraordinary nature must be approved by the Finance Committee before being incurred and reported to the next meeting of the National Executive.”

220    When, on 18 January 2012, Ms Jackson retained Toomey Pegg to act in her interests but at the expense of the HSU, Ms Jackson could not have known the quantum of fees which the firm would charge for carrying out her instructions. In her Defence she asserted that she “genuinely and reasonably believed that the cost of carrying out the Toomey Pegg instructions would be less than $10,000”. The soundness of this claim is open to question. The complexity of the task which confronted Toomey Pegg led it to seek an extension of time within which to respond to the delegate on Ms Jackson’s behalf. The complexity warranted the attention of senior counsel. It was necessary for the firm to consider 250 pages of material.

221    In any event, even if Ms Jackson reasonably believed, at the time at which she retained Toomey Pegg, that its fees would ultimately be less than $10,000, clause 3.1 did not authorise her to incur the expenditure. It only authorised her to “make” expenditure of an extraordinary nature. In this respect clause 3.1 may be compared with clause 3.2 which requires approval of expenditure of between $10,000 and $50,000 by the Finance Committee before that expenditure is “incurred”. Furthermore, even if the words “make” in clause 3.1 and “incurred” in clause 3.2 are to be read in context as being synonymous, the National Secretary’s authority, under clause 3.1, is conditioned by the requirement that the relevant expenditure “is within the annual budget” of the Union. There was no evidence which established that this condition had been satisfied.

222    It is also to be noted that any expenditure made under clause 3.1 had to be reported to the Finance Committee as soon as practicable and to the National Executive at its next meeting. Ms Jackson satisfied neither requirement.

223    I accept the HSU’s claim that Ms Jackson contravened s 287(1) of the FWRO Act and s 182(1) of the Corporations Act by improperly using her position as National Secretary to commit Union funds in order to secure a personal advantage. She wished to obtain legal advice for her own purposes and from a solicitor of her choosing. She could have, but did not, retain Toomey Pegg at her personal expense. Instead, without authorisation, she used her ostensible authority to commit the Union to pay whatever fees might be charged by Toomey Pegg when acting on her instructions. Ms Jackson had many opportunities to seek formal approval of the retainer or prompt ratification of her actions from the National Executive. The fact that she chose not to do so until late in March 2012 strongly suggests that she considered that, had she sought approval from either the Finance Committee or the National Executive at any earlier stage, that approval would not have been forthcoming.

224    Ms Jackson should pay the HSU $34,725 by way of compensation.

CREDIT CARD EXPENDITURE

225    At various times in the course of her employment by the HSU Ms Jackson was authorised to operate three credit card accounts.

226    Between 16 March 2003 and 4 August 2011 she held a Diners Club card.

227    Between 28 January 2004 and 25 June 2009 she held a CBA MasterCard. It was succeeded, on 26 June 2009, by another CBA MasterCard which she held and operated at least until 1 June 2012. It will be convenient to treat these two cards as a single CBA MasterCard.

228    Between 10 September 2003 and 10 April 2005 Ms Jackson held a Gold Citibank MasterCard account. On 11 April 2005 it was succeeded by a Platinum Citibank MasterCard account which Ms Jackson continued to hold until 4 August 2011. It will be convenient to treat the cards on these two accounts as a single Citibank MasterCard.

229    During the time she held these cards she incurred the following expenses which were paid, save for the amount of $11,860, by the Union:

    Travel expenses - $175,154.

    Retail expenses - $101,792.

    Food and alcohol expenses - $19,639.

    Health and fitness expenses - $5,237.

    Entertainment expenses - $40,133.

230    These amounts were calculated following an examination, by the HSU, of statements which had been obtained pursuant to subpoenas served on the card suppliers.

Travel expenses

231    Between July 2003 and August 2011 Ms Jackson made 24 overseas excursions and 10 trips to domestic destinations. On some of these journeys she was accompanied by a family member. The bulk of the expenditure incurred in relation to these trips was made on airfares and hotel accommodation.

232    The following table identifies the various trips made by Ms Jackson between 2003 and 2011 and the charges made in relation to them. Some of these excursions (or part of them) were funded from sources, such as the NHDA account, apart from the credit cards. In the table double counting is avoided by acknowledging these additional sources and the amounts involved without bringing them to account. The dates of travel are drawn from travel records which were subpoenaed from Qantas Airways and the Department of Immigration and Border Protection.