Health Services Union v Jackson (No 4) - [2015] FCA 865

FEDERAL COURT OF AUSTRALIA
Health Services Union v Jackson (No 4) [2015] FCA 865
SUMMARY
In accordance with the practice of the Federal Court in cases of public interest, importance or complexity, the following summary has been prepared to accompany the orders made today. This summary is intended to assist in understanding the outcome of this proceeding and is not a complete statement of the conclusions reached by the Court. The only authoritative statement of the Court’s reasons is that contained in the published reasons for judgment which will be available on the internet at the Court’s website. This summary is also available there.
There are two proceedings before the Court. It will be convenient to refer to them as “the Victorian proceeding”, (VID 1042 of 2013), and “the New South Wales proceeding”, (NSD 1501 of 2013). On 24 March 2014 I ordered that the two proceedings should be heard concurrently.
Initially, in the Victorian proceeding, the applicant (“the HSU” or “the Union”) sought orders that Ms Jackson pay to it some $280,000, together with interest and costs.
These claims arose from two matters. The first was referred to in the pleadings as the “Toomey Pegg matter”. Toomey Pegg is a firm of solicitors. The HSU alleges that, acting in breach of duty and without authority, Ms Jackson retained Toomey Pegg to provide legal services to the HSU on her instructions thereby incurring a liability, on the part of the HSU, for legal fees totalling $34,725.
The second claim in the Victorian proceeding related to what was referred to as “the NHDA transfers”. The acronym referred to the National Health Development Account which, it is alleged, Ms Jackson opened and operated as the account holder. The HSU alleged that, between February 2004 and May 2010 Ms Jackson, acting without authority and in breach of duty, caused a total of $246,500 to be transferred from the funds of the Victoria No 3 Branch of the HSU to the NHDA. The HSU sought to recover this amount.
Ms Jackson cross-claimed in the Victorian proceeding for wages said to be due to her as National Secretary of the HSU between 2012 and 2014 during which period she was on sick leave. This cross-claim was dismissed by operation of a self-executing order which I made on 15 August 2014.
The New South Wales proceeding was commenced by Mr Robert Elliott who was National Secretary of the HSU from 1996 to 2002. In this proceeding Mr Elliott sought orders for payment in lieu of untaken annual leave and long service leave, declarations and compensation for contravention of s 90(2) of the Fair Work Act 2009 (Cth) (“the Act”), imposition of pecuniary penalties payable to Mr Elliott pursuant to the Act and the Long Service Leave Act 1992 (Vic) and an award of damages for breach of contract.
The HSU cross-claimed against the former President of the HSU, Mr Michael Williamson, and Ms Jackson alleging that, acting without authority, and…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2015] FCA 865
Decision Date: 19 AUGUST 2015

CaseChat Overview and Summary

In the matter of Health Services Union v Jackson (No 4), the Health Services Union (HSU) sought compensation from Ms Jackson for various financial mismanagement issues, including misuse of union funds. The Federal Court of Australia was tasked with determining the liability of Ms Jackson for the financial irregularities and the appropriate compensation. The primary legal issues centred on whether Ms Jackson had breached her duties under the Fair Work (Registered Organisations) Act 2009 (Cth) and the Corporations Act 2001 (Cth), and if so, what the extent of the compensation should be. The Court found that Ms Jackson had indeed contravened her duties by improperly using union funds, resulting in significant financial loss to the HSU. The Court emphasised that the HSU was not bound by a deed that Ms Jackson argued could have provided her with a defence. Based on the findings, the Court ordered Ms Jackson to pay the HSU compensation totaling $1,406,538.16, which included various components such as NHDA transfers, cashed cheques, and credit card expenditure. Further orders regarding costs and interest were deferred pending additional submissions from the HSU.

Orders

Orders of the court

1. The respondent pay the applicant $926,990.30 as compensation for damage suffered by the applicant resulting from the contravention, by the respondent, of Schedule 1B of the Workplace Relations Act 1996 (Cth) and the Fair Work (Registered Organisations) Act 2009 (Cth).

2. The respondent pay the applicant $67,912 as money had and received by the respondent for the use of the applicant.

3. On or before 2 September 2015 the applicant file written submissions relating to any further amounts claimed by it by way of costs and interest.

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

1. The third cross-respondent pay the cross-claimant $411,635.86 as compensation for damages suffered by the cross-claimant resulting from the contravention by the third cross-respondent of Schedule 1B of the Workplace Relations Act 1996 (Cth) and the Fair Work (Registered Organisations) Act 2009 (Cth).

2. On or before 2 September 2015 the cross-claimant file written submissions relating to any further amounts claimed by it by way of costs or interest.

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

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

The HSU was not a party to the deed. It is not bound by it. The deed does not, as a result, afford any defence to Ms Jackson to the claims made against her by the HSU.CONCLUSION Compensation orders totalling $1,406,538.16 should be made in favour of the Union. This figure is made up as follows:·the NHDA transfers – $284,500;·the cashed cheques – $238,937;·the Honorarium – $63,000;·the Elliott Memorandum – $411,635.86;·the Toomey Pegg matter – $34,725; ·the credit card expenditure – $305,828.30; and·the overpayment of wages – $67,912. Outstanding issues relating to costs and interest will need to be dealt with in the light of the foregoing reasons. The HSU should make written submissions relating to these issues within 14 days of the handing down of this judgment.

Ratio Decidendi

Legal Principle Established

If a person contravenes a civil penalty provision (including ss 285, 286 and 287) the organisation concerned may apply to the Court for compensation for any damage which has “resulted from the contravention”: see ss 307(1), 310(3) and 338. Any compensation orders made by the Court must specify the monetary amount of any compensation awarded. Additional orders may be made under s 308.The Corporations Act The Union also pleaded causes of action founded on provisions of the Corporations Act 2001 (Cth) (“the Corporations Act”). Sections 180 and 181 of the Corporations Act impose on directors and officers of corporations care and diligence and good faith duties which are similar to those imposed by ss 285 and 286 of the FWRO Act respectively. The duty imposed by s 181 of the Corporations Act differs in terms from that imposed on union officials by s 286 because s 181(1)(a) requires directors and officers to exercise their powers and discharge their duties “in good faith in the best interests of the corporation”. It may be, however, that the same subjective element (“what he or she believes”) which appears in s 286(1)(a) is imported into s 181(1)(a): see, for example Westpac Banking Corporation v Bell Group Limited(in liq) (No 3) (2012) 44 WAR 1 at 169 (Lee AJA). See also Carr AJA at 525 who agreed with the analysis of the trial judge whose reasons are relevantly reported at the Bell Group Limited (in liq) v Westpac Banking Corporation (No 9) (2008) 39 WAR 1 at 575-583. Section 182 of the Corporations Act imposes on officers and employees of corporations the same constraints as those imposed on officers or employees of an organisation by s 287(1) of the FWRO Act. Although trade unions cannot be registered under the Corporations Act (see s 116), ss 180, 181 and 182 regulate the conduct of directors and officers of “corporations”. A “corporation” is defined to include “any body corporate (whether incorporated in this jurisdiction or elsewhere)”: see ss 9 and 57A(1)(b). By operation of s 27 of the FWRO Act, the HSU is deemed to be a body corporate. A person “who makes, or participates in making, decisions that affect the whole, or a substantial part, of the business of the entity” is an “officer”: see s 9. The Court may make an order, under s 1317H of the Corporations Act which requires a person to compensate a corporation if the person has contravened provisions, including ss 180, 181 and 182, and damage has resulted from such a contravention. The Court’s order must specify the amount of the compensation.The HSU Rules The supreme governing body of the Union was the National Council: Rule 21. It was required to meet annually: Rule 22(a). The powers of the National Council included the fixing of the remuneration and terms and conditions of employment of “the Officers of the Union”: Rule 21(c). Prior to 24 May 2010 the Rules provided that one of these “Officers” was the National Secretary who was to be a full time paid officer: Rule 19. The Rule was amended, with effect from that day, to provide that it was for the National Council to determine, from time to time, whether the office of National Secretary was to be a full time paid office. The Rule in its amended form applied for the remainder of the relevant period.