Baird, M. v Kingham, M.
[1993] FCA 823
•27 OCTOBER 1993
MALCOLM BAIRD v. MARTIN KINGHAM and OTHERS
No. VI54 of 1993
FED No. 823
Number of pages - 6
Industrial Law - Fiduciary Duty - Practice And Procedure
COURT
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
HEEREY J
CATCHWORDS
Industrial Law - union meetings - resolution appointing certain persons as temporary organisers - invalidity of resolution - inconsistency with earlier resolution - failure to rescind earlier resolution - construction of union rules - number of organisers permissible.
Fiduciary Duty - organiser's fiduciary duty to union - rules which require members of the branch management committee to be officers of the union - conflict with personal interest.
Practice And Procedure - interlocutory injunction - balance of convenience.
Aberdeen Railway Company v Blakie Bros (1861) 4 Macquarie 461.
Re Greymouth Point Elizabeth Railway and Coal Company Limited (1904) 1 Ch 32.
HEARING
MELBOURNE, 27 October 1993
#DATE 27:10:1993
Counsel for the applicant: Mr M Bromberg with Mr A Watson
Solicitor for the applicant: Slater and Gordon
Counsel for the respondent: Mr S Rothman
Solicitor for the respondent: Holding Redlich
ORDER
The Court Orders and Directs:
1. That until 4.00pm on 13 December 1993 or until further order the respondents treat as null and void and of no effect the resolution purportedly carried at a meeting of the Union's Victorian Divisional Branch, Committee of Management on 20 October 1993 appointing David Pillar, John Loh and John Setka as temporary organisers in the Victorian Division Branch of the Union.
2. The trial of the matter be fixed for hearing on 13 December 1993.
3. Reserve liberty to apply.
4. That any further affidavits by the respondents be filed and served by 5.00pm on 5 November 1993.
5. That any affidavits by the applicant in reply be filed and served by 5.00pm on 10 November 1993.
6. That the Construction Forestry Mining Energy Union be joined as a respondent.
NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules
JUDGE1
HEEREY J This dispute arises out of the appointment of three gentlemen, Messrs David Pillar, John Loh and John Setka, as temporary organisers by the branch management committee ("BMC") of the Victorian divisional branch of the Building Unions Division ("the Division") of the Construction Forestry Mining Energy Union ("the Union").
A resolution for the appointment was purportedly passed at a meeting of the BMC on 20 October 1993. The applicant, Mr Malcolm Baird, is himself a member of the BMC. He attacks the validity of the appointment on a number of grounds. The respondents are the other members of the BMC (including Messrs Pillar and Loh) and Mr Setka. Most, but not all, of the respondents have entered an appearance and have been represented by Mr S Rothman. Mr M Bromberg and Mr A Watson appeared for the applicant.
On 25 October I granted a rule to show cause and also interim relief which in effect restrained the respondents from treating the resolution of appointment as valid. A trial has now been fixed for 13 December 1993 and the remaining issue is whether that interim relief should be extended up until trial.
At the outset I stress that any comments I make are not made after a full trial of the proceeding, and obviously should not be taken as reflecting any concluded view on the ultimate merits one way or the other. The court has to make a decision which is the fairest and most convenient temporary arrangement, pending a full trial of the proceeding. Counsel for the respondents admitted that some at least of the issues raised by the applicant were arguable. In that context therefore the most important question I have to decide is whether the balance of convenience weighs for or against continuation of the interim relief. I shall, however, in deference to the careful and persuasive arguments which counsel for the respondents put, deal in a little detail with the applicant's substantive case.
Failure to Rescind Earlier Resolution
5. The applicant contends that the resolution of 25 October appointing Messrs Pillar, Loh and Setka was invalid because it was inconsistent with an earlier resolution of the BMC passed on 30 August and there had not been a rescission of that earlier resolution as required by r.64(j) of the Division Rules.
That rule provides as follows:
"A resolution may during the meeting at which it was passed be recommitted on the affirmative votes of two-thirds of those present at such meeting. A resolution may be rescinded by the giving of one month's notice and a majority vote being cast at the meeting subsequent to the expiry of the month's notice.
The resolution of 30 August was in these terms:
"That this Divisional Branch Management Committee resolves that no further staff are employed in the Victorian Branch by either the National Building Unions division, or the Victorian Building Division Union.
Further, this meeting demands that the national secretary of the Building Unions Division and the National Secretary of the CFMEU come to Melbourne and meet with a committee comprising of the executive members of the Building Unions Division to develop a financial strategy.
Further, a special Divisional Branch Management Committee with the same National Officers in attendance will be called at the earliest possible date. All branch full time paid officials are to be invited to attend this meeting. This process is to be completed within fourteen days."
It is common ground that no notice at all was given of any rescission of that resolution prior to the resolution at the meeting of 25 October.
Counsel for the respondents advanced a number of arguments in response to the applicant's attack. First, he contended that r.64 simply did not apply to BMC meetings. He pointed to internal evidence in r.64 which indicated that it was intended to apply to general meetings of branches of the Division, in particular the use of the word "member" and the reference in r.64(a) to items to be dealt with in the order of business, a number of which would not be appropriate for a BMC meeting.
He also pointed out that r.69(ii)(f) provided that divisional branch meetings were to be conducted in accordance with
"The standing orders and rules of debate prescribed in these rules."
He argued that this was a reference to r.64 and the absence of any such provision in relation to BMC meetings meant that r.64 was not to apply.
The arguments raised in relation to this first issue appear to raise complex questions of the construction of the rules, not all of which seem to be internally consistent. Consideration needs to be given, amongst other things, to r.27, which seems to be another rule laying down procedural rules and also r.42(b), (c) and (e) to (t) which contain detailed provisions about the functions of the BMC although, it has to be said, little if anything about how meetings are to be conducted. There was some force in the points made by counsel for the respondents on this issue, but it nevertheless remains a question on which I am satisfied there is a serious issue to be tried.
There were other responses to the applicant's case. It was said that the resolution of 30 August on its proper construction only provided for a moratorium on the engagement of further staff for a period of 14 days. I have less confidence in the arguability of this response. As a matter of construction, I think the word "process" in the resolution is referring to the requested visit of the national officials and their meeting with the BMC. The word "process" does not aptly describe a state of inaction, that is to say the non-appointment of staff.
Likewise, I do not find particularly persuasive another argument of the respondents', viz that the resolution of appointment of 25 October was not impliedly a rescission of the resolution of 30 August. It does seem to be on its face quite inconsistent with the earlier resolution.
Exceeding Maximum Number of Organisers
15. Rule 42(a)(vi), which deals with the composition of the BMC, provides for it to consist of the Divisional Branch President, various other officers, and "twenty two others, at least twelve of whom shall be non full-time officers and up to four of whom shall be Divisional Branch organisers". Counsel for the applicant argued that since the BMC already included four organisers, no further organisers could be validly appointed.
However there seems to be force in the argument of counsel for the respondents that the rules appear to distinguish between organisers and temporary organisers and that, in any event, even if there were a breach of r.42(a)(vi), that is a matter which affects the composition of the BMC rather than the validity of the appointment.
Voting Despite Conflict of Interest
17. On 20 October Messrs Pillar and Loh were already members of the BMC. It was argued that as such they owed a fiduciary duty to the Union and in voting for their own appointment as temporary organisers they were acting in a situation where their personal interests conflicted with that duty. Reliance was placed on the well known authority Aberdeen Railway Company v Blakie Bros (1861) 4 Macquarie 461 at 471 where Lord Cranworth said:
"The Directors are a body to whom is delegated the duty of managing the general affairs of the Company. A corporate body can only act by agents, and it is of course the duty of those agents so to act as best to promote the interests of the corporation whose affairs they are conducting. Such agents have duties to discharge of a fiduciary nature towards their principal. And it is a rule of universal application, that no one, having such duties to discharge, shall be allowed to enter into engagements in which he has, or can have, a personal interest conflicting, or which possibly may conflict, with the interests of those whom he is bound to protect.
So strictly is this principle adhered to, that no question is allowed to be raised as to the fairness or unfairness of a contract so entered into."
However, it does seem clear that in the present case the rules not only permit but positively require that some members of the BMC shall hold office as officers of the union. On its face it is difficult to see there could be a breach of fiduciary duty simply by reason of a member of the BMC being appointed to a paid office of the union.
The complaint of the applicant therefore has to be that Messrs Pillar and Loh voted in relation to a matter in which they had a personal interest and did not leave the meeting.
But there does not seem to be any express provision in the rules against members of the BMC voting on a matter in which they have an interest, as contrasted with the express provision contained in the articles of association of the company dealt with in Re Greymouth Point Elizabeth Railway and Coal Company Limited (1904) 1 Ch 32, a case relied on by the applicant. Insofar as a declaration of interest might be called for, this is not the case where a member of the governing body of a union or company conceals his or her personal interest in some contract. Nobody was under any apprehension that the individuals concerned were those who were to be appointed.
Balance of Convenience
21. The evidence makes it clear that behind this litigation is a dispute as to whether persons associated with the Builders Labourers Federation ("BLF") should be admitted to positions of power in the Union. There is plainly a serious dispute within the Union as to the merits or otherwise of this happening.
The applicant says in his affidavit that Messrs Loh, Pillar and Setka are "prominent former BLF activists". He asserts that for many years the BLF
"played a prominent and controversial role in the building industry in Victoria. This ultimately led to its deregistration as a union. There has already been considerable community and media reaction to the purported appointment of Loh, Pillar and Setka."
The applicant produces newspaper extracts which record reports of a hostile reaction to the appointments by the Master Builders Association of Victoria ("MBAV"), who are reported to have reacted by calling for the Victorian Minister for Industry and Development and the Federal Minister for Industrial Relations to investigate the divisional branch of the Union. The applicant also produces a reported statement by an official of a rival union, the FIMEE, in these terms:
"We have not made a major attempt to date to get into the building and construction industry but the CFMEU can expect full-on competition now."
The applicant deposes that he is concerned that the FIMEE, with the encouragement of the MBAV may try to encroach on the Union's traditional areas of coverage in the Victorian building industry. This could result in industrial disruption and demarcation proceedings involving the Union in considerable expense and creating the risk of a loss of members at a time when the divisional branch's financial and membership position has already been weakened by the recession in the building industry. He further deposes to the fear that the Victorian and/or Federal Governments may use the appointment of BLF officers as an excuse to launch an investigation of the Victorian division of the Union.
The respondents say that the matters I have referred to are not relevant to the exercise of the court's discretion. They contend through their counsel that it is the interests of the Union and not the individual which is relevant. They point to evidence that the national conference of the Division within the last few days has endorsed the appointment of the three former BLF members by the Victorian BMC and indeed has congratulated the branch on that action. It is argued by counsel for the respondents that the court cannot inquire into the desirability or otherwise of the policy decision the national body of the Union has taken, since that is a political exercise of the union's judgment.
However, it seems to me that the correct analysis of the situation is that the applicant is a member of the Union who is entitled to have the rules of the Union complied with. I might usefully stress again that he has not been the subject of cross-examination and his assertions in his affidavit are not matters on which I am making any final judgment. (I am not suggesting that cross-examination would have been appropriate, or even permitted, on an application for interim relief such as the present one.) Subject to these qualifications, I note that the applicant has deposed to harm which will come to the Union, and not just himself as an individual, if these disputed appointments are not set aside.
In considering the balance of convenience, the court has to compare two possibilities, that is, no injunction granted to the applicant but the applicant subsequently succeeds at trial, as against the grant of an injunction to the applicant but the applicant fails at trial. In the former case, on the evidence available to me, there does seem a case of possibility of damage and disadvantage to the Union.
Looking at the converse position, there does not seem to be any significant evidence as to damage that the respondents would suffer if the injunction were granted but they ultimately succeed at trial. The most that is put on this score is that Mr John Sutton, the divisional secretary and national assistant secretary of the Union, deposes that:
"The temporary suspension of the resolution of the Victorian branch has an unknown effect and may well cause serious damage to the CFMEU Building Unions Division. The CFMEU and in particular the Victorian Divisional Branch of the CFMEU Building Unions Division is not disadvantaged by the continued employment of the three temporary organisers while these proceedings take place."
However there is not any evidence on behalf of the respondents that there is any particular pressing need for additional temporary organisers to be engaged for the Union's business or that if such need exists that there are not other people who could adequately do that work apart from the three gentlemen whose appointment is in contest. No case is put on behalf of the three appointees that they will suffer by non-receipt of wages in the meantime.
Therefore, I think that on the balance of convenience I should continue the interim relief up until the trial of the proceeding or further order. I will make the following procedural directions.
I fix the trial for hearing on 13 December 1993. I direct that any further affidavits by the respondents be filed and served by 5 pm on 5 November and that any affidavits by the applicant in reply be filed and served by 5 pm on 10 November. I will reserve liberty to apply. I will direct that the Construction Forestry Mining Energy Union be joined as a respondent.
0
0
0