Krantz, Harry David v Federated Clerks Union of Australia

[1986] FCA 351

Re: HARRY DAVID KRANTZ and WILLIAM ALEX SMITH
And: FEDERATED CLERKS' UNION OF AUSTRALIA
No. SA 6 of 1985
Conciliation and Arbitration
14 IR 357

COURT

IN THE FEDERAL COURT OF AUSTRALIA

SOUTH AUSTRALIA DISTRICT REGISTRY
INDUSTRIAL DIVISION
Woodward J.
Evatt J.
Northrop J.

CATCHWORDS

Conciliation and Arbitration - organizations - whether whole or part of a rule contravenes sub-section 140(1) - whether the rules contravene sub-section 140(1) in a specified respect - effect of declarations made under sub-section 140(5G) - different consequences flowing from form of a declaration made.

Conciliation and Arbitration Act 1904 ss.118, 133A, 140

Federal Court of Australia Act 1976 s.24

Wright v. McLeod (1983) 74 F.L.R. 146

Imlach v. Daley (1985) 60 A.L.R. 377

HEARING

MELBOURNE

#DATE 15:8:1986

Counsel for Appellants: Mr. J. Von Doussa and Mr. P. Heywood-Smith

Solicitors for Appellants: Messrs. Johnston, Withers, McCusker & Co., 345 Carrington Street, ADELAIDE. S.A. 5000

Counsel for Respondent: Dr. C. Jessup

Solicitors for Respondent: Messrs. Oakley Thompson & Co.,
205 King Street, MELBOURNE. VIC. 3000

ORDER

THE COURT ORDERS THAT the appeal be dismissed.

(Settlement and entry of Orders is dealt with in O.36 of the Rules of Court.)

JUDGE1

The appellants are members of the Federated Clerks' Union of Australia ("the Union"), an organization of employees under the Conciliation and Arbitration Act 1904. They are attached to the South Australian Branch of the Union. On 13 July 1984, the appellants obtained a rule calling upon the Union to show cause why certain orders should not be made under s.140 of the Conciliation and Arbitration Act 1904 ("the Act"). The orders sought, as set out in the rule to show cause, were in a confused form but, on a proper reading, appear to be directed to the making of declarations that parts of the rules of the Union contravene sub-section 140(1). At no stage of the hearing of the rule to show cause did the appellants seek leave to amend the rule by seeking amendments to the form of the orders sought or by seeking additional orders. In particular, at no stage of the hearing of the rule to show cause did the appellants seek a declaration that the rules of the Union contravene sub-section (1) in a specified respect. The results flowing from these matters will be discussed later in these reasons. For present purposes, it is sufficient to set out the form of orders sought in the rule to show cause. The appellants were seeking orders:-

"... declaring:

1. That the rules of the Respondent hereinafter called 'the rules' and in particular Rule 12 (2) (a) contravenes Section 140 (1) (d) of the Act in that it precludes a branch of the Respondent from altering the branch rules without the approval of the Federal Executive.

2. That Rule 12 (2) (f) of the rules contravenes Section 140 (1) (d) in that it allows the Federal Council or Federal Executive to make alterations to rules of a branch of the Respondent regardless of the attitude of that branch to such amendment.

3. That Rule 12 (4) contravenes Section 140 (1)

(d) of the Act in that it allows the Federal Council or the Federal Executive of the Respondent to interfere with the autonomy of a branch.

4. That Rule 15 (1) of the rules contravenes Section 140 (1) (a) of the Act in that it contravenes Section 133 A (1) of the Act by allowing the Federal Council or the Federal Executive to direct branches to forward all monies collected by branches to the Federal Executive.

5. That Rule 15 (3) (d) of the rules contravenes Section 140 (1) (c) in that it provides for the payment of different amounts by different branches by way of sustentation fee in respect of members.

6. That Rule 15 (4) of the rules contravenes Section 140 (1) (c) in that it allows the Federal Council of the Respondent to reject the votes on Federal Council of duly elected members of Federal Council.

7. That Rule 27 (3) of the rules contravenes Section 140 (1) (a) and (d) in that it provides that the Federal Executive shall have the care control custody superintendence management and administration in all respects of the funds and property of the Union contrary to section 133 (A) (1) of the Act.

8. That Rule 37 of the rules contravenes Section 140 (1) (a) and (d) of the Act in that it, inter alia, makes no provision as required by Section 133 A (1) for the establishment of a Federal Fund and Branch Funds."

It is noted that by order made on 2 November 1984, the Court discharged the order sought in paragraph 6 of the rule to show cause. No further mention need be made of that paragraph.

1. By way of directions, the appellants were required to file and serve points of contention. Two of the points of contention are relevant for the purposes of this appeal, namely those contained in paragraphs 10 and 14. Those paragraphs are set out:-
   
   

"10. The rules of the organization generally make no provision for the autonomy of a branch in matters affecting members of the branch only and matters concerning the participation of the branch in any State industrial conciliation and arbitration system. The rules accordingly contravene s.140(1)(d) of the Act.

...

14. The rules of the organization generally are contrary to s.140(1)(a) of the Act in that being an association divided into branches the organization by its rules makes no provision for Federal and Branch Funds as required by s.133A of the Act."

The Union filed and served points of contention in answer to appellants' points of contention. The relevant paragraphs of the Union's points of contention, being paragraphs 11 and 15, are set out:-

"11. It denies each and every contention in paragraph 10 thereof, and says further that -

(a) Contentions (b) and (d) in paragraph 4 hereof are repeated; (They are set out:-

'(b) Section 140(1)(d) of the Act does not apply save where the ability of a branch of an organisation to participate in a state industrial conciliation & arbitration system is in question;

...

(d) The rules of the organisation as a whole comply with s.140(1)(d) of the Act;')

(b) The branches of the organisation have and exercise such autonomy as is required by s.140(1)(d) of the Act;

(c) No suggestion is made that in any respect the autonomy of a branch in matters affecting its members only or in matters concerning its participation in any state industrial conciliation and arbitration system only has been denied or frustrated by or pursuant to the rules of the organisation;

(d) In its discretion, the court ought not declare that the rules or any of them fail to make such provision as is required by s.140(1)(d) of the Act.

...

15. It denies each and every allegation in paragraph 14 thereof, and refers to the rules of the organisation generally, and to rules 15 and 37 in particular."

1. On 21 December 1984, the Court, after hearing the proceedings commenced by the rule to show cause, made certain orders and published its reasons for making those orders. The orders made were as follows:-
   
   

"THE COURT ORDERS THAT:

1. The proceeding is adjourned until Thursday 28th February 1985, at Adelaide, for the purpose of giving the Respondent an opportunity to alter its rules, so as to make the provisions required by section 133A of the Conciliation and Arbitration Act 1904.

2. The Rule to Show Cause is otherwise discharged."

1. This order has the effect of terminating the proceedings commenced by the rule to show cause but, because of subsequent events, this aspect must be considered in some detail. The effect of the order is apparent from a reading of the provisions of s.140 of the Act and of the Rules of Court as well as from a consideration of the authorities relating to s.140. Section 140 is a long section and need not be set out in full. Paragraphs 140(1)(a) and (d) are set out:-
   
   

"140(1) The rules of an organization -

(a) shall not be contrary to, or fail to make a provision required by, a provision of this Act, the regulations or an award or otherwise be contrary to a law;

...

(d) shall be such as to provide for the autonomy of a branch in matters affecting members of the branch only and matters concerning the participation of the branch in any State industrial conciliation and arbitration system."

Under sub-section 140(2) and s.118A of the Act, a member of an organization may apply to the Federal Court for an order under s.140 in respect of an organization and by sub-section 140(5E), the Court has jurisdiction to hear and determine an application under sub-section 140(2). Sub-section 140(5D) is set out:-

"140(5D) An order under this section may declare that the whole or a part of a rule of an organization contravenes sub-section (1) or that the rules of an organization contravene sub-section (1) in a specified respect."

It should be noted that sub-section 140(5D) contains two limbs which are mutually exclusive. The distinction between the two forms of order that can be made is of the utmost importance because of the consequences resulting from the order made. This is made clear by a reference to sub-sections 140(5G) and 140(7), each of which is set out:-

"140(5G) Where an order under this section declares that the whole or a part of a rule contravenes sub-section (1), the rule or that part of the rule, as the case may be, shall be deemed to be void from the date of the order.

...

140(7) Where -

(a) the Court makes a declaration under this section in relation to the rules of an organization; and

(b) at the expiration of 3 months from the date of the declaration, the rules of the organization have not been amended in a manner which, in the opinion of the Industrial Registrar, brings them into conformity with the requirements of sub-section (1) as regards the matters that gave rise to the declaration,

the Industrial Registrar shall, after inviting the organization to consult with him on the matter, determine such alterations of the rules as will, in his opinion, bring them into conformity with those requirements as regards those matters."

Instead of making an order under sub-section 140(5D), the Court may adjourn the proceedings in relation to an application under s.140. A specific power to so adjourn is contained in sub-section 140(6) which provides:-

"140(6) The Court may, without prejudice to any other power of the Court to adjourn proceedings, adjourn proceedings in relation to an application under this section for such period and upon such terms and conditions as it thinks fit for the purpose of giving the organization an opportunity to alter its rules."

It is not necessary to make reference to the other sub-sections of s.140.

1. There are many authorities dealing with aspects of s.140 of the Act, but for present purposes it is sufficient to refer to what was said by Evatt and Northrop JJ. in Wright v. McLeod (1983) 74 FLR 146 at pp 165-166, and 170-173. Those passages should be read in full, but we quote what appears at p 171:-
   
   

"Under s.140(5D) the court may declare that the whole or a part of a rule of an organisation contravenes s.140(1) of the Act or, as an alternative, the court may declare that the rules of an organisation contravene s.140(1) in a specified respect. The order made is of importance since the consequences flowing from the order are different depending upon which order is made. If the former order is made, then as from the date of the order, the whole or that part of the rule shall be deemed to be void from the date of the order. If the second order is made, no rule is deemed to be void, but under s.140(7) the organisation has three months within which to bring its rules into conformity with the requirements of s.140(1). If it fails to do so, the Industrial Registrar is required to bring the rules into conformity with the Act. The nature of the different forms of orders that can be made and the different consequences flowing therefrom are discussed in Linehan v. Transport Workers' Union of Australia (1981) IAS, Current Review 570."

1. Pursuant to the Rules of Court, an application under s.140 of the Act is commenced by a rule to show cause, see O.4 r.15 and Form 6. This procedure was adopted in the present case, but the appellants did not seek relief in the form of a declaration made under the second limb of sub-section 140(5D). The order made on 21 December 1984 was not a declaration under the second limb of sub-section 140(5D), thus the provisions of sub-section 140(7) have no application. The order of 21 December 1984 adjourned the hearing of the proceedings to 28 February 1985, but the order also "otherwise discharged" the rule to show cause. It is difficult to determine the true effect of these apparently contradictory orders. None of the orders sought by the rule to show cause and which were based on the first limb of sub-section 140(5D), was made. Nor would it have been appropriate to make any such order. The true nature of the appellants' case was disclosed by their points of contention numbered 10 and 14. The orders suggested by those contentions were not sought in the rule to show cause. The rule nisi was "otherwise discharged". No part of the rule to show cause remained to be decided. There would seem to have been nothing to adjourn.

2. This does not deny the power to adjourn the proceedings under sub-section 140(6). Such an adjournment having been granted, there should have been no need to "otherwise discharge" the rule to show cause. In all the circumstances, the order of 21 December 1984 should, we think, be treated as an order made under sub-section 140(6) adjourning the proceedings generally. The purported discharge of the rule should be regarded as an expression of future intent.

3. At the hearing of the proceedings before the trial Judge, the particular challenges made by the appellants were based first on s.140(1)(a) and s.133A of the Act and second on s.140(1)(d). Section 133A imposes conditions to be complied with by organizations divided into branches in relation to rules making provision for a Federal Fund and for Branch Funds. The proceedings were heard and the judgment of 21 December 1984 was given before a Full Court published its judgment in Imlach v. Daley (1985) 60 ALR 377. In that case, the Court had to consider whether specified rules of the Hospital Employees' Federation of Australia or specified parts of rules contravened sub-section 140(1) the Act and whether the rules of the Federation contravened s.140(1) in a specified respect. It is interesting to note what was said by Evatt and Northrop JJ. at p.384 with respect to the difference between those two questions. In that case, the orders sought by the rule to show cause, as amended during the hearing of the proceedings before the trial Judge, appear at p.384. They were:-
   
   

"(1) A declaration that rr13(b), 31 and 34(c) of the rules of the Federation contravene s 140(1)(c) of the Act.

(2) A declaration that the rules of the Federation contravene s 140(1) of the Act in a specified respect in that they fail to make a provision required by s 140(1)(d) of the Act, namely, provision for the autonomy of a branch in matters affecting members of the branch only."

For reasons appearing at pp.384 to 391, Evatt and Northrop JJ. held that paragraph 140(1)(d) applies only with respect to organizations which, through branches, participate or seek to participate in a State industrial conciliation and arbitration system. The question of the application of s.133A did not form part of the ratio for that case although, by parity of reasoning, a similar limitation may arise with respect to the operation of that section.

1. The Court hearing the rule to show cause in the present case did not have the benefit of the authority of Imlach v. Daley. The Court held that, however inconvenient it may be, s.133A and sub-section 140(1)(d) must be given some meaning in relation to all branches of organizations which have branches. The Court held, accordingly, that those provisions applied to the Union and its branch in South Australia, the Federated Clerks' Union of Australia, South Australian Branch. Having come to that conclusion, the Court considered whether the rules of the Union failed to make a provision required by s.133A and therefore contravened paragraph 140(1)(a) and whether specified rules, including r.15(1), were contrary to s.133A and therefore to paragraph 140(1)(a). The Court then considered a number of the rules of the Union. The Court found that rule 15(1) went further than contemplated by certain of the provisions of s.133A and in that respect that the rules of the Union failed to make a provision required by s.133A. The Court considered that the rules of the Union "fail to make the provision required by s.133A and, accordingly, contravene s.140(1)(a)". The Court then made reference to other rules of the Union including rules 27(3) and 37(3) and considered that "those rules do not cause the rules as a whole to fail to comply with s.133A". The Court then considered whether rule 12(2)(a) of the rules of the Union contravened paragraph 140(1)(d) and held it did not. It made the same finding with respect to rule 12(4).

2. In conclusion, the Court said:-
   
   

"Although, in form, the Rule to Show Cause may have permitted the Applicants to pursue a challenge to the rules of the Union as a whole, based upon s.140(1)(d), the challenges which were in fact pursued were limited to those relating to the specific rules 12(2)(a) and 12(4).

In the result, the Applicants have failed, to make out a case for the invalidity of the rules of the Union, except insofar as those rules fail adequately to make the provision required by s.133A. In the event that the Court took the view that any contravention of s.140 of the Act existed, Dr. Jessup (who appeared for the Union) submitted that it was appropriate that the Court should not make any declaration of a kind contemplated by s.140(5D), but that the Court should exercise the power given by s.140(6) to adjourn proceedings for the purpose of giving the organization an opportunity to alter its rules. Mr. Heywood-Smith (who appeared for the appellants) did not dispute that this course would be appropriate. In my view, it is appropriate to grant an adjournment. To make any declaration under sub-section (5D) might have the effect of leaving the Union powerless in some respect in the management of its funds and property, until such time as amended rules could be made and certified pursuant to s.139(4) of the Act. This would be an undesirable situation."

The reference in that passage to "any declaration under sub-section (5D)" must refer to a declaration under the first limb of that sub-section. The orders of 21 December 1984 were thus made. In all the circumstances it is, as we have said, appropriate to treat those orders as being an adjournment under sub-section 140(6).

1. On 24 May 1985, the Court, constituted by a single Judge, granted the appellants leave to appeal from the order of 21 December 1984. If these had been the only facts, the Full Court would have been in a position to hear and determine the appeal on the facts found by the trial Judge. This would have involved a consideration of Imlach v. Daley, judgment in which was given on 23 April 1985. If, instead of adjourning the proceedings under sub-section 140(6), the trial Judge had made a declaration under the second limb of sub-section 140(5D), the Full Court would have considered the correctness of the order and, if need be, stayed the effect of sub-section 140(7) pending the hearing and determination of the appeal. In any event, the Full Court would have heard and determined the appeal from the judgment insofar as it sought orders that specified rules or parts of rules contravened s.140(1) of the Act. Subsequent events, however, have altered the position.

2. Following the adjournment of the hearing of the rule to show cause granted on 21 December 1984, the renewed hearing resumed on 24 May 1985. By that time, the Union had made substantial alterations to its rules and those alterations had come into operation; see s.139 of the Act. The Industrial Registrar had given his consent to those alterations and he had given his certificate under sub-section 139(4). The alterations included substantial alterations to rule 7, to rule 15, and to rule 37. At the hearing on 24 May 1985, counsel for the Union contended that the alterations to the rules had the effect of overcoming the defect which the Court, in its judgment of 21 December 1984, had found to exist in the rules of the Union. Counsel for the appellants did not dispute that the alterations had overcome the defect which had been found to exist, but contended that the rules as altered may contravene sub-section 140(1) of the Act. The Court held, quite correctly, that it could not, in the proceedings then before it, consider whether the rules as altered were in conformity with sub-section 140(1). The trial Judge said, (1985) 7 F.C.R. 130 at p.132:-
   
   

"... it seems to me that I have to take account of the difficulties which are inherent in trying to judge all of the amendments made to the rules, by reference to all of the provisions in s.140(1), in the absence of a new proceeding. ...

I do foresee considerable difficulties, if I were to hold that the court should look at all rule amendments made during an adjournment period, for the purpose of determining at large, and without the notification of grounds which is inherent in the rule to show cause procedure, whether they comply or fail to comply with s.140 generally.

For these reasons I regard it as the better view, on balance, that the court should confine itself to the question whether the defect which was perceived in the rules at the time of the original application has been overcome, and if it has, the remainder of the rule to show cause should be discharged. Any challenge to any provisions, which are contained in the amendments to the rules, can be brought forward by the existing parties or, indeed, by any other member who wishes to challenge those rules in the ordinary way."

The Court then ordered that the rule to show cause not discharged by the order of 21 December 1984, be discharged.

1. It is noted that the difficulties referred to by the trial Judge could have been overcome by the applicants seeking a new rule to show cause. In that event, the question of whether the rules as altered contravened sub-section 140(1) in a specified respect, could have been determined.

2. The appellants appeal from the two orders made on 21 December 1984 and 24 May 1985 respectively. The notice of appeal states that the appellants appealed from that part of the judgment given on 21 December 1984 which discharged paragraphs 1, 7 and 8 of the rule to show cause and otherwise held the rules of the Union made provision for the matters required by s.133A of the Act and appealed from that part of the judgment given on 24 May 1985 which discharged the balance of the rule to show cause insofar as it related to rule 15(1) of the rules of the organization consequent upon amendments having been made to that rule. The order sought by the notice of appeal was that the proceedings be adjourned to a date to be fixed for the purpose of giving the Union an opportunity to alter its rules so as to bring them into compliance with the provisions of s.133A and paragraph 140(1)(d) of the Act. The notice of appeal illustrates the problems arising from the non-recognition of the difference between the forms of orders that can be made under the two limbs of sub-section 140(5D) and the consequences that flow from the form of order made.

3. It is not normal procedure to adjourn proceedings under sub-section 140(6) where the Court finds that the rules of an organization contravene sub-section 140(1) in a specified respect. Where that finding is made, it is normal for the Court to make a declaration under the second limb of sub-section 140(5D). Where that declaration is made, sub-section 140(7) prescribes the method by which the matter is to be rectified. Where the Court finds that a rule or part of a rule contravenes sub-section 140(1) of the Act, instead of making an order under the first limb of sub-section 140(5D), the Court may adjourn the further hearing of the application. The reasons for so adjourning the proceedings can vary from case to case and must depend upon the particular facts of the matter before the Court.

4. On the appeal, counsel for the appellants sought a reconsideration of Imlach v. Daley and a determination of the question whether the application of s.133A is limited in the way suggested in Imlach v. Daley. They sought also a consideration of the opinions expressed by the Court constituted by a single Judge in Bailey v. Krantz, (16 July 1985, Gray J., unreported). During the course of the hearing of the appeal, the difficulties arising from the matters already discussed were put to counsel by the Court. Counsel sought to avoid those difficulties by referring to the points of contention and seeking leave to amend the rule to show cause by adding two further orders, namely:-
   
   

"9. That the rules contravene s.140(1)(d) of the Act in that they make no provision for the autonomy of a branch in matters affecting members of the branch only and matters concerning the participation of a branch in any State industrial conciliation and arbitration system and in particular the rules fail to make such provision by reason of r.12(2)(a).

10. That the rules contravene s.140(1)(a) of the Act in that being an association divided into branches the organisation by its rules makes no provision for Federal and Branch Funds as required by s.133A of the Act and in particular the rules fail to make such provision by reason of rr.15(i), 27(3) and 37(3)."

1. The formulation of those two proposed orders contain, in their concluding clauses beginning with the words "and in particular", defects similar to those discussed already. More importantly, however, if what is being sought are orders under the second limb of sub-section 140(5D) that the rules of the Union contravene sub-section 140(1) in a specified respect, the Court would need to consider the present rules of the Union. The present rules are the rules as altered by the Union after 21 December 1984 and before 24 May 1985. Those rules have not been considered by any Court. They have not been challenged by proceedings under s.140 of the Act. There is no order of the Court refusing to make the declaration sought nor is there any order declaring the rules contravene sub-section 140(1) in a specified respect. The issues sought to be raised have never been the subject of any judgment of the Court and cannot be made the subject of an appeal under s.24 of the Federal Court of Australia Act 1976. Leave to amend the rule to show cause is therefore refused.

2. In the result, the appeal must be dismissed. In doing this, we wish to make it clear that we express no views on the correctness of the reasons for judgment given herein on 21 December 1984 or on the correctness of the reasons for judgment in Bailey v. Krantz.