FEDERAL COURT OF AUSTRALIA

Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Gray [2012] FCAFC 158

THE COURT ORDERS THAT:

1.    Leave to appeal is granted.

2.    The appeal is allowed.

3.    Order 1 of the orders made by the trial judge on 17 April 2012 be set aside.

4.    The respondent’s application in NSD 304/2011 be dismissed.

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

REASONS FOR JUDGMENT

KEANE CJ & BUCHANAN J:

1    The appellant is an “organisation” registered under the Fair Work (Registered Organisations) Act 2009 (Cth) (“the federal Act”). As an organisation, the appellant is a body corporate with perpetual succession and the other attributes of incorporation (s 27 of the federal Act). The affairs of the appellant are governed by rules (“the federal Rules”) which establish three divisions. One of those divisions is the Electrical, Energy and Services Division (“the Division”). The rules of the Division (“the Divisional Rules”) are part of the federal Rules. The Division is organised into divisional branches along State lines. One such branch is the NSW Divisional branch.

2    At the heart of the present appeal is the proposition that it is oppressive or unjust to some members of the appellant that members of the NSW Divisional branch are exempt from paying subscriptions if they pay an identical amount to a NSW trade union, but are otherwise treated under the federal Rules as fully financial members of the appellant with full rights to vote and full rights of representation.

3    This proposition was accepted by the trial judge (Gray v Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia [2012] FCA 380). The consequence, the trial judge decided, was that an opportunity should be afforded to the appellant to amend its rules pursuant to s 163(5) of the federal Act. The amendment in contemplation was one which would either remove the exemption or remove certain voting rights.

4    The trial judge reached these conclusions in proceedings commenced by the present respondent, a member of the appellant, who claimed that the existing rules operated unjustly or oppressively against him and other members of the appellant. So far as is relevant to the present appeal, that claim was based on s 142(1)(c) of the federal Act, which provides:

142(1)    The rules of an organisation:

    …

(c)    must not impose on applicants for membership, or members, of the organisation, conditions, obligations or restrictions that, having regard to Parliament’s intention in enacting this Act (see section 5) and the objects of this Act and the Fair Work Act, are oppressive, unreasonable or unjust; …

5    The appellant argued at trial that the respondent’s claim should be dismissed. It now seeks leave to appeal against the order made by the trial judge which necessarily rejected that argument. Leave to appeal is necessary because the order made by the trial judge was interlocutory in nature. Because of the importance of the case and the complexity of the issues involved, this Court reserved its decision as to whether leave should be granted and heard full argument on the merits of the proposed appeal.

THE TRIAL JUDGE’S DECISION

6    The Electrical Trades Union of Australia, NSW Branch (“the NSW Union”) is registered under the Industrial Relations Act 1996 (NSW) (“the NSW Act”). The NSW Union also has corporate status and the other attributes of incorporation (s 222 of the NSW Act).

7    The fields of activity of the NSW Divisional branch and the NSW Union are, for relevant purposes, the same. Each has a representative role under industrial legislation (respectively federal and NSW legislation) but it is clear that the interests of the NSW Divisional branch and the NSW Union, and those of its members, are regarded as substantially concurrent. Long standing practice permits satisfaction of subscription obligations by a single payment which is recognised as providing financial membership of both organisations.

8    Those circumstances were referred to by the trial judge in the judgment under appeal as follows (at [32]):

32    … the Federal NSW Branch and State Union are essentially run by the same officials out of the same offices. Considerable effort has been devoted to making the two organisations appear to operate like a single body, at least from the point of view of their two sets of (largely identical) members. In particular, one fee is paid by a member of either in apparent discharge of his or her obligation to pay membership fees to both. A single membership card (called an ‘OK Card’) is issued bearing the logos of both the Federal NSW Branch and the State Union and both logos also appear on the letterhead of correspondence emanating from the shared offices in Sydney …

9    As a matter of history these co-operative, although formally separate, arrangements between the NSW Divisional branch and the NSW Union followed the decision of the Industrial Commission of New South Wales in In re Electrical Trades Union of Australia, New South Wales Branch (1963) AR 796 (“Benson’s Case”). In that decision a Full Bench of the New South Wales Industrial Commission found that an earlier State trade union registered under the Trade Union Act 1881 (NSW) had become effectively moribund as an organisation separate from a federal organisation, the Electrical Trades Union of Australia. The Commission said (at 805):

Upon the evidence it is abundantly clear to us that the business affairs of the trade and industrial union and of the federal organization in New South Wales have been carried on for some forty years upon the basis of a practical identification of those bodies. Of course, that fact would not of itself necessarily have destroyed the identity and real existence of the trade and industrial union, but consequences that have flowed from it have led us to conclude that that is what happened in this case. For our purposes it will be sufficient to deal only with two such consequences, namely, the matter of membership of the State union and the matter of the election of officers to govern its affairs.

10    The Commission went on to refer to a lack of evidence that any person had actually joined the State trade union for many years. It also did not appear that there had been any effective elections by persons actually enrolled as members. In the same proceedings the Commission approved the registration of a new New South Wales trade union actually consisting of members of a federal branch of the then federal organisation.

11    The need to establish a fully functioning New South Wales union, side by side with any counterpart branch of a federal union, explains the origins of the present arrangements. Another matter of historical significance is the judgment of the Commonwealth Industrial Court in Moore v Doyle (1969) 15 FLR 59 and the report of J B Sweeney QC, a judge of the Australian Industrial Court who was appointed in February 1974 to inquire into systems of registration of industrial organisations.

12    Those developments generated an understandable consciousness of the need to be able to show that State unions (at least those incorporated under the NSW legislation) retained financial capacity and a separate existence. These matters were relied upon by the appellant in the present case. While it is true to say that it is by reference to contemporary, rather than historical, considerations that the challenge to the operation of the rules of the appellant in the present case must be examined, a decent regard for reality requires that one should not lightly conclude that arrangements which seem to have been generally accepted as perfectly reasonable when they were originally made now operate in a manner which is oppressive, unreasonable or unjust.

13    In the Divisional Rules, subscription arrangements are dealt with in Rule 5 which provides relevantly:

5.2.1    Members shall pay a contribution rate as determined by Divisional Council from time to time.

5.2.2    The Divisional Branch Conference or a meeting of a Divisional Branch State Council may fix a higher rate of contributions for members of that Divisional Branch subject to endorsement by the Divisional Executive or Divisional Council.

…

5.2.5    All subscriptions, fines, levies, fees or dues may be paid by any member to any of the authorised collectors or to the Secretary of the Divisional Branch or Divisional Sub-Branch or the Agent for the district to which the member is attached but to no other person or member. No receipts shall be valid unless given under and on the form prescribed by the Union.

5.2.6    Provided that any person who has paid contributions, subscriptions, fines, levies, fees or dues to [the NSW Union] whether before or after its registration, shall be exempt from payments of contributions, subscriptions, fines, levies, or dues under these rules to the extent of his payment to the [NSW Union] in any year.

5.1.7    All financial members may be issued with an OK Card showing the date to which they are financial.

(Emphasis added.)

14    In the Rules of the NSW Union, Rule 7 provides:

7.    ENTRANCE FEES AND CONTRIBUTIONS

…

(b)    Contributions:

…

(iv)    All contributions paid pursuant to this Rule, shall also be deemed to be payment in respect to membership contributions to [the appellant].

15    The trial judge rejected the contention that these arrangements had the effect that members’ liabilities to the two organisations were discharged by payment to the NSW Union. His Honour said at Reasons [46]-[47]:

46    …There are two situations in which a party who does not actually receive direct payment of money may nevertheless be said, as a matter of law, to have been paid. The first is where money is received on that person’s behalf by an agent or trustee; the second is where the money is received by another person to whom the money is owed jointly with the first person. The first situation cannot be made to fit the facts of this case. The State Union was not the agent of the Federal NSW Branch for the purpose of receiving payments on behalf of the Federal NSW Branch because, for reasons to which I return below, the unions have never agreed that this should be so.

47    Nor was the obligation owed by each member to the two unions a joint obligation susceptible to discharge by payment to either one of them. What existed at the legal moment prior to a member’s payment were two obligations owed by that member to two different legal entities. They happen to have been obligations to pay identical amounts of money, but the fallacy in the Federal Union’s position is the impermissible elision of the concept of two debts in identical amounts with the concept of one debt and an apparently single joint obligation. Here the Federal Union’s argument depended for its ultimate efficacy on the notion that these two distinct obligations owed to different parties could be described as being joint obligations. It is meaningless, however, to speak in such terms: distinct and several obligations can never be joint. The inevitable corollary is that the legal acquittal of those separate obligations cannot have been achieved by the fulfilment of only one of them: one dollar cannot be made to do two dollars’ work.

16    We do not agree. In our respectful opinion, for reasons we will set out directly, Divisional Rule 5 and Rule 7 of the Rules of the NSW Union have the combined effect that payment of a single subscription is effective to discharge the obligation for financial membership to each of the appellant and the NSW Union. As we see it, the funds subscribed by the joint members are then held by the NSW Union for the benefit of the NSW Union and the NSW Divisional branch.

17    Under the Divisional Rules the following provisions are also made:

20.3    Classes of Divisional Funds

The funds of the Division shall be divided into two classes, as follows:-

20.3.1    The Divisional Fund: The funds which are allocated to and the expenditure of which is administered by the Divisional Council, viz:

20.3.1.1    Twelve-and-a-half per centum of the contributions and entrance fees collected by each Divisional Branch in accordance with Rule 5 “Entrance Fees and Contributions” …

…

20.3.1.6    Each Divisional Branch shall make payments of Divisional Council allocated funds to the Divisional Council each financial half-year based on the duly audited contributions and entrance fees collected for the previous financial half-year. Such half-yearly payments shall be made to the Divisional Secretary on or before the 30th June and 31st December each year.

20.3.2    The Divisional Branch Funds: The funds of the Union which are allocated to and the expenditure of which is administered by each Divisional Branch, and which shall be managed and controlled in accordance with the Rules of that Divisional Branch shall consist of:

20.3.2.1    Eighty-seven and one-half per centum of the entrance fees and contributions paid by the members of the Divisional Branch …

18    The effect of those provisions is to impose an obligation upon Divisional branches to pay “sustentation fees” of 12½% of subscriptions and entrance fees to the Division, but to allow branches to retain control of the remaining 87½%.

19    At this point the following further findings of fact made by the trial judge about the conduct of the affairs of the NSW Divisional branch should be noted:

-    sustentation fees are paid by the NSW Divisional branch to the Division;

-    the amount required to make such payments is calculated by the NSW Divisional branch;

-    the NSW Divisional branch instructs the NSW Union to make a payment of that amount to the Division;

-    the required amount is paid to the Division from monies drawn from the the NSW Union’s bank account.

20    Owing to his construction of another rule (Divisional Rule 7.3.3), which we discuss hereunder, the trial judge concluded at Reasons [52]-[53] that r 5.2.6 has no unjust operation in relation to the processes for the election of the Divisional Council and the Divisional Executive. On the other hand, his Honour held that the operation of r 5.2.6, in combination with the rules relating to members’ plebiscites and the election of the Divisional Secretary and Assistant Secretary, is potentially unjust:

52    … [I]n relation to the selection of the Divisional Council and the Divisional Executive … the problem of which Mr Gray complains does not arise. Members of the State Union who have paid their dues in the ordinary way to get their OK Card have not paid dues to the Federal NSW Branch. But they are financial members nonetheless since they are exempt from any obligation to pay dues by r 5.2.6. That is what the rule says and it is also what the accounts, apart from Note 17, say. The 15,000 members of the Federal NSW Branch are therefore non-paying financial members. They do not count for the purposes of r 7.3.3 and the matters arising from Mr Gray’s complaints about the electoral procedures for the Divisional Council and Divisional Executive do not, in substance, arise. It is true that, in a very limited sense, these members still get to participate in the affairs of the Division because they retain the right to vote in the elections, even if the quota of delegates allotted to their branch does not substantively reflect its size and even if they do not count for determining numbers in the Divisional Executive. This is, however, a very minor effect. As Mr Kenzie SC correctly submitted for the Federal Union, democracy is never perfect and any given conception of it must admit of imperfections: cf McGinty v Western Australia (1996) 186 CLR 140; Western Australia v The Commonwealth (1975) 134 CLR 201; Queensland v The Commonwealth (1977) 139 CLR 585. In the case of these provisions, I do not see that r 5.2.6 operates in a way which makes the rules oppressive, unreasonable or unjust.

53    This is not so in respect of the provisions providing for the members’ plebiscite or the election of the Divisional Secretary and Assistant Secretary. In both cases, members who are not paying federal dues are given a significant input into the affairs of the Division. By plebiscite, the members may control the Divisional Council and the Divisional Executive. The members of the Federal NSW Branch make up approximately 30% of the national membership, which is well above the threshold necessary to trigger a plebiscite (5%). If such a plebiscite were called, 30% of the members who would get to vote would not have paid any federal dues when the vast majority of other members would have had to have done so. In my opinion, the operation of rules giving rise to that outcome are ‘unjust’ within the meaning of s 142(1)(c). The same conclusion follows with respect to the election of the Divisional Secretary and Assistant Secretary. These are important offices within the Division and it is unjust that the members of the New South Wales branch are permitted to participate in that election without paying membership fees when the rest of [the] electorate must do so. This conclusion does not retroactively influence the outcome of elections held under these procedures: s 164B(1).

21    His Honour then concluded that the operation of the rules in relation to voting in plebiscites and for the election of Divisional Secretary or Assistant Secretary is, in fact, unjust to the respondent. His Honour said at Reasons [54]-[57]:

54    I have considered whether the rules may escape characterisation as unfair because r 5.2.6 is to be seen as redressing an unfairness which would otherwise exist. What is in play in this argument is essentially indirect discrimination, that is, the vice of treating persons who are not equal as if they were. The argument would be that r 5.2.6 does treat members of the Federal NSW Branch differently to members such as Mr Gray but this is because they are relevantly different. What is the difference? The difference is that in New South Wales there is a State Union to which the members of the Federal NSW Branch belong.

55    I do not accept that this is a relevant difference. If it were the case that members of the Federal NSW Branch had to belong to the State Union, I might be disposed to accept it; in that case, the members would be burdened, without choice, with an obligation to belong to two unions and this would be a burden which did not rest upon other members of the Federal Division, such as Mr Gray. In that circumstance, a rule such as r 5.2.6 might well be seen as adjusting for that pre-existing burden.

56    But the short fact is that the members of the Federal NSW Branch do not have to belong to the State Union. The pre-existing burden is, therefore, self-imposed and cannot qualify as a difference which can justify a provision such as r 5.2.6.

57    These problems, of course, are not new: see Moore v Doyle (1969) 15 FLR 59. But to say that is to throw no light on their resolution. One can admire the perspicuity of Justice Sweeney’s report (Justice John Bernard Sweeney, Report of the Committee of Inquiry on Co-ordinated Industrial Organisations, Parliamentary Paper 220 of 1975, Australian Government Publishing Service, 1975), but the problems there identified are no closer to resolution than they were at the time that he pondered them.

22    The trial judge relied upon s 163(5) of the federal Act to adjourn the proceedings until 17 July 2012 to provide the organisation with the opportunity to alter its rules. His Honour explained his approach at Reasons [58]-[59]:

58    What then should be done? One difficulty is that the Federal Union has proceeded on an erroneous understanding that it has received dues for the purposes of r 7.3.3 when it has not; another is the operation of r 5.2.6 in the light of the provisions dealing with the plebiscite and the election of the Divisional Secretary and Assistant Secretary. The former only arises as an evidentiary issue in Mr Gray’s challenge to r 5.2.6 – it is a conclusion which causes Mr Gray’s attack on the provisions dealing with the election of the Divisional Council and the Divisional Executive to fail. This Court is not called on to grant any relief in respect of the finding that the members pay their dues to the State Union. It is a just a fact whose finding was necessary to resolve part of Mr Gray’s claims.

59    On the other hand, the latter difficulty with r 5.2.6 does directly arise. Mr Kenzie QC argued that the difficulty contended for by Mr Gray may be solved in ways apart from invalidating that rule and in this he is, with respect, correct. The problem is not r 5.2.6 in isolation: it is the effect of r 5.2.6 when the plebiscite and Divisional Secretary and Assistant Secretary electoral provisions fail to exclude from voting persons who are exempt from paying dues. There are two possible solutions. The first is to abolish r 5.2.6, thereby bringing to an end the existence of that class of person. The second is to amend the rules to prevent persons exempted by r 5.2.6 from voting in a plebiscite or in the election of the Divisional Secretary or Assistant Secretary. Put another way, the problem may be resolved by ensuring either that those who vote pay or, alternatively, that those who do not pay do not vote. Mr Kenzie QC’s point is that the Federal Division should be given the chance to make this choice.

ANALYSIS

23    In our view, the findings of fact made by the trial judge reflect the express acknowledgement by the NSW Divisional branch in a note to its accounts (to which we will refer directly) and by the NSW Union in r 7(b)(iv) of the obligation to pay sustentation fees calculated in accordance with the Divisional Rules. In conformity with that acknowledged obligation, the Division (and the appellant) have accepted contributions to the Divisional Fund. No basis for that acceptance other than as a receipt of moneys collected by the NSW Union pursuant to Rule 5 of the Divisional Rules and Rule 7 of the Rules of the NSW Union is apparent. Accordingly, the full contribution to the Divisional Fund contemplated by the federal Rules has been made on no premise other than that members of the NSW Divisional branch have made a contribution to the Divisional Fund, from their subscriptions, as fulsome as that made by any other member of the Division in any other Divisional branch. It is also important to note that the respondent’s case did not identify a single instance where the NSW Divisional branch has been financially embarrassed by the failure of the NSW Union to pay out dues received on account of the Divisional Fund.

24    In addition, it is not strictly correct to say that r 5.2.6 “exempts” anyone from the obligation to pay dues to the appellant. On the proper construction of r 5.2.6, the payment to the NSW Union operates pro tanto as a discharge of the member’s liability to pay his or her dues to the appellant, and not as an exemption from the liability to pay dues to the appellant. It is to be noted that r 5.2.6 operates as a proviso to r 5.2.5. It is a qualification to a provision concerned with the mode of payment of subscriptions or dues which a member is liable to pay. Rule 5.2.6 expressly contemplates that, where a member chooses to make his or her payment to the Division by paying the necessary sum to the NSW Union, that member is thereby relieved pro tanto of the liability to make payments to the appellant. That relief is only to the extent of the payment made to the NSW Union. In this state of affairs, it is not accurate to describe the member as exempt from dues in the sense that exemption indicates an absence of liability to pay dues to the appellant.

25    The complaint of the respondent seems at its heart to turn on the asserted possibility that, despite the guarantee in the federal Rules that a branch of the Division may retain 87½% of funds collected by way of subscription and entrance fees, there may be some lack of future Divisional (or federal) control of those funds if they are held by the NSW Union. There are a number of answers to this proposition.

26    First, the conduct of the NSW Divisional branch and the NSW Union is only consistent with our view of the proper construction of r 5.2.6. Any suggestion that the Division (or the appellant) might (or should be able to) exert direct control over branch funds would require an alteration to the allocation of funds between the Division and its branches made in the federal Rules themselves. That suggestion does not provide a foundation from which to argue that the federal Rules in their present form are oppressive or unjust. Secondly, there is no reason to suppose that any future call for funds could not or would not be met, whether for sustentation fees or any other levy properly imposed. Moreover, notwithstanding that moneys are held in an account in the name of the NSW Union, there is no reason to conclude, in our view, that they are not held also for the NSW Divisional branch, in light of r 7(b)(iv) of the NSW Union. Having regard to the arrangements under which subscriptions and entrance fees are paid, it is inconceivable that if, for example, the NSW Union were to become insolvent that the NSW Divisional branch could not sustain a proprietary claim to the benefit of those moneys.

27    In our view, therefore, the case for the respondent, so far as it concerned financial arrangements, should not have succeeded. The fact that a single payment operates to secure membership of both the NSW Divisional branch and the NSW Union does not impose a condition, obligation or restriction on members of other branches of the Division, or on members of the appellant generally, within the meaning of s 142(1)(c). Their rights are not thereby reduced either.

28    It may be seen at [54] of the trial judge’s Reasons that his Honour approached the question of “injustice” through the prism of “discrimination”. We respectfully doubt that this approach accords with s 142(1)(c) of the Act. “Discrimination”, whereby members in different circumstances are treated differently, is not necessarily productive of injustice. As was explained in the parable of the Workers in the Vineyard in Chapter 20 of the Gospel of Matthew, a person is not oppressed or treated unjustly merely by reason of the circumstance that other persons are treated benevolently. The respondent suffers no injustice merely because other members of the appellant enjoy a convenient mode of paying their dues. That is especially so when that convenience meets a problem which does not affect the respondent.

29    It may be noted as well that the subject of discrimination between members is expressly dealt with in s 142(1)(d). We do not suggest that discrimination on a ground other than those expressly mentioned in s 142(1)(d) could not be characterised as oppressive, unreasonable or unjust; but s 142(1)(d) does, we think, tend to confirm that s 142(1)(c) does require that the impugned condition must be imposed directly on the member who challenges the rule.

30    The trial judge concluded that injustice arose from the provisions giving members of the NSW Divisional branch voting or representative rights or power with respect to members’ plebiscites and the election of the Divisional Secretary and Assistant Secretary. That view appears to be based on the conclusion of the trial judge that all the subscriptions collected were directed to the NSW Union and its affairs, and held by it exclusively in its own interest. None of the money, on this view, was paid for the benefit of the NSW Divisional branch or held on its behalf. On this view, money transferred to the Division in supposed discharge of the obligation to pay sustentation fees was just a gratuitous payment. That had significant consequences, the trial judge thought, for some of the representational rights under the Divisional Rules. Those consequences were reflected in two major conclusions. The first concerned the right to send delegates to the Divisional Council. The second concerned rights to vote in plebiscites and certain Divisional elections.

31    Rule 7.3.3 of the Divisional Rules provides:

For the purpose of determining the number of members of a Divisional Branch at meetings of the Divisional Council, the receipts of such Divisional Branch for the preceding year from entrance fees and contributions, as expressed in dollars, shall be divided by the dollar amount charged by the Divisional Branch in the preceding year as the annual subscription rate for adults employed as tradespersons or in classifications receiving equal to or in excess of a tradesperson’s rates of pay.

32    The effect of this rule (taken together with other rules) is to make the number of votes allocated to a Divisional branch at the Divisional Council depend upon a notional number of contributing members (i.e. those from whom contributions have been received). In practice, at the present time, the NSW Divisional branch has been calculated to have an entitlement to 30 votes. This may be compared with 26 for the Victorian Divisional branch and lesser numbers for the other Divisional branches. The trial judge took the view that the financial arrangements to which we have already referred had the result that no money was actually received by the NSW Divisional branch, it all having been paid to (and therefore received by) only the NSW Union. The first major conclusion reached by the trial judge was that, on this analysis of r 7.3.3, the number of delegates allowed to the NSW Divisional branch at Divisional Council would be one. As has been seen, the trial judge did not regard this operation of the Divisional Rules to be unjust because he took the view that a person not making a payment to the NSW Divisional branch should not have the same voting or representational rights as persons making payments to other Divisional branches.

33    The respondent’s Counsel did not seek to dispute the trial judge’s construction of r 5.2.6 and r 7.3.3, even though that interpretation was different from that advanced by them below as a basis for arguing that r 5.2.6 operated in a way which was oppressive, unreasonable or unjust. It can be seen that his Honour took a view of the phrase “the receipts of such Divisional Branch … from entrance fees and contributions” in r 7.3.3 which isolates it from r 5.2.6. There is nothing in the other rules of the appellant which suggests that r 5.2.6 was intended to create a class of member with limited rights of membership reflecting a failure to comply with r 5.2.5. It is not difficult to read “receipts” in r 7.3.3 as referring to moneys paid in accordance with the Divisional Rules so as to discharge the putative member’s liability to pay his or her dues.

34    In our respectful opinion, the trial judge’s construction of the effect of r 7.3.3 was erroneous. The rules to which we have already referred represent a co-ordinated system of interacting rules applying to the two separate incorporated bodies (the appellant and the NSW Union) which have the result, as intended, that a single payment is sufficient to discharge the subscription obligations to both bodies and is impressed with a trust for that purpose. Although the payment is made (initially at least) into an account in the name of the NSW Union, it is held in that account for the benefit also of the NSW Divisional branch. That is the effect of the acknowledgement contained in r 7(b)(iv) of the Rules of the NSW Union set out earlier. It is also reflected in a note to the accounts of the NSW Divisional branch to the following effect (Note 17):

All money collected by the [NSW Union] for members’ contributions, subscriptions, fines, levies, fees or dues owing are also held to be contributions, subscriptions, fines, levies, fees or dues collected on behalf of [the NSW Divisional branch].

35    If one were to hypothesise the insolvency of the NSW Union, a court of equity would not countenance an attempt by the unsecured creditors of the NSW Union to claim the dues held in its bank account in respect of Divisional branch membership as assets available for distribution to creditors generally: Palette Shoes Pty Ltd (In Liq) v Krohn (1937) 58 CLR 1 at 26-27; Associated Alloys Pty Limited v ACN 001 452 106 Pty Limited (In Liq) (2000) 202 CLR 588 at [25]-[38].

36    In the result, we disagree with the trial judge about the meaning and effect of Divisional Rule 7.3.3. In our view the conclusions of the trial judge to the effect that the NSW Divisional branch was permitted one delegate only on the Divisional Council should be disapproved.

37    Moreover, there is no reason why members of the NSW Divisional branch should not have representational and voting rights in accordance with the subscriptions paid by them. Not only are they financial members of the appellant, as the trial judge correctly found, they have made the financial contribution to the affairs of their branch which the federal Rules contemplate. That contribution is not lost to the appellant, as the trial judge appeared to conclude. It is discharged by full compliance with the obligation to pay sustentation fees and other charges arising under the federal Rules.

38    The second major conclusion reached by the trial judge, with which we respectfully disagree, was that it is unjust that persons who make no direct financial contribution to the NSW Divisional branch should be permitted to participate in plebiscites and elections in the Division as though they had done so. In our respectful opinion, this conclusion proceeded upon a misunderstanding of the true character and effect of the financial contribution actually made by those who applied jointly to be members of, or who paid subscriptions to, the NSW Divisional branch and the NSW Union. It will be apparent from our earlier observations that we can see no reason why such persons should be regarded as having made any lesser contribution to the NSW Divisional branch than members of other Divisional branches make by their own contributions. The fact that the monies are paid into, and subsequently to an extent held in, an account in the name of the NSW Union does not detract from this conclusion.

CONCLUSION AND ORDERS

39    In our respectful view, the respondent did not establish that there were any conditions, obligations or restrictions imposed upon him, or upon others, by the federal Rules that were oppressive, unreasonable or unjust. It follows that we differ from the trial judge on the necessity for any alteration to the rules of the appellant. In our respectful view, the application before the trial judge should have been dismissed.

40     The appropriate orders are to grant leave to appeal, uphold the appeal, set aside the order made by the trial judge and order instead that the application to the Court by the respondent be dismissed.

Associate:

Dated:    13 November 2012

REASONS FOR JUDGMENT

DOWSETT J:

41    I have read the reasons prepared by the Chief Justice and Buchanan J. I concur in the orders proposed by their Honours and, save for one matter, with their reasons. The exception is the conclusion that the NSW Union holds contributions on trust for itself and the NSW Divisional branch. As their Honours have set out the facts in some detail, it is not necessary that I do so. I shall use the same nomenclature as is used in their Honours’ reasons.

42    The appellant is an organization registered under the relevant federal Act. Persons employed in the electrical industry in New South Wales may choose to join either the NSW Divisional branch or the NSW Union which is registered under the NSW Act. Alternatively, they may choose to join both organizations. In that event, the rules of each organization contemplate that the relevant member will pay contributions only to one of them. It is not necessary that I enquire into the circumstances which led to the present situation. The evidence indicates that the two bodies are, for most purposes, effectively conducted as one, with substantially overlapping cohorts of office-holders.

43    This case is concerned with the relationship between persons who are members of both organizations but pay contributions only to the NSW Union. On appeal two questions arise concerning such relationship. First, was the primary Judge correct in concluding that payment of a contribution by such a member to the NSW Union did not discharge his or her obligation to pay a contribution to the NSW Divisional branch? Second, assuming that his Honour was correct in that view, was it oppressive, unreasonable or unjust to other members of the appellant that a member of both organizations should participate in plebiscites of Division members and the election of the Divisional Secretary and Assistant Secretary of the Division, given that he or she had not discharged such obligation.

44    Pursuant to r 5.2.1 of the Divisional Rules, members of the NSW Divisional branch must pay contributions to it, subject to the proviso in r 5.2.6 which states:

Provided that any person who has paid contributions, subscriptions, fines, levies, fees or dues to [the NSW Union] whether before or after its registration, shall be exempt from payments of contributions, subscriptions, fines, levies, fees or dues under these rules to the extent of his payment to the said [NSW Union] in any year.

45    Pursuant to r 7 of the Rules of the NSW Union, members must also pay contributions to that organization. However r 7(b)(iv) provides:

All contributions paid pursuant to this Rule, shall also be deemed to be payment in respect to membership contributions to the [appellant].

46    The evidence demonstrates that contributions paid to the NSW Union are held in an account in its name, but are apparently applied for the purposes of that organization and the NSW Divisional branch. In particular, “sustentation fees” are paid to the appellant from these funds, such fees being 12.5% of the contributions payable in connection with membership of the Division. The primary Judge concluded that contributions paid to, and retained by the NSW Union are not “paid” in accordance with the rules of the Division, and that the relevant members therefore make no contribution to the finances of the appellant, the Division or the NSW Divisional branch. His Honour concluded that such an arrangement is oppressive, unreasonable or unjust to members of the appellant in other states. That conclusion was based upon his Honour’s view that a member of both organizations who has paid his or her contribution to the NSW Union is entitled to vote in plebiscites of Division members and elections of the Divisional Secretary and Assistant Secretary.

47    The Chief Justice and Buchanan J have concluded that a contribution paid to the NSW Union “operates pro tanto as a discharge of the member’s liability to pay his or her dues to the appellant … ”. Their Honours have also held that moneys so paid to the NSW Union are held upon trust for the benefit of both the NSW Divisional branch and the NSW Union. Their Honours observe that:

… it is inconceivable that if, for example, the NSW Union were to become insolvent that the NSW Divisional branch could not sustain a proprietary claim to the benefit of those moneys.

48    Their Honours also observe at [35] that:

If one were to hypothesise the insolvency of the NSW Union, a court of equity would not countenance an attempt by the unsecured creditors of the NSW Union to claim the dues held in its bank account in respect of Divisional branch membership as assets available for distribution to creditors generally … .

49    I would not go so far. It is not clear to me that moneys paid to the NSW Union are held upon trust for both organizations. That is only one possible characterization. The arrangement is similar to that frequently adopted within groups of associated companies where one company acts as banker for the others. The relationship of banker and customer is generally that of debtor and creditor, rather than trustee and beneficiary. It may be that the NSW Union acts as banker for itself and the NSW Divisional branch.

50    The basis upon which the NSW Union holds the contributions is to be found in r 7 of the Rules of the NSW Union, part of which I have set out above. The primary Judge observed (at [37] and [38]) that the rules of each organization do not have contractual effect as between it and its members, but are legally enforceable. The case appears to have been conducted on that basis. Thus a member of both organizations, who has paid his or her contribution to the NSW Union, could compel that organization to apply the contribution in the way contemplated by r 7, presumably as directed or arranged by the two organizations. However other matters may also bear upon the characterization of the relationship between the two organizations and/or regulate the basis upon which contributions are held. The arrangements between the organizations have emerged over time and seem to be well understood and effective in the day-to-day operation of both or at least, the contrary has not been suggested. The circumstances which have led to this situation may provide evidence which would further inform a decision as to the legal basis upon which the NSW Union holds such contributions. At [36] the primary Judge noted that at first instance the appellant had “… eschewed any argument that the [NSW Union] held any moneys it collected on trust for the [NSW Divisional branch]”. However the contributions are clearly held by the NSW Union on its own behalf and on behalf of the NSW Divisional branch. It is not necessary that I decide whether they are held on trust.

51    Although the Divisional Rules do not expressly provide that contributions payable to the NSW Divisional branch be held by the NSW Union, they provide that contributions to the NSW Union will, pro tanto, discharge the obligation upon members of both organizations to pay a contribution to the NSW Divisional branch. The NSW Union acknowledges (by r 7) that such payments are “in respect to” contributions to the appellant. These provisions were no doubt made in the expectation of close co-operation between the two organizations. In practice, realization of this expectation is probably fostered by the extensive overlapping of the two cohorts of office-holders. One may wonder about potential conflicts of interest, but that matter is not presently relevant.

52    In my view the requirement for the payment of contributions to the NSW Divisional branch is discharged pro tanto by a member of both organizations paying his or her contribution to the NSW Union. The holding of such contribution by the NSW Union is merely an administrative arrangement which may or may not be prudent. Thus the factual basis for the respondent’s claim has not been made out. My reluctance to conclude that the NSW Union holds the contributions on trust does not otherwise detract from the force of the reasons given by the Chief Justice and Buchanan J for rejecting any finding of oppression, unreasonableness or injustice. For those reasons the challenge must fail.

Associate:

Dated:    13 November 2012