FEDERAL COURT OF AUSTRALIA

Gray v Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia [2012] FCA 380

THE COURT ORDERS THAT:

1.    The proceedings be adjourned pursuant to s 163(5) of the Fair Work (Registered Organisations) Act 2009 (Cth) to permit the respondent to alter its rules so as to comply with s 142(1)(c) of that Act.

2.    The matter be listed for directions on 17 July 2012 at 9:30 am.

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

REASONS FOR JUDGMENT

1    The respondent is a federal union and the applicant, Mr Gray, is one of its members. In the interests of economy, I will refer to it as ‘the Federal Union’. The Federal Union has a broad membership coverage involving a number of trades. Each of the trades is reflected in a distinct, and largely autonomous, ‘division’. These divisions, their autonomy and the Federal Union’s mahabharatesque name reflect its nature as the historical endpoint of a large number of amalgamations. This case is concerned with the division which covers electricians and allied trades. It is sometimes known as the ‘Electrical, Energy and Services Division’ and sometimes also as the ‘Electrical Trades Union Division’. I will call it ‘the Federal Division’. It represents electricians (and some related trades) when issues of federal industrial coverage arise and its governing bodies are the Divisional Executive and the Divisional Council. The Federal Division is a national organisation which has state-based branches. This case principally concerns the New South Wales branch of the Federal Division, which I will call ‘the Federal NSW Branch’. Mr Gray is not a member of that branch, although he is a member of the Victorian branch of the Federal Division.

2    Electricity pays no regard to the subtleties which drive the distinctions between the state and federal industrial systems, so it is no surprise that electricians can find it of assistance to be represented in both the federal and the various state industrial systems which exist and to this end there are, at least in some states, state-based unions to perform that function. In New South Wales, the state union which represents electricians is called the ‘Electrical Trades Union of Australia, New South Wales Branch’. I will call this union ‘the State Union’. The State Union is a creature of New South Wales law and owes its existence to the Industrial Relations Act 1996 (NSW), whilst the Federal Union (together with its various internal components including the Federal Division and its Federal NSW Branch) is a creature of federal law maintained under the auspices of the Fair Work (Registered Organisations) Act 2009 (‘the Act’). Membership of the Federal Division is, of course, national in nature but, in practical terms, membership is organised through the Federal Division’s various state branches. Each member of the Federal Division is, therefore, also a member of a state branch.

3    An electrician living and working in New South Wales and who wants to be represented by a union is presented, therefore, with two distinct bodies which he or she could join: the Federal Division, through the Federal NSW Branch, or the State Union. From a practical perspective it would be in such an electrician’s interest to belong to both; on the other hand, having to pay two sets of union dues is hardly an attractive proposition.

4    There is thus created an incentive to combine the operations of the State Union and Federal NSW Branch so that their respective memberships need pay only one set of dues.

The relevant rules of the federal division

5    The Federal Division has its own set of rules and, although they are not material to this case, the Federal Union which includes that division also has its own set of rules. The present litigation arises from Federal Division rr 5.2.1, 5.2.2 and 5.2.5-5.2.7 but, particularly, r 5.2.6:

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

5.2.2    The Division 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 State 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 said trade and industrial Union in any year.

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

6    Federal dues are payable under r 5.2.5 to the relevant state branch (in this case, the Federal NSW Branch) and, as will be seen in due course, each state branch has an obligation to pay to the Federal Division one eighth of the membership fees collected by it from the Federal Division’s members. Each is entitled – at least in principle – to keep the remaining seven eighths. It is the Federal Division which fixes the minimum subscription nationally but each branch is authorised to fix a higher subscription rate for its members, so long as the Divisional Executive or Divisional Council approves: r 5.2.2. Rule 5.2.6 appears to be an important qualification to the collection of federal dues in the case of members of the Federal NSW Branch for, if it means what it appears to say, it would have the effect that the Federal NSW Branch would receive no revenue from its members whenever they had opted, instead, to pay their dues the State Union.

mr gray’s application

7    The applicant, Mr Gray, is not a New South Wales resident and has not paid dues to the State Union. He is a member of the Victorian branch of the Federal Division. He is aggrieved that he has to pay dues to the Federal Division (through the Victorian branch) but that the members of the Federal NSW Branch apparently do not. His immediate concern is that Federal Division r 5.2.6 permits persons to participate in its governance without their financial contributions being subject to the same control as all other members of the Federal Division. He says this is because the dues paid by the members of the Federal NSW Branch go into the coffers of the State Union and therefore lie beyond the Federal Division’s reach and control. The complaint is not Otis or Mayhew’s demand that there should be no taxation without representation, but rather the converse: no representation without taxation.

Mr Gray’s first argument

8    Reduced to legal terms, Mr Gray’s first argument is as follows: s 140(1) of the Act requires the Federal Division to have rules and s 141(1)(b)(iv) requires those rules to provide for ‘the control of committees of the organisation and its branches respectively by the members of the organisation and branches’. Mr Gray says that the effect of Federal Division r 5.2.6 is that the rules do not provide for the control of the committees of the Federal Division by its members and that, therefore, s 141(1)(b)(iv) has been flouted. This matters because of s 142(1)(a) which provides:

142 General requirements for rules

(1)    The rules of an organisation:

(a)    must not be contrary to, or fail to make a provision required by this Act, the Fair Work Act, a modern award or an enterprise agreement, or otherwise be contrary to law

9    A breach of s 142(1)(a) enlivens this Court’s powers under s 163 which include a power to declare the whole or a part of rule to contravene s 142. Where that occurs, one consequence is that the rule in question is thereafter (but not thereunto) void: s 163(6). What Mr Gray, therefore, seeks is the prospective invalidation of Federal Division r 5.2.6.

Mr Gray’s second argument

10    Mr Gray has a second string to his bow. He says that he is entitled to a declaration that s 142(1)(c) has been contravened. That section provides that the rules ‘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’. Section 5(3) provides:

5 Parliament’s intention in enacting this Act

...

(3)    The standards set out in this Act:

(a)    ensure that employer and employee organisations registered under this Act are representative of and accountable to their members, and are able to operate effectively; and

(b)    encourage members to participate in the affairs of organisations to which they belong; and

(c)    encourage the efficient management of organisations and high standards of accountability of organisations to their members; and

(d)    provide for the democratic functioning and control of organisations; and

(e)    facilitate the registration of a diverse range of employer and employee organisations.

11    Mr Gray’s argument is that the operation of r 5.2.6 is oppressive, unreasonable or unjust because it provides for participation in the governance of the Federal Division by a class of persons who have not financially contributed to its affairs.

consideration—Mr Gray’s first argument

12    Mr Gray’s first argument may be dispensed with shortly. The rules of the Federal Division do provide for the control of committees of the organisation and its branches by their respective members. The operation of Federal Division r 5.2.6 is not such as to permit persons who are not members of the Federal Division to take part in its control and organisation. All that r 5.2.6 does is to exempt a certain class of member from having to pay the dues otherwise payable under r 5.2.1. The consequence of that exemption should be understood: a member not required to pay dues under r 5.2.6 does not fail to pay dues. The relationship is not one of default but rather exemption – it is the difference between getting into the movies for free and not getting into them at all. Consequently, a member who takes advantage of the exemption afforded by r 5.2.6 is not an unfinancial member and does not suffer the consequences of having such a status, as detailed in r 6. So much flows from the definition of ‘unfinancial’ in r 6.1.1: a member will have such a status when ‘in arrears of fines, levies and contributions’ on the days specified. This result also flows from the use of the word ‘default’ in r 6.1.2 which provides:

Any member who fails to pay the entrance fees, or contributions, levies or fines imposed in accordance with the rules of the Union or this Division, shall be deemed to be unfinancial in accordance with the rules of this Division unless the default in payment arises through a banking or other technical or clerical error caused through no fault of the member. A member who becomes unfinancial for this reason will not be considered unfinancial for the time it takes to rectify the problem.

[Emphasis added.]

In the absence of arrears or default, rr 6.1.1 and 6.1.2 cannot be engaged; and if r 5.2.6 is engaged then there can be no arrears or default.

13    It will be necessary to return below to the mechanics of how the Federal Division is internally governed. For present purposes it will suffice to observe that the rules provide for a Divisional Council, a Divisional Executive, Divisional Executive Officers, a Divisional Executive Committee, Divisional Branches and Sub-Branches and officers for those branches. None of the rules governing their selection either permits non-members to participate in the electoral process or prevents members from doing so. That being the case, it is not possible to describe the rules as not providing for ‘the control of committees of the organisation and its branches respectively by the members of the organisation and branches’ in terms of s 141(1)(b)(iv). Consequently, Mr Gray’s case under s 142(1)(a) that the rules are contrary to the requirements of s 141(1)(b)(iv) must fail. It rests on the flawed assumption that a person availing herself of r 5.2.6 would not be a member, but that result is precisely what that rule is trying to avoid.

consideration—mr gray’s second argument

14    I turn then to Mr Gray’s alternate case under s 142(1)(c) that the rules impose restrictions on members that, having regard to the objects of the Act, are ‘oppressive, unreasonable or unjust’. As I understood it, the argument was that the exemption from having to pay dues under r 5.2.6 was a ‘condition’ imposed on members which, having regard to the objects of the Act &c. was ‘oppressive, unreasonable or unjust’. No argument was advanced that the oppressive nature of the condition referred to in s 142(1)(c) had to fall on those upon whom the condition operated.

15    The basic point was that it was ‘oppressive, unreasonable or unjust’ to require Victorian branch members, such as Mr Gray, to pay Federal Division dues whilst permitting the members of the Federal NSW Branch to participate in its governance without having to do the same.

The meaning of ‘oppressive, unreasonable or unjust’

16    There may be little to be gained in seeking to parse an expression such as ‘oppressive, unreasonable or unjust’, for there comes a point in every process of legal reasoning when the time for further discussion of what a statute means must end and the time for the application of the standard posited by it to the facts as found must begin. There may be much to be said for the view that, in many cases, the mere glossing of a statute may not only be ultimately unenlightening but, worse, may carry with it a significant risk of error and confusion. Exchanging the words used by Parliament for other judicially discerned synonyms not only runs the risk of engaging in a legal game of Chinese whispers, but distracts attention from the task at hand. No doubt it was for this reason that, when they came to consider s 142(1)(c)’s statutory ancestor in Municipal Officers’ Association of Australia v Lancaster (1981) 54 FLR 129, Evatt and Northrop JJ eschewed saying what the phrase meant, confining themselves instead to what it did not mean (at 150-151, quoting at length their joint judgment in Wiseman v Professional Radio and Electronics Institute of Australasia (1978) 35 FLR 24). It was not, for example, a license to the Court to rewrite a set of rules based on ‘what it considers to be desirable objects’. On the other hand, the third member of the bench, Deane J, was willing to chance his arm (at 165):

There is nothing in the context of s 140(1)(c) [of the Conciliation and Arbitration Act 1904 (Cth)] which would justify giving an expansive construction of the requirement that the conditions, obligations or restrictions imposed by the rules of an organization [sic] upon applicants for membership or members not be “oppressive, unreasonable or unjust”. Those three words are used objectively in the clause and each of them is to be given its ordinary strong meaning. Plainly, their meanings overlap and definition is liable to adulterate the strength which the words possess. Nonetheless, it seems desirable that I indicate the meaning which I ascribe to them. To be oppressive, a condition, obligation or restriction must be burdensome, harsh and wrongful (see, for example, Scottish Co-operative Wholesale Society v Meyer; Re Jermyn Street Turkish Baths Ltd.; Allen v Townsend). To be unreasonable, it must be immoderate and inappropriate. To be unjust, it must be contrary to right and justice and to ordinary standards of fair play (see, for example, Re Kempthorne Prosser & Cos’s New Zealand Drug Co. Ltd.).

[Footnotes omitted.]

17    I take from this, as Mr Borenstein SC for Mr Gray submitted I should, that the words bear their ordinary strong meaning; or, to put it another way, that ‘oppressive, unreasonable or unjust’ means ‘oppressive, unreasonable or unjust’.

The relevance of the relationship between the Federal Division and the State Union

18    There was next a debate about the matrix of materials which might be considered in reaching a conclusion about a rule’s oppressive, unreasonable or unjust nature. The dispute concerned the receipt of evidence of what was alleged to be an arrangement between the Federal Division and the State Union under which dues were collected from the members on behalf of both bodies. I will return to this evidence below. The present question, however, is whether it is capable of throwing light on the viability of an argument that r 5.2.6 is oppressive, unreasonable or unjust.

19    There is no doubt that a set of rules operates in a factual milieu and that, depending on the particular rule, oppressiveness &c. may be affected by a change in the surrounding facts. In Hodder v Australian Workers’ Union (1985) 9 FCR 498, Pincus J instanced at 502 the example of a rule which fixed the composition of an executive body in a way which became unreasonable because of changes in the geographical distribution of the membership around the nation. On the other hand, there is no doubt that evidence will not be received about the attitude of members to the rules: Hodder at 502; Lawley v Transport Workers’ Union of Australia (1987) 22 IR 114 at 118 per Gray J.

20    In this case, the point of the evidence is to show, if accepted, that the Federal Division’s New South Welsh members do, as a matter of fact, actually pay dues to the Federal NSW Branch and that r 5.2.6 in its practical operation is never engaged and has no work to do. I accept that evidence of this kind would be a legitimate aid to the questions posed by s 142(1)(c). If, in substance, there are no members affected by the rule it may be difficult to discern its harsh operation. Accordingly, the evidence is potentially relevant. Before turning to the appropriate findings about that evidence it is useful first to sketch the governance structures involved.

The governance of the Federal Division

21    As has already been noted, the Federal Division is comprised of state-based branches. This is achieved by r 11.1 (‘The members of the Union in each State shall be deemed a Divisional Branch’). Each branch is entitled to representation in the Divisional Council, which r 7.2.1 describes as the ‘supreme governing body’ of the Federal Division. The Divisional Council is elected every four years but meets annually: r 7.5.1. In between its meetings, the Federal Division is administered by the Divisional Executive: r 8.3. The control of the Federal Division’s funds and property is vested in the Divisional Council and the Divisional Executive: r 20.1.1.1.

Electing the Divisional Council

22    There are two steps in the process of appointing the members of the Divisional Council. The first is an assessment of how many delegates each state-based branch will be allotted. The second is the election of those delegates by the branch’s members. The first step requires, by r 7.3.2, an assessment of the number of members a branch has and then the allocation to that branch of a fixed number of delegates. This is determined using the following table:

However, what r 7.3.2 refers to as the number of members is, in fact, a number determined by the application of r 7.3.3, and is not the raw number of members in a branch. Only the first paragraph of r 7.3.3 is relevant:

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.

23    The second step (the election of the delegates) is provided for by r 7.3.1. They are to be elected ‘by the financial membership of each respective Divisional Branch’. There is a curiosity about the operation of rr 7.3.1 and 7.3.2 for, between them, they provide for one franchise for determining the number of delegates (closely, although not perfectly aligned with the concept of members who have in fact paid money for their membership) and another for the election of those delegates (financial membership – a concept which in the case of members exempt from paying dues will include persons who have not paid any money for their membership). As the number of non-paying, but nevertheless financial, members increases, the differences between the two franchises becomes more pronounced.

24    In practice, however, this fact is by itself of little moment. This is because the Divisional Council’s deliberative rules do not afford an individual vote to delegates. Instead r 7.4.1 gives each Divisional Branch a vote for each 500 members that it has. But, once again, the number of members is to be determined by the mechanism in rr 7.3.2 and 7.3.3. Somewhat cumbersome machinery, not presently material, then governs how those votes are to be assigned between individual delegates.

Electing the Divisional Executive

25    A similar, although not identical, arrangement applies in the case of the Divisional Executive. Pursuant to r 8.2, each Divisional Branch is entitled to at least one Divisional Executive member but, where a Divisional Branch comprises at least 10% of the national membership, it is entitled to one additional Divisional Executive member; where it has at least 20% of the national membership, it is entitled to two additional Divisional Executive members, and so on. As with the Divisional Council’s electoral procedures, the number of members is to be determined under r 7.3.3, that is, as an approximate function of the number of actually paying members (as opposed to the number of actual members). The function is approximate only because, in ways not presently relevant, there are different subscription rates fixed for some members (for example, those who are unemployed) and this operates asymmetrically on the number determined by r 7.3.3. Unlike the Divisional Council, each member of the Divisional Executive is entitled to vote.

The potential for disenfranchisement under r 7.3.3

26    These two sets of rules bring about a partial disenfranchisement of members who do not have to pay dues (such as honorary members) or those who are, for whatever reason, exempt. There is no elegant way to describe this class: ‘the non-paying financial membership’ will have to suffice. The disenfranchisement of the non-paying financial membership is partial rather than complete because such members remain entitled to vote in Divisional Council elections every four years under r 7.3.1. But some form of disenfranchisement it remains nevertheless, for the effect of the member counting principle in r 7.3.3 is to reduce, at least potentially, the participatory role of members from Divisional Branches with high numbers of non-paying financial members. Whilst the non-paying financial members are able to cast a vote in an election, they do not count for the purpose of determining the number of delegates by whom they will be represented. An analogous problem would arise if the number of members of the House of Representatives for New South Wales was to be determined by reference only to the number of women in the State even though the men continued to be entitled to vote in the actual election. That observation highlights that the disenfranchisement wrought by r 7.3.3 is not only of the persons who are excluded from the count it mandates (the non-paying financial membership) but also of those whom it includes (the paying financial membership). Even though paying financial members are, in effect, counted by r 7.3.3 they are not represented to the same extent on the Divisional Council as they would be if the non-paying financial membership were also counted under the r 7.3.3, just as women in New South Wales would not be fully represented if New South Wales’ representation in the House of Representatives was halved because men did not count for the purposes of the franchise.

27    On its face, however, there is no apparent problem with r 7.3.3 because it is a national rule and applies to all members and all branches; everyone is equally disenfranchised. The difficulties with its operation arise when it encounters in its application a rule affecting the numbers of non-paying financial members in a single branch. At that point it will develop a lop-sided operation. Mr Gray’s argument is that r 5.2.6 is such a rule.

28    It is not possible to say, in a vacuum, whether this effect is trivial or substantial without knowing something about the membership profile of a particular branch. For example, if a Divisional Branch has 1205 members of whom 1200 pay dues and five are exempt and, if the national membership is 50,000, then r 7.3.3 has no impact in so far as the non-paying members are concerned. The branch is entitled to one delegate to the Divisional Council (r 7.3.2) with two votes (r 7.4.1) and one member on the Divisional Executive (r 8.2). Even if the non-paying financial members were counted under r 7.3.3, it would make no difference in the case of such a branch because they have no impact, one way or the other, on the arithmetic of Divisional Council and Divisional Executive selection procedures. On the other hand, if the membership of a large branch is made up almost entirely of exempt members, the opposite is likely to result. A branch consisting of 20,000 non–paying financial members and only 200 paying financial members would operate very differently where there was a national membership of 50,000. The direct operation of r 7.3.3 would mean that that branch had one delegate to the Divisional Council and one member on the Divisional Executive. If, on the other hand, the non-paying financial members were not effectively excluded by r 7.3.3, the branch would be entitled to five delegates to the Divisional Council with 40 votes between them and four members on the Divisional Executive.

Other possible disenfranchisements

29    There are two further effects which should be noted. First, rr 17.1 and 17.6 provide for the control of the Divisional Council and the Divisional Executive (and, although presently immaterial, a subcommittee of the Divisional Executive called the Divisional Executive Committee) by a plebiscite of financial members if 5% of that membership so request. Secondly, there exist at both the divisional and branch levels executive officers known as the Secretary and Assistant Secretary. As with the plebiscite provision, the rules governing the election of these positions reckon on an election from the entire financial membership of the division or branch: rr 9.4.1, 9.5.1, 15.3.1, 15.6.1 and 15.19.8. The same is true of the election of Divisional Branch Presidents and Organisers: r 15.6.1.

30    Although Mr Gray relied upon it, I do not think that the rules relating to the election of the aforementioned branch officials can assist his argument, for the electorate in that case consists only of New South Welsh members and can have no impact on the members of the Victorian branch. This is not so, however, in relation to the election of the Divisional Secretary and Assistant Secretary. The plebiscite and Divisional Secretary/Assistant Secretary election rules therefore proceed on the basis of a franchise which includes all financial members, and this will include both those who have actually paid for their membership and those who are exempt from doing so.

31    Under these rules, there is no disenfranchisement of non-paying financial members at all because those members are able fully to participate. These rules stand, therefore, in contrast to the rules for election to the Divisional Council and Divisional Executive, where a partial disenfranchisement potentially does occur.

Actual disenfranchisement under r 7.3.3: the facts on the ground

32    The word ‘potentially’ requires an examination of the facts. The first important fact is that 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. Although there was available no direct evidence in the form of bank statements, a witness for the Federal Union, Mr Tighe, did give evidence that the membership moneys had been paid into the State Union’s bank account and, ultimately, I did not apprehend this to be in dispute.

33    The second important fact concerns the number of members of the Federal NSW Branch. The evidence suggested that it had been around 14,000-15,000 in the period between 2006 and 2010. It is impossible to be precise about this, as the evidence was based on the Federal NSW Branch’s member count for the purposes of r 7.3.3, which was done on the assumption that its members had, in fact, paid Federal NSW Branch dues (a false assumption for reasons given below). Nevertheless, that incorrect assumption does provide a convenient proxy for actual membership, although the proxy is not perfect. On the same basis, the national membership appears to be around 50,000, which means that the financial members of the Federal NSW Branch (whether paying or exempt) constitute around 30% of the national membership.

34    A third important fact concerns the very substantial sums of money paid by the Federal NSW Branch to the Federal Division in the form of sustentation fees. Rule 20.3.1 provides for the creation of a Divisional Fund into which are to be paid various sums including a fee calculated as follows (r 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”, provided that where differential contribution rates have been determined for a Divisional Branch, the allocation to the Divisional Council shall be twelve-and-a-half per centum only of the amount which would have been collected by such Divisional Branch had such differential contribution rates not been determined.

Over a number of years, around $16 million appears to have been paid under this rule. The evidence was that this money was drawn from the State Union’s bank account and not from any account maintained by the Federal NSW Branch.

35    The difficulties thrown up by this case may now be seen in clearer outline. If the 15,000 or so members of the Federal NSW Branch have not paid their dues to the Federal NSW Branch but to the State Union (a factual matter to which I turn below) and are therefore exempted from having to pay dues by r 5.2.6 then, although they will be financial members and entitled to take part in a plebiscite under r 17.1 and the election of the Divisional Secretary and Assistant Secretary under rr 9.4.1 and 9.5.1, they will not be counted under r 7.3.3. The immediate consequence is that the members of the Federal NSW Branch, regardless of their number, will be entitled to elect only one delegate to the Divisional Council (r 7.3.2) but this delegate will have no votes at Divisional Council (r 7.4.1); they will be entitled to be represented by one person on the Divisional Executive and that person will be entitled to vote (r 8.2).

To whom were the dues paid?

36    The position of the Federal Union was to argue that these problems never arose because r 5.2.6 was never engaged. It was not engaged, so the argument ran, because the members of the Federal NSW Branch had, as a matter of fact, actually paid their dues both to the Federal NSW Branch and the State Union. The evidence for this was the Federal NSW Branch’s ‘receipting’ of the membership fees from members evidenced: (a) by the issue to each member of the OK Card bearing the Federal NSW Branch’s logo; (b) by an arrangement it had with the State Union to pool the membership fees collected by them both into a single bank account; (c) by the State Union’s acknowledgment in its accounts that it had collected the fees for the Federal NSW Branch; (d) by the preparation—in some years at least—of ‘Consolidated Financial Statements’ for the Federal NSW Branch and the State Union; (e) by an agreement between the Federal NSW Branch and the State Union that they would have matching exemption clauses in respect of each other’s memberships so that payment of membership fees for one exempted the relevant member from having to pay the other; and, (f) by the reality of that agreement having been implemented. On the other hand, the Federal Union expressly eschewed any argument that the State Union held any moneys it collected on trust for the Federal NSW Branch. As will be seen, I do not accept most of these claims but the reasons for this can be postponed for now.

37    The task at hand is to arrive at the correct legal analysis of the events which occurred. One must begin, then, with the legal obligations which precede the actions of the unions and their members and one must discern therein the framework upon which the remaining facts must be draped. There are two unions involved with two distinct memberships. In the case of the Federal Division its rules are called for, and authorised by, s 140(1) of the Act. They are not contractual in nature (as, for example, the constitution of a corporation is) but they may, nevertheless, be enforced by this Court (ss 164 and 164A) so long as any such enforcement order does not declare an election invalid or provide for the payment of compensation (ss 164B(1) and 164B(2)). Under r 5.2.1, members must pay their contribution at the rate determined. Pausing there, unless there is an operative exemption (such as is contained in r 5.2.6) the rules provide for a legal obligation to pay the subscription amount.

38    So far as the State Union is concerned, s 234 of the Industrial Relations Act 1996 (NSW) requires it to have rules. As with its federal counterpart, these rules are not contractual in nature but are, nevertheless, enforceable before the NSW Industrial Commission (s 248). Rule 7(b) of the State Union provides that members must pay a contribution fee. As in the case of the Federal NSW Branch, therefore, each member of the State Union is under a legal obligation, curially enforceable, to pay his or her dues.

39    The consequence of an individual being a member of both unions is that, at least before he has paid dues to either organisation, he is legally bound to pay dues to both. And, this is to be emphasised, the obligations involved are both separate and distinct. Because they are owed to two different entities it is legally impossible for them to be considered a joint obligation. A corollary is that payment of one could never operate, by itself, as a discharge of the other.

40    It is now necessary to say something of State Union r 7B(iv). It provides:

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

It was not suggested by either party that this rule could actually have the effect of discharging a member’s obligation to pay her federal dues. That being so, this rule is bereft of legal significance. I reject the submission, understandably advanced with little enthusiasm, that this rule exempts a member from paying state dues when she has already paid federal dues. It simply does not say that.

41    The relationship between the two unions on the question of membership fees is therefore not one of reciprocity. Although the Federal NSW Branch exempts its members from having to pay dues to it if the State Union’s dues have already been paid, the State Union’s rules do not return the favour. A member who pays his dues to the Federal NSW Branch is not exempt from having to pay his dues to the State Union.

42    Before this Court, Mr Tighe gave evidence for the Federal Union about the difficulties which the question of joint membership had generated for the two unions. Those difficulties are very obvious. He also gave evidence of an arrangement which was reached between the two as to how the problem might be resolved – one hesitates to say it – moving forward. But an aspect of his evidence about this agreement was that the two organisations would adopt joint exemptions and, as r 7B(iv) inevitably shows, this plainly has not happened.

43    What then does happen as each member comes to pay his dues? First, each member signs a two-sided application card. Secondly, each member either hands their membership subscription (if it be cash) or some form of payment instrument or instruction (such as a credit card) to a person who the evidence does not identify or makes the payment directly (possibly by electronic funds transfer) into an account maintained by the State Union. Thirdly, where the member pays by a payment instrument or credit card, I infer that the proceeds are ultimately deposited into the same account. Fourthly, the member is then issued with an ‘OK Card’, which serves as proof of paid-up membership, and a receipt. The OK Card bears the logo of both organisations but is impressed with the ABN of the State Union. Fifthly, the amount said by the Federal NSW Branch to be necessary for it to pay its sustentation fees to the Federal Division (that is, one eighth of the fees alleged to be collected by it) is subsequently paid to the Federal Division from monies drawn from the State Union’s bank account. Sixthly, I infer that the Federal NSW Branch instructs the State Union to make that payment and that, in response to that instruction, the State Union does so.

44    This final step will be a payment by direction by the Federal NSW Branch to the Federal Division only if there was an antecedent obligation on its part to make the payment under r 20.3.1.1 and this, in turn, will depend on the Federal NSW Branch having collected ‘contribution and entrance fees’ from its members in the first place (its obligation to pay sustentation fees being contingent on itself having first collected fees). If it has not collected such fees from its members (because, for example, those fees have been paid to the State Union in its own right and not in discharge of any obligation owed to the Federal NSW Branch) then there will be no such obligation on the Federal NSW Branch’s part and, correspondingly, there will be no payment by the Federal NSW Branch by direction. In that circumstance, and since it will not be parting with any actual money itself, no payment to the Federal Division will be made by it at all. What will have occurred instead is a gratuitous payment by the State Union of its money to the Federal Division.

45    Did then the Federal NSW Branch receive membership dues from its members? The fact that no money was ever received into a bank account of the Federal NSW Branch did not deter the Federal Union from submitting that it had, nevertheless, received the fees. Mr Tighe, who was cross-examined about this, was quite unshaken in his resolve to assert that because the Federal NSW Branch had issued each member with a receipt it followed also that it had received the money.

46    But his certainty about this legal matter, although sincere, was unjustified. 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.

48    This proposition is intractable and Mr Pinker, the auditor of both unions, must have felt it acutely. In the audited financial statements for the State Union there was recorded, in the 2008 and 2009 years, the receipt by it as income of $5,520,131 and $6,214,794 in ‘members contributions and entrance fees’. On the other hand, the financial statements of the Federal NSW Branch do not reveal it as having received any income by way of membership fees. There is, however, a note to the accounts (Note 17):

All money collected by the [State 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 Federal NSW Branch].

49    This is, with respect, untenable. There was no evidence of such an arrangement. There was evidence from Mr Tighe that there had been an agreement between the Federal NSW Branch and the State Union that they would collect the subscription moneys together and deposit them into a joint bank account but it is clear that this did not come to pass, for the moneys were paid into the State Union’s bank account alone. In any event, neither that arrangement nor the arrangement adverted to in Note 17 would solve the underlying problem which is that the amount of money needed to discharge two separate debts is the sum of the two debts, not some other lesser sum. The arrangement in Note 17 would also inevitably give rise to a trust. Other questions left unresolved by Note 17 are: how much was being collected by the State Union on its own behalf and how much on behalf of the Federal NSW Branch; why do the income statements for the Federal NSW Branch not include as income the element which the State Union was collecting on its behalf; and why has the State Union included as its income that component which, on Note 17’s view of world, belongs to the Federal NSW Branch? These questions have no coherent answers. In those circumstances, Note 17 does not accord with reality.

50    To whom then were the membership fees paid? They were paid to the State Union. The audited financial statements of both unions shows the membership fees as income in the State Union’s hands and do not show it as income in the hands of the Federal NSW Branch. Only Note 17 stands in the way of that conclusion but, for the reasons given, I afford it no weight. Consistent with the audited accounts, the fees were paid into the State Union’s bank account. The receipt was printed using the State Union’s ABN. I do not accept that the mere fact that the Federal NSW Branch’s logo appeared on the OK Card can overcome this myriad of problems. Nor do I find the suggested agreement between the Federal NSW Branch and the State Union of any assistance, for it is plain that the processes which are presently taking place are not the ones contemplated by that agreement.

51    The conclusion that the fees were paid to the State Union fits tidily in with the operation of the rules. Payment to the State Union discharged any obligation to pay the fee to the Federal NSW Branch, for this was the effect of r 5.2.6. It is only through this mechanism that the members can be relieved of their obligation to pay both state and federal dues. If, as the Federal Union submits, the whole of the Federal NSW Branch’s fees were paid to the Federal NSW Branch, then it follows that the whole of their New South Wales dues remain outstanding: State Union r 7B(iv) does not release a member from the obligation to pay dues to it just because she has paid the fees due to the Federal NSW Branch. That rather suggests, and I am inclined to infer, that the members themselves are likely to have intended to do whatever was necessary to ensure that they did not have pay the fees twice. The only path to that conclusion is r 5.2.6; there is no other way. Only payment of the State Union’s fees can avert the necessity for payment of both sets of fees.

Conclusions on oppressiveness &c.

52    At least in relation to the selection of the Divisional Council and the Divisional Executive, this means that 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 electorate must do so. This conclusion does not retroactively influence the outcome of elections held under these procedures: s 164B(1).

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.

conclusion and orders

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.

60    Section 163(5) of the Act permits this Court to adjourn proceedings to give an organisation an opportunity to alter its rules. Mr Kenzie QC submitted that I should take this course and that the Federal Union should be given the opportunity of making that choice. Not without some misgivings, I am going to embrace that course. The misgivings relate to the likely nature of the Federal Division if the rules are amended so that the members of the Federal NSW Branch are not entitled to vote in any plebiscite or for the Divisional Secretary or Assistant Secretary. Such a division will nominally have members in New South Wales, but they will neither pay dues nor participate in any but the most limited ways in the affairs of the Division. It is not necessarily clear that the Act would countenance a federal union an entire state branch of which consisted of ghostlike members unable to participate in its affairs. An answer to that, however, may be that this arises from choices which have been made by its members.

61    I do not think I should resolve those issues at this stage. The Federal Division must be given the opportunity to see if it can come up with amendments to the rules which will resolve the unfairness identified in these reasons. I will therefore adjourn the proceedings for three months to 17 July 2012 at 9:30 am to permit the Federal Union to amend its rules in light of these reasons. I will indicate that I would presently be minded to grant leave to appeal were such an application to be made.

Associate:

Dated:    17 April 2012