McGee, S. v Sanders, J.H.

[1991] FCA 701

Re: STEVEN McGEE and REX HORE
And: J.H. SANDERS; C. KEILY; K. WISE; H.S. WEIR; G.R. NEWMAN; B.R. AGG; D.
CRUMP; K.J. CONNORS; G. WOOD; J.M. BILTRIS; J.B. WHITE; D.A. PORTER and P.
POWER
No. V I70 of 1991
FED No. 701
Industrial Law
(1991) 32 FCR 397
(1991) 39 IR 400

COURT

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY
INDUSTRIAL DIVISION
Gray J.(1)

CATCHWORDS

Industrial Law - registered organisation - rules - performance and observance - right of members of branch committee of management to inspect documents of branch - whether resolution of branch committee of management inhibiting inspection valid - whether right of inspection may be exercised in company with a stranger such as an accountant - whether entitlement to photocopies of documents - application for interim orders - orders sought would have effect of final orders - considerations in granting of interim orders.

Industrial Relations Act 1988 ss. 192, 209

McGee v Sanders (Federal Court of Australia, Heerey J., 13th August 1991, unreported)

Bevan v Webb (1901) 2 Ch 59

Norey v Keep (1909) 1 Ch 561

Dodd v Amalgamated Marine Workers' Union (1924) 1 Ch 116

Edman v Ross (1922) 22 SR (N.S.W.) 351

McCusker v McCrae (1966) SC 253

Burns v London and South Wales Coal Company (1890) 7 TLR 119

HEARING

TOWNSVILLE

#DATE 15:11:1991

Counsel for the applicants: Miss M. Hickey

Solicitors for the applicants: Holding Redlich

Counsel for the respondents other
than the respondents G.R. Newman,
D. Crump and J.B. White: Mr H. Borenstein

Solicitor for the respondents
other than the respondents
G.R. Newman, D. Crump and J.B. White: Harry Nowicki and Co.

JUDGE1

The Transport Workers' Union of Australia ("the Union") is an organisation, registered pursuant to the Industrial Relations Act 1988 ("the Act"). By virtue of s. 192(a) of the Act, it is a body corporate. It has a number of branches, including its Victorian branch ("the branch"). The parties to this proceeding are the members of the branch committee of management, which is constituted by rule 30(a) of the rules of the Union. Under rule 30(d), the branch committee of management has specific powers to, "Vote and expend any money that may be necessary in connexion with the business of the Branch", and, "Determine what salaries or other remuneration shall be paid to Branch Officers and others employed by the Branch".

1. The first applicant is a member of the branch committee of management by virtue of holding the office of branch trustee. The branch has two trustees. The other is the respondent Weir. Under rule 32(d), the duties of a branch trustee include: being responsible for the safe custody of all documents, securities and accumulated funds of the branch; subject to the direction of the branch committee of management, controlling all property of the branch; and investing any accumulated funds of the branch in securities allowed by law as the branch committee of management may direct.

2. On 28th October 1991, the applicants obtained a rule to show cause, calling upon the respondents to show cause why they should not be ordered to perform and observe the rules of the Union by refraining from hindering, obstructing or preventing each of the applicants, whether alone or in the company of his or their servant or agent, from gaining access to, inspecting and obtaining copies by photocopying techniques of documents concerning certain specified matters, and by treating as null and void and of no effect a resolution passed by the branch committee of management at its meeting on 21st October 1991. The application is made pursuant to s.209 of the Act. The applicants also sought similar relief by way of interim orders, pursuant to s.209(4). The rule to show cause came on for directions, and for the hearing of the application for interim orders, on 6th November 1991.

3. The first applicant (Mr McGee) had instituted earlier proceedings against all of the other members of the branch committee of management by rule to show cause in matter No. VI 32 of 1991. On 13th August 1991, Heerey J. ordered that the respondents in that proceeding (who were all of the respondents in the present proceeding and the second applicant in the present proceeding) perform and observe the rules of the Union by refraining from hindering or obstructing the applicant in gaining access to and inspecting certain specified classes of documents. In his reasons for judgment, published on that date, Heerey J. held that the principle that a director of a company has a right, enforceable at law, to inspect documents of the company, in aid of the proper execution of his or her fiduciary obligation to advance the interests of the company, was equally applicable to a member of a committee of management of a registered organisation under the Act, or one of its branches. There was no appeal from that judgment. Thus, it may be taken for the purposes of this proceeding that the applicants have a general right to inspect documents of the branch. Nothing in the rules of the Union purports to take away that right, and it follows that the respondents have no lawful authority to hinder or prevent inspection by the applicants of documents of the branch. See McGee v Sanders (Federal Court of Australia, Heerey J., 13th August 1991).

4. Following the judgment and order of Heerey J., the first applicant inspected some documents at the branch office in Port Melbourne. By letter dated 21st August 1991, the second applicant (Mr Hore) requested the respondent Wise as branch secretary to permit him to have access to certain specified documents. By letter dated 3rd September 1991, Mr McGee also requested that Mr Wise allow him access to the documents requested by Mr Hore and to certain other specified documents. He also requested access to photocopying facilities, for the purpose of copying documents. Mr McGee's letter raised other questions in relation to the documents which he had already inspected, pursuant to the order of Heerey J. By letter dated 4th September 1991, Mr Wise responded to Mr McGee's request by pleading shortness of notice in respect of the inspection time nominated by Mr McGee. He invited Mr McGee to specify another date, giving longer notice, "so that the documents and records can be prepared for your perusal". He also said that he was seeking legal advice in relation to the other matters raised by Mr McGee.

5. By letter dated 6th September 1991, the solicitors for the applicants nominated 11th September 1991 as the date for Mr McGee to conduct his inspection. In reply, the solicitors for the respondents advised that this date was inconvenient, because of the biennial congress of the Australian Council of Trade Unions. The respondents' solicitors advised that the branch secretary would write to Mr McGee and confirm a suitable date. On the same date, the respondent Keily, who had apparently become the branch secretary by that date, wrote to Mr McGee, responding to some of the matters raised in Mr McGee's letter of 3rd September and nominating 19th September as the day for inspection of documents.

6. On 19th September, both of the applicants and an accountant attended at the branch office at approximately 8.00 a.m. It is unnecessary to detail the allegations which Mr McGee makes as to what occurred at that time. The substance of them is that a scuffle occurred, and both applicants and the accountant were excluded from the premises. On the same date, Mr Keily wrote a letter as branch secretary to Mr McGee, making certain allegations about Mr McGee's behaviour, stating that he (Mr Keily) would not flout the order of the Federal Court, "however it should be clearly understood that your visits to the office are to be pre-arranged and conducted in an orderly manner."

7. On 30th September, the branch committee of management met. Mr McGee attempted unsuccessfully to move motions concerning the expenditure of funds and the inspection of documents. Those motions were ruled out of order by the respondent Sanders, who chaired the meeting as branch president.

8. By letter dated 7th October 1991, addressed to the secretary of the branch, Mr McGee requested access to certain specified categories of branch documents and records, which are the subject of the order sought in this proceeding. The letter contained the following passage:
   

"As you know, I have no professional, financial or accounting qualifications. Therefore in order to be able to understand and assess the matters dealt with in the branch documentation to which I seek access, I will need the professional assistance and advice of an accountant of my choosing. I therefore propose that when I inspect the branch documents, the subject of my request, I be accompanied by such a person who will be engaged by me on the basis that he or she is in attendance for the purpose of providing me with professional accounting advice in relation to matters which, so far as they arise from my inspection of Branch records are to remain confidential between him or her and me. This confidentiality would, of course, be subject to any order of the Court or resolution of the Branch Committee of Management to the contrary.

It may be necessary for me to obtain photocopies of some of the Branch documents which I inspect. This will only be done where reasonably necessary and I assume that you will co-operate with me in this respect so as to make access effective while at the same time minimizing the time required for such access."

On the following day, Mr Keily responded by letter to Mr McGee. His letter included the following:

"The Branch will give access to the records in the manner you are entitled to under the decision of the Federal Court. The Branch now needs to obtain legal advice as to whether the type of access requested by you is within the order of the court. This will take a short period and the Branch should be in a position to advise you of an appointment by early next week. In any event, collation of the documents you have requested will take a few days to complete. I will advise you shortly of an appointment."

1. By letter dated 11th October, Mr Hore wrote to Mr Keily, seeking to inspect certain documents, and stating that he wished to attend the branch office in the company of Mr McGee and the respondent Crump. His letter contained the statement that Mr Hore reserved the right to attend "with an agent who is not a member of the Union".

2. By letter dated 14th October, Mr Keily offered Mr McGee an appointment between 8.00 a.m. and 12.00 noon on 16th October for the purpose of inspecting Union records. The letter said nothing at all about the question of Mr McGee being accompanied by an accountant, or about photocopying of documents. Mr McGee did not receive this letter until the morning of 16th October. He did not attend to inspect documents on that day. His expressed reason for failing to attend was that his late receipt of the letter (which may have occurred because Mr McGee had arranged to divert his mail to a post office box) left it too late to him to organise an accountant or some other person to accompany him and he was unwilling to attend the branch office on his own.

3. By letter dated 17th October, the applicants' solicitors informed Mr Keily that Mr McGee sought inspection of documents on 21st October, following a meeting of the branch committee of management, and in the company of Mr Hore, Mr Crump and Mr McGee's accountant. On the same date, Mr Keily wrote to Mr McGee, complaining of a waste of the time of branch officers and tying up of branch resources, arising out of the failed appointment on 16th October. This letter also enclosed a copy of a letter from Mr Keily to Mr McGee dated 15th October, which had not previously been received by Mr McGee. This letter was in reply to Mr McGee's letter of 7th October. It stated that, in accordance with the Federal Court decision, documents would be made available for inspection by Mr McGee but that the additional matters that he raised would not be afforded him. Reference was made to consideration of confidentiality of the branch's documents and access to them by strangers. An offer was made that if Mr McGee had difficulty understanding documents, he could give Mr Keily a note of which documents he did not understand, and Mr Keily would arrange for an explanation.

4. On 21st October, the branch committee of management met. It passed a resolution in the following terms:
   

"Having received a report from the Secretary concerning S. McGee's further requests for inspection of Branch records and documents: having been provided with copies of S. McGee's letters to the Secretary and the letters sent by the Secretary to S. McGee; having noted that McGee failed to attend at the last arranged appointment for an inspection, which caused considerable cost and inconvenience to the Branch and a number of Branch officers and employees; and

having regard to S. McGee's past behaviour towards the Branch and in particular his recent attempt, without authority, to bring a television crew into the Branch office. IT IS RESOLVED THAT -

1. That no further inspections should be arranged with S. McGee until he has provided a written assurance that he will attend as arranged, and in default, his continuing entitlement to inspect will be further reviewed.

2. The Secretary is directed and instructed that in providing inspection to S. McGee in accordance with the Federal Court decision, he should take all necessary steps to protect the confidentiality of the Branch's records and documents, and in particular, he should not permit inspection by third parties.

3. That insofar as S. McGee is unable to understand any particular item inspected, he should submit a written query to the Secretary, such query should be clarified by the Secretary with the Branch's accountant, and a reply given to S. McGee as soon as practicable. The Secretary is also authorized in appropriate circumstances to refer such queries to the branch auditors for clarification.

4. This meeting expressed its lack of confidence in S. McGee's bona fides in seeking inspection, and accordingly directs the Secretary that no copies of any records or documents are to be provided to S. McGee without first obtaining from him a written request specifying precisely the record or document in question and his reason for wanting a copy. Each such written request is then to be submitted to BCOM for consideration.

5. Any difficulties or disagreements about future inspections should be referred to BCOM for decision."

At the same meeting, Mr McGee attempted to move resolutions concerning inspection of documents and the presence of an agent and the taking of copies. These motions were ruled out of order.

1. At the meeting of 21st October 1991, the applicants discovered that the respondent Wise and the respondent Biltris had resigned as members of the branch committee of management. On the same day, each wrote a letter to Mr Keily requesting copies of the resignation. By letter of the same date, Mr Keily wrote to Mr McGee refusing to hand out copies of resignations without a direction from the branch committee of management, but offering inspection of the documents on 23rd October.

2. On 23rd October, Mr McGee telephoned Mr Keily and was advised that an appointment had been arranged for him to attend the branch office on 28th October to inspect the documents which were to have been inspected on 16th October. Mr Keily stated that inspection would be afforded only in terms of the resolution of the branch committee of management passed on 21st October.

3. In opening the application for interim orders, counsel for the applicants indicated that she would endeavour to show that there existed a serious issue to be tried as to the applicants' entitlement to relief, and that the balance of convenience favoured the applicants. I am by no means convinced that these tests, which have been applied by courts in dealing with applications for interlocutory injunctions, are appropriate to the specific statutory power under s.209(4) of the Act. It should be noted that the power to make interim orders is given in broad terms. The Court may make "such interim orders as it considers appropriate". Parliament has not chosen to use the word "injunction". The practice in granting or refusing interim orders differs from the practice in relation to interlocutory injunctions in at least one important respect. It is rare for an applicant for interim orders to be called upon to give an undertaking that he or she will pay damages in the event of failure. In my view, it is the duty of the Court to do justice as best it can when confronted by an application for interim orders. Sometimes, the evidence proferred by an applicant will be uncontested and will demonstrate a strong case. In such circumstances, a court will naturally be more ready to make orders on an interim basis.

4. The present proceeding is complicated by the fact that the interim orders sought by the applicants are in the same terms as the final relief which they seek. To grant those orders would be effectively to grant final relief, without giving the respondents the opportunity of going to trial. It should be noted that the respondents did not place before the Court any evidence on affidavit and did not complain that they had insufficient time to do so. There are allegations made in the correspondence as to which the respondents may wish to swear at the trial. They are, however, not central to the issues raised in the proceeding. They leave the case made by the applicants for principal relief as a case of considerable strength.

5. Counsel for those respondents who appeared sought to make a case that Mr McGee was disentitled to relief because of lack of bona fides. It should be noted that, in his judgment of 13th August 1991, Heerey J. was faced with allegations of bad faith against Mr McGee, and rejected them. Some of the cross-examination of Mr McGee in the present case went to matters which had occurred prior to 13th August 1991. No question of issue estoppel was argued, but it would appear unlikely that the respondents would be permitted to re-activate at the trial of this proceeding the same allegations of bad faith which failed in the earlier proceeding. The central allegation put to Mr McGee was that he was only interested in causing disruption. Presumably this was intended to convey that Mr McGee had no wish to exercise his right of inspection of documents for any purpose connected with his holding of the offices of trustee and member of the branch committee of management, but only wished to seek inspection for the purpose of disrupting the affairs of the branch. If this were so, the allegation was not made out by cross-examination. It was suggested that Mr McGee was motivated by grievances about the alleged role of another official or other officials of the branch in preventing him from obtaining a job and in refusing to give him full time jobs within the branch for which he had applied. It appears that Mr McGee now makes a complaint that the inspection which took place following the order made by Heerey J. was not in compliance with that order, although he made no complaint of non-compliance in his correspondence, particularly his letter of 3rd September. It also appears that he has failed to avail himself of opportunities to inspect documents and on one occasion he enticed a television crew to the branch office, apparently to film his attempt to gain admission.

1. These matters fall well short of establishing that Mr McGee lacks bona fides in seeking to exercise the power of inspection. It is true that, in cross-examination, Mr McGee tended to prevaricate and was not necessarily truthful. Again, his lack of candour in the witness box does not establish that his attempt to exercise his right is for some improper purpose. On the evidence before me, I regard it as most unlikely that the respondents will succeed at the trial in establishing bad faith on the part of Mr McGee. It does not appear that any allegation of bad faith is made against Mr Hore.

2. Counsel for the respondents also attempted to argue that among the documents which Mr McGee sought to inspect was legal advice obtained by the branch secretary in respect of a proceeding in which Mr McGee, in his capacity as a federal councillor of the Union, is on the opposite side of the record. Counsel for the respondents called in aid Bennetts v Board of Fire Commissioners of New South Wales (1967) 87 WN (N.S.W.) 307, in which it was held that a trade union representative on the board of a corporation was not entitled to see a document which contained legal advice given to the board in relation to litigation between the corporation and the trade union. In my view, that case cannot be regarded as authority in relation to a proceeding in which all parties are officers of the one corporation. Legal advice given to a branch is the property of the registered organisation. Mr McGee is not a member of the branch committee of management as a representative of some outside body, as was the representative in Bennett's case. He has been elected, along with the other parties to this proceeding, and has the full rights of a member of the branch committee of management. If the branch has sought and obtained legal advice, it is difficult to see that Mr McGee can be prevented from seeing it.

3. Once it appears that these issues will be likely to be resolved in favour of the applicants, it is plain that the applicants have an excellent chance of making out at the trial their right to inspect documents of the branch. Their right is a right to inspect documents generally. They ought not to have to commence proceedings, naming specific categories of documents, and to obtain orders of the Court, simply in order to exercise that basic right. They are entitled to attend at the branch office at any time when it is open, and to look at all documents of the branch without restriction. It is unnecessary for them to arrange appointments for inspection. That is not to say that the practice of arranging appointments should be avoided by the applicants. It is obviously convenient for the administration of the branch that they should communicate to the branch secretary, who is responsible for the conduct of the branch office, their intention to exercise their rights at a specified time, and that they should attend at that time. I see no difficulty about the attendance of both applicants together, nor about their being accompanied by other members of the branch committee of management.

4. It follows from what I have said that it was not open to the branch committee of management to attempt to place on Mr McGee the restrictions found in paragraphs 1, 4 and 5 of the resolution of 21st October. It is exceedingly unlikely that the respondents will be able to justify those restrictions at the trial of this proceeding.

5. Paragraphs 2 and 3 of the resolution of 21st October deal with the question whether Mr McGee is entitled to be accompanied by his accountant in exercising his right of inspection. There is a considerable line of authority, suggesting that the right of a person, who owes a fiduciary duty to a corporation, to inspect the documents of that corporation, carries with it a right to conduct that inspection by means of a suitably qualified agent, such as an accountant. See Bevan v Webb (1901) 2 Ch 59 (a partnership), Norey v Keep (1909) 1 Ch 561 (a trade union), Dodd v Amalgamated Marine Workers' Union (1924) 1 Ch 116 (a trade union), Edman v Ross (1922) 22 SR (N.S.W.) 351 (a company) and McCusker v McRae (1966) SC 253 (a company). The courts have recognised some constraints on this right. The agent chosen (generally an accountant) must not be someone to whom the management of the corporation has grounds for objection. The agent may be called upon to give an undertaking that any knowledge which he or she acquires will not be used for any other purpose than that of giving confidential advice to his or her principal. In the present case, nothing has been raised in respect of the accountant chosen by Mr McGee, and the evidence indicates that that accountant is prepared to give the necessary undertaking of confidentiality.

6. Counsel for the respondents attempted to argue that the extension of the right of inspection to an agent was inapplicable in the present case. His argument was that the right was given in order to overcome the inability of the director to understand the accounts. Some of the documents which Mr McGee seeks to inspect are such that an accountant's advice as to their contents is obviously unnecessary. Nevertheless, many are documents relating to the financial affairs of the branch. Counsel for the respondents argued that paragraph 3 of the resolution of 21st October obviated the necessity for Mr McGee to have his own accountant, because it gave him access to the branch's accountant and the branch auditors, so that he could receive explanations of anything he did not understand from those persons. In my view, such an arrangement would not remove any disability under which Mr McGee must operate by not having the qualifications or experience of an accountant. The branch's accountant and the branch auditors owe duties not to Mr McGee, but to the Union itself. It may be that an investigation of the books and records of the branch, aided by an independent accountant, might reveal mismanagement, to which the branch's accountant or the branch auditors might not wish to admit. Plainly, their involvement would not remove the disability under which Mr McGee might labour, particularly if it is necessary for him to specify his queries in writing to the branch secretary and for any reply to be passed through that officer. Individual members of the branch committee of management have independent rights of inspection, and are entitled under the principles laid down in the authorities to which I have referred to be assisted in that right by engaging their own independent advisers.

7. It follows that paragraphs 2 and 3 of the resolution of 21st October also constitute an unjustified interference with the rights of the applicants and particularly of Mr McGee. It is unlikely that the respondents will be able to justify that interference at the trial.

8. In the circumstances, I regard it as appropriate that an interim order should be made, requiring the respondents until the hearing and determination of the application or further order to treat as null and void and of no effect the resolution of 21st October. It is my view that the resolution is very likely to be held to be a completely unwarranted attempt to interfere with Mr McGee's right to inspect branch documents. It would be wrong to allow such interference to persist while Mr McGee awaits the trial of this proceeding.

9. One further issue was argued. It is the question whether the applicants should be entitled to photocopies of documents. The authorities establish that the right of inspection carries with it a right to take copies. See Burns v London and South Wales Coal Company (1890) 7 TLR 119 and Edman v Ross (1922) 22 SR (N.S.W.) 351. Those cases were decided before the existence of photocopying machines. No doubt what was contemplated was that the director exercising a right of inspection was entitled to make handwritten copies of the documents. Where photocopying facilities are available, there seems to be no reason why photocopies should not be made available, or at least reasonable access to a photcopying machine should not be allowed, upon the person exercising the right of inspection paying the reasonable cost of copying.

10. It is my view that the first order sought by the applicant ought to be unnecessary on an interim basis. As I have said, it is undesirable that the applicants should be forced to come to Court, seeking orders permitting them to inspect specified documents or classes of documents, on each occasion on which they wish to exercise their rights of inspection. The making of orders relating to specified classes of documents lends itself to subsequent arguments as to whether those orders have been complied with. It may also necessitate detailed orders as to times and places and persons present. If possible, that kind of specificity should be avoided. I have endeavoured to make it clear in these reasons for judgment that the applicants have rights to inspect, take copies and be accompanied by an accountant, subject to the giving of the appropriate undertaking. It is proper to reserve the applicants' right to proceed in respect of the first order they sought if their rights are not afforded to them.

11. For the above reasons, on 6th November 1991, I adjourned the application for the first order sought to a date to be fixed, but made an interim order, requiring the respondents to treat as null and void and of no effect the resolution of 21st October. I pronounced those orders and reserved my reasons, which I have now given.