CPSU v UniSuper Ltd

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMERCIAL COURT

S ECI 2020 03671

CPSU, THE COMMUNITY AND PUBLIC SECTOR UNION & ANOR	Plaintiffs
v
UNISUPER LIMITED (ABN 54 006 027 121) & ANOR	Defendants

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JUDGE:	DELANY J
WHERE HELD:	Melbourne
DATE OF HEARING:	9 November 2020
DATE OF JUDGMENT:	8 December 2020
CASE MAY BE CITED AS:	CPSU v UniSuper Ltd
MEDIUM NEUTRAL CITATION:	[2020] VSC 825

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CORPORATIONS – Corporate Trustee – Public Offer Superannuation Fund – Statutory contract – Union and scheme member seek declaratory and other relief concerning Corporate constitution – Whether sufficient interest in declaratory relief – Clarence City Council v Commonwealth of Australia [2020] FCAFC 134; 328 ALR 273 applied – Marketing Advisory Service (MAS) v Football Tasmania Ltd [2002] FCAFC 165; (2002) 42 ACSR 128 cited –Corporations Act 2001 (Cth), s 140 – Supreme Court (General Civil Procedure) Rules 2015 (Vic), r 54.02.

CONTRACT – Construction – Post-contractual conduct sought to be relied upon – Johnston v Brightstars Holding Company Pty Ltd [2014] NSWSCA 150 cited – Adaz Nominees Pty Ltd v Castleway Pty Ltd [2020] VSCA 201 cited – Superannuation Industry (Supervision) Act 1993 (Cth) ss 89, 91(3).

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Dr O Bigos QC with Mr O Ciolek	Brand Partners Commercial Lawyers
For the Defendants	Mr T Boston QC with Ms E Poole	Herbert Smith Freehills

HIS HONOUR:

Background

The first plaintiff the Community and Public Sector Union (‘CPSU’), is an association of employees, registered under the Fair Work (Registered Organisations) Act 2009 (Cth).

The second plaintiff, Shelley Anne Odewahn, is the Assistant Branch Secretary of the New South Wales branch of the CPSU. She is a member of the CPSU and a member of the UniSuper superannuation fund (‘the Scheme’).

The first defendant, UniSuper Limited (ABN 54 006 027 121) (‘USL’), is an Australian public company and the corporate trustee and superannuation entity licensee of the Scheme. USL’s shareholders comprise thirty-seven Australian Universities.[1]
[1]Defendants, Affidavit of Michael Kevin O’Sullivan, dated 16 October 2020 (‘O’Sullivan Affidavit’), [7]-[8].

The second defendant, Jane Panton, is the company secretary of USL and is sued in that capacity.

The Scheme provides superannuation services to members working in Australia’s higher education and research sector, amongst others (‘Members’). The Members include eligible employees of universities and university owned companies.

As at 30 June 2020, there were approximately 472,785 Members of the Scheme.[2] At that date, the Scheme held approximately $83.2 billion in assets.[3]
[2]Ibid, [30].
[3]Ibid, [28].

The Scheme was formed following an amalgamation of the Tertiary Education Superannuation Scheme (‘TESS’) into the Superannuation Scheme for Australian Universities (‘SSAU’) with effect from 1 October 2000, via a successor fund transfer under the Superannuation Industry (Supervision) Act 1993 (Cth) (‘the SIS Act’).

USL was the corporate trustee of the SSAU, and TESS Superannuation Ltd (‘TESS Ltd’) was the corporate trustee of TESS. Following the amalgamation, USL became the trustee of the Scheme.

USL is governed by a constitution (‘Constitution’). The Constitution was adopted on 31 July 2000 following the amalgamation of the two funds to form the Scheme. The Constitution provides for a Board of not less than eight and not more than 11 persons.[4]
[4]Plaintiffs, Affidavit of Karen Michele Batt, dated 11 September 2020 (‘First Batt Affidavit’), exhibit KB-1, KB-1/195; see Rule 33 of the Constitution at KB-1/203.

The Scheme is governed by a trust deed. The current USL Consolidated Trust Deed is dated 1 April 2020 (‘Trust Deed’).

By Originating Motion dated 21 September 2020 the plaintiffs seek the following substantive relief:

(a)The determination, pursuant to rule 54.02 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (‘Supreme Court Rules’), of the question: what are the rights or interests of the members of the Scheme who are also members of the CPSU, alternatively of the CPSU, to have their nominee appointed as a director of USL (the trustee of the Scheme) under Rule 34(2)(e) of the Constitution.
(b)A declaration that, if each of two or more national unions, who represent a significant number of members of the Scheme (‘national unions’), makes one eligible nomination of a person for appointment as director of USL under Rule 34(2)(e) of the Constitution, such union may make no more than that single eligible nomination.
(c)An injunction restraining Jane Paton from receiving and/or communicating to the members of USL, for the purposes of the appointment of directors at an Annual General Meeting of USL, more than a single eligible nomination for the office of director of USL by any one national union under Rule 34(2)(e) of the Constitution, in circumstances where each of two or more national unions makes an eligible nomination for the office of director.

As appears from the relief sought, the proceeding concerns the proper construction of Rule 34(2)(e) of the Constitution of USL, the trustee of the Scheme. Rule 34(2)(e) provides:

Power to appoint Directors
(2)The Directors appointed under this Rule shall be appointed as follows:
…
(e)two of the persons appointed Directors shall be nominated by national unions who represent a significant number of members of the Scheme.

Two alternative interpretations of Rule 34(2)(e) are advanced:

(a)the plaintiffs contend that on a proper construction, the Rule provides that each national union, representing a significant number of Members of the Scheme, is limited to nominating one person to be appointed director (unless there is only one national union which qualifies, in which case that single union would be entitled to nominate two person for two directors’ positions);[5]
(b)the defendants contend that on a proper construction, the Rule provides that a single national union, who represents a significant number of Members of the Scheme, is entitled to nominate more than one person and that more than one person from that union may be appointed a director of USL.[6]

[5]Plaintiffs, Outline of Opening Submissions, dated 26 October 2020 (Plaintiffs’ Opening Submissions’), [3]; Transcript of Proceedings, CPSU, The Community and Public Sector Union v UniSuper Limited (Supreme Court of Victoria, Delany J, 9 November 2020) (‘Transcript’), 118-119.

[6]Defendants, Defendants’ Outline of Submissions, 2 November 2020 (‘Defendants’ Opening Submissions’), [13]-[14].

The competing contentions are in the context of events that have happened during 2020 and the next Annual General Meeting of USL expected to be held in December 2020.

Between 2 August 2006 and 20 February 2020, one of the directors nominated pursuant to Rule 34(2)(e) of the Constitution was nominated by the CPSU and the other director was nominated by another union, the National Tertiary Education Union (‘NTEU’). Following the resignation from the board on 20 February 2020 of Neville Kitchin (who had been nominated for appointment by the CPSU), the board of USL appointed a second nominee of the NTEU to fill the casual vacancy caused by his resignation.

On 5 August 2020, Ms Paton, USL’s secretary, informed the CPSU that the terms of appointment of the two directors representing the national unions would expire at the next Annual General Meeting, and that the two NTEU-nominated board members would be nominated for re-appointment by the NTEU.[7] On 24 August 2020, the CPSU wrote to USL, nominating Blake Stephens for appointment to the board of USL.
[7]This followed an exchange of correspondence in which the CPSU disputed the NTEU’s ability to nominate two directors.

Of the 472,785 Members of the Scheme, the CPSU represents 1,646 or approximately 0.35% of the total membership.[8] The NTEU represents 27,734 or approximately 5.9% of the total membership. Approximately 39% of all NTEU Members who work in universities are ‘general or professional staff’.[9] Applying that percentage to NTEU total Scheme Members equates to approximately 2.3%, or 10,816 Members of the Scheme, who are NTEU Members working as ‘general or professional staff’.[10]
[8]The First Batt Affidavit refers at paragraph [11] to 1664 professional staff employed by universities, university owned companies and student unions; and at paragraph 15 refers to the total number of CPSU members whose conditions of employment are subject to the 20 enterprise agreements being approximately 1646.
[9]Defendants, Affidavit of Matthew McGowan, dated 16 October 2020, [18] (‘McGowan Affidavit’).
[10]McGowan Affidavit, [30].

The CPSU represents ‘non-teaching and non-academic staff’ with members who are employees of ‘universities, university owned companies and student unions’ amongst other institutions (i.e. ‘professional staff’).[11]
[11]First Batt Affidavit, [9]-[11].

The NTEU’s membership comprises both academic staff and general/professional staff who are university employees.

The CPSU and the NTEU are not the only unions with Members of the Scheme. Although USL does not collect data on Members’ union affiliations, there are eleven other unions with Scheme Members.

The CPSU is party to 21 enterprise agreements with employers (17 of which are universities and two of which are university owned companies).[12] The CPSU is covered by 17 of these enterprise agreements. Eleven of the 17 enterprise agreements where the CPSU has coverage are located in NSW.[13] There are no enterprise agreements to which the CPSU is a party where coverage is located in Queensland.[14]
[12]Plaintiffs, Second Affidavit of Karen Michele Batt, dated 26 October 2020, [15(a)] (‘Second Batt Affidavit’).
[13]McGowan Affidavit, [28].
[14]Ibid.

The NTEU is ‘covered by 48 enterprise agreements with university employers which either require employer contributions to be paid to the [Scheme], or name the [Scheme] as the default superannuation fund for employees’.[15]
[15]McGowan Affidavit, [27]. In the McGowan Affidavit, the Scheme is referred to as the Unisuper fund. In the Second Batt Affidavit, Ms Batt deposes that the number is 49 enterprise agreements, [15(b)].

There are in addition 19 enterprise agreements where the Scheme is the default fund to which the CPSU is not a party, and to which a union other than the CPSU or the NTEU is a party.[16]
[16]Plaintiffs, Plaintiffs’ Outline of Submissions in Reply, dated 5 November 2020, [42] (‘Plaintiffs’ Reply Submissions’); Second Batt Affidavit, exhibit KB-2, KB-2/18-19.

Relevant provisions of the Constitution and the Trust Deed

Rule 33 of the Constitution provides that the number of directors of USL must be not less than eight, and not more than 11.

The rules of the Constitution include the following definitions:

1.In this Constitution unless the context requires otherwise:
…

Employer shall have the same meaning as in clause 1(1) of the Trust Deed.
…
Shareholders’ Consultative Committee means the committee referred to in Rule 35.
…
SIS Act means the Superannuation Industry (Supervision) Act 1993.
…
Trust Deed means the Deed dated 24^th December 1982 and made between the University of Tasmania and the Company as amended from time to time under which the Scheme was established.

Rule 2 is important in the context of this dispute. It provides:

2.A word or phrase, which is given a meaning by the Law, has the same meaning in this Constitution. Words in the singular include the plural and vice versa.

The directors of USL represent different interests and are appointed via a variety of different processes as provided for in Rule 34 of which the Rule in contention forms part. Set out in full, Rule 34 provides:

Power to appoint Directors
34.(1) Subject to Rule 37, the holders for the time being of a majority of the issued shares in the capital of the Company shall have the right to appoint and maintain in office eight Directors.
(2)The Directors appointed under this Rule shall be appointed as follows:
(a)two of the persons appointed Directors shall be nominated and elected by the members of the Shareholders’ Consultative Committee who were appointed by the governing bodies of the Employers and, in each case, that person must meet each of the following criteria at the time of their nomination, election and appointment or, in the case of a Director being appointed for a consecutive term, at the time of being nominated, elected and appointed for the first of those consecutive terms:
(i)is an employee of an Employer;
(ii)is a member of the Scheme; and
(iii)is a member of the Shareholders’ Consultative Committee who was appointed by the governing bodies of the Employers; and

(b)one person appointed a Director will be a person who:
(i)is nominated by a member of the Shareholders’ Consultative Committee who represents the academic staff of the Employers; and
(ii)is elected by the members of the Shareholders’ Consultative Committee who represent the academic staff of the Employers; and
(iii)meets each of the following criteria at the time of their nomination, election and appointment or, in the case of a Director being appointed for a consecutive term, at the time of being nominated, elected and appointed for the first of those consecutive terms:
(A)is an employee of an Employer;
(B)is a member of the Scheme; and
(C)is a member of the Shareholders’ Consultative Committee who represents the academic staff of the Employers; and

(c)one person appointed a Director shall be a person who:
(i)is nominated by a member of the Shareholders’ Consultative Committee who represents the professional staff of the Employers; and
(ii)is elected by the members of the Shareholders’ Consultative Committee who represent the professional staff of the Employers; and
(iii)meets each of the following criteria at the time of their nomination, election and appointment or, in the case of a Director being appointed for a consecutive term, at the time of being nominated, elected and appointed for the first of those consecutive terms:
(A)is an employee of an Employer;
(B)is a member of the Scheme; and
(C)is a member of the Shareholders’ Consultative Committee who represents the professional staff of the Employers;

(d)two of the Directors shall be nominated by universities who are Employers; and
(e)two of the persons appointed Directors shall be nominated by national unions who represent a significant number of members of the Scheme.

(3)A person who is nominated for appointment as a Director must certify in writing to UniSuper that to the best of their knowledge, information and belief that he or she:
(a)is a fit and proper person to be appointed a Director of the Company and otherwise satisfies the conditions applicable to any license it holds in connection with its role as Trustee of the Scheme or otherwise;
(b)is in a position to carry out duties as a Director consistent with the Company’s Code of Conduct.

(4)A Director shall not be required to hold any share qualification.
(5)A Director who is not a member of the Company shall nevertheless be entitled to attend and speak at general meetings.
(6)A Director appointed pursuant to Rule 34(2)(a), Rule 34(2)(b) or Rule 34(2)(c) is eligible to be nominated, elected and appointed for another consecutive term even if that person ceased meeting any criteria specified in the relevant rule (other than the requirement to be nominated and elected) after the commencement of the first of those consecutive terms. In such circumstances, the relevant nominee will be deemed to have met the relevant criteria for any consecutive appointment.
(7)Nothing in this Rule 34 requires an election to be conducted if there is only one eligible nominated for a particular vacancy or, if there are multiple vacancies, the number of eligible nominations with respect to those vacancies is less than or equal to the number of relevant vacancies. In such circumstances, the relevant nominee will be deemed to have met the requirement to be elected for that particular appointment.
(8)If Rule 34(2)(a), Rule 34(2)(b) or Rule 34(2)(c) requires a person to be a member of the Shareholders’ Consultative Committee at the time of being nominated, elected and appointed, that criteria is only met if the person is themselves a member of the Shareholders’ Consultative Committee at those times and not merely an alternate or proxy for another person who is.

One of the processes for the appointment of directors in Rule 34 involves the Shareholders’ Consultative Committee. The Shareholders’ Consultative Committee is dealt with in Rule 35 of the Constitution. That Rule relevantly provides:

Shareholders’ Consultative Committee
35.(1) There shall be a Shareholders’ Consultative Committee, the members of which shall:
(a)be the members from time to time of the Consultative Committee constituted under the Trust Deed; and
(b)hold office on such terms and condition as are specified in the Trust Deed.

…

As provided for in Rule 35(1)(a), the members of the Shareholders’ Consultative Committee are the members from time to time of the Consultative Committee constituted under the Trust Deed.

Clauses 9.1 and 9.2 of the Trust Deed are concerned with the Consultative Committee. Those clauses are in the following terms:

9.1Establishment of Consultative Committee
There will be a Consultative Committee consisting of persons nominated, appointed or elected as follows:
(a)in the case of an Employer with 750 or more Employees who are Members of the Defined Benefit Division or are Division C14 Members:
(i)two persons representing the Employer appointed by the controlling body of the Employer;
(ii)one person representing the academic staff of the Employer, being a person who is:
(A)a Member entitled to benefits under the Defined Benefit Division or is a Division C14 Member;
(B)a member of the academic staff of the Employer; and
(C) elected by such of the academic staff of the Employer who are Members;

(iii)one person representing the non-academic staff of the Employer, being a person who is:
(A)a Member entitled to benefits under the Defined Benefit Division or is a Division C14 Member;
(B)a member of the non-academic staff of the Employer; and
(C)elected by such of the non-academic staff of the Employer who are Members;

(b)in the case of an Employer with more than 249 but less than 750 Employees who are Members of the Defined Benefit Division or are Division C14 Members:
(i)one person representing the Employer appointed by the controlling body of the Employer;
(ii)subject to Clause 9.2, one person representing the academic or non-academic staff of the Employer, being a person who is:
(A)a Member entitled to benefits under the Defined Benefit Division or is a Division C14 Member;
(B)a member of the academic or non-academic (as the case may be) staff of the Employer; and
(C)elected by such of the staff of the Employer who are Members.

9.2Trustee to direct Employers in relation to certain nominations
For the purposes of Clause 9.1 (b), the Trustee may direct an Employer as to whether the person to be nominated, appointed or elected is to represent the academic or non-academic staff of the Employer having regard to:
(a)the composition of the Consultative Committee; and

(b)the intention that, as near as practicable, one quarter of the membership is to represent the academic staff of Employers and one quarter is to represent the non-academic staff of Employers.

Statutory Context

USL is the corporate trustee and the superannuation entity licensee of the Scheme.[17] The Scheme is a standard employer–sponsored fund, within the meaning of that term in s 16(4) the SIS Act.[18] As such, the Scheme is subject to the rules under Part 9 of the SIS Act concerning the equal representation of employers and members in relation to its management and control. As a public offer superannuation fund with more than 49 members, the Scheme must comply with the basic equal representation rules.[19]
[17]O’Sullivan Affidavit, 11.
[18]Section 16(4) of the SIS Act provides that ‘If a regulated superannuation fund has at least one standard employer-sponsor, the fund is a standard employer-sponsored fund (as well as being an employer-sponsored fund)’.
[19]Section 93(3)(a)(ii) of the SIS Act.

The Constitution must be construed in the context of the legislative environment in which the Scheme operates. Certain definitions and provisions of the SIS Act were referred to in submissions and in argument. It is convenient to set out some of those provisions.

The expressions ‘employer representative’ and ‘member representative’ are defined in s 10 of the SIS Act in the following terms:

“employer representative”, in relation to a group of trustees of a fund, a policy committee of a fund or the board of directors of a corporate trustee of a fund, means a member of the group, committee or board, as the case may be, nominated by:
(a)the employer or employers of the members of the fund; or

(b) an organisation representing the interests of that employer or those employers.
…
“member representative”, in relation to a group of trustees of a fund, a policy committee of a fund or the board of directors of a corporate trustee of a fund, means a member of the group, committee or board, as the case may be, nominated by:
(a)the members of the fund; or
(b)a trade union, or other organisation, representing the interests of those members.

Section 89 of the SIS Act is concerned with the basic equal representation rules. That section relevantly provides:
89. Basic equal representation rules
Basic rule
(1)For the purposes of this Part, a fund complies with the basic equal representation rules if:
(a)both:
(i) the fund has a group of individual trustees;
(ii)the group of trustees consists of equal numbers of employer representatives and member representatives; or
(b)both:
(i) the fund has a single corporate trustee;

(ii)the board of the corporate trustee consists of equal numbers of employer representatives and member representatives.

Additional independent trustee or additional independent director
(2)For the purposes of the application of the basic equal representation rules to a fund, a group of trustees, or the board of a corporate trustee, is taken to consist of equal numbers of employer representatives and member representatives if:
(a)the group or board includes an additional independent trustee or an additional independent director, as the case may be; and
(b)the additional independent trustee or additional independent director, as the case may be, is appointed at the request of the employer representatives, or the member representatives, who are the members of the group or board; and
(c)provision is made in the governing rules for the appointment of the independent additional trustee or additional independent director, as the case may be; and
(d)the governing rules do not allow the additional independent trustee or additional independent director, as the case may be, to exercise a casting vote in any proceedings of the group or board concerned.

Sections 93(1) – (3) of the SIS Act are in the following terms:
93. Post-30 June 1995 rules - funds with more than 49 members
Application
(1)This section applies to a standard employer-sponsored fund with more than 49 members.
Post-30 June 1995
(2)This section applies on and after 1 July 1995.
Public offer funds
(3)If the fund is a public offer superannuation fund:
(a)either:
(i)the trustee of the fund must be an independent trustee; or
(ii)the fund must comply with the basic equal representation rules; and
(b)if the regulations provide that the fund is subject to rules about the existence, number and functions of policy committees (prescribed policy committees)—the fund must comply with those rules; and
(c)each prescribed policy committee must consist of equal numbers of employer representatives and member representatives.
A Threshold Question: Do the plaintiffs have standing?

The defendants raise as a threshold question whether the plaintiffs, or either of them, have standing to seek the declaratory and other relief sought in the Originating Process.

The competing contentions

Neither plaintiff is a member of USL. Neither plaintiff is a party to its Constitution. The CPSU is not a Member of the Scheme. It is not a party to or beneficiary under the Trust Deed. Although Ms Odewahn is a member of the Scheme, she is not a Member of USL, the trustee of the Scheme.

The defendants submit that as a Member of the Scheme Ms Odewahn possesses no rights or interests that would give her standing to seek the relief sought in the Originating Motion. They assert that Rule 34(2)(e) does not permit a union member (nor a Member of the Scheme) to nominate candidates for directorship of USL.[20]
[20]Defendants’ Opening Submissions, [11].

The plaintiffs submit that they have standing. They rely upon the recent decision of the Full Federal Court in Clarence City Council v Commonwealth of Australia.[21] The plaintiffs submit that they have a sufficient commercial and practical interest in the determination of the question whether a single union can make more than one eligible nomination under Rule 34(2)(e).[22]
[21][2020] FCAFC 134; 328 ALR 273 (‘Clarence’).
[22]Ibid, [8], [140]-[142], [183].

In support of their claim, the plaintiffs refer to the following passage in Clarence:

…to obtain declaratory relief in respect of a contract, the underlying interest need not be an enforceable legal rights or liability… As Hutley JA explained in Johnco Nominees Pty Ltd v Albury–Wodonga (NSW) Corporation [1977] 1 NSW LR 43 at 65, “the plaintiff seeking a declaration may not necessarily have to have an existing bond which he is entitled to enforce, but the declaration itself must be made within the sphere of legal relations. It must be made within the sphere of rights broadly conceived”...[23]

[23]Ibid, [147].

The plaintiffs contend that if they are successful in obtaining the relief sought, there would be real legal and practical consequences that would flow. These consequences include that the prospect of the appointment of the CPSU’s nominee to the Board of USL would be materially improved. In addition, if their construction is accepted, the CPSU will be able to stop the NTEU from gaining two board seats. If the CPSU nominee were to be appointed, he would be a ‘member representative’, within the meaning of the SIS Act, and would represent the interests of each CPSU member who is also a member of the Scheme, including Ms Odewahn.[24] Ms Odewahn is not a member of the NTEU and therefore not part of the constituency that NTEU’s board nominees would represent.
[24]Plaintiffs’ Reply Submissions, [33].

The plaintiffs argue that there is a real and immediate controversy as to the correct interpretation of the Constitution, at the heart of which is a question as to the extent of the right of a national union, who the plaintiffs contend represents a significant number of Members of the Scheme, to nominate persons for appointment as directors of USL. They submit that the controversy is a real one, as borne out by the events that have happened following the resignation of Mr Kitchin.

Relying upon these arguments and the decision in Clarence,[25] the plaintiffs contend that their interest is sufficient to confer standing to seek declaratory, and associated injunctive, relief.[26]
[25][2020] FCAFC 134; 382 ALR 273.
[26]Plaintiffs’ Reply Submissions, [34].

The defendants do not agree. They submit the decision in Clarence[27] is distinguishable and that it has no application to a dispute involving a corporate constitution.[28] They contend in the alternative that even if Clarence applies, unless the Court is satisfied that the CPSU is a ‘national union who represents a significant number of members of the Scheme’, that the CPSU has no standing. They submit that on the evidence the Court cannot be satisfied that the CPSU meets the Rule 34(2)(e) criteria. They submit that Ms Odewahn has no standing. The defendants argue that she is a stranger to the Constitution, she is a stranger to the dispute, and that the Constitution is a corporate contract. They submit that Ms Odewahn possesses no rights or interests that would give her standing to seek the declarations and relief sought. Further, that in any case, if the plaintiffs, or either of them, have standing to seek declaratory relief, they lack standing to obtain injunctive relief.[29]
[27][2020] FCAFC 134; 382 ALR 273.
[28] Transcript, 75-77. In seeking to confine the application of the decision in Clarence to cases involving private contracts only, the defendants rely upon Bailey v New South Wales Medical Defence Union Ltd (1995) 184 CLR 399), 435-6 (McHugh and Gummow JJ). The defendants also place reliance on the statement by Lander J made as a member of the Full Federal Court in Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd [2006] FCAFC 144; (2006) 156 FCR 1, [236] (‘Lion Nathan’).
[29]Ibid, 79-81, referring to Clarence [2020] FCAFC 134; 328 ALR 273, [89]-[90].

The defendants further submit that the dominant focus of the test for standing as referred to in Clarence[30] is upon identifying what the third party has to gain from the declaratory relief sought. As the asserted right is a right to nominate, and not a right to appoint a director, it is submitted that the CPSU cannot suffer detriment from being able to nominate more than one director. If the plaintiffs have nothing to gain, they will not have standing.
[30][2020] FCAFC 134; 328 ALR 273, [148].

On a factual level, the defendants contend there is an insufficient nexus between either of the plaintiffs, in particular the CPSU with 0.35% of the Members of the Scheme, and Rule 34(2)(e) of the Constitution. The Rule refers to ‘national unions who represent a significant number of members of the scheme’. The defendants submit that a relevant fact is that the shareholders of USL chose to include additional requirements, which are not required by the SIS Act, that any trade union wishing to nominate a candidate must also be a national union and, further, must also represent a significant number of Members of the Scheme. They say that if 0.35% were a sufficient proportion of Members to constitute a ‘significant number’ of Members of the Scheme, these additional requirements would have no real meaning.

In response, the CPSU submits the Court is not required to determine as a matter of fact whether the CPSU is a ‘national union who represents a significant number of members of the Scheme’. That question is said not to arise, and not to be part of the controversy in respect of which relief is sought.[31] The Plaintiffs further submit that if it is necessary to answer that factual question that, in any case, the CPSU is a national union and that it represents a significant number of Members of the Scheme.
[31]Plaintiffs’ Reply Submissions, [30].

Rule 54.02

The first question posed by the Originating Motion is one that does not depend upon standing as discussed in Clarence.[32] The plaintiffs seek to invoke r 54.02 of the Supreme Court Rules as the basis of the Court’s jurisdiction.
[32][2020] FCAFC 134; 328 ALR 273.

Rule 54.02 of the Supreme Court Rules relevantly provides:

Relief without general administration
(1)A proceeding may be brought for any relief which could be granted in an administration proceeding and a claim need not be made for the administration or execution under the direction of the Court of the estate or trust in respect of which the relief is sought.
(2)Without limiting paragraph (1), a proceeding may be brought for—
(a)the determination of any question which could be determined in an administration proceeding, including any question—
(i)arising in the administration of an estate or in the execution of a trust;
(ii)as to the composition of any class of persons having a claim against an estate or a beneficial interest in an estate or in property subject to a trust; or
(iii)as to the rights or interests of a person claiming to be a creditor of an estate or to be entitled under the will or on the intestacy of a deceased person or to be beneficially entitled under a trust;

…

‘Administration proceeding’ is defined in r 54.01 to mean a ‘proceeding for the administration of an estate or the execution of a trust under the direction of the Court’.

The plaintiffs submit there are no implied limitations on the Court’s power under r 54.02.[33] They contend that r 54.02(2)(a)(iii) confers a very broad power to determine any question in an administration proceeding, as to the ‘rights or interests’ of ‘a person claiming … to be beneficially entitled under a trust.’ They argue that the Scheme is a trust, and its members are beneficiaries. Further, that the question for determination, concerns the rights or interests of Members of the Scheme to have the nominee of their union appointed as a director of the corporate trustee. The plaintiffs say that although Rule 34(2)(e) of the Constitution confers the right on the union, the ‘beneficiaries’ of that right are the Members, whose interests the unions represent, consistently with the statutory equal representation rules’.[34]
[33]Plaintiffs’ Reply Submissions, [45], referring to Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar the Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66, [55]-[56].
[34]Ibid, [46].

In response the defendants submit that the CPSU’s claims do not enliven the Court’s jurisdiction under r 54.02 of the Supreme Court Rules, because the dispute is not an ‘administration proceeding’ under r 54.02 of the Supreme Court Rules. They say it does not involve a question about the administration or execution of a trust,[35] a claim to the property of a trust,[36] nor does the proceeding involve the rights and interests of beneficiaries under a trust.[37]
[35]Rule 54.01 and 54.02(2)(a)(i) of the Supreme Court Rules.
[36]Rule 54.02(2)(a)(ii) of the Supreme Court Rules.
[37]Rule 54.02(2)(a)(iii) of the Supreme Court Rules.

The defendants argue that even if the dispute were an ‘administration proceeding’, the CPSU would not have standing to bring the proceeding because the CPSU is not a Member of the Scheme, and is not a party to or beneficiary under the Trust Deed.

Standing: Consideration: Clarence

Clarence[38] involved a claim by two municipal Councils seeking declaratory relief in relation to leases concerning land within their municipalities. The leases were between the Commonwealth and companies who occupied the Hobart airport and the Launceston airport, both airports being constructed on Commonwealth land. Both leases included a mechanism to the effect that where council rates are not payable by the lessees, because the airport site is owned by the Commonwealth, the lessees must pay the Council an amount, as notified by the Council, calculated according to certain parameters described in the lease. There was a dispute between the Councils and the lessees of the airports relating to the manner in which the payments in lieu of council rates were to be calculated. The Council sought declaratory relief in respect of the interpretation and application of the leases. The trial judge determined that the Councils had no standing. He considered that to grant the Councils standing would be to jettison the doctrine of privity of contract. That decision was overturned on appeal.
[38][2020] FCAFC 134; 328 ALR 273.

On appeal, a Full Federal Court held that the proceeding for declaratory relief in respect of the interpretation of the airport leases did not raise the privity doctrine: The Court distinguished between action to enforce a contract and a claim for declaratory relief:

89.…the general rule is typically recited as imposing a restriction on a third party from suing “on” or “upon” a contract (or expressions to similar effect). In this context, to sue “on” or “upon” a contract does not carry the broader meaning of a party commencing legal proceedings in relation to, or in connection with, the contract. Neither does it mean commencing legal proceedings to indirectly derive benefits from a contractual relationship. …..
90.The restriction on a third party from suing “on” or “upon” a contract under the general rule instead refers to the direct enforcement of obligations arising under the contract pursuant to a right of action derived from that contractual relationship. The “enforcement” of such obligations for these purposes entails that the enforcer will obtain a judgment capable of being judicially enforced by execution, which is otherwise known as an “executory judgment”. And, importantly for the present case, an “executory judgment” may be contrasted with a “declaratory judgment”……
91.Where a third party to a contract seeks to obtain a declaration in respect of the interpretation or application of that contract, the third party is not seeking to sue “on” or “upon” the contract in the sense necessary to engage the doctrine of privity of contract. The third party has no legally enforceable rights under the contract, and is accordingly not entitled to enforce any aspect of the contract. Moreover, the third party’s entitlement to seek and obtain declaratory relief does not derive from any cause of action arising pursuant to the contract, but instead derives from the relevant declaratory jurisdiction… to the extent that the award of a declaratory relief to a contractual third party may be characterised as the authentication of that party’s entitlement to some “benefit”, that benefit is not “based on” the contract in the sense necessary to engage the doctrine of privity of contract.[39]

[39]Ibid, [89]-[91] (citations omitted).

The Court identified the question for determination:

128.The key enquiry in the present case is identifying in what circumstances a third party to a contract is entitled to seek declaratory relief in respect of the interpretation or application of that contract. That question is not to be determined by reference to, or constrained by, the common law doctrine of privity of contract. As explained above, that doctrine relates to the circumstances in which a party may sue upon, and obtain an executory judgment in respect of, the contract.[40]

[40]Ibid, [128].

The Court approached resolution of that question in the context of the constitutional requirement for the existence of a ‘matter’[41] in order to found federal jurisdiction. The Court identified the circumstances in which a third party to a contract might have sufficient standing to obtain declaratory relief:

133.For a third party to a contract to obtain declaratory relief in respect of the interpretation or application of a contract, it is insufficient for that relief to simply be of interest to a third party (in the requisite sense that will be discussed below). The third party must also ‘be able to secure a proper contradictor, that is to say, someone presently existing who has a true interest to oppose the declaration sought’….[42]

…
148.Instead, where a third party to a contract seeks declaratory relief in respect of the interpretation or application of that contract, the dominant focus, as the analysis of Lockhart J in Aussie Airlines demonstrates, is identifying what the third party stands to gain from the declaratory relief. For this purpose, it is necessary to assess what foreseeable legal, commercial or other practical consequences, if any, flow from the third party obtaining the relief sought. It may be the case, for example, that a contractual third party obtaining such relief will enable that party to avoid further litigation costs: see JN Taylor at 438, ….. Alternatively, and again by way of example, there may be scenarios where the application of a contract will have reputational consequences for a third party. Although the relevance of reputational consequences to a party’s standing in proceedings will more naturally emerge in non-contractual settings (such as in Ainsworth), it may be that the prevalence of governmental contracting with private entities increases the possibility of these circumstances arising. In that context, it will be relevant to assess whether the applicants for relief have an interest that is greater than that of other members of the public..... although the core concern is not assessing the relative importance of the relief, but characterising the benefit which the applicant itself would receive from such relief.[43]

[41]Ibid, see, for example, [131]-[132].

[42]Ibid, [33] (citations omitted).

[43]Ibid, [148] (citations omitted).

Further:

153.To the extent a designation as an “outsider” excludes an applicant from an entitlement to seek declaratory relief, that designation cannot simply refer to a third party to the contract, otherwise all third parties would be prohibited from seeking declaratory relief. This would be inconsistent with Aussie Airlines (see also, in England and Wales, Milebush Properties at [44] per Mummery LJ, with Jackson LJ agreeing). Nor, in our view, is it necessarily determinative to label the circumstances of the case as “exceptional” to warrant a third party to a contract obtaining standing: cf Meadows at 309. Instead, whether or not a party is an “outsider” to a contract in the relevant sense ultimately depends on a process of characterising the applicant’s interests in the declaratory relief sought in light of all the circumstances of the case. As discussed above, this will include assessing the foreseeable legal, commercial or other practical consequences for the applicant flowing from the relief. Amongst other salient factors, it will also require consideration of the terms of the contract in question to discern the strength of the connection between the subject matter of the contract and the third party. And, in the present case, the terms of the leases are key.[44]

[44]Ibid, [153].

The defendants contend that because the present dispute does not involve a private contract that the approach to standing in Clarence,[45] on which the plaintiffs rely, has no application.
[45]Ibid.

It is correct that the relief sought by the plaintiffs concerns the proper construction of a statutory contract created by s 140(1) of the Corporations Act 2001 (Cth), a very different form of contract than private contracts, of which the leases, considered in Clarence,[46] are an example.
[46]Ibid.

Section 140(1) is in the following terms:

Effect of constitution and replaceable rules
(1)A company’s constitution (if any) and any replaceable rules that apply to the company have effect as a contract:
(a)between the company and each member; and
(b)between the company and each director and company secretary; and
(c)between a member and each other member;

under which each person agrees to observe and perform the constitution and rules so far as they apply to that person.

In Marketing Advisory Service (MAS) v Football Tasmania Ltd, Sackville, Kenny and Allsop JJ relevantly stated:

[21]By virtue of s 140 of the Corporations Act 2001 (Cth) (the Corporations Act) (previously s 140 of the Corporations Law), a company’s constitution has the effect of a contract between:
·     the company and each member;
·     the company and each director and company secretary; and
·     a member and each other member,
under which each person agrees to observe and perform the constitution and rules so far as they apply to that person. …

…
[35]...The only basis on which the applicant could put his case, having regard to the evidence, was that the objects of the respondent included undertaking the liabilities of the TFL and that the TFL had incurred a liability to the applicant by reason of its alleged breaches of contract or copyright.
[36]The effect of the statutory contract created by s 140 of the Corporations Act (see [21] above) is summarised in Butterworths, Ford’s Principles of Corporations Law, looseleaf, [6.040] as follows:
It has always been clear that the original statutory provision making the rules a contract did not cause the contract to impose duties on outsiders. Nor did the legislation create a deemed contract for the benefit of anybody other than the company and the members.

That was established by Eley v Positive Government Security Life Assurance Co Ltd (1875) 1 Ex D 20 affirmed (1876) 1 Ex D 88:
“The plaintiff, a solicitor, sued a company for breach of contract for ceasing to employ him as the company’s solicitor. He relied on a clause in the articles in which it was stated that he should be the company's solicitor. He failed in his action. The statutory contract was held to be a deemed contract only as between the persons referred to in the Act.”

Those limitations still apply to the current provision in s 140(1) so that it creates no rights or duties for outsiders.
These principles are well established: Bailey v New South Wales Medical Defence Union Ltd (1995) 184 CLR 399 at 410; 132 ALR 1 at 8; 18 ACSR 521 at 529, per Brennan CJ, Deane and Dawson JJ, at CLR 437–8; ALR 28; ACSR 548, per McHugh and Gummow JJ.
[37]It is clear, therefore, that the mere fact that the respondents objects included undertaking all the liabilities of the TFL could not, of itself, entitle the applicant to enforce any claim he had against the TFL directly against the respondent. It would be necessary for the applicant to show that there was an independent basis, whether in contract, under statute or otherwise, whereby the respondent incurred a liability directly to him. The evidence before the primary judge was plainly insufficient to establish any such liability.[47]

[47][2002] FCAFC 165; (2002) ACSR 128, [21], [35]–[36].

Ordinarily, proceedings involving a question of the proper construction of the constitution of a company would be brought by a member of the company or by one of its directors, and not by a stranger to its constitution. Section 140(1) of the Corporations Act 2001 (Cth) creates a deemed contract for the benefit only of the company and its members. In addition, officers of the company, as well as members can be bound to the company and have rights against it under the deemed contract. However, s 140(1) denies enforcement rights to outsiders.[48]
[48]R P Austin and I M Ramsey, Ford, Austin & Ramsey’s Principles of Corporations Law (LexisNexis, last reviewed November 2018), [6.040].

The defendants did not identify any authority that dealt specifically with the distinction between private contracts and the s 140(1) statutory contract in support of the proposition that a different approach should be adopted to the question of third party standing where declaratory and other relief is sought. The cases upon which the defendants placed reliance,[49] do not advance the position.
[49]See footnote 28 above, referring to Bailey v New South Wales Medical Defence Union Ltd (1995) 184 CLR 399); Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd [2006] FCAFC 144; (2006) 156 FCR 1.

I do not consider the difference in the two types of contract provides a reason to distinguish between or to diverge from the approach to standing adopted by the Full Court in Clarence.[50] Both forms of contract preclude outsiders from bringing enforcement claims. In the case of a private contract, to permit such claims would be to engage the doctrine of privity. In the case of s 140(1) of the Corporations Act 2001 (Cth) it would be to permit an outsider to the statutory contract to seek enforcement when the statute does not permit it. However, in the case of proceedings by a third party for declaratory relief, for the reasons discussed in Clarence,[51] these considerations do not arise. As Clarence makes clear, different considerations apply when it comes to claims by third parties for injunctive relief.
[50][2020] FCAFC 134; 328 ALR 273.
[51][2020] FCAFC 134; 328 ALR 273, [89]-[91], see paragraph 55 above.

I consider it is appropriate to approach the question of the plaintiffs’ standing to seek declaratory and injunctive relief in accordance with the decision of the Full Court in Clarence.[52]
[52]Ibid.

It is not sufficient that the proper construction of Rule 34(2)(e) is of interest to the plaintiffs. What is required is to identify what the plaintiffs stand to gain from the declaratory relief sought and to assess the foreseeable legal, commercial or other practical consequences, if any, that would flow to the plaintiffs, or to either of them, from them obtaining the relief sought.

To undertake that inquiry, contrary to the submission on behalf of the plaintiffs, it is necessary to determine whether the CPSU qualifies as a ‘national union’ having a significant number of Members for the purposes of Rule 34(2)(e). That is so because it cannot be said that a union, that is not a national union or that does not have a significant number of members of the Scheme, or that fails to meet both qualifying criteria, is a person for whom a declaration would have any conceivable legal commercial or other practical consequences. Such consequences only flow if it is a union to whom the Rule in question has application.

Turning to the second plaintiff, the question is whether not being a union, to which Rule 34(2)(e) expressly refers, is her membership of the Scheme sufficient to give her standing to seek a declaration. That is, a declaration not concerning the Scheme itself or its trust deed, but as to the proper construction of a rule in the Constitution of its corporate trustee.

In the same way the reference in the airport leases in Clarence to payments in lieu of rates provided a nexus between the Councils and the contract in question,[53] in the present case, Rule 34(2)(e) makes express reference to a national union with a significant number of members of the scheme. In Clarence, there was no contest that the plaintiffs were municipal Councils and met the description of persons to whom payments were to be made in lieu of rates, as contemplated by the leases. The CPSU in the present case is one step removed from the situation of the Councils in Clarence.[54] It needs to establish that it meets the criteria in Rule 34(2)(e).
[53]Ibid, [20].
[54]Ibid.

I also do not accept that on the material filed in support of this application the plaintiffs have discharged the onus of proving either that the CPSU is a ‘national union’ for the purposes of the Rule or, that with 1664 members, that the CPSU represents a ‘significant number’ of Members of the Scheme.

Ms Batt, Joint National Secretary of the CPSU deposes, without elaboration, to the CPSU having offices and members in each state and territory.[55]
[55]First Batt Affidavit, [4].

The defendants submit that while the CPSU describes itself as ‘a national union, with offices and members in each state and territory’, the CPSU membership does not include professional staff at ‘universities, university owned companies and student unions’ in Queensland or in Victoria.[56] To make good these propositions, the defendants rely upon more granular evidence as to the activities of the CPSU contained in its annual returns, than the broad assertion in the First Batt Affidavit.
[56]Defendants’ Opening Submissions, [57].

The CPSU’s Annual Return of Information for the years to 30 December 2018 and 2019, do not list the CPSU as having branches in Queensland, the Northern Territory or the Australian Capital Territory.[57] The exhibits to Ms Batt’s first affidavit establish that the CPSU does not have offices in Queensland, the Northern Territory or in the Australian Capital Territory.[58]
[57]First Batt Affidavit, exhibit KB-1, KB-1/8-9.
[58]Ibid, exhibit KB-1, KB-1/5-7.

Of greater significance, the evidence shows that the CPSU does not have any members in Queensland or in Victoria.[59] Further, in June 2009, CPSU transferred Western Australian Members to the NTEU for a fee, via an ‘Orderly Transfer of Members Agreement’.[60]
[59]Ibid, [10].
[60]McGowan Affidavit, [31].

In support of its claim to be a ‘national union’ in the sense relevant for the purposes of Rule 34(2)(e), the CPSU relies upon the fact that it is a party to 21 enterprise agreements that either require employer contributions to be paid to the Scheme, or that name the Scheme as the default fund.[61]
[61]Second Batt Affidavit, [15(a)].

A reference to a national union in Rule 34(2)(e) must be understood as a reference to a national union representing Members of the Scheme across Australia. It might be sufficient if the CPSU had members in all of the most populous States, but even in that respect, without Members in Queensland and Victoria, the CPSU fails to meet the description of a ‘national union’.

Further, while the Scheme is the default fund pursuant to 21 enterprise bargaining agreements to which the CPSU is a signatory, there is no evidence that the CPSU is a signatory to any enterprise bargaining agreements with coverage in the state of Queensland. There are seven universities in Queensland where the NTEU has coverage and the Scheme is the default fund.[62]
[62]McGowan Affidavit, [25].

On the available evidence the CPSU does not have any members in Queensland or in Victoria. It does not have an office in Queensland. It has no coverage in enterprise agreements in Queensland. It does not in those circumstances meet the description of a ’national union’.

Just as the CPSU fails, as a matter of fact, to meet the description of a ‘national union’ it fails to answer the description of a union that has a ‘significant number of Members of the Scheme’.

At its highest, the CPSU has 1664 members[63] who are also Members of the Scheme. The Scheme has approximately 472,000 Members. The 1664 CPSU Members represent only 0.35% of the Members. That is both a small number of Members in absolute terms and at 0.35% of total Scheme Members, compared to the NTEU, a small number in relative terms. The number of CPSU Members falls well short of what might constitute a significant number of Members. For that separate reason the CPSU fails to satisfy the relevant criteria for standing.
[63]See footnote 8 above.

Because the CPSU fails as a matter of fact to qualify both as a ‘national union’ and as a union having a ‘significant number of members of the Scheme’, it cannot be said that any foreseeable legal, commercial or other practical consequences would flow from it obtaining the relief that it seeks. As the CPSU is not a national union ‘who represents a significant number of members of the Scheme’, it has no right, no matter what the correct construction of Rule 34(2)(e), to nominate a person or persons to be appointed a director.

Turning to the position of Ms Odewahn, express reference to a third party in the Constitution, as was the situation in Clarence,[64] will support a connection between identification of the third-party as a person claiming to have a ‘sufficient interest’ or ‘real interest’ in the question of construction of the contract. Ms Odewahn is one step further removed in terms of any relevant connection with Rule 34(2)(e) than even the CPSU, a union.
[64][2020] FCAFC 134; 328 ALR 273, [20].

As an individual member of the Scheme, Ms Odewahn is not a person to whom Rule 34(2)(e) refers. What is in issue is the right of a union of which Ms Odewahn is a member to nominate a person for appointment as director. Her claim to standing is a derivative one, based on her membership of the CPSU. The fact she is a member of the Scheme does not give rise to any ‘bond’ which she is entitled to enforce concerning nomination of members of the corporate trustee of the Scheme. She has no standing as a Member to seek declaratory relief, even taking a ‘sphere of rights broadly conceived’ approach.[65] Once it is established that the CPSU lacks standing, so too does Ms Odewahn.
[65]Ibid, [147].

Applying the test in Clarence,[66] for which the plaintiffs contend, the CPSU does not have standing in relation to the declaratory relief sought in the Originating Motion. Ms Odewahn similarly lacks standing in respect of the relief claimed. For the reasons discussed in Clarence,[67] neither plaintiff has standing to obtain injunctive relief.
[66]Ibid, [128], [132], [148].
[67]Ibid.

Consideration: Rule 54.02 of the Supreme Court Rules

The first question in the Originating Motion[68] seeks to directly invoke rule 54.02 of the Supreme Court Rules. The question is framed by reference to the rights and powers of Members of the Scheme, Ms Odewahn and others like her, and the CPSU ‘to have their nominee appointed as a director’.
[68]See paragraph 11 above.

Rule 54.02 has application to questions concerning the proper construction of a trust instrument, and as to the proper administration or execution of an estate or trust. In this case, the question of construction does not concern the trust instrument. It concerns the corporate constitution of USL, the entity which happens to also be the trustee of the Scheme. I agree with the defendants’ submission that this proceeding is not an administration proceeding as defined in Rule 54.01.

The present case is not a proceeding that meets any of the inclusive categories mentioned in Rule 54.02(2). The types of cases to which Rule 54.02 typically has application include a trustee seeking a determination of whether it is justified in proceeding in the administration of a trust in a particular way.[69] As described in Civil Procedure Victoria:[70]

Rule 54.02 is important as it is the only statutory basis in Victoria for a personal representative of a deceased estate or trustee of a trust to seek the advice and directions of the court … It is commonly used by trustees or personal representatives who seek specific directions from the court about how they should administer an estate or executive a trust, or about the construction of a will or trust instrument … A trustee also has a right under the general principles of equity to approach the court for directions … Under r 54.02 the Court has a broad jurisdiction and power to advise and direct trustees and executors in relation to the performance of their trusts and where appropriate to approve their entering into and performance of any transaction.[71]

[69]See for example Baymill Investments Pty Ltd v Drewlock Pty Ltd [2019] VSC 827 (Sloss J); Re Mandeville Group Pty Ltd (In Liq) [2020] VSC 293 (Sloss J); Charlesworth Nominees Pty Ltd v Charlesworth [2017] VSC 445; (2017) 54 VR 155, [6] (Croft J).

[70]David L Bailey and John K Arthur, LexisNexis, Civil Procedure Victoria, (Online at 19 November 2020).

[71]Ibid, [I 54.02].

The present question posed for determination does not come within the jurisdiction with which the rule is concerned.

There is a further difficulty. It concerns the content of the question. The argument was directed to the proper construction of Rule 34(2)(e) of the Constitution. The question said to fall within r 54.02, as framed, is not one that concerns Rule 34(2)(e) of the Constitution. The question posed is directed to the appointment of directors. Appointment is dealt with in Rule 34(1) of the Constitution. Appointment is a matter for the shareholders in USL. Any question concerning the appointment of directors to the corporate trustee of the Scheme, once nominated under Rule 34(2)(e), is a separate question, well removed from questions concerning nomination under Rule 34(2)(e).

No issue connected with the rights of Members or beneficiaries of a trust arises from the question. No question under Rule 54.02 of the Supreme Court Rules falls for determination.

In short, the present proceeding is not a case that comes within rule 54.02 of the Supreme Court Rules, no matter how broadly or liberally interpreted.

Principles of Construction

Having found that both plaintiffs lack standing and that the first question for determination in the Originating Motion falls outside rule 54.02 of the Supreme Court Rules, it is unnecessary to decide the construction questions concerning Rule 34(2)(e). However, as the construction issues were comprehensively argued by the parties, and the issues raised are of broader significance, it is appropriate that I express my view as to the proper construction of Rule 34(2)(e), had it been necessary for me to decide that issue.

As might be expected, there is little controversy as to the principles to be applied when it comes to questions of construction. The exception concerns the use that might be made of post contractual conduct.

The plaintiffs submit the Constitution should be interpreted according to the rules of construction applicable to commercial contracts, but taking into account the nature of a company’s constitution.[72] They contend that evidence of mutually-known objective background circumstances is admissible to determine the circumstances that the contract addresses, and its purpose, ’no matter how clear the “ordinary meaning” of the words to be construed is said to be’.[73]
[72]Plaintiffs’ Opening Submissions, [12], referring to HNA Irish Nominee Ltd v Kinghorn (2010) [2010] FCAFC 57; 78 ACSR 553 at [42] (the Court); Coeur de Lion Investments Pty Limited v The President’s Club Limited [2017] QCA 309 at [22], [34] (Philippides JA, Morrison JA and McMeekin J agreeing).
[73]Ibid, [15], referring to Lopes v Taranto [2018] VSCA 288, [66]-[72] (Kyrou, McLeish and Hargrave JJA); Siemens Gamesa Renewable Energy Pty Limited v Bulgana Wind Farm Pty Ltd [2020] VSC 126, [87(b)] (Riordan J); see also Cherry v Steele-Park (2017) 96 NSWLR 548, [83] (Leeming JA, Gleeson and White JJA agreeing); Commissioner of Taxation v The Trustee for the Michael Hayes Family Trust [2019] FCAFC 226, [28]-[32] (Steward J, Griffiths and Derrington JJ agreeing). Cf Apple and Pear Australia Ltd v Pink Lady America LLC [2016] VSCA 280; 343 ALR 112, [137]-[138] (Tate JA), [231] (Ferguson and McLeish JJA). In argument reliance was placed upon Echunga Football Club Inc v Hills Football League Inc [2014] SASC 201; (2014) SASR 449, [36]

The plaintiffs submit that ‘the range of surrounding circumstances available as aids to the construction of such a contract is perhaps more limited than in other cases’, and that, ‘ordinarily primacy must be given to the objective intention discernible from the language in which the constitution is expressed rather than to other features of the surrounding matrix of fact in which its provisions may have been made’.[74]
[74]HNA Irish Nominee Ltd v Kinghorn [2010] FCAFC 57; (2010) 78 ACSR 553, [42]. The plaintiffs also rely upon the passages from Weinberg J and Kenny J in Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd [2006] FCAFC 144; (2006) 156 FCR 1, [59], [124].

The defendants submit that evidence of some surrounding circumstances may be considered in the interpretation of a company constitution. That is so, at least where the extrinsic material is likely to have been well known both to the members of the company at the time of the adoption of the constitution, and to have been easily ascertainable by relevant third parties whose interests might have stood to be affected by its adoption.[75]
[75]Defendants’ Opening Submissions, [17], referring to Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd [2006] FCAFC 144; (2006) 156 FCR 1, [59].

More broadly, the defendants’ submissions identify the following principles of construction:

(a)Firstly, the meaning of a constitution (like a commercial contract) is to be determined objectively having regard to the words in the document themselves.[76]
(b)Second, ‘even absent ambiguity or uncertainty’ the Court can have regard to ‘[s]ome surrounding circumstances’ in construing constitutions.[77] However, the ‘range of these circumstances may be more limited in this context than as regards some other commercial contracts’.[78] The surrounding circumstances include the underlying purpose and object of the commercial transaction.[79]
(c)Third, evidence of surrounding circumstances is not admissible to contradict the language of the constitution when it has a plain meaning.’[80]
(d)Fourth, ’a court is entitled to approach the task of giving a commercial contract an interpretation on the assumption “that the parties…intended to produce a commercial result. …[A] commercial contract should be construed so as to avoid it ‘making commercial nonsense or working commercial inconvenience”’.[81]
(e)Fifth, a constitution ’should be considered as an enduring and flexible document‘ and ’should not be construed narrowly or pedantically’.[82]
(f)Sixth, courts are slow to imply terms into a company’s constitution.[83]
(g)Seventh, “[p]ost-contractual conduct is inadmissible to construe the terms of the contract”.[84]
…[85]

[76]Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd (2006) 156 FCR 1, [251].

[77]Ibid, [59].

[78]Ibid, [124], [226].

[79]Ibid, [251].

[80]Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337, 352 (Mason J), which was affirmed in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104, [52].

[81]Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104, [51].

[82]Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd (2006) 156 FCR 1, [244].

[83]Ibid, [239], [243].

[84]Adaz Nominees Pty Ltd v Castleway Pty Ltd [2020] VSCA 201, [70(qq)].

[85]Defendants’ Opening Submissions, [15]-[22].

Concerning post contractual conduct, the plaintiffs rely upon the decision of Flick J in Australian Rail, Tram and Bus Industry Union v Qube Logistics (Rail) Pty Ltd concerning the interpretation of an enterprise agreement in support of the proposition that:

One exception to the general rule [excluding post contractual communications] is thus where the post-contractual “conduct evidences a clear and mutual subjective intention as to what the contract originally meant”; another exception is that post-agreement conduct may be admissible “as part of the surrounding circumstances” if it provides evidence of “mutual subjective intention”.[86]

[86][2020] FCA 1520, [33] (‘Australia Rail’) (emphasis in original).

The defendants take issue with the use of post-contractual conduct for the purposes of construction of the Constitution. They rely upon the decision of the NSW Court of Appeal in Johnston v Brightstars Holding Company Pty Ltd, where Beazley P, with whom Gleeson JA agreed, made the following observation in the context of dispute over a variation to a deed of settlement:

56.Although the status of post-contractual conduct may not be finally settled, it is clear that Australian law does not recognise the subjective intentions of the parties as relevant to the construction of the contract actually formed: see Codelfa, Brambles and Electricity Generation Corporation. In Administration of Papua and New Guinea v Daera Guba (1973) 130 CLR 353 at 446, Gibbs J approved a statement from James Miller & Partners Ltd v Whitworth Street Estates (Manchester) Ltd [1970] AC 583 at 603 that:
“... it is not legitimate to use as an aid in the construction of [a] contract anything which the parties said or did after it was made.”

57.This statement was recently reaffirmed in Agricultural and Rural Finance Pty Limited v Gardiner [2008] HCA 57; 238 CLR 570 by Gummow, Hayne and Kiefel JJ at [35].[87]
[87][2014] NSWCA 150, [56]-[58], [84].

Rule 34(2)(e): Competing Constructions

The plaintiffs contend for a construction of Rule 34(2)(e) that does not permit a national union who represents a significant number of members of the Scheme, an eligible union, to nominate more than one person for appointment as a director. They do not contend that the Rule limits the number of eligible unions that may make nominations. Nor do they contend that the Rule limits the total number of nominations that can be made to two (or more) eligible unions.[88]
[88]Plaintiffs’ Reply Submissions [1]-[2]; Cf. Defendants’ Opening Submissions [24]-[25], [40]. Contrary to the defendants’ submissions, it is not part of the plaintiffs’ case to contend that if three eligible unions each made a nomination, each union would nominate two-thirds of a candidate.

There is a complication in the construction for which the plaintiffs contend. They contend that if there are multiple eligible unions in existence, then, on a proper construction, each union could nominate one person. However, if there is only one eligible union that meets the Rule 34(2)(e) criteria, then that union could nominate two directors.

The defendants contend that on a proper construction any number of eligible unions can nominate as many persons to be an appointed director pursuant to Rule 34(2)(e) as they wish.

It follows from the plaintiffs’ construction that if there are two vacancies under Rule 34(2)(e), and there are two nominees, for example one nominated by the CPSU and the other nominated by the NTEU, then each person nominated becomes appointed without the need for an election. However, if there are two vacancies but three nominees, one from each of three eligible national unions, then the shareholders in USL elect their preferred two candidates from the three nominees. The plaintiffs’ submission is that once a union’s nominee has been appointed as a director, that union may not nominate a person to fill the other vacancy. On the plaintiffs’ construction, subject to the exception where there is only one eligible union, there would be no occasion for a single eligible union to nominate more than one candidate as that union’s nominee, given that its nomination can give rise to only one appointment.

Text

As a starting point to the analysis of the text and context of Rule 34(2)(e) the plaintiffs draw attention to the content and structure of each of the sub paragraphs of Rule 34(2) which set out different methods for the appointment of eight non-independent directors.

Four of the eight directors are appointed in accordance with the Shareholders’ Consultative Committee process as provided for in Rule 35 of the Constitution and Clause 19 of the Trust Deed.[89] Under the Trust Deed the Consultative Committee consists of equal numbers of persons who represent employers participating in the Scheme, and equal numbers of persons representing the employees of participating employers. The process of appointment under the Trust Deed is directed to achieving the appointment of an equal number of academic staff representatives and non-academic staff representatives.[90]
[89]See Rule 35 of the Constitution set out at paragraph 28 above.
[90]See clauses 9.1-9.2 of the Trust Deed as set out at paragraph 30 above.

In relation to those four directors, Rule 34(2)(a) provides that two of the directors shall be nominated and elected by members of the Shareholders’ Consultative Committee who were appointed by the governing bodies of participating employers. Those directors are ’employer representatives’ as defined in the SIS Act. Rules 34(2)(b) and (c) provide that of the other two directors, one will be a person nominated and elected by members of the Shareholders’ Consultative Committee who represents the academic staff of the participating employers, and the other will be a director nominated and elected by members of the Shareholders’ Consultative Committee who represent the professional staff of participating employers.[91] Each of those directors are ’member representatives’ within the meaning of the SIS Act. Rule 34(2)(d) provides that two directors shall be nominated by universities who are employers, therefore ’employer representatives’ within the meaning of the SIS Act.
[91]The descriptor in the Rules is that of professional staff. In the Trust Deed, professional and other staff who are not academic staff are described as non-academic staff; see clauses 9.1-9.2 of the Trust Deed.

Finally, Rule 34(2)(e) provides for the appointment of two ’member representative’ directors of USL.

The plaintiffs submit that the text of subparagraphs (a) to (e) of Rule 34(2) focuses on the nomination of persons for appointment as directors, as each sub-paragraph uses the expression ‘shall be nominated’ or ‘is nominated’. They contend that the act of nomination is significant because it reflects the statutory equal representation rules[92] and the definitions of ‘member representative’ and ‘employer representative’ in the SIS Act.[93]
[92]Section 89 of the SIS Act.
[93]Section 10 of the SIS Act.

The defendants drew attention to the numbers in sub-rules 34(2)(a) to two persons, (b) to one person, (c) to one person and (d) to two persons. They draw attention to references in Rule 33(1) to the number of directors being not less than eight, not more than eleven. The intent of the Rule is to restrict the number of appointments to eight directors but not to restrict the number of nominations that can be made. The defendants submit that the purpose of the SIS Act which provides for equal employer and employee representation does not include a purpose to restrict the number of nominations prior to the appointment process.

The plaintiffs submit that read in the context of Rule 34 and the Constitution more broadly, Rule 34(2)(e) is ambiguous as to whether a single national union may nominate only one director, or may nominate both directors. They submit that Rule 2 of the Constitution, which provides that ’Words in the singular include the plural and vice versa’ does not assist. They contend that if its effect were to authorise a single union to nominate two directors under Rule 34(2)(e) it would also follow that the two employer representative directors appointed under Rule 34(2)(a) could be nominated and elected by a single member of the Shareholders’ Consultative Committee appointed by the governing body of a participating employer, and that such an outcome could not have been intended.[94]
[94]Plaintiffs’ Opening Submissions, [34].

In those circumstances they submit that the textual ambiguity should be resolved in a way that best achieves the purposes that Rule 34 seeks to secure.[95] They submit that the purpose of Rule 34 for which they contend, providing both diversity and equality of representation,[96] supports the construction for which they contend and that such a construction would achieve greater consistency with the statutory context and the intention in the legislature of enacting the statutory definition of ’member representative’ than the construction for which the defendants contend.[97]
[95]Ibid, [35].
[96]Ibid, [36].
[97]Ibid, [39].

The competing approach of the defendants to the text begins with Rule 34(2)(e) itself. They contend that the Rule is plain and unambiguous and that it says two things. First, two persons are to be appointed directors from this category. Second, that eligible unions are entitled to nominate persons under the rule. They argue the Rule does not restrict the nomination process (and the appointment process) in any other way. The Rule does not say that only one or two nominations (as opposed to appointments) can be made by any eligible union and it does not say that the CPSU and NTEU can only nominate one candidate each.[98]
[98]Defendants’ Opening Submissions, [24].

The defendants submit that the number two in Rule 34(2)(e), applies to the number of appointments, but that it does not apply to impose a limit on the number of nominations that can be made or on the number of eligible unions that can make such nominations.[99]
[99]Ibid, [25].

The defendants submit that to construe the Rule so that each eligible union may nominate only one person to be appointed a director requires reading a restriction into the text of the Rule that is not present.[100] Further, that to adopt the construction favoured by the plaintiffs would usurp the appointment power conferred on the shareholders in Rule 34(1). They contend that the construction for which the plaintiffs contend elevates a nomination into a direct appointment of the nominated candidate and that the shareholders’ power to appoint should not be made ineffectual in that way.[101]
[100]Ibid, [34], referring to Lion Nathan [2006] FCAFC 144; (2006) 156 FCR 1, [239], [243].
[101]Ibid, [36].

The defendants contend that Rule 34(2)(e) has an in-built dispute resolution function in that multiple eligible unions can nominate multiple candidates, and then, the shareholders decide from all of the nominated candidates, which two to appoint. They submit that construing the sub-rule in the matter for which the plaintiffs contended would eliminate the inbuilt dispute resolution effect of Rule 34(2)(e) and would create ’commercial inconvenience’.[102] Further, that to limit the number of persons who might be nominated would be contrary to the interests of the shareholders and commercial common sense, both of which favour as broad a pool as practicable from which to select and appoint the two Rule 34(2)(e)directors.
[102]Ibid, [41], referring to Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 10, [51].

Focussing on the language of Rule 34, the defendants rely on references in Rule 34 to three separate steps; nomination, election and appointment. Those separate three steps are expressly referred to in Rules 34(2)(b) and (c) but are not found in Rule 34(2)(e). The Rule in question does not provide for an election and is to be distinguished from the Shareholders’ Consultative Committee process where the members of the Shareholders’ Consultative Committee, or rather a subclass of those members, are responsible for the election of directors.

Context

Rule 34(7) was relied upon by the plaintiffs as showing the importance of nomination by unions because, if there are only as many nominations as places, being two, then those persons are deemed to have met the requirements to be elected for that appointment.

The plaintiffs contend that while the act of appointment is performed by the shareholders of USL, pursuant to Rule 34(1), the effect of Rule 34(7) is that the nominee becomes appointed as a director, and is ‘deemed’ to have been so elected, unless the number of eligible nominees exceeds the number of vacancies. The connection between nomination and appointment is demonstrated in Rule 39(1) which refers to ‘bodies responsible for his or her appointment pursuant to Rule 34’. A union whose nominee becomes appointed as a director is ‘responsible for his or her appointment’. The unions’ nomination does not ‘usurp’ the shareholders’ power to appoint;[103] rather, it is a condition of eligibility for appointment, and the Constitution itself provides that in some cases the nominee becomes appointed without any election.
[103]Cf. Defendants’ Opening Submissions, [36].

The defendants submit that Rule 34(7) supports their construction because it contemplates more nominations than director vacancies. They submit that the objective meaning of both Rule 34(7) and Rule 34(2)(e) is that there could be more nominations than vacancies.[104]
[104]At [6(c)] of the Plaintiffs’ Reply Submissions, they agree that a situation could arise where the number of eligible nomination exceeds the number of vacancies on the board, and they submit that Rule 34(7) provides the machinery to deal with such a situation.

It was submitted on behalf the plaintiffs that Rule 2 of the Constitution, which provides that ‘…Words in the singular include the plural and vice versa’, must be read subject to the relevant context. Attention was drawn by way of example to Rule 34(2)(a) and it was submitted that it made no sense to read the word ‘persons’ in the singular. It was said that the same is the case so far as the references to ‘persons’ and ‘unions’ in Rule 34(2)(e) is concerned.[105]
[105]Plaintiffs’ Opening Submissions, [34]; Plaintiffs’ Reply Submissions, [5].

The defendants submit that Rule 2 supports the construction for which they contend. They stress that the Rule does not include the exception ’unless the context requires otherwise’, or similar wording. That is, in contrast to Rule 1 that does contain such an exception. They submit this suggests that it was the intention of the parties to exclude such an exception from Rule 2 and therefore the Court need not embark on a search for ’context’ which would warrant an ’otherwise’ interpretation.

The defendants submit that applying Rule 2 to the phrase ’national unions’ in Rule 34(2)(e), clearly means that ’national unions’ can be read in the plural or singular. Therefore, it is permissible for one eligible union to make all the nominations and for more than one eligible union to make nominations. Shareholders can then validly exercise their ’rights’ and appoint the two required directors from the pool of nominations, irrespective of whether those nominations are from one or more eligible union. The defendants submit that there is nothing in Rule 34, nor in the Constitution more broadly, that invalidates the appointment of two directors from candidates nominated by the same eligible union.[106]
[106]Defendants’ Opening Submissions, [26]–[28].

The defendants contend that if the plaintiffs’ construction were to be accepted, there could never be a case where one union would nominate two persons because unions must, on the plaintiffs’ case, be read consistently as the plural, in all circumstances.

Rule 2 of the Constitution, providing for the singular and the plural was said by the defendants to sensibly apply to the Rule in question and that there is no reason not to apply that Rule when it comes to construction of Rule 34(2)(e).

Context: External

Two categories of background facts were relied upon by the plaintiffs. The first, industrial relations practices in the industry, the second, negotiations leading up to the adoption of the Constitution.

Concerning industrial relations practices, four facts were relied upon on behalf of the plaintiffs. The first, that as at 2000 when the Constitution was adopted, there were multiple unions who represented members of both the SSAU and TESS funds which were amalgamated.[107] The second, that different unions represent different categories of employees.[108] Third, that it is unlikely that any employee belongs to more than one union.[109] Fourth, that the NTEU has a heavy preponderance of academic staff and the CPSU has coverage of professional staff.[110]
[107]O’Sullivan Affidavit, [37]-[38].
[108]McGowan Affidavit, [18], [29], which evidences the percentage of NTEU’s members who are academic or general/professional staff; First Batt Affidavit, [9]; Second Batt Affidavit, [13].
[109]Plaintiff Opening Submissions, [37]; Second Batt Affidavit, [14].
[110]Second Batt Affidavit, [13]; First Batt Affidavit, [9]. This last proposition is not without its problems. The affidavit of McGowan shows approximately 39% of NTEU members are general and professional staff.

When directing attention to background facts, the plaintiffs referred to various draft heads of agreement between TESS Ltd and USL prior to the late 1999/2000 merger.[111] Reliance was placed upon a memorandum dated 23 August 1999 to the TESS Board, which proposed that two of the employee representatives on the board of the trustee of the merged scheme should be directly nominated by unions.[112] A further memorandum to the TESS Board dated 16 February 2000 recorded a draft proposal for one director to be nominated by the NTEU and one director to be nominated by the ACTU.[113] It was submitted that these documents evince an intention that there be only one director per union or representative body. It was submitted that it was not intended that there be more than one representative of any one national union, that this had not been allowed under the TESS constitution and that it was not provided for under the Heads of Agreements that preceded the merger of the two funds.
[111]Plaintiffs’ Opening Submissions, [47].
[112]Plaintiffs’ Opening Submissions, [46]; O’Sullivan Affidavit, exhibit MKO-1, 280-4.
[113]O’Sullivan Affidavit, exhibit MKO-1, 289. The composition of the Board is also discussed in the Minutes of Meeting of Directors of TESS Ltd dated 18 November 1999 and 24 February 2000; see exhibit MKO-1, 287 and 291 respectively.

The plaintiffs also rely upon a Memorandum to the Consultative Committee dated 17 April 2000 which refers to a compromise between the two structures of the existing funds, that compromise including two directors to be nominated by unions.[114]
[114]O’Sullivan Affidavit, exhibit MKO-1, 325-328.

As to admissibility of these documents, it was submitted the participants in negotiations were the employer representatives and the union representatives and that the unions were well aware of these matters as a result of reporting back by those persons involved on their behalf in negotiations.[115]
[115]Referring to a Memorandum to the Consultative Committee dated 17 April 2000, which provides, in part, ‘This paper has been prepared for the Consultative Committee by the Merger Committee which consists of independent, employee and employer representative directors appointed by both Boards’; see the O’Sullivan Affidavit, exhibit MKO-1, 328.

The defendants contend that the surrounding circumstances, known to the parties at the date of adoption of the Constitution support the construction for which they contend. They submit that the Plaintiffs’ Construction also fails to recognise that Rule 34(2)(e) when originally adopted included further wording that was later removed. The now deleted Rule 34(3) provided relevantly that ’Directors appointed pursuant to Rule 34(2)(d) and (e) must be:…(c) officers, officials, employees or members of national unions representing a significant number of members of the Scheme…’.[116] If the parties’ ’objective intention’[117] was to read ‘national unions’ as a plural only and to ignore Rule 2, this additional requirement would never have been capable of compliance as a person likely would not be an ’officer, official, employee or member’ of more than one eligible union that meets the significant number test.[118]
[116]O’Sullivan Affidavit, exhibit MKO-1, 266.
[117]Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd [2006] FCAFC 144; (2006) 156 FCR 1, [251]; Adaz Nominees Pty Ltd v Castleway Pty Ltd [2020] VSCA 201, [70].
[118]Defendants’ Opening Submissions, [38]. The defendants submit that this appears consistent with the statements in the Second Batt Affidavit at [13]-[14].

The defendants submit that expressly allocating to two named unions the right to nominate one candidate, and limiting the number of nominations and the number of unions who could nominate to two, were rejected in the negotiation of the rule prior to the merger that led to the formation of the scheme. The defendants submit that the construction of which the plaintiffs contend seeks to enliven a rejected rule which the Court should not allow to occur.[119]
[119]Ibid, 42.

The plaintiffs relied in support of their argument for external context upon provisions of the SIS Act. They submitted that the Constitution should be construed in the context of the SIS Act because it is apparent that the Constitution had that legislation in mind when it was drafted. Reference was made to s 19, Part 9, s 93 of the SIS Act, and to the basic equal representation rules found in s 89(1)(a)(ii) to show the requirement for equal employer and employee representation at board level.[120]
[120]Plaintiff Opening Submissions, [19]-[24]; Plaintiff Reply Submissions, [3], [13].

The defendants respond by submitting that s 89(1)(b) of the SIS Act, the basic equal representation section, requires that the board have equal numbers of employer and employee representatives. The SIS Act does not require any further segmentation into academic and professional staff members

Purpose

In support of the construction of Rule 34(2)(e) for which they contend, the plaintiffs emphasise the intention, as manifested in the Trust Deed, of the importance of equality of representation and the diversity of representation at board level on behalf of academic and non-academic or professional staff. In this regard, the role of the Consultative Committee, established pursuant to the Trust Deed but recognised and given effect in Rules 34 and 35 of the Constitution is submitted to be significant.

Attention was drawn to clauses 9.1 and 9.2 of the Trust Deed which distinguish between and provide for equality of representation for, on the one hand academic staff and, on the other hand, non-academic staff. It was submitted that these provisions reflect the dual goals of equality of representation and diversity of representation.

It was also submitted that the fact the NTEU is a larger union does not make it more representative of Members of the Scheme. Each of the CPSU and the NTEU is representative of its constituency and it is consistent with the Constitution that different cohorts of Members are separately represented.

While the plaintiffs accept that Rule 34(2)(e) does not require a differentiation between academic staff and professional staff, it was said to be desirable that such a breakup be recognised and given effect. It was submitted that the Rule points to a desire that no one union is to be given too much power. The provisions of the Trust Deed and the Constitution are said to support a construction that ensures there is a balance of influence between academic staff members and professional staff members of the Scheme.

In support of the construction for which they contended, the defendants submit that the Rule in question provides the opportunity for union members to be represented on the board. Rule 34(2)(e) is the only opportunity for union members to obtain board representation.

Post-Contractual Conduct

Post contractual conduct, said to constitute admissions were relied upon by the plaintiffs in support of the construction for which they contend. The first document relied upon in this category was a letter from the CEO of USL to Ms Batt, dated 8 August 2017, setting out information required if a union wished to nominate a person as a director of USL.[121] The second document was a letter from the General Secretary of the NTEU, dated 15 December 2011, communicating information to the members of that union.[122] It was accepted that this document was not an admission by either of the defendants but it was nevertheless relied upon as ‘shed[ding] light’ upon the NTEU’s understanding that each union would have a right to nominate one director only.[123] The NTEU policy manual was also relied upon.[124]
[121]First Batt Affidavit, exhibit KB-1, KB-1/335-377. The letter contains three enclosures: A, B and C. Relevantly, enclosure B sets out the procedure and relevant information for nomination of persons for the appointment of directors of USL to represent national unions in 2017.
[122]Ibid, exhibit KB-1, KB-1/322-6.
[123]Transcript, 42.
[124]Second Batt Affidavit, exhibit KB-2, KB-2/6.

It was submitted that, adopting the language of Flick J in Australian Rail,[125] taken together the evidence shows a mutual subjective intention.
[125][2020] FCA 1520, [33].

The defendants submit that if Australian Rail[126] applies in this case, there is no evidence of clear and mutually subjective intention. It was submitted that the evidence does not establish a mutual subjective intention and does not involve a party to the Constitution.
[126]Ibid.

Rule 34(2)(e): Consideration

The starting point for the proper construction of Rule 34(2)(e) is the text. Contrary to the submissions on behalf of the plaintiffs, there is nothing particularly ambiguous about the language of Rule 34(2)(e).

I agree with the defendants’ submission that on a plain reading the Rule says that two directors are to be appointed but is silent as to the permitted number of nominations by eligible unions. It does not refer to or impose any limit on the number of persons who may be nominated for the two director positions. It is no part of the language of the Rule to limit the number of persons to be nominated. The Rule does not say that there may be only one nominee per eligible union.

To impose a limit upon the number of nominations would require restrictive words to be read into the text of the Rule that do not form part of the language of the Rule itself. There is nothing in the context of the Constitution itself that supports a restriction on the number of nominations that might be made by an eligible union or unions. The external context does not provide support for reading in such a restriction. Similarly the purpose of the Rule itself, rather than supporting a restriction upon the number of nominees, supports that there should be as many nominees as eligible unions wish to put forward for appointment.

When the Constitution intends to refer to numbers of persons and to impose numerical restrictions, it does so. As submitted on behalf of the defendants, dealing with Rule 34, sub-rule (2)( a) refers to two persons, sub-rule (2)(b) refers to one person, sub-rule (2)(c) refers to one person and sub-rule(2)(d) refers to one person. Rule 33(1) refers to not less than eight and not more than 11 directors and Rule 34(1) expressly refers to eight directors. Looking at the matter objectively, if the Constitution intended that one nominee only per eligible union be permitted in Rule 34(2)(e) it would have said so. The failure to specify a number is consistent only with there being no limits upon the number of persons who may be nominated by an eligible union or unions.

Rule 34(2)(e) provides a nomination mechanism leading to the appointment of two employee directors, balanced against the two employer directors, provided for in Rule 34(2)(d). As such, the Rule reflects the equality of employer/employee representation that is given effect in the different mechanisms in Rule 34 for the appointment of the other six directors. However, the employer and employee equality principle that underpins Rule 34 does not assist in resolving the construction question that separates the parties.

Looking to Rule 34(2)(e) in context, sub-rules 3(a) and (b) of Rule 34 are concerned with directors appointed via the Shareholders’ Consultative Committee process. Those sub-rules require a balance of directors representing the interests of employers and employees and, as amongst the employee representative directors, a balance between those representing academic staff, pursuant to Rule 34(2)(b) and clause 9.1(a)(iii) of the Trust Deed, and professional staff, pursuant to Rule 34(2)(c) and clause 9.1(a)(iii) of the Trust Deed. However, Rule 34(2)(e) is not concerned with the same subject matter. It is a separate stand-alone provision which is concerned with the nomination of persons by eligible unions for appointment by the shareholders of USL to two of the eight director positions.

Unlike the other provisions mentioned, it is no part of the language of Rule 34(2)(e) to be concerned with a distinction between unions representing professional staff and unions representing academic staff. As is apparent from the express references to these descriptors both in other parts of Rule 34 and in clauses 9.1 and 9.2 of the Trust Deed, when it was intended to qualify directors, whether as part of the process of nomination, appointment or election, as provided for in clause 9.2, by reference to those persons representing either academic or non-academic staff, the Trust Deed in that case, and Rules 34(2)(b)(i) and (c)(i), by way of example in the case of the Rules, specified such a requirement.

Rules 34(2)(b)(i) and (c)(i) concerning nominations for directors impose specific employee category requirements, the academic staff category and the professional staff category. No such requirement attaches to the nomination provision in Rule 34(2)(e) when it comes to nomination by national unions. What is required is that such national unions represent ‘a significant number of members of the Scheme’, that is, irrespective of whether they are academic members, professional staff or general staff. The language of the Rule does not require that unions in some way represent different sectors of the Members of the Scheme.

The reference to ‘national unions’ in the Rule is appropriately read as either the singular or the plural, depending on the number of eligible unions from time to time. To read the Rule in this way is to give effect to the directive in Rule 2 that the singular include the plural and vice versa.

It is only by reading the Rule in this way that, if there is only one eligible union, there can be a sufficient number of nominees so that the requirement for the appointment of two directors pursuant to the Rule can be satisfied. The acceptance on behalf of the plaintiffs that if there were only one eligible union then, in that circumstance there would be a need to permit that single union to nominate two directors, undercuts in a critical respect the plaintiffs’ construction argument.

The Rule must only be interpreted once. It must have the same construction, whether as a matter of fact there is one eligible union or there are many eligible unions. The construction for which the defendants contend permits a consistent and workable construction of the Rule. The plaintiffs’ construction that requires an interpretation of the Rule that varies depending upon the number of eligible unions must be rejected.

The reliance by the plaintiffs upon the language of Rule 34(2)(a) does not assist to show that ‘unions’ in Rule 34(2)(e) must also be read in the plural, at all times, unless there is only one eligible union. Clearly ‘persons’ when used in the context of ‘two of the persons appointed Directors’ in Rule 34(2)(a) is a reference to the plural in that particular provision. If ‘unions’ in Rule 34 (2)(e) is read as either union or unions, as the argument for the plaintiffs is obliged to recognise, if there is only one eligible union there would on the plaintiffs’ construction be no ability to nominate one, let alone two directors. The plaintiffs are obliged to concede that where there is only one eligible union then, that union must be able to nominate more than one person to be appointed director.

The purpose of the particular Rule under consideration is to provide, as expressly stated, for nominees for the two positions of director to which the Rule refers, to be submitted by eligible unions so as to ensure appointment of the two directors comes via that process and has union involvement. In that respect the purpose of the Rule is distinct from and a more narrow purpose, than the broader purpose, of balancing employer and employee representation across the eight non-independent board members. The provisions of the SIS Act to which attention was directed support the broader purpose, but the particular Rule has the more specific purpose of ensuring that the two directors are selected from nominees whose names are put forward by eligible unions, apparently reflecting an intention that two such persons thought suitable for appointment by eligible unions should be appointed to and take their positions as members of the board.

The diversity and equality purposes to which the plaintiffs refer feature in other parts of Rule 34, but are not features of Rule 34(2)(e). Such purposes do not inform the construction of the Rule.

As set out earlier in these reasons, both parties referred to contextual matters surrounding the merger of the two funds and the adoption of the Constitution. The matters relied upon by the plaintiffs do not constitute mutually known background facts. The matters relied upon are in the nature of private communications involving the TESS side of the proposed merger transaction. They do not constitute the types of communications that might be expected to be known by the members generally.

The fact that historically there had been specific union appointed directors to TESS and the fact there was an earlier Rule that made provision for such appointments that was later amended, does not assist in resolving the construction question. It is also significant that the Constitution adopted was a compromise.[127] Once that is known, what went before, irrespective of whether it was mutually known, is not of assistance when it comes to construction of the compromise that was arrived at.
[127]See paragraph 129 above.

The further issue of substance related to construction canvassed both in submissions and in argument concerns post contractual conduct as an aid to construction. Neither of the primary cases relied upon by the parties in this regard was a case concerned with the construction of a corporate constitution. The position concerning the use of post-contractual conduct when construing a conventional contract is, as referred to in Johnston v Brightstars Holding Company Pty Ltd,[128] well-settled. Namely, post contractual conduct is inadmissible to construe the terms of the contract.[129]
[128]See paragraph 100 above.
[129]Adaz Nominees Pty Ltd v Castleway Pty Ltd [2020] VSCA 201, [70(qq)].

There is nothing in the authorities referred to by the parties and in particular by the plaintiffs that would indicate that position should be departed from in the case of the statutory contract created pursuant to s 140(1) of the Corporations Act 2001 (Cth). Even if it were the case that post-contractual conduct were required to be taken into account, the conduct in question, by analogy with private contracts, would need to be conduct of the members of USL. The conduct sought to be relied upon by the plaintiffs was not the conduct of those persons.

For these reasons, the construction of Rule 34(2)(e) of the Constitution advanced on behalf the plaintiffs, in substance, that the Rule permits only one eligible union to nominate one director and that a single union is not permitted to nominate more than one director must be rejected. The text of the Rule imposes no such restriction. The construction for which the plaintiffs contend is a construction that cannot work in circumstances where for whatever reason, there is only one eligible union.

The purpose of the Rule, namely, to provide for union involvement in the nomination process of the two Rule 34(2)(e) directors, would not be advanced by the plaintiffs contended for construction. The plaintiffs’ construction would have the opposite effect. It would restrict nominations by unions. A construction of the Rule that permits multiple nominees by one or more eligible unions does not disadvantage any eligible union. It permits all eligible unions to put forward as many suitable nominees as they consider appropriate, providing a greater pool of persons from whom the shareholders may appoint to the board.

Disposition

The proceeding commenced by Originating Motion dated 21 September 2020 is dismissed.

Subject to submissions the parties may wish to make, the plaintiffs shall pay the defendants’ costs on a standard basis.

If either party wishes to contend for a costs order other than as proposed, the parties should file and serve short submissions in relation to costs within the next seven days.

SCHEDULE OF PARTIES

BETWEEN:

CPSU, THE COMMUNITY AND PUBLIC SECTOR UNION First Plaintiff

SHELLEY ANNE ODEWAHN Second Plaintiff

and

UNISUPER LIMITED (ABN 54 006 027 121) First Defendant

JANE PANTON, IN HER CAPACITY AS THE COMPANY SECRETARY
OF UNISUPER LIMITED (ABN 54 006 027 121) Second Defendant

[2020] VSC 825

8 December 2020