The effect of the 202 agreement on the power to alter the rules and the validity of the June 1999 alterations to rule 71
75 A central question these proceedings is whether the alterations made to rule 71, which have been certified under s 205 of the WR Act, can stand. It is put this way because the applicants contend the alterations can be challenged on several bases. One involves the invocation of ss 208 and 196, another involves the enforcement of the 202 Agreement in the Court's accrued jurisdiction. However the starting point in considering the challenge to the alterations to rule 71 is the proper construction of that agreement.
76 Before turning to the terms of the 202 Agreement reference should be made to applicable principles of construction. They have been considered in the various judgments of the members of a Full Court in McVeigh, in the matter of Piccolo v National Australia Bank Ltd [2000] FCA 187. They are conveniently summarised in the judgment of Finkelstein J who said (at par 29 and following):
The starting point for the construction of any instrument is to look at the language used, not just to the particular words in question but at the whole of the instrument, to gather the intention of the parties: Leader v Duffey (1888) 13 App Cas 294. The words actually used must also be construed in light of the surrounding circumstances, such circumstances being proved by recitals (if any) or by extrinsic evidence: Inland Revenue Commissioners v Raphael [1935] AC 96; Reardon Smith Line Ltd v Yngvar Hansen-Tangen (trading as H E Hansen-Tangen) [1976] 1 WLR 989.
In some cases it is also permissible to have regard to other instruments. Thus, where several instruments are made as part of one transaction they will be construed together and each will be construed with reference to the other. In Smith v Chadwick (1882) 20 Ch D 27, Jessel MR said (at 62-63):
'that when documents are actually contemporaneous, that is, two deeds executed at the same moment, a very common case, or within so short an interval that having regard to the nature of the transaction the Court comes to the conclusion that the series of deeds represents a single transaction between the same parties, it is then that they are all treated as one deed; and, of course, one deed between the same parties may be read to show the meaning of the sentence, and be equally read, although not contained in one deed, but in several parchments, if all the parchments together in the view of the Court make up one document for this purpose.'
The rule applies whether the documents are executed contemporaneously or at different times: see Norton on Deeds 2nd ed (1928) at p 87-89 and the cases there cited. The reason for the rule is that when a series of documents is necessary to give effect to a single transaction each is executed on the faith of the others being executed and each is intended to operate only as part of that transaction and therefore, as a matter of substance, they should be regarded as one: Manks v Whiteley [1912] 1 Ch 735 at 754.
It seems that English law has only developed to the point where several instruments representing a single transaction may be read together if the documents are between the same parties: Smith v Chadwick, above, Chitty on Contracts 27th ed (1997) at par 12-057. This is also the position that has been taken in Australia: see Halsbury's Laws of Australia Vol 10, 'Deeds & Other Instruments' par 140-535(1) citing Smith v Chadwick.
77 I now turn to consider the terms of the 202 Agreement. The applicants' case depends in part on the scope of clause 6 (this is found in what I have described as the third element set out in para 28 above). That clause conferred autonomy on the "union" with the qualification that its autonomy to decide matters only extended to matters "which do not to directly effect (this should probably be "affect") members of the organisation outside (NSW)". At one point counsel for the applicants submitted that the word "union" in this clause included or was a reference to the NSW Branch.
78 The document in question (the third element) commenced with a provision specifically intended to invoke s 202. That is, it was a provision containing an agreement of the type contemplated by that section (though that was also achieved in what I earlier described as the first element: see par 26 above) . This provision was, however, cast in terms that made the agreement subject to other terms contained in what was described as the "schedule". Clause 6 was one of the clauses in the schedule. The provision identified the parties to the agreement as being the NUW, described as an organisation of employees registered under the (now) WR Act, and the NSW Union. After the name and status (as a registered industrial union) of the NSW Union were set out, it was said "… in this agreement called 'the union'". Both in that provision and throughout the schedule the dichotomy was maintained between the organisation (the NUW) and "the union". Each reference made sense if the expression "the union" is treated, as the instrument itself indicates should be done, as a reference to the NSW Union. Indeed in clause 8, which dealt with funds, there was a specific reference to the NSW Branch. That reference was necessary because a distinction was sought to be drawn in the clause between the position of the organisation generally and the NSW Branch specifically for the purposes of a provision which dealt with funds of the organisation and the funds of "the union". If one looks beyond the document in question (the third element) to the remainder of what is being treated as the 202 Agreement, the same dichotomy was drawn between the NUW (referred to as the "organisation") and the NSW Union (referred to either as "the union" or "the Union"). Having regard to the language and structure of the 202 Agreement, the words "the union" in clause 6 and more generally appear to be intended to refer to the NSW Union.
79 However it is necessary, ultimately, to ascertain the intention of the parties from the agreement as a whole. In support of a submission that clause 6 was also intended to confer autonomy on the NSW Branch, counsel for the applicants pointed out that the beneficiary of the proposed alterations to the rules (the inclusion of rule 71) was the NSW Branch. The proposed rule 71 conferred a measure of autonomy on the NSW Branch. This indicated, it was submitted, that clause 6 was not simply limited to the autonomy of the NSW Union. The rule simply perfected, in relation to the NSW Branch, the autonomy conferred by the clause. The difficulty with this submission is that it is not consistent, indeed at odds, with the language used. In addition there is no reason to believe that clause 6 was not intended to relate to the NSW Union only and, to the extent that the parties were agreeing to confer autonomy on the NSW Branch, that was achieved (and only achieved) by the inclusion of the proposed rule 71 in the rules of the NUW. In my opinion, clause 6 was directed only to the position of the NSW Union and the expression "the union", was a reference to the NSW Union only.
80 Understood this way, clause 6 was intended to confer limited autonomy on the NSW Union in circumstances in which it was agreeing to be bound by decisions of the National Conference of the NUW "on matters of National significance". It was not intended to confer autonomy on the NSW Branch whose position (in terms of independence from the activities and powers of federal officials or federal governing bodies and other branches) was, at the time, established by the registered rules of the NUW and would be enhanced by the inclusion of proposed rule 71. However even if the autonomy agreed to by clause 6 concerned the autonomy of the NSW Union, it is nonetheless necessary to consider what the effect of one other aspect the 202 Agreement was intended to be.
81 The agreement to introduce rule 71 appears in the fifth of the recitals in the memorandum set out in par 27 above (the second element) and clauses 1(iii) and 2(ii) of that memorandum. In the fifth recital the NUW was agreeing that its rules would be altered "in order to achieve constructive and co-operative relations". Clause 1(iii) provided a program for various events and specifically for the alterations of the rules of the NUW which were to follow an amalgamation of the NSW Union and an amalgamation involving the NUW. In clause 2 the NUW agreed to amend or alter its rules in accordance with a schedule which contained proposed rule 71. It is set out in par 29 above (the first part of the fourth element of the 202 Agreement). What was agreed, in terms, by the NUW was to amend its rules. This it did. What must be considered is whether the NUW was agreeing to amend them on the basis that there was a common understanding that the rule (or at least the substance of the rule having regard to its effect) arising from the amendment would not, itself, be further amended or deleted from the rules. This question can probably be approached two ways (if they be different). The first is to ask whether the agreement to amend also involved agreement to preserve that which had been agreed. The second is to ask whether a term should be implied into the agreement that the rule resulting from the implementation of the agreement would not be further amended (or its substance not altered) or not deleted from the rules. If the answer on either approach is affirmative, then it is necessary to consider whether the NUW breached the 202 Agreement by altering rule 71 in the way it did in June 1999 (the same question might arise in relation to amendments made prior to June 1999 but that is not an issue in these proceedings).
82 I deal firstly with the question of whether a term can be implied. The principles concerning when a term is to be implied in a contract are comparatively well settled. They were recently considered by a Full Court in Riverwood International Australia Pty Ltd v McCormick [2000] FCA 889. The principles can be illustrated by their application, in that matter, by Lindgren J who approached the issue the following way (at par 67):
I do not think, for example, that if asked [at the time the contract was made] whether the term in question formed part of their contract, both parties would unhesitatingly have said "Of course" or "It goes without saying" or "Obviously" (cf Shirlaw v Southern Foundries (1926) Ltd [1939] 2 KB 206 at 227 per Mackinnon LJ; Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 121; Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 442). Nor do I think it was necessary to give business efficacy to the contract to imply the term in question; the contract operates reasonably and effectively without it (cf BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 (PC) at 282-3; Hawkins v Clayton (1988) 164 CLR 539 at 573). A court must not find a term to be implied merely in order to make the contract "reasonable or fair or prudent" and it is important to recall that "[t]he necessary foundation for the creation of contractual rights and obligations is the agreement of the parties" (Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 at 401 per Brennan J).
83 In addition, the circumstances in which a term can be implied can be influenced by the express terms of the agreement. The principles governing the construction of a lease (but of more general application) were summarised by Powell JA in Darin Nominees Pty Ltd v Franklin's Selfserve Pty Ltd [1999] NSWCA 209 (noted in 74 ALJ 285). One such principle is that no term can be implied if it is inconsistent with the express terms in the instrument nor can it be implied if it appears on the face of the instrument that the parties adverted to the point and either deliberately rejected it or deliberately abstained from dealing with it. Authority cited by His Honour in support of these propositions were Maritime National Fish Ltd v Ocean Trawlers Ltd [1935] AC 524; Chandler Bros Ltd v Boswell [1936] 3 AllER 179 at 186-187; Heimann v Commonwealth (1938) 38 SR (NSW) 691 at 695.
84 It is necessary to consider the provisions of the 202 Agreement having regard to these principles. The entire agreement dealt with alteration to rules in several ways. First both the NUW and the NSW Union agreed to alter their rules in a specified way. This has already been discussed in relation to the proposed alteration to the rules of NUW. The NSW Union also agreed in clause 2(i) to amend its rules (see the memorandum set out in par 27 above) to include the rules referred to in par 30 above (the second part of the fourth element).
85 The next way the 202 Agreement dealt with rules was in clause 11 of the schedule set out in par 28 above (the third element). That clause required the secretary of the NSW Union to consult with the general secretary of the NUW in relation to proposals to alter the rules of the NSW Union. That clause created a scheme involving notice and consultation before any alteration was to be made to the rules of the NSW Union. The purpose of the scheme was to bring about consistency between the rules of the NSW Union and the NUW. However this purpose was expressed in somewhat qualified terms having regard to the expression "in an effort to ensure the consistency". Moreover the secretary of the NSW Union was only obliged to "take into account all reasonable concerns" of the general secretary. Plainly this clause preserved the power on the NSW Union to alter its rules in whatever way it wished. This was, of course, subject to the proviso expressed in the last sentence of clause 11, namely that "alterations or rescissions to rules shall not conflict with the rules of the (NUW)". In summary, the NSW Union agreed, in relation to any alteration to its rules, to consult, to consider concerns and not create conflict between its rules and the rules of the NUW.
86 The last way the 202 Agreement dealt with alterations of rules was found in the rules agreed to be included in the rules of the NSW Union. It is to be recalled that the NSW Union agreed to include in its rules a special rule, rule 48A, dealing with the execution of an agreement under s 202 and procedures to implement such an agreement. Significantly sub-rule (2) contained a provision designed to entrench rule 48A. It did so by making any alteration to the rule conditional upon consent to the alteration been given by the National Council of the NUW.
87 It is apparent from the 202 Agreement that the parties turned their minds to not only what changes had to be made to the rules of both the NUW and the NSW Union but also how, in the future, rule alterations might be made which impacted on the entire agreement. It is true that this latter matter is addressed only in relation to alterations to the rules of the NSW Union. However it is difficult to accept this does not reflect that it was a matter that was considered by both parties in relation to all rule alterations to which the 202 Agreement was directed. The absence of any reference to the future alterations of the rules of the NUW (that is, alterations following the inclusion of the proposed rule 71) provides a fairly compelling indication that, insofar as the rules of the NUW were concerned, it was not intended that the power of the NUW to alter its rules was to be fettered or limited even in relation to rule 71.
88 Counsel for the applicants submitted, in a variety of ways, that the 202 Agreement must have been intended to limit alterations to rule 71 having regard to the subject matter of that agreement. This submission really raised for consideration the circumstances in which the 202 Agreement was negotiated and concluded. However the submissions proceeded on assumptions that are not self-evident. Whether the NSW Union owned property, whether employees who applied for membership of the union (in a practical and not legal sense) would become members of the NUW or the NSW Union or both and what would happen to their membership contributions and indeed whether the NSW Union had legal existence independently of the NUW were all issues confronting both the NUW and the NSW Union and their officials at the time the 202 Agreement was negotiated and concluded. They were questions that were coming into particular focus because of amalgamations proposed both under state legislation and federal legislation. They were (and are) issues of considerable legal complexity: see Re McJannet; Ex parte the Australian Workers' Union of Employees, Queensland (1995) 184 CLR 620 and The Sweeney Report, Report of the Committee of Inquiry on Co-ordinated Industrial Organisations (1974). The assumptions underpinning the submissions of counsel for the applicants were that these questions would be answered in favour of the NSW Union in the sense that when it entered the 202 Agreement it was relinquishing rights (including property rights) for which it was receiving some benefit in return. There is no basis evident to me for making these assumptions. Indeed it appears to me that the parties to the 202 Agreement were, in a sense, content to avoid having to answer these difficult legal issues (with potentially significant practical consequences) by entering into that agreement. The 202 Agreement was in terms that rendered it unnecessary to answer them.
89 In my opinion a term should not be implied in the 202 Agreement that the rule resulting from the alteration to the rules of the NUW which was agreed to (the adoption of rule 71) would not be susceptible to further alteration either in form or in substance. It is not a term that would have been obvious to the parties to be included had they addressed the question (indeed, as just discussed, the terms of the agreement suggest otherwise). Nor is it a term necessary to give efficacy to the agreement. It was not as if, at the time, there were no constraints on the further amendment of rule 71. Any further alterations to rule 71 would be subject to the rules of the NUW and the democratic processes provided for in the rules concerning their alterations. Members and officials in the NSW Branch (if also members and officials of the NSW Union) would be able to participate in those processes with the objective of preventing alterations to rule 71 or ensuring any alteration was one that was acceptable to them.
90 Moreover the 202 Agreement could be terminated by the Federal Commission on the application of "an interested person": see s 208(8)(b) of the WR Act. There is little reason to doubt that the NSW Union would be an interested person in relation to an agreement to which it was a party: as to the notion of "person interested" more generally see Re Building Workers' Industrial Union of Australia (1987) 18 IR 315; Gallagher v Federated Engine Drivers and Firemans Association of Australasia (1988) 28 IR 35; and Re Victorian Master Pastrycooks Association Inc (1992) 45 IR 91. If alterations were made to rule 71 which were unacceptable to the NSW Union it could apply to cancel the 202 Agreement. If that occurred, of course, the questions referred to in par 82 above might then have to be addressed both by the NSW Union and the NUW. Nonetheless it is difficult to conclude that any implied term of the type under consideration is necessary to give efficacy to the 202 Agreement given the statutory right to apply to have the 202 Agreement terminated and the existence of an opportunity that arises under the rules of the NUW to influence any proposed alterations to rule 71.
91 One further matter should be mentioned. In Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 Dawson J said (at 137):
Perhaps, however, express mention should be made of the trial judge's finding that under the law of New York and of Connecticut "every contract imposes upon each party a duty of good faith and fair dealing in its performance and in its enforcement" Restatement of the Law: Contracts (2d), s 205. This, he found, meant no more than that neither party to an agreement may do anything to impede the performance of the agreement or to injure the right of the other party to receive the proposed benefit and was, in substance, an expression of the same principle enunciated by this Court in Secured Income Real Estate (Australia) Ltd v. St Martins Investments Pty Ltd (1979) 144 CLR 596 at 607, quoting the words of Griffith C. in Butt v M'Donald (1896) 7 QLJ 68, at 70-71:
"It is a general rule applicable to every contract that each party agrees, by implication, to do all such things as are necessary on his part to enable the other party to have the benefit of the contract."
92 This principle was not expressly referred to by counsel for the applicants though it appeared to underlie much of what was put on their behalf. It may mean, applied to the circumstances of this case, that the NUW would be obliged to ensure that the NSW Union (and perhaps also the NSW Branch) continued to enjoy the benefit of the term of the 202 Agreement involving the inclusion of rule 71. However this approach assumes that the benefit conferred on the NSW Union was not only the inclusion of rule 71 (which occurred) but also the preservation of that rule (in substance if not form) in perpetuity or at least for the currency of the 202 Agreement. For reasons already given, I do not consider that it was intended that the benefit conferred on the NSW Union was in terms as wide as this.
93 In the result, it has been unnecessary to consider whether the NUW could enter an agreement which fettered its capacity to alter its rules. The alteration to rules ultimately involves the exercise of a fundamental democratic right of members of an organisation: see eg Roots v Mutton (1978) 32 FLR 15 at 19.3. The WR Act requires an organisation to have rules dealing with the manner in which the rules may be altered: see s 195(b)(xiii), and contains a statutory mechanism for the consideration of any alteration to the rules: see ss 203 to 206. It may be doubted that an organisation can, by agreement, inhibit its capacity to alter its rules and deny the members this right: see also s 187A(a). It is unnecessary to consider whether the analogy with a company incorporated under the Corporations Law (which cannot, by agreement, deprive itself of a statutory power to alter its articles) is a good one: see Peters' American Delicacy Co Ltd v Heath (1939) 61 CLR 457 at 479.
94 I am satisfied that the 202 Agreement did not prevent the amendments being made to rule 71 which were made by the NUW in June 1999. Accordingly the applicants have not made good the contention that the amendments to rule 71 could not have been made because they involved a breach of the 202 Agreement. Nor have they made good the related submission that the rules are of the type referred to in s 196(c) because they are or resulted from a breach of the 202 Agreement.