Ludwig, W.P. v Harris, W

[1991] FCA 320

Re: W.P. LUDWIG; BARRY MEIKLEJOHN; FERGUS LAKE; BOB SMITH; JOHN TURLEY; B.
WILSON; JOHN BUTLER and VIC JACOBS
And: WILLIAM HARRIS
No. S I7 of 1990
FED No. 320
Industrial Law
30 FCR 377
(1991) 37 IR 189

COURT

IN THE FEDERAL COURT OF AUSTRALIA

SOUTH AUSTRALIA DISTRICT REGISTRY
INDUSTRIAL DIVISION
Black C.J.(1), Beaumont(2) and Burchett(3) JJ.

CATCHWORDS

Industrial Law - Whether Union executive had power to grant legal aid to a member, in respect of proceedings concerning the interpretation of the rules of the Union, after the conclusion of the proceedings - meaning of rules governing legal assistance to members - power in rules construed "liberally" - whether test was what could fairly and reasonably be regarded as within the power - relevance and effect of bona fides on the part of the executive - relation of legal assistance for members to the objects of the Union.

HEARING

SYDNEY

#DATE 14:6:1991

Counsel for the Appellants: Mr R. Kenzie QC with Mr F. Di Fazio

Solicitors for the Appellants: Messrs Moloney and Partners

Counsel for the Respondent: Mr T.L. Stanley

Solicitors for the Respondent: Messrs Duncan Groom Hannon

ORDER

The appeal be allowed.

The order made below be set aside; and, in lieu thereof, the order to show cause be discharged.

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

JUDGE1

I agree with the judgments of Beaumont J. and Burchett J. and with the orders proposed by Burchett J.

JUDGE2

I agree with Burchett J. for the reasons he gives. I would only wish to add the following.

1. In Stevens v Keogh (1946) 72 CLR 1, an association of police officers paid the legal costs incurred by one of its members in an unsuccessful libel action brought by the member against the Commissioner of Police arising out of comments made by the Commissioner in respect of the performance by the officer of his duties. It was held, Latham C.J. dissenting, that, on the true construction of the rules of the Association, the payment was not beyond the powers of the Association. McTiernan J. said (at pp 30-1):
   

"If the Association is truly a trade union and therefore duly registered under the Act there is a question whether it is within the powers of a trade union to apply its funds to the object of providing legal aid to one of its members. There was no argument on this particular question. The argument was devoted to the interpretation of the rules. As at present advised, I think that it is not beyond the scope of the legitimate objects of a trade union to provide legal aid in the way of financial assistance out of its funds to a member to enable him to bring legal proceedings to redress any grievance to which he is subject in his relations with his employer. Instances of trade unions whose rules contained such an express object are to be found in Adams v London Improved Motor Coach Builders Ltd....; Greig v National Amalgamated Union of Shop Assistants, Warehousemen and Clerks... In Oram v Hutt..., the rules of the Society contained no express power to make the expenditure which was there in question. Lord Parker and Lord Sumner...observed on the absence of any express power to justify the expenditure. There could hardly be any point in these observations if it is beyond the scope of the objects for which a trade union is legalized to provide legal aid for members in connection with their employment."

1. In Hill v Archbold (1968) 1 QB 686, the Court of Appeal dismissed a claim that the use of the funds of a trade union to pay the costs of union officials in unsuccessful libel actions was beyond power. Lord Denning M.R. said (at pp 695-6):
   

"The other point is whether the payment of the costs is permitted by the rules of the union. Mr. Hill has pointed out, and it is admitted, that there is no specific provision in these rules to authorise the payment. Nevertheless, all associations have power to do everything which is fairly incidental to achieving their objects. For instance, this very union has power to employ and pay officials, although there is nothing specific on the point. They can pay them pensions and do everything which a good employer would do for his servants, even though the rules say nothing about it. So also it seems to me that when a servant is involved in litigation which arises out of his work with the union, it is within the power of the union to help him in his litigation. Just as much as if the servant of a company, while driving the company's car, is involved in an accident. I should have thought that the company could support him in his litigation, although the rules say nothing about it."

1. See also Ward v Williams (1985) 6 FCR 384 per Spender J. at p 396; cf. Magna Alloys and Research Pty. Ltd. v Federal Commissioner of Taxation (1980) 33 ALR 213.

2. It is well established that the controllers of a trade union or association, as fiduciaries, are bound to use the powers and resources given to them by their union or association in good faith and for the purposes for which they were conferred; that is to say, for purposes honestly and reasonably believed by the controllers to be in the interests of the members of the union or association as a whole (see, e.g., Allen v Townsend (1977) 31 FLR 431; Williams v Hursey (1959) 103 CLR 30 per Fullagar J. at p 70). In the context of the powers of the Executive Council, it cannot be said, in my opinion, that the payment now under challenge travelled beyond what could fairly and reasonably be regarded as an expenditure incurred in the interests of the members as a whole: the subject matter of the previous litigation was the affairs of the union and the operation of its rules; these were plainly matters of legitimate concern for the members of the union as a whole, in the same way as employment relations were seen to be properly a matter of concern for all union members in Stevens v Keogh and Hill v Archbold.

3. I agree with Burchett J. that there is nothing express, and nothing implicit, in the rules of this organisation which would prohibit payment of the costs. Moreover, there is not, and could not be, any suggestion that the payment of the costs was made for an object which was collateral, or extraneous, to the objects of the union, or for a private purpose of its controllers.

4. I agree with the orders proposed by Burchett J.

JUDGE3

On 27 June 1990, the Executive Council of the Australian Workers' Union resolved to pay an amount of $34,039.73, being so much of the legal costs of a Mr N. Thompson as had not been recouped under a grant of legal assistance which he had previously received from the Attorney-General pursuant to s. 141A of the Conciliation and Arbitration Act 1904. The legal proceedings referred to in the resolution are reported: Thompson v Dunnery (1988) 27 IR 130. They concerned the validity of certain purported appointments of officers of the Union, and in particular of Mr Thompson as branch secretary of its South Australian branch. The purported appointment of Mr Thompson had been made in connection with what Northrop J. (who heard the case) described as "a tale of intrigue and deception that rivals any novel". In short, what happened was that a faction in the union, being in the minority on its South Australian branch executive, attempted to turn a power-sharing arrangement into a coup. The attempt was not successful, at any rate immediately. Mr Thompson's claim to have been appointed secretary of the branch was rejected by Northrop J., but, at the same time, certain subsequent appointments of other persons, which Mr Thompson had challenged, were declared invalid under the rules of the Union.

1. The respondent sued the appellants, as members of the Executive Council, seeking an order of the Court under s. 209 of the Industrial Relations Act, 1988 directing them to treat the resolution of 27 June 1990 as invalid. His contention was that the resolution was not authorised by the Rules of the Union. In that suit he was successful at first instance; hence this appeal.

2. The "Constitution and General Rules of the Australian Workers' Union" commence with rules 1 and 2, setting out the name and head office of the union. Rule 3 then makes a series of provisions for the bringing of legal proceedings on behalf of the union - by the general secretary in respect of a wide range of causes of action, by branch secretaries, also in a wide variety of cases, and by organisers in more confined circumstances. There is a special provision which appears to be directed to certain proceedings in respect of breaches of orders or awards, the precise scope of which and the relationship of which to the other provisions of the rule it is unnecessary to consider here. Paragraphs (e) and (f) then provide:
   

"(e) No member of this Union shall be entitled to pecuniary assistance in any legal proceedings unless the interests of the Union are directly or indirectly involved. The District Secretary shall submit particulars of all matters of this nature to the Branch Secretary as soon as possible. Provided that in case any member shall sustain any injury through the negligence of the employer, and a claim for damages on the member's behalf shall be made, the Executive of the Branch operating in the district where the cause of action arose may afford the member legal assistance to enforce such claim against such employer.

(f) Legal proceedings shall be taken on behalf of any member (at such member's request) discharged for refusing to shear sheep which in the member's honest opinion were so wet as to be likely to injure the member's health, or which were adjudged too wet to shear by a majority of the shearers by vote on a secret ballot, provided the Branch concerned has secured legal opinion favourable to such action."

1. Curiously, it is only when rule 4 is reached that the document turns to the topic of the objects of the Union. That rule is headed "OBJECTS", and continues:
   

"The objects for which the Union is established are, by the provision and distribution of funds and by all other lawful means, whether industrial, political, municipal, or otherwise:

(a) To regulate and protect the conditions of labor, the relations between workers and between workers and employers.

(b) To regulate conditions on the conduct of the trade, business, or industry of the members;

(c) To promote the general and material welfare of the members;

(d) To provide legal assistance in defence of members' rights where deemed necessary;

(e) To endeavour by political action to secure social justice;

(f) To establish and maintain a Union Newspaper;

(g) To assist by federation or otherwise kindred organisations in upholding the rights and privileges of workers, and generally to assist in the emancipation of Labor;

(h) To establish One Big Union for Australian Workers;

(i) To abolish the contract system in all industries;

(j) To replace the present competitive system by the collective ownership of the means of production, distribution, and exchange;

(k) To advocate and fight for a six-hour day and five days of six hours each to constitute a week's work;

(l) To oppose the Australian Communist Parties and the industrial, political and municipal aims and objectives of the said Parties and/or their members acting jointly or individually;

(m) To oppose any body or persons incorporated or unincorporated which in the opinion of the Executive Council by its constitution, aims, objectives, conduct, propaganda or otherwise advocates, assists or encourages the overthrow by force or violence of the established Government of the Commonwealth of Australia or of a State or of any civilised country or of organised government;

(n) To uphold the authority of constitutional government and the Constitution of the Commonwealth of Australia and the States and to oppose the growth of doctrines and groups or organisations of persons incorporated or unincorporated which in the opinion of the Executive Council advocate, assist or encourage the overthrow by force or violence of the established Government of the Commonwealth of Australia or of a State or of any civilised country or of organised government. Disbursements in furtherance of any of the above objects shall be deemed to be part of the ordinary expenses of the Union."

1. By rule 36 it is provided that "(t)he general management of the affairs of the Union," subject to a presently irrelevant qualification, "shall be vested in the Executive Council". Rule 56(b) provides:
   

"All property and funds of the Union held for the use of the Union shall vest in the Union for the benefit of members generally and the Executive Council shall have power in their absolute discretion to control, invest, expend and otherwise deal with the same."

1. The ground on which the learned trial judge based his decision was that the rules did "not permit the grant of pecuniary assistance retrospectively to a member in respect of concluded legal proceedings". There seems to have been some confusion, in discussion at the hearing below, as to whether a concession was made in respect of this point, but it is clear his Honour reached his own conclusion upon it, which he stated in the terms I have quoted. The decisive question in the appeal is whether that conclusion was correct.

2. Counsel for the appellants put at the forefront of his argument, in support of the width of the powers of the Executive Council, the terms of rule 56(b). However, I agree with the learned trial judge that a rule of this nature must be read in the context of the rules as a whole. Also, to borrow the language of Dixon J. in Stevens v Keogh (1946) 72 CLR 1 at 27, such a wide clause "must, no doubt, be limited by reference to the general nature of the (Union)". I do not accept that the rule gives the Executive Council the untrammelled power the submission asserted. More relevant, for present purposes, is the final sentence of rule 4, authorizing disbursements "in furtherance of any of the ... objects" set out in that rule.

3. The word "objects" is not, I think, to be construed strictly. The very fact that the rule is placed after rules making detailed provision for certain of the Union's activities is, perhaps, an indication that a carefully logical arrangement was never intended by the draftsman. Rule 4 has the appearance of a mixture of ends and means. A good example is paragraph (d), which seems to be a means to the end stated in paragraph (c) (and also the ends in paragraphs (a) and (b)), and is subjected, in a way which would hardly be appropriate for an object, to the restriction imposed in rule 3(e). There is nothing surprising, or unusual, about finding that sort of lack of consistency in the draftsmanship of rules of this nature. Fullagar J. (with whom Dixon C.J. and Kitto J. agreed) found a similar position to obtain in respect of the constitution under consideration in Williams v Hursey (1959) 103 CLR 30 at 56-57.

4. The effect of rule 3(e) is to prevent a grant of legal assistance "in any legal proceedings unless the interests of the Union are directly or indirectly involved". But, whatever might have been the position if the suit in question had been concerned only with Mr Thompson's attempt to defend the means by which he had been purportedly appointed secretary of the South Australian branch (as to which I say nothing), and whatever effect those means might have been expected to have had when his application for assistance came to be considered, there is simply no gainsaying that the validity of the purported appointments of other officers by the Executive Council was a matter in which the interests of the Union were directly involved. It concerned the operation of the rules upon their true legal effect.

5. Rule 3(e) providing no obstacle, the question remains whether rule 4(d) authorized the resolution of the Executive Council. There is no doubt that the suit was concerned with the rights of members, insofar as members had a right to the due observance of the rules. What is in issue is simply whether the expression "provide legal assistance in defence of members' rights" embraced a resolution passed after the conclusion of the legal proceedings in question.

6. The authorities state that such a rule should not be construed restrictively; it should have the full meaning which the language is reasonably capable of conveying. In The Amalgamated Society of Engineers v Smith (1913) 16 CLR 537 at 559 Isaacs J. said:
   

"Now, I am disposed to give a very broad interpretation to the terms of association in a society of this nature. I am prepared to read them, not as the strictly prepared and technically framed stipulations inserted in some legal instrument of lawyers, but as the plain and business-like statement of members of the trades concerned, combining for mutual support, and setting down the terms of their combination in language which is applicable to their situation and intended (subject to the presumptive intendment of legality) to be understood apart from technical rules of interpretation."

In Stevens v Keogh (supra, at 22) Starke J. said of the rules of a trade union (the Police Association of New South Wales):

"However the objects or the capacities of the Association in relation to its members as officers of police are in very general terms, which should receive a liberal rather than a restrictive interpretation."

And in Williams v Hursey (supra, at 57) the judgment of Fullagar J., already cited, accepts that general expressions used in the rules of the Waterside Workers' Federation of Australia, though they should be read subject to the context as referring to the interests of members (with which they dealt) as waterside workers, should not otherwise be limited in any way. In the light of this principle, Fullagar J. in Williams v Hursey (ubi cit. supra) went on to say that

"any action which can fairly and reasonably be regarded as likely to further the interests of the organization and its members is within the objects stated in the rules, and therefore within the powers of the federation acting directly or through the branch. To adapt slightly the words of Lord Selborne in Attorney-General v Great Eastern Railway Co. (1880) 5 AC 473 at 478: `... whatever may fairly be regarded as incidental to, or consequential upon, what is expressly authorized ought not (unless expressly prohibited) to be held by judicial construction to be ultra vires'".

1. Counsel for the appellants insisted that the test was the bona fides of the Executive Council, and that if it bona fide considered payment of Mr Thompson's costs to be in the interests of the Union, no more need be said. I do not think this is correct. It is necessary, to use the words of Fullagar J., that the court should be able to describe the resolution as one which "can fairly and reasonably be regarded as" falling within the terms of rule 4(d). Giving the rule a liberal interpretation, it expresses a criterion which is sufficiently elastic to extend that far, but is not so nebulous as to allow a resolution, which cannot fairly and reasonably be so regarded, to suffice if only it have the virtue of bona fides. Fullagar J., in the same case, returned to the point (at 70), when he referred to something "reasonably and in good faith believed" (emphasis added) to be within a very broad power. This is not to substitute good faith as the test, but to add it to the previously stated requirement. That seems to me to be in keeping with principle; without good faith, a technical compliance with the rules would be merely a lifeless form. But the reality of compliance, quite apart from good faith, is indispensible; the Executive Council does not have any carte blanche. In Stevens v Keogh (supra, at 28) Dixon J. put the question as "whether the matter could reasonably present itself to the executive as one in which the Association ought to become responsible". He added that, though their view of the facts may or may not have been well-founded, they seemed to have been regarded as "acting bona fide". For Starke J. (at 22), the decision rested on the proposition that "the executive ... might reasonably take (the) view" that the matter fell within the rules. McTiernan J. (at 30) also held the payment involved in that case (which was a payment of legal costs) to be within the relevant rule because it "could reasonably be considered an appropriate method to attain the object" to which the rule related. Finally, Williams J. (at 36) used the word "reasonable" in testing the connection between the action taken and the power conferred by the rule, in the context of an acceptance of the executive's bona fides.

1. I find it impossible to say that the payment of the costs here in question, though made after the conclusion of the proceedings, could not fairly and reasonably have been regarded as a provision of legal assistance in defence of members' rights within rule 4(d). The expression used in the rule is not merely the equivalent of a power to provide aid to launch a particular proceeding; it is a broad charter to "provide (by any "lawful means" - see the opening words of the rule) legal assistance in defence of members' rights", a charter well capable of encompassing a payment the relation of which to some identifiable suit is indirect, rather than direct. At all events, the proposition which Fullagar J. in Williams v Hursey derived from Lord Selborne may be applied to this payment. It may fairly be regarded as incidental to and consequential upon what is expressly authorized, that is, the payment of the costs of an action concerned with the effect of the Union's rules. There can be no doubt that a provision of costs after the conclusion of an action, when what is involved has become clear, may be a normal incident of the provision of legal assistance, and consequential upon the exercise of a discretion to provide the assistance. Perhaps I should make it clear that, even in the absence of rule 4(d), broader considerations might still have justified a grant of legal aid in a case involving questions which are concerns of the Union: see the authorities referred to by Beaumont J. in his reasons for judgment.

2. For these reasons, the appeal should be allowed; the order made below should be set aside; and, in lieu thereof, it should be ordered that the order to show cause be discharged.