Lawrence, Jeffrey Paul v Fry, Eugene Leslie

[1998] FCA 1500

FEDERAL COURT OF AUSTRALIA

INDUSTRIAL LAW – Workplace Relations Act 1996 (Cth) s 209 – amendment to the rule to show cause – joinder of parties and claim for negligence and breach of fiduciary duty – within accrued and associated jurisdiction – common substratum of fact – exercise of discretion – policy of section.

Workplace Relations Act 1996 (Cth) ss 209, 414
Judiciary Act 1903 (Cth) s 44
Federal Court of Australia Act 1976 (Cth) s 23

Allen v Sideris (1984) 9 IR 68, referred to
Fencott v Muller (1983) 152 CLR 570, cited
Stack v Coast Securities (No. 9) Pty Ltd (1983) 154 CLR 261, cited

JEFFREY PAUL LAWRENCE v EUGENE LESLIE FRY AND OTHERS
NG 189 of 1998

FRENCH J

PERTH
11 NOVEMBER 1998

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	NG 189 of   1998

BETWEEN:

JEFFREY PAUL LAWRENCE
APPLICANT

AND:

EUGENE LESLIE FRY
FIRST RESPONDENT

TERENCE JAMES LOCKWOOD
SECOND RESPONDENT

BENEDICHT KUNO HUGI
THIRD RESPONDENT

NORMAN CHARLES WEBB
FOURTH RESPONDENT

JOHN CLIFFORD CARR
FIFTH RESPONDENT

WENDY MAE LEE KONG
SIXTH RESPONDENT

PENG KOK CHEAH
SEVENTH RESPONDENT

LYNETTE ANNE SHAW
EIGHTH RESPONDENT

MERLE SELBY TAVERNER
NINTH RESPONDENT

ERNEST JAMES WELSH
TENTH RESPONDENT

FEDERATED LIQUOR AND ALLIED INSUTRIES, EMPLOYEES UNION OF AUSTRALIA, WESTERN AUSTRALIAN BRANCH, UNION OF WORKERS
ELEVENTH RESPONDENT

JUDGE:

FRENCH J

DATE OF ORDER:

11 NOVEMBER 1998

WHERE MADE:

PERTH

THE COURT ORDERS THAT:

1. The amended rule to show cause be further amended to provide for orders B1-9 of the Applicant’s motion filed on  23 September 1998.

1. The motion is otherwise dismissed.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	NG 189 of 1998

BETWEEN:

JEFFREY PAUL LAWRENCE
APPLICANT

AND:

EUGENE LESLIE FRY
FIRST RESPONDENT

TERENCE JAMES LOCKWOOD
SECOND RESPONDENT

BENEDICHT KUNO HUGI
THIRD RESPONDENT

NORMAN CHARLES WEBB
FOURTH RESPONDENT

JOHN CLIFFORD CARR
FIFTH RESPONDENT

WENDY MAE LEE KONG
SIXTH RESPONDENT

PENG KOK CHEAH
SEVENTH RESPONDENT

LYNETTE ANNE SHAW
EIGHTH RESPONDENT

MERLE SELBY TAVERNER
NINTH RESPONDENT

ERNEST JAMES WELSH
TENTH RESPONDENT

FEDERATED LIQUOR AND ALLIED INDUSTRIES EMPLOYEES UNION OF AUSTRALIA, WESTERN AUSTRALIAN BRANCH, UNION OF WORKERS
ELEVENTH RESPONDENT

JUDGE:	FRENCH J
DATE:	11 NOVEMBER 1998
PLACE:	PERTH

REASONS FOR RULING ON PROPOSED AMENDMENT TO RULE

These proceedings were instituted in the New South Wales District Registry of the Court on 11 March 1998.  At their commencement the proceedings named Jeffrey Paul Lawrence as the applicant and Eugene Fry as the respondent.   Lawrence is a member and the Joint National Secretary of the Australian Liquor Hospitality and Miscellaneous Workers’ Union (LHMU) which is registered under the Workplace Relations Act 1996 (Cth). Eugene Fry is the Joint National President of the LHMU and Branch Secretary of the Western Australian Branch of the Liquor and Hospitality Division of the LHMU.

The LHMU arose out of the amalgamation in 1992 of the Federated Miscellaneous Workers’ Union (FMWU) and the Federated Liquor and Allied Industries Employees Union (LTU).  Since amalgamation the new union has operated with two principal divisions based on the two component organisations and known respectively as the Miscellaneous Workers Division (MWD) and the Liquor and Hospitality Division (LHD).  Each of the branches of the old FMWU and LTU became branches of the corresponding division.  Thus the West Australian Branch of the FLAIEU became the West Australian Branch of the LHD.

The amalgamated body is governed by a transitional National Executive comprising members from both Divisions at the national level.  At the Branch level there is a transitional Branch Executive.

The proceedings were commenced by the filing on 11 March 1998 of an affidavit sworn by Lawrence and a proposed rule to show cause on 11 March.  A rule to show cause was made by O’Connor J on 12 March 1998. 

The application was brought under s 209 of the Workplace Relations Act.  The rule made by O’Connor J called upon Fry to show cause why orders should not be made that he perform and observe the rules of the LHMU by providing to its Joint National Secretary, Lawrence, various documents including a complete role of financial members of the WA Branch of the Liquor and Hospitality Division of the LHMU, a copy of their membership application cards, copies of minutes of meetings of the Divisional Branch Committee and particulars of all property and assets held by the Western Australian Branch.

Ancillary orders for rights of access to records of the Divisional Branch of the LHMU were also sought.  A claim for interlocutory relief included in the rule sought from Fry an affidavit containing particulars of:

“(a)All financial institution accounts, the location and number of each such account and balance in each such account; and

(b)      An inventory of all items of property

in or under the custody and control of the Australian Liquor Hospitality and Miscellaneous Workers’ Union, Liquor and Hospitality Division Western Australian Branch.”

Also required was an affidavit attaching a roll of the current membership of the LHMU Liquor and Hospitality Division. 

The rule to show cause and the affidavit were served on Fry on 16 March in Perth. As it turned out Fry had resigned as Divisional Branch Secretary on 28 February 1998.  He remained in office as Joint National President of the LHMU and Joint Branch Secretary.

On 25 March 1998 I made an order amending the rule to show cause by video link hearing from Perth.  The second to tenth respondents were joined.  They are members of the Branch Committee of the WA Branch of the Liquor and Hospitality Division of the LHMU. 

A return date for the rule was set for 30 March 1998.  On that day orders in terms of the interlocutory relief sought under the rule granted by O’Connor J were made by consent of the first and second respondents.

The rule to show cause was then listed for further directions on 8 April 1998.

On 6 April, Lawrence filed a notice to join as an eleventh respondent the Federal Liquor and Allied Industry Employees Union of Australia, Western Australian Branch (State LTU).  He sought the addition of further relief to that claimed in the amended rule to show cause as against the first to tenth respondents and interlocutory relief against all respondents. The gravamen of his complaint about the eleventh respondent was that there was evidence that Fry and his Divisional Committee of Management had transferred assets to the State LTU and that this appeared from or could be inferred from affidavits filed pursuant to the interlocutory orders.

On 15 April 1998 the first to seventh respondents consented to orders in terms of paragraphs 1 to 7 of those proposed in Lawrence’s motion.  On 5 May the eighth and eleventh respondents consented to orders 1, 2, 3, 5 and 6, including the order joining the eleventh respondent.  The eleventh respondent was later, by consent, bound also to par 7 on 12 June 1998.

There followed a series of adjournments of directions hearings while the parties negotiated. 

On 23 July 1998 an order was made in the following terms:

“By consent of the applicant, first and eleventh respondents the court orders:

1.If the application has not been discontinued within six weeks the applicant to apply at the expiry of that time for an appointment to fix a hearing date and for ancillary directions.

2.There be liberty to apply.

3.The applicant do notify all parties of this order and of the date of any appointment.

4.In the event that the application has not been discontinued within six weeks and that no application has been made to the Registrar for an appointment to fix a hearing date the application will stand dismissed as from 4 September 1998.”

The application was not discontinued and on 23 September 1998 the applicant filed a motion seeking an amendment to the amended rule to show cause.  The substance of the orders sought is as follows:

1.Joinder of the LHMU as a second applicant.

2.The first to tenth respondents to:

(i)deliver up to Lawrence or his nominee all property and assets of the LHMU;

(ii)treat as null and void a resolution of the Divisional Branch Committee of the LHD to transfer interests in a lease at 251 Adelaide Terrace to the eleventh respondent;

3.The eleventh respondent to treat the above resolutions as null and void, to transfer the leasehold interest to the LHMU, to refrain from holding itself out as a branch of the LHMU and from using the telephone and facsimile numbers previously used by the LHD.

4.The respondents take necessary steps to transfer to the Western Australian Branch of the LHMU the exclusive use of the telephone and facsimile numbers previously operated by the LHD, and to transfer records of members.

5.The respondents take necessary steps to:

(i)transfer use of the telephone and facsimile numbers previously operated by the LHD to the WA Branch of the LHMU;

(ii)transfer membership and membership income of the WA Branch of the LHD to the LHMU;

(iii)call special meetings of the Committee of Management to give effect to the above orders.

In addition and in reliance upon the associated jurisdiction of the Court the proposed second applicant, the LHMU, claims relief in the following terms:

“That the respondents and each of them be individually and severally liable in damages to the second plaintiff (sic) for the income stream lost to the second plaintiff from, and as a consequence of, the loss of membership income to the LHMU, (which membership represented income to Western Australian Divisional Branch of the Liquor and Hospitality Division of the LHMU recorded as such in the accounts of the Divisional Branch as at June 30, 1997) by reason of the negligence and/or breach of the fiduciary duty of the first to tenth respondents by themselves and in combination with the eleventh respondent.”

The motion was opposed and written submissions filed on behalf of the respondents and the first applicant and the LHMU.

Affidavits in Support of the Motion

Lawrence filed two affidavits in support of the motion, one sworn 9 September 1998, the other sworn 2 October.  He referred to minutes of the Committee of Management of the Federated Liquor and Allied Industries, Employees Union of Australia, Western Australia Branch Union of Workers (State LTU) and the Branch Committee of the former Liquor and Hospitality Division of the Union in WA.  The minutes disclosed a resolution of the latter committee authorising an assignment of a lease on premises at Level 13, 251 Adelaide Terrace to the State LTU.  Lawrence had not become aware of this decision before seeing the minutes in mid 1998.  At no time, according to him, was any communication with the LHMU made concerning the decision to alienate the LHMU’s interest in the lease.  He knew of no bona fide reason for the assignment.

Subsequently, according to Lawrence, investigations disclosed that considerable sums of money held in accounts of the branch had been transferred to accounts held by the State LTU.  He regarded the lease transfer decision as “…consistent with other steps that were taken by Mr Fry to strip the branch of its assets and property in the State LTU”.

In addition, according to Lawrence, financial statements and the audit report of the Divisional Branch of the LHMU indicated an income derived from membership of $167,961 reflecting a financial membership of 1,290.  He contrasted this with claims by Fry and Lockwood that there were only twenty or so members of the Branch.  An electoral roll of branch members certified by Lockwood for mid year elections showed 200 members.  No explanation has been given, says Lawrence, for the dramatic decline in membership.  Fry, he contends, has conducted the affairs of the State LTU as separate from those of the WA Branch of the LHMU.  While the LHMU is entitled to occupy the premises at 251 Adelaide Terrace it does so under a consent order made in these proceedings, but does not have the exclusive right to occupy them because of the assignment of the lease back to the State LTU.  Income to the LHMU from membership of the WA Branch has completely dried up.  Membership records for all persons whose contributions to the union are recorded in the auditor’s report remain in the possession of the State LTU as do accounts and records of the former LHD Branch.  The State LTU is said to be using the telephone numbers of the former Divisional Branch and callers to those numbers are not referred to the WA Branch of the LHMU.

In his second affidavit Lawrence adds that the rules of the LHMU empower him as National Secretary to demand the return of property of the union in the hands of a member.  On 17 September he sent a letter of demand to the second to tenth respondents requiring them to “restore all property and assets of the LHMU” and take the various other steps reflected in the proposed amended motion to show cause.  He received no reply to that letter.

It is to be noted that the affidavit evidence thus filed has not been tested and no opportunity for a response has yet been available to the respondents.  The affidavits are referred to to indicate the basis of the claims which Lawrence seeks to introduce into the rule to show cause by the proposed amendment.  The Court makes no finding on the facts set out on the affidavit material.

The Contentions

The respondents contend that the LHMU has no standing to be joined as an applicant under s 209 of the Workplace Relations Act 1996 (Cth) and that this Court does not have jurisdiction to entertain the proposed claim under the accrued or associated jurisdictions. It is accepted that the position under the cross-vesting scheme is unclear in the sense that there is no authority directly on point. In any event, it was submitted, the Court should exercise its discretion against the joinder of the LHMU.

The respondents also oppose the application of the proposed amendments to the eleventh respondent on the basis that it is not a proper party to the proceedings and submitted that the Court should order that the eleventh respondent cease to be a party.

The applicant and the LHMU accept that the claims they seek to raise travel beyond the jurisdiction conferred by s 209 but nevertheless rest upon a common substratum of fact with the claims brought under that section. The non-federal claims and in particular the claim of breach of fiduciary duty will depend upon the interpretation of the rules of the union. To bring those claims in a State Supreme Court would require that court to embark upon an examination and construction of the rules, a matter exclusively within the jurisdiction of the Federal Court pursuant to s 414(2) of the Workplace Relations Act. 

It is submitted for the applicant and the LHMU that the claim based upon the breach of fiduciary duty is within both the associated and exclusive jurisdictions of the Court.  The non-federal elements are non-severable.  The joinder of the LHMU brings it in under the accrued jurisdiction as what is sometimes called a “pendent party”. 

As to the State LTU, the eleventh respondent, it is also said to be properly joined as a pendent party.  Were it not to be joined, it could not be bound by, inter alia, the declaration sought as to the reassignment of the lease at 251 Adelaide Terrace.  On the matter of discretion the applicant and the LHMU submit that the prima facie position is that the Court will entertain a claim within its accrued jurisdiction providing the claim is substantial and submit that the claim in this particular case falls within that category.

Statutory Framework

Section 209 of the Workplace Relations Act under which these proceedings were commenced provides in the relevant parts:

“209(1)  A member of an organisation may apply to the Court for an order under this section in relation to the organisation.
     (2)  Before making an order under this section, the Court shall give any person against whom the order is sought an opportunity of being heard.
     (3)  The Court may refuse to deal with an application for an order under this section unless it is satisfied that the applicant has taken all reasonable steps to try to have the matter the subject of the application resolved within the organisation.
    (4)  At any time after the making of an application for an order under this section, the Court may make such interim orders as it considers appropriate, and, in particular, orders intended to further the resolution within the organisation concerned of the matter the subject of the application.
     (5)  An order under subsection (4) continues in force, unless expressed to operate for a shorter period or sooner discharged, until the completion of the proceeding concerned..
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.
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     (7)Where the Court, in considering an application under this section, finds that the whole or a part of a rule of the organisation concerned contravenes section 196 or that the rules of the organisation concerned contravene that section in a particular respect, the Court may, by order, make a declaration to that effect.
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    (9) In this section:
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“order under this section” means an order giving directions for the performance or observance of any of the rules of an organisation by any person who is under an obligation to perform or observe those rules.”

The jurisdiction of the Court is dealt with in Part XIV and in particular s 412 provides:

“412(1)  The Court has jurisdiction with respect to matters arising under this Act in relation to which:

(a)applications may be made to it under this Act; or

(b)actions may be brought in it under this Act; or

(c)questions may be referred to it under this Act; or

(d)appeals lie to it under section 422; or

(e)penalties may be sued for and recovered under this Act; or

(f)prosecutions may be instituted for offences under this Act.”

Subsections 412(2) and (3) relate to the jurisdiction of the Court with respect to prerogative relief against officers of the Commonwealth and matters remitted to the Court under s 44 of the Judiciary Act 1903 (Cth). The Court is also given jurisdiction in relation to the interpretation of awards and of certified agreements. Section 414 confers exclusive jurisdiction on the Court in the following terms:

“414(1)  Subject to this Act, the jurisdiction of the Court in relation to an act or omission for which an organisation or member of an organisation is liable to be sued, or to be proceeded against for a pecuniary penalty, is exclusive of the jurisdiction of any other court created by the Parliament or any court of a State or Territory.

(2)  The jurisdiction of the Court in relation to matters arising under section 208, 209 or 261 or Division 5 of Part IX is exclusive of the jurisdiction, or any similar jurisdiction, of a State industrial authority.

(3)  The jurisdiction of the Court under section 422 is exclusive of the jurisdiction of any court of a State or Territory to hear and determine an appeal from a judgment from which an appeal may be brought to the Court under that section.”

It is noted that under the Federal Court of Australia Act 1976 (Cth) s 23:

“The Court has power, in relation to matters in which it has jurisdiction, to make orders of such kinds, including interlocutory orders, and to issue, or direct the issue of, writs of such kinds, as the Court thinks appropriate.”

The associated jurisdiction to which reference was made in submissions derives from s 32 of the Federal Court of Australia Act wherein, to the extent that the Constitution permits, jurisdiction is conferred on the Court in respect of matters not otherwise within its jurisdiction that are associated with matters in which the jurisdiction of the Court is invoked.

The original jurisdiction of the Federal Court has also recently been expanded by the enactment of s 39B(1A) and now extends to jurisdiction in any matter “arising under any laws made by the Parliament” (s 39B(1A)(c)). This latter jurisdiction will extend to cases involving rights or duties which owe their existence to a law of the Commonwealth or depend upon Commonwealth law for their enforcement.

Although s 209 of the Workplace Relations Act makes no reference to rules to show cause, the use of that mechanism for initiating proceedings under s 209 is established in Order 48 of the Federal Court Rules. In particular O 48 r 7 dealing with requirements of applications under s 209, among others, provides that an application may be made to a Judge ex parte and that it must be accompanied by an affidavit. Where the application is made under s 209 of the Workplace Relations Act, the affidavit is required to state:

“(a)the nature of the order sought by the applicant; and

(b)each rule of the organisation the applicant seeks to have performed or observed by a person who is under an obligation to perform or observe the rule; and

(c)the ground relied upon by the applicant to establish the obligation of the person to perform or observe the rule.”

The Widening of the Action

This action was commenced as an application under s 209 of the Workplace Relations Act. That section has a specific purpose, namely, to provide a process whereby members of organisations may seek the assistance of the Court in the performance and observance of the rules of those organisations. The section also discloses a legislative policy in favour of resolution of such questions by negotiation rather than by litigation. The Court is given an express discretion to refuse to deal with the application unless satisfied that all reasonable steps have been taken by the applicant to have the matter resolved within the organisation. This is reinforced in s 209(4) dealing with the power of the Court to make interim orders and, in particular, orders intended to further the resolution of the matter within the organisation.

The rules of Court provide a mechanism for the commencement of such applications which is specific to the exercise of the jurisdiction conferred under ss 208, 209 and 26 of the Act.  The mechanism created involving as it does the use of the rule to show cause process itself is intended to achieve an expeditious approach to the resolution by negotiation or determination by the Court of the question whether rules have been breached and the making of orders for their performance and observance.  The interests served by that process go beyond those of the immediate parties to it and extend to the members of the organisation generally.

The jurisdiction of the Court to deal with an application under s 209 is conferred by s 412(1)(a) of the Act and made exclusive by s 414(2). It is jurisdiction with respect to “matters” arising under s 209. It is thus conferred in terms consistent with the requirements of Chapter 3 of the Constitution. Being jurisdiction with respect to a “matter” it encompasses the controversy which has given rise to the application and renders amenable to the jurisdiction of the Court non-severable claims whether arising under State or Federal law or under the common law which are part of that controversy.

For the complete disposition of the controversy it may also allow parties to be joined as either applicants or respondents and relief to be awarded in relation to them where the claims upon which the relief is based are properly part of the matter.

The exercise of the accrued jurisdiction and indeed of the associated jurisdiction conferred by s 32 of the Federal Court of Australia Act is discretionary.  Its exercise will have regard to questions of convenience, economy, expedition and the substance and relationship of the accrued or associated claims to the principal relief which is sought.

In Allen v Sideris (1984) 9 IR 68 at 80, Toohey J dealing with equivalent provisions of the Conciliation and Arbitration Act 1904 (Cth) and the then applicable Federal Court Rules, said:

“While it is necessary to identify the rules of an organisation in respect of which performance or observance is sought …the court is not confined to directions that specific rules be complied with in terms.  In [R v Commonwealth court of Conciliation and Arbitration; ex parte Barrett (1945) 70 CLR 141] …Latham CJ said of a provision which was the predecessor of s 141 (at 156-157):

“In my opinion, these words contemplate the giving of detailed directions for the doing of acts or observance of forbearances which will constitute performance or observance of the rules.”

Likewise in Gordon v Carroll (1975) 27 FLR 129 the Australian Industrial Court ordered the return of money obtained in breach of the rules of an organisation.  I am satisfied that this Court may make orders moulded to ensure that the matters complained of in an application under s 141 may be remedied.”

However at 81 his Honour said:

“In terms of the “matter” arising for determination, it is the observance or performance of rules with which the court is concerned.  It is taking Fencott v Muller and Stack v Coast Securities too far to suggest that, in proceedings under s 141, there can be an inquiry into and accounting for property by operation of the general law.”

The two cases referred to in that passage from his Honour’s judgment were Fencott v Muller (1983) 152 CLR 570 and Stack v Coast Securities (No. 9) Pty Ltd (1983) 154 CLR 261.

I am prepared to assume, without deciding, that the claims for relief based on negligence and breach of fiduciary duty are within the accrued jurisdiction of the Court and, at least as to the latter, within its associated jurisdiction as a matter arising under a federal law in the sense that it asserts breach of a duty the existence of which depends upon federal law, namely, the obligation to observe and perform the rules of the union.

In my opinion, however, I should not as a matter of discretion allow the claims based upon breach of duty of care and/or fiduciary duty to be introduced into these proceedings. It will delay the resolution of the central question relating to the performance and observance of the rules. It will widen the scope of the proceedings and, in my opinion, is likely to become the dominant feature of the proceedings. The provisions of the rules relating to applications under s 209 are adapted to endeavour to achieve a comparatively expeditious outcome focussing upon questions of compliance which as I have said is in the interests not only of the immediate parties but of all the members of the relevant organisation. I do not consider that that purpose would be well served by the introduction of these additional claims. These are matters which can be raised in the appropriate jurisdiction. It may well be that they can be raised within the jurisdiction of this Court under s 39B(1A) of the Judiciary Act.  That, however, is a matter on which I express no concluded view at this time.

Consistently with that approach, I am content to allow the amendment of the rule to show cause by the inclusion of a claim for return of property to the LHMU although I do not consider it necessary for that purpose to join the LHMU as a second applicant.

The joinder of the eleventh respondent so that it will be bound by any orders which affect its property interests is, I think, appropriate and within the accrued jurisdiction of the Court and sufficiently related to the primary relief claimed to make it appropriate that the eleventh respondent remain as a party.

Other elements of the relief claimed against the eleventh respondent relate to the use of the name “Liquor and Hospitality Union” and the use of telephone and facsimile numbers.  They may be entertained on the basis that the performance and observance question has a close connection with the implementation of the amalgamation agreement and that this inclusion is unlikely to unduly widen the scope of the proceedings in the way that the claims for negligence and/or breach of fiduciary duty would. 

The Orders

For the above reasons I make the following orders:

1. The amended rule to show cause be further amended to provide for orders B1-9 of the Applicant’s motion filed on 

1. The motion is otherwise dismissed.

I certify that this and the preceding twelve (12) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice French

Associate:

Dated:             11 November 1998

Counsel for the Applicant:	Mr J.W. Nolan
Solicitor for the Applicant:	Steve Masselos, Solicitor
Counsel for the Respondents:	Mr J. Fiocco
Solicitor for the Respondents:	Fiocco Hopkins Nash
Date of Hearing:	8 October 1998
Date of Judgment:	11 November 1998