Buchanek, J. v Jones, I

[1989] FCA 197

Re: JOHN BUCHANEK
And: IAN JONES; STEPHANIE BAILLIE; HERBERT MUENCH; LEN BARRY; MICHAEL
McCORMACK; BERNARD COMMANDEUR; SHAUN CAREY; NOEL LONG; LUCA PICCI; DESI
MARTIN; DOUGLAS HARDIE; GEORGE BOBANOVIC; DAOUD ADAM; SPIRO LOUCANARIS
and GARY SHERRIFF
No. VI 12 of 1989
FED No. 197
Industrial Law

COURT

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY
INDUSTRIAL DIVISION
Gray J.(1)

CATCHWORDS

Industrial Law - registered organisation - rules - performance and observance - member charged with misappropriation of funds and gross misbehaviour - whether charges known to or recognised by rules - whether misappropriation of funds of an organisation necessarily a breach of the rules - whether charges formulated with sufficient specificity.

Industrial Relations Act 1988 ss. 195, 196 and 209

Conciliation and Arbitration Act 1904 s.141

HEARING

MELBOURNE

#DATE 26:4:1989

Counsel for the applicant : Mr. S. Marshall

Solicitor for the applicant : Maurice Blackburn & Co.

Counsel for the respondents : Mr. H. Borenstein

Solicitor for the respondents: Slater and Gordon

ORDER

The respondents and each of them perform and observe the rules of the Vehicle Builders Employees Federation of Australia by refraining from proceeding to hear and determine the charges that the applicant is guilty of misappropriation of the funds of the Vehicle Builders Employees Federation of Australia, Victorian branch and gross misbehaviour by reason that:

(i) he misappropriated the funds of the Victorian branch of the Federation by substantially abusing his petrol account during his term of office as an organiser with the branch;

(ii) he misappropriated the funds of the Victorian branch of the Federation by pledging the credit of the branch to place advertisements in newspapers to be paid for by the Victorian branch of the Federation in support of his campaign for election as an organiser.

NOTE: Settlement and entry of orders is dealt with by O.36 of the Federal Court Rules.

JUDGE1

The applicant in this proceeding is a member of the Vehicle Builders Employees Federation of Australia ("the Federation"), an organisation of employees, registered pursuant to the Industrial Relations Act 1988 ("the Act"). He is attached to the Victorian branch of the Federation. The respondents hold various offices, and together make up the committee of management of the Victorian branch of the Federation.

1. The applicant is employed by Holdens Engine Company at its plant at Fishermen's Bend, Victoria, as an inspector tradesman. He has been employed by that company and its predecessor, General Motors-Holdens Limited, since April 1970, apart from some ten months' employment with Nissan Motor Company in 1977 and 1978, and a period as a temporary organiser for the Victorian branch of the Federation from 14th September 1987 to 15th December 1988. It is common ground that the applicant is not, and never has been, an elected officer of the Federation or its Victorian branch.

2. By letter dated 12th April 1989, the respondent Ian Jones, the acting secretary of the Victorian branch of the Federation, wrote to the applicant in the following terms:
   

"Dear Sir,

You are hereby summonsed to attend a meeting of the Committee of Management of the Victorian Branch of the Vehicle Builders Employees' Federation upon 26th April 1989 at 9 a.m.

The purpose of the meeting is to hear and determine charges against you as follows: "That John Buchanek is guilty of mis-appropriation of the funds of the VBEF Victorian Branch and gross mis-behaviour by reason that:

(i) He mis-appropriated the funds of the Victorian Branch of the Federation by substantially abusing his petrol account during his term of office as an Organiser with the Branch.

(ii) That he mis-appropriated the funds of the Victorian Branch of the Federation by pledging the credit of the Branch to place advertisements in newspapers to be paid for by the Victorian Branch of the Federation in support of his campaign for election as an Organiser. These charges are most serious and the consequences of a finding adverse to you are most serious. Please ensure your attendance at the Hearing at the time and place set out above.

This matter will be heard by the Committee of Management and legal representation will not be allowed."

The applicant received this letter on 13th April 1989. By letter dated 20th April 1989, solicitors acting for the applicant wrote to the respondent Jones and to the branch committee of management. They referred to the letter dated 12th April 1989, and made two points. The first was that the charges referred to are not charges known to or recognised by the rules of the Federation. The second was that no particulars of the charges had been given to the applicant. The letter threatened proceedings in this Court unless advice were given by 11 a.m. on 21st April 1989 that the proposed hearing would not proceed on 26th April. The letter was sent by facsimile transmission to the office of the Victorian branch of the Federation.

1. Apparently some particulars of the charges were given, but no advice was given that the proposed hearing would not proceed. The applicant therefore sought and obtained a rule to show cause, which was granted on 24th April, and returnable at 9.30 a.m. today. The rule called upon the respondents pursuant to s.209 of the Act, to show cause why the following orders should not be made:
   

"1. That the Respondents and each of them perform and observe the rules of the Vehicle Builders Employees' Federation of Australia and the Vehicle Builders Employees' Federation of Australia, Victorian Branch, by treating as null and void a Summons by the Firstnamed Respondent directed to the Applicant requiring him to attend a meeting of the Committee of the Victorian Branch of the Vehicle Builders Employees' Federation of Australia on 26 April, 1989 at 9.00 a.m.

2. That the Respondents and each of them refrain from proceeding on 26th April 1989 or on any subsequent date to hear and determine the charges: "That John Buchanek is guilty of mis-appropriation of the funds of the VBEF Victorian Branch and gross misbehaviour by reason that:

(i) He mis-appropriated the funds of the Victorian Branch of the Federation by substantially abusing his petrol account during his term of office as an Organiser with the Branch.

(ii)That he mis-appropriated the funds of the Victorian Branch of the Federation by pledging the credit of the Branch to place advertisements in newspapers to be paid for by the Victorian Branch of the Federation in support of his campaign for election as an Organiser"."

An interim order was made restraining the respondents from hearing and determining the charges until 4.15 p.m. today or further order. Needless to say, time for service of the rule to show cause and the accompanying documents was abridged.

1. The matter therefore came before me this morning, originally for directions and for the hearing of any application for further interim orders. Some argument took place as to the effect of s.209(3) and (4) of the Act. These sub-sections provide:
   

"(3) The Court may refuse to deal with an application for an order under this section unless it is satisfied that the applicant has taken all reasonable steps to try to have the matter the subject of the application resolved within the organisation.

(4) At any time after the making of an application for an order under this section, the Court may make such interim orders as it considers appropriate, and, in particular, orders intended to further the resolution within the organisation concerned of the matter the subject of the application."

Sub-section (3) had no equivalent in s.141, which was the corresponding section of the Conciliation and Arbitration Act 1904. The old s.141(2) empowered the Court to make interim orders, in terms similar to the present s.209(4), but did not contain the specific reference to orders intended to further the resolution within the organisation concerned of the matter the subject of the application. It is plain that the Parliament has indicated an intention that members of organisations should be encouraged to bring their allegations of non-compliance with the rules of organisations to the Court as a last resort, rather than as a first step. Those who are alleged to be failing to comply with the rules should be given every opportunity to remedy any non-compliance before proceedings are taken, or before they are heard and determined in the Court. In many cases, there will be a real question as to how this intention is to be translated into practice. In the presence case, for instance, counsel for the applicant argued that the letter from his solicitors, giving the respondents an opportunity to advise that the hearing would not proceed, was sufficient to constitute "all reasonable steps" within s.209(3). Counsel for the respondents argued that the appropriate course for the applicant to take was to turn up to the proposed hearing by the committee of management this morning, and to argue about the issues raised in his solicitor's letter. Should the committee of management find him guilty of one or both of the charges, he would then have a right of appeal under the rules, which he should exercise before coming to Court.

1. In the present case, it is unnecessary to reach a conclusion on these matters. In the course of argument, the parties by their counsel consented to the Court making a final determination of the crucial issue in the proceeding, namely whether the applicant had been charged in accordance with the rules. In this case, the making of that determination at this stage of the proceeding will have the greatest effect in enabling the parties to resolve the matter the subject of the application quickly. It is therefore appropriate to accede to the wishes of the parties.

2. The rules of the Federation contain what might be described as disciplinary provisions of various kinds. Rule 28A is entitled "Duties of a Member". It contains nine sub-rules, each setting out a positive or negative obligation of a member or members. The first of these is sub-rule (a), which provides, "Every member shall observe, abide by and carry out each of the Rules of the Federation or the Branch applicable to him whether as a member or as an officer." After the nine sub-rules is sub-rule (j), which provides, "A member who commits any breach of this rule shall be deemed guilty of misconduct." Rule 28B is headed "Misconduct". Its three sub-rules provide for three specific kinds of misconduct. The first relates to arrears of contributions, levies or fines, the second to refusal to give information to any officer of the Federation, and the third to the distribution of unauthorised reports of the business of the Federation. These provisions are followed by rule 29, which is headed "Power to Impose Fines". This rule provides as follows:
   

"The Committee of Management in each Branch shall have the power to impose a fine not exceeding $100 for each offence on any member of such Branch who:-

(a) Violates any Federal or Branch rule.

(b) Works in contravention of any Award, order, or agreement.

(c) Refuses to obey any resolution passed at a Special Meeting of the branch.

(d) Fails to attend a meeting of the Committee of Management when summoned by the Secretary.

(e) Owes one quarter's contributions or more or levies and/or fines equal to or greater than one quarter's contributions, and does not, after fourteen days' notice to pay the same, make satisfactory arrangements with the Secretary. In cases coming within this sub-rule defaulting members may be fined without being given notice of the change

(sic.) and without being heard in reference thereto and the fine may be imposed automatically on the happening of the events herein before mentioned in this sub-rule, but the Committee of Management which imposed the fine may if they think fit remit it in whole or in part.

(f) Give misleading information to any officer of the Union.

(g) Refuses to give information to any officer of the Union in regard to Union business or matters.

(h) Without the authority of the Committee of Management gives information as to any of the business of the Union or Branch to any person not a member of the Union.

(i) Makes any untrue statement, whether to a member of the Union or to a non-member as to the decisions of the Branch or of the Committee of Management or as to the conduct of any member of the Branch, where such statement is likely to injure the Branch or the reputation of any member.

(j) Distributes in any way or posts in any place any report of the business of the Union or Branch unless such report has been issued by and with the authority of the Federal Council or of the Committee of Management and is authenticated by the seal of the Branch.

(k) As a shop steward deliberately fails to attend a meeting of shop stewards (approved by the Federal or State Branch or approved educational courses associated with their position as shop stewards without adequate excuse)."

By virtue of rule 30, a person who has been fined under rule 29 may, in addition, be disqualified from holding office in the Federation for a period not exceeding five years.

1. Rule 42 provides for the making of branch rules, not inconsistent with the rules of the Federation. Branch rules have been made for the Victorian branch, and attention was drawn to some of their provisions. The most important of the branch rules is rule 9, which is headed "Disciplinary Action To Be Used In Dealing With Officers Or Members". The relevant provisions of that rule are as follows:
   

"(1) An Officer of the Union as determined in State Rule 3, who fails to carry out their duties may be suspended by the Committee of Management for a period not exceeding 3 months. Where an Officer has been suspended, he/she may have his/her suspension annulled by a majority of members present at a Special meeting of the Branch which shall be called by the Committee of Management not later than fourteen (14) days from the date upon which the Officer is suspended. Provided however, that a holder of an office elected by ballot of the whole of the financial membership shall only finally be removed after appearing before the Committee of Management and then being found to be guilty by a majority ballot of the whole of the financial members in accordance with the Rules of the Organisation of misappropriation of the funds of the Organisation, a substantial breach of the Rules of the Organisation or gross misbehaviour or gross neglect of duty or has ceased, according to the Rules of the Organisation to be eligible to hold the office. Resultant vacancies may be filled by the Committee of Management for the unexpired portion of the term, provided that the remaining portion of his/her term of office is less than 12 months. If the remaining portion is any more than 12 months, a ballot under the Rules will be conducted.

(II) No member shall be fined, removed or suspended from any position they may hold within the Union, subject to Rule 9(I) above unless by a Branch or Sub-Branch Committee of Management without his/her first being duly summoned to answer the charge preferred against him/her. The summons shall specify the charge and shall be forwarded to his/her address by registered post. Notice of charge shall be deemed sufficient if the summons be posted fourteen (14) days prior to the date of investigation. Should the member not attend, the charge may be investigated and determined in his/her absence unless a satisfactory excuse for his/her absence has been received."

It should be noted that the definition of officers in rule 3 of the branch rules refers to various specified positions. As I have said, it is common ground that the applicant does not hold, and has not held, one of those positions.

1. This examination of the rules reveals that no express provision exists under which a member may be charged with either misappropriation of the funds of the Federation or one of its branches, or gross misbehaviour. Such specific provisions do exist with respect to certain officers. For instance, provisions which reflect the restrictions placed on the content of rules by s.195(1)(c) of the Act are found in relation to the federal secretary in rule 6(h) of the rules of the Federation (a provision also made applicable to the assistant federal secretary by rule 6A) and with respect to other officers of the Federation in rule 8(c) of the rules of the Federation. Likewise, the officers of the Victorian branch are protected by the proviso in rule 9(1) of the branch rules, to which reference has already been made. All of these provisions protect the various officers from removal from office unless found guilty of misappropriation of the funds, a substantial breach of the rules or gross misbehaviour or gross neglect of duty, or unless they have ceased to be eligible to hold the office concerned.

2. Despite the lack of such a specific provision relating to members, counsel for the respondents endeavoured to argue that the applicant had been charged properly under the rules. He argued that the requirement of branch rule 9(II) that the charge be specified had been complied with, in that the letter gave to the applicant a clear indication that he was charged with misappropriation of the funds and gross misbehaviour. He referred to rules 28A(a) and (j) and 29(a) of the federal rules. The argument was that a member could be charged with a violation of any rule of the Federation, or of a branch, and that such a violation amounted to misconduct under rule 28A(j), and was capable of being the subject of a fine under rule 29(a). Central to this argument was the proposition that expenditure of the funds of a registered organisation in pursuit of a purpose which falls outside its objects, or is beyond the powers given in its rules, is a breach of those rules. Thus, excessive expenditure on a petrol account, or pledging the credit of the branch to place advertisements in newspapers amounted to a violation of the rules, and could be the subject of a charge.

1. This argument involved reference to those decisions of the Court which have held that the funds of a registered organisation cannot be spent legitimately on electioneering. Particular reference is made to Scott v. Jess (1984) 3 FCR 263, especially at pp 270-272 and 287-289 and Tanner v. Maynes (1985) 7 FCR 432, especially at pp 440-441. In those cases, it was possible to point to specific rules of the organisations concerned, giving to the respective governing bodies powers to expend their funds. Those powers were held by the Court to be subject to implied limitations. Any expenditure beyond the implied limitation amounts to unauthorised expenditure, and therefore to a breach of the rules in that sense. In the present case, counsel for the respondents was unable to advance to the first stage of this process of reasoning. The rules of the Federation and its Victorian branch do not contain any provision relating to any power of an employee organiser to expend the Federation's funds. Any entitlement of a person in that position to use the funds of the Federation can only have arisen because some officer or officers authorised by the rules to spend money have entrusted that employee organiser with some of the funds, subject to certain limitations. The position of such a person is really very little different from a non member employed by the Federation, who misappropriates funds placed in his or her control, or even a burglar who breaks into the office of the Federation and steals cash stored in a safe. Theft of the funds of a registered organisation is a criminal offence, whether the person committing it is a member or not. Whether the thief can also be charged under the rules of the organisation will depend upon, first, whether the thief is a member, and second, the precise provisions of the rules. If the rules make no provision at all for misappropriation of the funds to be an offence, no such charge is possible. If they make breaches of the rules in general terms an offence, but there is no rule relating to misappropriation of the funds, again it would seem that a charge could not be sustained. That is the position in the present case.

2. This leads to the further difficulty facing the respondents, which is the actual formulation of the charges. In Hawkins v. Willis (1981) 58 FLR 364, at p 371, Smithers and Evatt JJ. said, "It would require clear words to create punishable offences." In Hills v. Higgins (1982) 61 FLR 131, at p 152, Fitzgerald J. said:
   

"...natural justice does require that, an adequate interval prior to the hearings of the relevant charges, those charged have fairly indicated to them the matters alleged against them. Elements of confusion or uncertainty must be removed from the charges, along with any other aspect which may impede the preparation of a defence or prejudice a fair hearing."

A person in the applicant's position, receiving charges in the terms of those the subject of the present case would naturally go to the rules to find the basis for the charges. In the rules of the Federation there are not to be found any provisions which expressly enable the applicant to be charged with misappropriation of the funds or gross misbehaviour. Specific provisions of those kinds are found in various places in the rules, with respect to persons occupying specific offices. When the respondents say that the terms of the charges merely inform the applicant of the substance of what is alleged against him, and that he can be charged under rule 29(a) with violation of the rules, he is entitled to object that he has not in fact been charged with violation of the rules. Nor has he been charged with misconduct under rule 28A(j), if indeed misconduct were an offence, otherwise than being a violation of a rule. Rules which leave vague the content of offences, so that the guilt of a person charged under them depends upon the collective opinion of a domestic tribunal are likely to offend against s.196 of the Act, on the ground that they impose conditions, obligations or restrictions that are oppressive, unreasonable or unjust. See Cameron v. Australian Workers' Union (1959) 2 FLR 45, at pp 84-86, in the judgment of Morgan J., and the cases cited by his Honour at p 85. Similarly, rules which permitted a person to be charged by giving to him or her the substance of the allegations, without specifying the charge in terms of some offence created by the rules of an organisation, would be likely to be invalid. Fairness dictates that the offence, as well as its substance, should be specified in any notice given to a member of an organisation charged under the rules. In the case of the applicant, there has been no charge specified of any offence of which he could be found guilty, in accordance with the rules as they stand.

1. For these reasons, the applicant has not been charged in accordance with the rules. It is therefore appropriate to make absolute the second paragraph of the rule to show cause. The Order of the Court will be that the respondents and each of them perform and observe the rules of the Vehicle Builders Employees Federation of Australia by refraining from proceeding to hear and determine the charges that the applicant is guilty of misappropriation of the funds of the Vehicle Builders Employees Federation of Australia Victorian Branch and gross misbehaviour by reason that:
   

(i) he misappropriated the funds of the Victorian branch of the Federation by substantially abusing his petrol account during his term of office as an organiser with the branch;

(ii) he misappropriated the funds of the Victorian branch of the Federation by pledging the credit of the branch to place advertisements in newspapers to be paid for by the Victorian branch of the Federation in support of his campaign for election as an organiser.