Lennon, Dennis Keith v Davenport, D

[1984] FCA 342

Re: DENNIS KEITH LENNON
And: D. DAVENPORT; L. SHORT; D. ROBERTS; R. PHILLIPS; J. OSBORNE; W. DAVIS; S.
NEAL; C. PATTERSON; J. HOWARD; G. NEEDHAM; V. WELK; P. SHORT; D. WHITTINGSLOW;
J. DAVIS; K. MARCH; J. MARSHALL; S. DURKIN; T. MARCOVICH; D. WATKINS; J.
LYNCH; N. McGREGOR; F. LAURIE; G. FRANKCOM
No. NSW5 of 1984
56 ALR 409
Industrial Law
4 FCR 476
9 IR 477

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
INDUSTRIAL DIVISION
Beaumont J.(1)

CATCHWORDS

Industrial Law - S.141 Conciliation & Arbitration Act, 1904 - Showmen's Guild - Ban on show - Resolution not in interests of members as a whole - Unreasonable.

Trade & Commerce - Restraint of trade - Whether unreasonable.

Industrial Law - Showmen's Guild - Resolution not in interests of members as a whole as affected only one member - Restraint of trade - Unreasonable.

HEADNOTE

Held, that the resolution by an organisation of employers prohibiting any member of the organisation from attending a particular show in circumstances where the likelihood was that only one member was affected by such resolution was an improper exercise of the fiduciary power of management, and was an unreasonable restraint of trade.

HEARING

1984, July 23, 24; October 26. #DATE 26:10:1984

APPLICATION

Application pursuant to s 141 of the Conciliation and Arbitration Act 1904 (Cth).

M Moore, for the applicant.

J W Shaw, for the respondents.

Cur adv vult

Solicitors for the applicant: Merton & Co.

Solicitors for the respondent: Masselos & Co.

GFV

ORDER

The respondents and each of them and their servants and agents be restrained from doing or omitting to do any act or acts the effect of which act or acts or omission or omissions would be to make any statement or representation to the effect that any member of the Showmen's Guild of Australasia is not entitled to provide amusements at any show conducted by the Engadine Apex Club.

The respondents and each of them perform and observe the Rules of the Showmen's Guild of Australasia by treating the resolution passed at the Executive meeting of the Showmen's Guild of Australasia on 6 December 1983 as null, void and of no effect to the extent that the said resolution instructs members to refrain from attending any show conducted by the Engadine Apex Club in 1984.

The respondents and each of them perform and observe the Rules of the Showmen's Guild of Australasia by not taking any action with the object or effect of enforcing the decision of the Executive of 6 December 1983 requiring members to refrain from attending any show conducted by the Engadine Apex Club in 1984.

Orders accordingly

JUDGE1

This is an application pursuant to s.141 of the Conciliation and Arbitration Act, 1904 ("the Act") for orders that the respondents perform and observe the Rules of the Showmen's Guild of Australasia ("the Guild"). The Guild is an organisation of employers registered under the Act. It was formed in 1927 and has approximately 430 members. The applicant is a member of the Guild. The respondents, who are also members of the Guild, hold various offices in the Guild and constitute its Committee (styled the "Executive of the Guild").

The complaint made by the applicant arises out of a resolution carried at a meeting of the Executive of the Guild on 6 December 1983. The resolution purported to forbid participation by members of the Guild at the Engadine Apex Show. This is an annual event conducted by the Apex Club of Engadine, a Sydney suburb. The applicant challenges the resolution on the grounds, inter alia, that it is beyond power and that it is an unlawful restraint of trade.

The members of the Guild are proprietors and operators of amusement machines. As such, they provide and operate amusements and attractions such as merry-go-rounds, dogem cars and ferris wheels at shows, fairs and festivals in New South Wales and elsewhere. The applicant earns his living by owning and operating a range of amusement machines and attractions at shows throughout New South Wales.

The Guild has negotiated arrangements with a number of agricultural societies whereby certain shows are designated as "Guild Shows", that is to say, shows where certain of the ground space in the defined amusement area is allocated on a priority basis to financial members of the Guild. In the case of such a show, the Guild guarantees to the organiser of the show the payment of rent in respect of amusements and attractions operated by Guild members, supervises the behaviour and disciplining of Guild members who attend the show and, if requested, collects rental payments and other charges on behalf of the organiser. Guild members receive priority on Guild Showgrounds with respect to the allocation of space. While this does not mean that persons who are not Guild members are prevented from operating amusements and attractions at Guild Shows, such persons are only allocated space for the operation of their amusements and attractions after the space needs of the Guild members have been satisfied. In the case of a Guild Show, there is an understanding that the organiser and the Guild will observe the terms of an agreement between the Guild and the Agricultural Societies Council of New South Wales. That agreement provides for, inter alia, allocation of space for amusements and attractions, the sale of foodstuffs by showmen, layouts of amusement areas, resolution of disputes between show organisers and the Guild and the fixing of rental payments and other charges for the use of facilities at show sites.

The history of the dispute which has arisen is as follows. The applicant was contacted by a representative of the Engadine Apex Club in the first half of 1983 in connection with the production by that club of the Engadine Show. In 1983 the Engadine show extended over a Friday night, Saturday and Saturday night at the beginning of November. Included in the activities of the show were a parade, a fireworks display, demonstrations of ethnic dancing, a performance by a pop band and displays by merchants from the Engadine area. The function attracted participation by groups such as local schools and the boy scouts. On a vacant site allocated to the Engadine Show the applicant erected and operated dogem cars, a chair-o-plane, a carousel, a slippery slide, a mini ferris wheel and a small merry-go-round. The applicant charged members of the public for rides on each amusement and attraction and paid the Engadine Apex Club a percentage of the proceeds. At the conclusion of the 1983 Engadine Show, the applicant was asked by the secretary of the Engadine Apex Club if he would be available and willing to provide amusements and attractions at the 1984 Engadine Show. The applicant indicated that he would be so available and willing.

However, on 27 June 1983, one of the respondents had written to the Secretary of the Engadine Show Society in the following terms:

"We are advised that you have been inquiring regarding the possibility of hiring Sideshows for your forthcoming Show.

Could we respectfully suggest that you might give consideration to becoming a Guild Show in which we undertake to provide a wide range of amusements. Under these circumstances we undertake to collect rents from our members and generally supervise and be responsible for a Defined amusement area. An agreement exists with the A. S. C. (i.e. Agricultural Societies Council) which seems to work very well for most of the Agricultural Shows throughout the State.

Please advise us if we may be of assistance.

Yours faithfully,

The Showmens Guild of Australasia.

(sgd.) Gordon Frankcom Gen Organiser."

The secretary of the Engadine Apex Club responded as follows:

"18th August, 1983.

Thank you for your letter of the 27th June, 1983 advising us of the services of the Showmen's Guild of Australasia.

However we as local Apexians, would prefer to use the many talents we have in our organisation to run our own show in our local area.

We enjoy the opportunity to use our own amusements and provide other Service Clubs in our area to participate."

On 6 December 1983 an executive meeting of the Committee of the Guild was held. Presumably, the letter from the Apex Club was discussed. The minutes of that meeting include the following resolution passed by the Committee:

"ENGADINE

Advising they do not wish to be a Guild Show. Mov. J. Lynch 2nd D. Davenport - No guild member or his equipment attend Engadine Show in accordance with their letter and because they are not affiliated with the Agricultural Council."

On 7 December 1983 a general meeting of the Guild was held. Apparently, this was the Guild's Annual General Meeting for 1983. The minutes of the meeting record, under the heading "New South Wales Correspondence", the following:

"ENGADINE

Advising they do not wish to be a Guild Show. Committee directed members not to attend show."

The applicant attended during part of the general meeting but was not present when the matter of the Engadine Show was discussed. He was informed during the lunch break at the meeting that the show had been the subject of discussion prior to the applicant's arrival. When questioned as to why he had not sought to raise the matter of the Engadine Show again after the lunch break, the applicant explained that he had had to leave the meeting early to attend to another matter.

It is not altogether clear from the minutes what actually took place at the general meeting in relation to the item of business in question. Rule 24 of the Rules of the Guild provides that the Annual General Meeting of the Guild shall be held for the purpose of, inter alia, adopting the outgoing Committee's report and transacting such other business as shall have been specified in the notice convening the meeting or as may be brought forward without notice by the unanimous consent of the meeting, not being business of which notice is required by the Rules. Since the matter of the Engadine Show was only dealt with by the Committee on the day preceding the general meeting, it seems that this item of business was "other business" brought forward without notice by the unanimous consent of the meeting. All that can be safely said in respect of this item of business, then, is that the members of the Guild, in general meeting, appear to have adopted the Committee's resolution of 6 December 1983 in respect of the Engadine Show.

The Rules provide a sanction for breach of the resolution, assuming it to be valid. Rule 40 deals with the laying of charges by one member against another in cases where a member knowingly refuses to comply with a lawful resolution passed under the Rules. If, in the Committee's opinion the offence be proved, the Committee may suspend the offending member from operating at the particular show at which the offence occurred or fine that member a sum not exceeding $400.00 but not being less than $50.00.

Reference should be made to the issues as disclosed by the pleadings. In the Rule to Show Cause, the relief sought by the applicant includes orders that the respondents be restrained from doing or omitting to do any act or acts the effect of which would be to make any statement or representation to the effect that any member of the guild is not entitled to provide amusements at any show conducted by the Engadine Apex Club; that the respondents perform and observe the Rules of the Guild by treating the resolution passed on 6 December 1983 as null, void and of no effect to the extent that that resolution instructs Guild members to refrain from attending any such show; and that the respondents perform and observe the Rules by not taking any action with the object or effect of enforcing the decision of the Committee of 6 December 1983. The applicant's points of claim alleges that the Committee of the Guild had no power or authority under the Rules to pass the relevant resolution to the extent that the resolution purported to be a direction to Guild members not to provide amusements at the Engadine Show. It was further alleged that the Guild members in general meeting had no power or authority under the Rules to pass such a resolution. The points of claim further claim that, on their true construction, the Rules provide that the Committee will not unreasonably restrain the trade of Guild members and that the relevant resolutions of the Committee and Guild members in general meeting unreasonably restrain the trade of the applicant.

In their points of defence, the respondents deny that there was no authority or power on their part to pass the resolution of 6 December 1983. They claim that there is no power in this Court to make any order under s.141 of the Act where, as here, the applicant has not specified any express rule on which he relies in order to obtain an order under s.141. Alternatively, the respondents say that the Court should not, as a matter of discretion, make any order in the present case because the decision of the Committee was taken bona fide and in the best interests of the members of the Guild as a whole; the applicant was present at the general meeting of Guild members on 7 December 1983 but did not speak against the resolution; and the applicant has, in the past, taken the benefit of the policies, decisions and Rules of the Guild. In his reply, the applicant attacked the respondents' reliance on the Rules as authorising the decision in question on the basis that the relevant Rules are contrary to the provisions of s.140(1) of the Act in that they are contrary to law by virtue of the fact that they impose an unlawful and unreasonable restraint of trade on Guild members; are contrary to the provisions of s.140(1)(a) of the Act in that they contravene the provisions of s.45 of the Trade Practices Act, 1974; and are contrary to the provisions of s.140(1)(c) of the Act in that they impose restrictions on the Guild members which are oppressive, unreasonable and unjust.

I turn first to the preliminary point raised by the respondents that there is no power in the Court to make any order under s.141 of the Act where, as here, the applicant has not specified any express rule on which he relies to obtain such an order. This question was recently dealt with adversely to the respondents in Scott v. Jess (Full Federal Court, unreported, 5 October 1984). Evatt and Northrop, JJ., in their reasons for judgement at p.13, held that if members of a Committee of an organisation resolve to exercise a power conferred upon them by the rules of the organisation otherwise than bona fide for the purpose for which the power was conferred, a member of the organisation would be entitled to obtain an order under s.141(1G) of the Act. The normal form of directions given by an order would be that the respondents to the proceedings perform and observe the rules of the organisation by treating the resolution so made as being void and of no effect. If necessary, similar directions would be given with respect to any actions taken or to be taken pursuant to the void resolution. In the same case, Gray, J. observed, at p.16 of his reasons for judgement, that the jurisdiction of this Court to order or direct performance and observance of the rules of the organisation concerned as a whole where it is not possible to point to any specific provision of the rules the performance or observance of which is required, is too well established to attempt to overturn it.

The respondents seek to support the resolution now attacked by reliance upon certain of the objects of the Guild, coupled with a reference to the power of management vested by the Rules in the Committee. The vesting is done by r.18 as follows:

"The management of the business and the control of the Guild shall be vested in the Committee. The Committee shall carry out the objects of the Guild as herein stated."

The following, amongst other objects, are found in r.3:

"3. The objects of the Guild shall be:-

(a) To promote and conserve the common interests of its members, to aid and assist in the advancement and improvements of conditions in any way relating to the business of showmen for the general welfare and benefit of its members.

(b) To uphold the rights of members of the Guild and to aid and assist in harmonising, improving, protecting and fostering the best interests of its members.

(c) To take all steps as may be necessary for the purpose of securing satisfactory industrial conditions or the furtherance of the Guild's objects or any of them under all or any provisions of any Statute, Award or Regulation, whether State or Federal, relating to industrial disputes and arbitration or otherwise.

(d) To aid in harmonising and conserving any operation in which its members are engaged and the proper and more efficient conduct of these operations.

. . .

(j) To do all such other lawful things as are incidental or conducive to the attainment of the above objects or any of them."

The respondents adduced a deal of opinion and other evidence to the effect that some agricultural societies perceive advantages in dealing with the Guild rather than attempting to deal with individual showmen. For reasons which were not explained, the respondents did not themselves give evidence. Instead, they called a number of residents of Queensland to speak of the merits of the Guild's method of operating and the advantages to an agricultural society of dealing through the Guild rather than through individual entrepreneurs. Particular emphasis was placed upon the Guild's ability to achieve an orderly allocation of space among showmen. Further, it is submitted on behalf of the respondents that it is in the interests of the Guild and its members to achieve as large a "coverage" of shows as is possible.

Two distinct legal questions arise. First, was the resolution of the Committee ultra vires in the sense of being beyond the objects of the Guild? This is primarily a matter of construction of the objects of the Guild. To be within power, the requisite nexus between those objects and the act in question must be demonstrated to exist. In the present case, this issue would seem to fall to be determined essentially as a question of fact (see Kathleen Investments (Australia) Limited v. The Australian Atomic Energy Commission (1977) 139 C.L.R. 117). In the light of the conclusion I have reached on another aspect of the case, I need express no view on this particular question.

The second question is whether, assuming for the purposes of the argument that the resolution is intra vires in the sense of being within the Guild's objects, it is nonetheless voidable on the ground that it was not carried bona fide in the interests and for the benefit of the members as a whole but for some improper purpose (see Scott v. Jess, supra). Allied to this question is the suggestion that the resolution is bad as an unreasonable and therefore unlawful restraint of trade (see Clarke v. Printing & Kindred Industries Union (1977) 30 F.L.R. 39; Porter v. Dugmore, unreported, Full Federal Court 2 April 1984).

In my opinion, the impugned resolution was an improper exercise of the fiduciary power of management vested in the Committee. If it matters, the resolution of the general meeting, in adopting the Committee's resolution, was likewise vitiated. In my view, given the way the resolution discriminated against the applicant, no reasonable man could have believed that the resolution was passed bona fide in the interests and for the benefit of members as a whole (see Australian Fixed Trusts Pty. Limited v. Clyde Industries Limited (1959) S.R. 33; Ford, Company Law, 3rd Ed. at p.439). On the known facts, the resolution was aimed at the applicant, with a view to preventing his continuing his established relationship with the Engadine Apex Club. The only effect of the resolution was to preclude any member of the Guild, in particular, of course, the applicant, from participating in the Engadine Show. The only result of the resolution would be that showmen other than Guild members would take the applicant's place at the show. The resolution is thus adverse to the interests of members as a whole. Far from expanding the Guild's coverage, the resolution could only serve to contract it.

I am further of the opinion that the resolution was an unreasonable restraint of trade. It may be accepted that a general restraint on all members, inhibiting them from dealing with any show which was not a Guild show, may well be upheld as a reasonable restraint (see, e.g., Hardie & Lane v. Chilton (1928) 2 K.B. 306; Sorrell v. Smith (1925) A.C. 700; Pengilley, Trade Associations, Fairness and Competition, at pp.58-61 and the cases cited in note 12 on p.77). But this resolution was directed at only one show and thus only one member, the applicant. There was thus no mutuality in the restraint. It is one thing to restrain every member from dealing with any show not associated with the Guild. In that situation, each member makes a potential sacrifice as a means to an end, to advance their common interests. It is a different thing to restrain a single member only, whilst imposing no such restraint on other members. In short, this resolution does no more than discriminate against the applicant. As such, it is bad as an improper exercise of the fiduciary power of management.

It is clear that a discretion resides in this Court under s.141 of the Act. In the circumstances, that discretion should be exercised in favour of the applicant so that his right to work may be protected (cf. Lee v. The Showmen's Guild of Great Britain (1952) 2 Q.B. 329 per Denning, L.J. at p. 343).

In the circumstances, it is unnecessary to consider the other grounds alleged by the applicant in his challenge to the resolution.

I propose to make the following orders in this matter:

1. The respondents and each of them and their servants and agents be restrained from doing or omitting to do any act or acts the effect of which act or acts or omission or omissions would be to make any statement or representation to the effect that any member of the Showmen's Guild of Australasia is not entitled to provide amusements at any show conducted by the Engadine Apex Club.

2. The respondents and each of them perform and observe the Rules of the Showmen's Guild of Australasia by treating the resolution passed at the Executive meeting of the Showmen's Guild of Australasia on 6 December 1983 as null, void and of no effect to the extent that the said resolution instructs members to refrain from attending any show conducted by the Engadine Apex Club in 1984.

3. The respondents and each of them perform and observe the Rules of the Showmen's Guild of Australasia by not taking any action with the object or effect of enforcing the decision of the Executive of 6 December 1983 requiring members to refrain from attending any show conducted by the Engadine Apex Club in 1984.