Brown v Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia

LEGISLATION CITED: Industrial Relations Act 1996, ss3(d), 245, 288

Re Seamens' Union of Australia New South Wales Branch [2001] NSWIRComm 151 CASES CITED: Australian Liquor, Hospitality and Miscellaneous Workers Union, New South Wales Branch [1999] NSWIRComm 217 Merchant Service Guild of Australia, Queensland Branch, Union of Employees [2005] QIRComm 191 Brown v Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia [2001] 109 IR 162

Mr J Nolan of counsel LEGAL REPRESENTATIVES: Ms A Owens Instructing Officer of LHM Union, NSW Branch

Liquor, Hospitality and Miscellaneous Union, New South Wales Branch

Application by the Liquor, Hospitality and Miscellaneous Union, New South Wales Branch for a determination of a question of an invalidity under section 288 of the Industrial Relations Act 1996

1 This matter concerns an application by the Liquor Hospitality and Miscellaneous Union, New South Wales Branch ("the union"), a State organisation registered under ch 5 of the Industrial Relations Act 1996 ("the Act"), seeking a declaration that an invalidity occurred for the purposes of s288(1) of the Act and seeking orders in relation to that invalidity. 2 This application arises from the union altering its rules ("the rules") to increase contribution rates payable by its members for the period from 1 July 2004 to 30 June 2005 and levying those increased contribution rates notwithstanding that the union had not sought the consent of the Industrial Registrar to the alteration of its rules. Background 3 The rules provide that the NSW Branch Council has the power to set membership contribution rates and to alter the rules of the union. Rule 39 provides (inter alia): 39. Branch Council (a) Subject to the rules the Branch Council shall have the control and conduct of the Branch in the following matters: (ii) The amendment, recission or alteration of the Branch rules, subject to rule 75B. 4 On 8 June 2004, the Branch Council passed a resolution altering sub-rule N6 of rule 75B to provide for increased contribution rates for the period from 1 July 2004 to 30 June 2005. The union subsequently levied the increased contribution rates from its members for this period, however, it did not seek the consent of the Industrial Registrar to the amendments of sub-rule N6 under s245 of the Act. It is not necessary for the purposes of the union's application to set out the terms of sub-rule N6 of rule 75B. 5 The relevant alteration related to contribution rates payable by the union's members for the period from 1 July 2004 to 30 June 2005. An application for consent has not, to date, been filed with the Industrial Registrar for the amendment to the rule for this period. Mr J Nolan of counsel, who appeared for the union, submitted that a new amended rule came into effect from 1 July 2005 and the necessary variation was approved by the Industrial Registrar under s245 of the Act. Further, the rules for the federally registered union were varied (in a similar manner to the variation to the state rules for the 2004/2005 fee increase) and approval was given for such variation under the federal legislative regime on 11 October 2004. 6 Section 245 of the Act provides that: 245 Alteration of rules of State organisation (1) An alteration of the rules of a State organisation does not take effect unless the Industrial Registrar consents to the alteration. (2) The Industrial Registrar may consent to an alteration of the rules in whole or part, but must not consent to an alteration unless satisfied that the alteration: (a) complies with, and is not contrary to, this Act and relevant awards or orders of the Commission made under this Act, and (b) is not otherwise contrary to law, and (c) has been made under the rules of the organisation. (3) The Industrial Registrar must not consent to an alteration of the rules of an industrial organisation of employees relating to eligibility for membership of the organisation if, in relation to persons who would be eligible for membership because of the alteration, there is, in the opinion of the Industrial Registrar, another industrial organisation of employees to which those persons might conveniently belong. (4) If particulars of an alteration of the rules of a State organisation have been lodged with or recorded by the Industrial Registrar, the Industrial Registrar may, with the consent of the organisation, amend the alteration for the purpose of correcting a typographical, clerical or formal error. (5) If the Industrial Registrar consents under this section to an alteration, the alteration takes effect on the recording of the change by the Industrial Registrar. (6) This section does not apply in relation to an alteration of the rules of a State organisation that is: (a) determined by the Industrial Registrar under section 244 or 247, or (b) proposed to be made for the purpose of an amalgamation under this Part. 7 Section 288 of the Act provides that:

288 Commission may make orders in relation to consequences of invalidity (1) An organisation, a member of an organisation or any other person having a sufficient interest in relation to an organisation may apply to the Commission for the determination of the question whether an invalidity has occurred in: (a) the management or administration of the organisation, or (b) an election or appointment in the organisation, or (c) the making or alteration of the rules of the organisation. (2) On an application under subsection (1), the Commission may make such determination as it considers appropriate. (3) If, in a proceeding under subsection (1), the Commission determines that an invalidity of a kind referred to in that subsection has occurred, the Commission may make such order as it considers appropriate: (a) to rectify the invalidity or cause it to be rectified, or (b) to negative, modify or cause to be modified the consequences in law of the invalidity, or (c) to validate any act, matter or thing rendered invalid by or because of the invalidity. (4) Where an order is made under subsection (3), the Commission may give such ancillary or consequential directions as it considers appropriate. (5) The Commission must not make an order under subsection (3) without satisfying itself that such an order would not do substantial injustice to: (a) the organisation, or (b) any member or creditor of the organisation, or (c) any person having dealings with the organisation. (6) The Commission may determine: (a) what notice, summons or rule to show cause is to be given to other persons of the intention to make an application or an order under this section, and (b) whether and how the notice, summons or rule should be given or served and whether it should be advertised in any newspaper. (7) This section applies: (a) to an invalidity whenever occurring (including an invalidity occurring before the commencement of this section), and (b) to an invalidity occurring in relation to an association before it became an organisation. The Application 8 In its application, the union sought the following orders: (1) A declaration that an invalidity has occurred in the management and administration of the Liquor Hospitality and Miscellaneous, Union New South Wales Branch ["LHMU (NSW)"] between 8 June 2004 and the date of this order, in that, notwithstanding the registered rules of the organisation, no application was filed to give effect to the decision of the Branch Council of the Union dated 8th June 2004, to increase the union contribution rates as provided for in sub rule N6 of Rule 75B New South Wales Branch, for the year commencing 1 July 2004. (2) An order under s288 of the Industrial Relations Act 1996 that the rules adopted on 8 June 2004, by the Union as being the Contribution Rates for the year commencing 1 July 2004 purporting to be rules of the organisation to be registered under the Industrial Relations Act 1996 be, and are hereby, validated as, the duly registered rules. (3) An order under s288 of the Industrial Relations Act 1996 that the decision taken by the Branch Council of the LHMU(NSW) on 8th June, 2004 to increase the contribution rates under sub rule N6 of Rule 75B, and the date of this order be declared to have been duly made and authorised under the rules of the organisation registered the Industrial Relations Act 1996 and be, and are hereby, validated. (4) An order under s288 of the Industrial Relations Act 1996 that the effect or effects of the failure to make an application to alter sub rule N6 of Rule 75B be negatived and rectified. (5) A declaration that the Commission is satisfied that the making of the orders herein will not do injustice to the LHMU(NSW) or any member or creditor of LHMU(NSW) or to any person having dealings with the LHMU(NSW). 9 Mr Nolan identified the following grounds in his submission in support of the relief sought by the union:

(a) there is no reason to suppose that those responsible for the invalidity have acted other than bona fide;

(b) the invalidities did not arise as a result of a knowing and deliberate act on the part of the officers of the union;

(d) the officers of the union, upon appreciating the omission, took the steps available to them to rectify the deficiencies in the affairs of the union;

(e) the making of the orders would have the effect of enabling the union to function and operate effectively and legally;

(f) the making of the orders would permit the union to function effectively as a representative body of its members in industrial relations and will rectify the potential effects of a "technical" deficiency;

(g) no issue of injustice relevant to the union or its members arises from the orders sought in the application; and

(h) no adverse consequence was identified for any creditor or any other person having dealings with the union in the proceedings. 10 In accordance with directions of this Court given on 26 May 2006, the union published an advertisement in The Sydney Morning Herald on 31 May 2006 outlining its application and advising of the hearing date for the application. In its evidence, the union stated that, as at 7 June 2006, the Branch Secretary had not received any inquiries arising from this advertisement. 11 On 30 June 2006, the Court issued a statement seeking further submissions from the union relating to clarification of factual matters and the applicability of s245 of the Act, both as to the Court's jurisdiction and the exercise of the Court's discretion under s288. The union provided further submissions on 13 July 2006 and a hearing was held on 27 July 2006. On the basis of the union's original application and the further written and oral submissions, the Court is now prepared to proceed to determine this matter. Consideration 12 The issue raised by the union's application is whether the Court should make a declaration that there has been an invalidity in the management or administration of the union and/or in the making or alteration of its rules for the purposes of s288(1) of the Act and, if so, whether the Court should exercise its discretion in favour of the union by making the orders sought pursuant to ss288(3) and (4) of the Act. 13 The principles applicable to applications of this kind were considered by this Court in Re Seamens' Union of Australia New South Wales Branch [2001] NSWIRComm 151 (18 July 2001) in which the Court undertook a detailed review of the applicable authorities. Mr Nolan also referred the Court to two other authorities: Australian Liquor, Hospitality and Miscellaneous Workers Union, New South Wales Branch [1999] NSWIRComm 217 (delivered by Hungerford J ex tempore on 11 May 1999) and Merchant Service Guild of Australia, Queensland Branch, Union of Employees [2005] QIRComm 191 (delivered by Linnane VP ex tempore on 17 November 2005). Having considered these authorities, the applicable principles can be summarised as follows:

(a) Section 288 of the Act requires the Court to firstly consider, as a jurisdictional prerequisite, whether an invalidity has occurred in relation to the matters described in s288(1)(a), (b) or (c) of the Act;

(b) the terms of s288(3) encompass any order rectifying the invalidity declared by the Court, negating and modifying the consequences in law of the invalidity and validating acts so that, in an appropriate case, the circumstances arising from the invalidity can be "put right" and the legal consequences of those circumstances changed;

(c) the discretion residing in the Court to declare such an invalidity is wide;

(c) in considering whether to exercise that discretion, the Court must have regard to the objects of the Act and orders that are made to enable the organisation to function and operate effectively and legally will assist in achieving these objects, in particular, the object in s3(d) of the Act. Other relevant factors include the circumstances in which the invalidity arose and the actions taken upon becoming aware of the invalidity;

(d) the discretion conferred under s288(3) of the Act is extended by the provisions of s288(4) which permits the Court, in circumstances where an order is made under s288(3), to give such ancillary or consequential directions as it considers appropriate; and

(e) the discretion of the Court is, however, constrained by s288(5), which prevents the Court from making an order pursuant to s288(3) unless the Court first satisfies itself that such an order would not do a substantial injustice to the organisation, any member or creditor of the organisation, or any person having dealings with the organisation. 14 I now apply these principles to the union's application in the present matter. Has there been an invalidity?

15 On the evidence presented by the union, an invalidity has occurred for the purposes of s288(1) of the Act. The invalidity is twofold. 16 First, it is clear that an invalidity arises from the union levying the increased contribution rates from its members for the period from 1 July 2004 to 30 June 2005, despite the amendment to its rules producing this result not being legally effective. I am satisfied that this constitutes an invalidity "in the management or administration" of the union for the purposes of s288(1)(a) of the Act as the relevant officers of the union effectively acted without appropriate power. 17 While not as clear, the Court is satisfied that a second invalidity arises from the failure of the relevant officers of the union to take such steps as were necessary to secure the consent of the Industrial Registrar to the amendment of sub-rule N6, the effect of which was that the new rule did not have legal effect. There is a question as to whether this constitutes an invalidity given the terms of s245(1) of the Act and, in particular, that there is no time limit by which an application for consent to an alteration must be filed with the Industrial Registrar under s245(1). 18 Mr Nolan submitted that s245(2) is arguably discretionary as the Industrial Registrar "may consent to an alteration" but "must not consent" in certain specified circumstances and, accordingly, it follows that in some unspecified circumstances, the Industrial Registrar may decline an application and the present case could be one such circumstance. Mr Nolan also submitted that it would not be unusual for there to be implied into s245 a requirement, for the purposes of the exercise of the discretion, that the application for the rules alteration is made within a reasonable time. 19 The union's submission relating to the interpretation of s245 essentially amounts to a contention that the power in s288 co-exists with the consent regime in s245 and that it is not necessary to apply for consent to an alteration under s245 before seeking relief under s288 of the Act. 20 The terms of s288(1)(c) are clearly directed to "the making or alteration of the rules" of the union and in taking a broad view of the power conferred by the section (see comments of Moore J in Brown v Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia [2001] 109 IR 162 at paragraph 26 in the context of the analogous federal validation provisions), I consider that a failure to obtain the consent of the Industrial Registrar falls within the terms of s288(1)(c). A prerequisite to the alteration taking legal effect is the alteration being consented to under s245(1) and the failure to obtain such consent gives rise to the rule being invalid. Should the Court exercise its discretion to make orders pursuant to ss288(3) and (4)?

21 The orders sought by the union are set out earlier in this decision. As already noted, the authorities make clear that s288(3) provides the Court with a wide discretion to determine the circumstances under which relief may be granted under the section. 22 In deciding whether to exercise that discretion in the present circumstances, it is relevant to consider whether it is appropriate to require the union to first seek the consent of the Industrial Registrar under s245 before seeking relief under s288, notwithstanding the Court's finding that the failure to obtain such consent constitutes an invalidity for the purposes of s288(1)(c). As already outlined, there is no time limit in s245 and it is conceivable that the union could still seek the consent of the Industrial Registrar.

23 Mr Nolan submitted that were the union to make an application for the variation to the rules, the Industrial Registrar would be placed in the unusual position where he would be effectively asked to give significant retrospective operation to the alteration of the rules that have since ceased effective operation. Mr Nolan also submitted that it may even be argued that the effect of s245 is that the rule so altered could only in any event have a prospective operation and that, if this was accepted, the registration would have no practical operation. 24 While there may be circumstances where it is appropriate for a union to first seek the consent of the Industrial Registrar before seeking relief under s288 where there has been a failure to obtain consent for an alteration to a rule, I do not consider that it is appropriate to require the union to seek that consent in the present circumstances. The relevant variation related to contribution rates levied for the period 1 July 2004 to 30 June 2005 such that the rule, in those terms, is no longer in operation. A further variation applies to current contribution rates and the union submitted that the Industrial Registrar has consented to such variation. Further, given that the increased contribution rates have already been levied, an application under s245 would validate the rule but would not cure the invalidity arising from the union levying those rates for the relevant period. 25 Turning to the other factors to consider, on the basis of the union's submissions, the Court is satisfied that:

(a) there is no reason to suppose that those responsible for the invalidity have acted other than bona fide;

(b) the invalidities did not arise as a result of a knowing and deliberate act on the part of the officers of the union;

(c) the invalidities arose due to inadvertence; and

(d) the officers of the union, upon appreciating the omission, took the steps available to them to rectify the deficiencies in the affairs of the union. 26 In view of these considerations, subject to dealing with s288(5), I consider that it is appropriate for the Court to make orders in this matter addressing the invalidities declared by the Court. The union has acted honestly in connection with the invalidities, the invalidities arose from inadvertence and addressing the invalidities would allow the union to function effectively and legally. Appropriate orders would also achieve the objects of the Act, in particular, the object contained in s3(d) to encourage the responsible management of representative bodies of employees. Further, for the reasons already outlined, it is appropriate to validate the rule under s288 notwithstanding that consent to the alteration to that rule has not been obtained under s245. 27 As to the form of the orders that the Court may make, the words of s288(3) are sufficiently wide to encompass any order rectifying the invalidity declared by the Court, negating and modifying the consequences in law of the invalidity and validating acts. In the present context, it is appropriate to deal with all aspects of the invalidities and, accordingly, it is appropriate for the Court to make orders:

(a) "rectifying" the invalidities declared by the Court to the extent that officers of the union have failed to obtain the consent of the Industrial Registrar to the rule change and have levied increased contribution rates in reliance on the purported rule change;

(b) "negating" and "modifying" the consequences in law of the invalidity to the extent that the alteration of the contribution rates has not legally taken effect; and

(c) "validating" acts to the extent that the alteration has not been approved under s245 and contribution rates have been levied in reliance on the purported rule change. Would the orders do a substantial injustice to the organisation, any member or creditor of the organisation, or any person having dealings with the organisation?

28 As required by s288(5), the Court must, before making any orders under s288(3), satisfy itself that such an order would not do a substantial injustice to the organisation, any member or creditor of the organisation, or any person having dealings with the organisation. 29 Having considered this requirement, I consider that no issue of injustice relevant to the union or its members arises from the orders sought. The proposed orders are beneficial to the union and its members as they restore conformity, so far as practicable, with the requirements of the rules and validate amendments that the Branch Council of the union made pursuant to its powers under the rules. 30 In this regard, the Court is satisfied that sufficient notice of these proceedings (and their subject matter) has been given by virtue of the steps taken by the union in compliance with the Court's direction of 26 May 2006. 31 Finally, as to whether any creditor of the union or any other person having dealings with the union may suffer a substantial injustice, no adverse consequence was identified for any creditor or any other person having dealings with the union. Accordingly, the Court is satisfied that the orders proposed would not do a substantial injustice to a creditor or any person having dealings with the union. Orders 32 I have considered the form of orders proposed by the union in light of the relevant statutory provisions and consider the following orders are appropriate. 33 In all these circumstances, the Court makes the following orders:

(1) On the facts before it, Court determines, declares and orders that: (a) an invalidity has occurred in the management or administration of the Liquor Hospitality and Miscellaneous, Union New South Wales Branch ["the union"], in that union contribution rates for the period from 1 July 2004 to 30 June 2005 were increased in reliance on an alteration to the rules of the union that was not legally effective; and

(b) an invalidity has occurred in the making or alteration of the rules of the union in that an application under s245 of the Industrial Relations Act 1996 was not made seeking the consent of the Industrial Registrar to a change in sub rule N6 of Rule 75N New South Wales Branch made pursuant to a decision of the Branch Council of the union on 8 June 2004;

(2) That upon the basis of such invalidities, the Court, being satisfied that these orders do not do substantial injustice to the union or to any member or creditor of the union or to any person having dealings with the union, orders: (a) that sub-rule N6 of rule 75B passed on 8 June 2004 by the union containing the contribution rates from 1 July 2004 to 30 June 2005 be validated as forming part of the duly registered rules of the union;

(b) that the effect or effects of the failure to make an application to alter sub rule N6 of Rule 75B be negatived and rectified; (c) that the actions of the union in levying contribution rates from 1 July 2004 to 30 June 2005 be validated as having been undertaken in accordance with the union's rules.

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