Health Services Union (No 2) [2010] FCA 485

REASONS FOR JUDGMENT 1 On 4 August 2009 I determined that the Victorian No 1 Branch ("the Branch") of the Health Services Union of Australia ("the Union") had ceased to function effectively and I approved a scheme to rectify this position: see Health Services Union [2009] FCA 829. These orders were made pursuant to s 323 of the Fair Work (Registered Organisations) Act 2009 (Cth) ("the Act"). Part of the scheme involved a spill of all elected officers in the branch and the conduct of fresh elections. Those elections were to be held in October 2009. Paragraph 5 of the scheme provided that: "The officers elected under the Scheme shall hold office until the conclusion of the elections for offices conducted in accordance with the Rules in 2014." 2 The purpose of this provision was to obviate the need for the successful candidates to face re-election this year when the normal round of four-yearly branch elections were to be held under the rules. 3 The elections were held as anticipated and the Branch has been functioning under the control of the newly elected officials. The Branch has recently agreed to amalgamate with the Victorian No 3 and the New South Wales branches to form the East Branch of the Union. Rule changes to give effect to the amalgamation and its consequences have been approved by the Union's national council. This occurred on 6 April 2010. 4 Amongst other things, the rule amendments will involve the Branch and the Victoria No 3 branch merging with the New South Wales branch, the abolition of all offices within the Branch and election for offices in the merged branch to be held towards the middle of this year. The offices in the merged branch are to be filled on a transitional basis by officers of the merging branches. 5 The rule amendments also provide for what is to occur in order to facilitate the transition from three separate branches to a single East Branch. Of present relevance is the proposed new rule 48B which provides that it is to apply: "…notwithstanding anything elsewhere contained in these rules" and is said to be intended to facilitate the amalgamation of the operations, administration, funds and resources of the three branches in an orderly and expeditious fashion. 6 The merger is to occur on the date on which the amended rules are certified. One of the transitional provisions is sub-rule 48B(f) which provides that, on the merger date: "The assets, funds and property of, and the debts and liabilities incurred by, the Victoria No. 1 Branch and the Victoria No. 3 Branch shall be the assets, funds and property of, and the debts and liabilities of, the HSU East Branch." 7 The proposed amended rules have been submitted to the General Manager of Fair Work Australia under s 159 of the Act for certification. The General Manager has advised the Federal Secretary of the Union, Ms Jackson, that paragraph 5 of the scheme constitutes a prima facie obstacle to the approval of the amendments because, as he understands paragraph 5, the officials elected in the October 2009 Branch elections are guaranteed the right to hold office until 2014. This, as he judges matters, would give rise to difficulty because the amended rules would remove from office the officials elected within the Branch in October 2009 as part of the amalgamation process. 8 It was not my intention, in approving the scheme, to prevent an amalgamation of the kind presently proposed. Rather, as I have said, paragraph 5 was designed to obviate the necessity of the newly elected officers of the Branch having to face election as part of the normal cycle within a few months of them having been elected. 9 By notice of motion dated 23 April 2010 the Union moves the Court for an order which would vary paragraph 5 of the scheme by adding at the end the words: "…subject to the continued constitution of the Branch under the Rules of the Union." The terms of the proposed amendment are founded on s 323 of the Act. 10 The notice of motion was made returnable on 30 April 2010. On that day there were appearances on behalf of the Union and of Ms Pauline Fegan (who had been the president of the Branch prior to the 2009 elections) and of eight persons who were either members or former members of the Union who had been represented in the course of the hearing which led to the making of the August 2009 orders. There was also, through the same lawyers, representation of two firms, Macpherson & Kelley who had acted in the earlier proceeding on behalf of Ms Fegan and Wisewould Mahonys who had acted on behalf of the eight individual members. 11 The representatives of the firms said that they had not had an adequate opportunity to obtain instructions from their individual clients as to what attitude they wished to adopt before the Court on the motion. They were also concerned that any approval of the proposed amendment to paragraph 5 of the scheme could have a prejudicial effect on the firms should the order have the effect of removing the only obstacle to the approval of the amended rules and the consequential dissolution of the Branch. Their reason for concern stemmed from the terms of a deed which had been entered into by the parties prior to the making of the orders in August 2009. That deed was dated 30 June 2009 and the parties to it included the Union and the various individuals who had been represented in the course of that hearing. Clause 3 of the terms provided: "Subject to the relevant individual party complying with clause 1 of this Deed, the Branch will pay, from branch funds, the reasonable legal costs of each individual party in relation to proceeding VID 378 of 2009." 12 The solicitors advised the Court that they had rendered accounts for their services but had not been paid. They had instituted proceedings in the Supreme Court of Victoria and the Magistrates Court of Victoria to require the Union to pay the amounts claimed for the provision of their legal services. Their concern, as it was expressed, was that, because the obligation contained in clause 3 of the deed fell upon the Branch and the source of any funds to meet the legal fees was to be the Branch funds, any dissolution of the Branch would stultify any attempt by them to obtain orders in the two court proceedings to which I have referred. 13 There was no evidence of the terms of the deed before the Court and there was some uncertainty about its terms. The solicitors also wished to obtain instructions from their clients. In these circumstances, I agreed to an adjournment of the hearing of the notice of motion until today so that those instructions could be obtained. 14 When the matter was called on this morning, Mr Reitano appeared for the Union. Mr McKeown appeared initially for Ms Fegan but in the course of the hearing announced that he also had instructions to appear for Macpherson & Kelley. Mr Strong appeared for the eight individual members who he had previously represented and Wisewould Mahonys. 15 Mr Strong's clients, save one, had all resigned from the Union following the elections and they are no longer members. The one client who remained a member did not oppose the making of the orders. Ms Fegan opposed the making of the orders because she said that she would be personally prejudiced by the dissolution of the Branch. She said that this would be the case because of another provision of the deed, namely clause 10(e). That clause provided, in part, that the Branch would continue to pay her salary up to 31 December 2010, subject to certain conditions. Her solicitor deposed that, earlier this year, Ms Fegan had her employment with the Branch terminated by the new Branch Secretary and she had not thereafter been paid, in breach, she said, of the terms of the deed. 16 In an effort to alleviate certain of the concerns raised by the opposing parties, Mr Reitano advised the Court that he had instructions to give an undertaking on behalf of the Union in the following terms. "The Health Services Union undertakes to the Court that it will not rely upon the alteration to the Scheme approved by the Court in proceedings number VID 378 of 2009 in any way as a defence to or in proceedings brought by any party to these proceedings or their legal representatives concerning the payment of legal costs under the Deed of Agreement dated 30 June 2009 which is annexure RJT-1 to the Affidavit of Richard James Thompson sworn 3 May 2010." 17 The order that is sought in the notice of motion would ensure that the intention of the Court in approving paragraph 5 was clarified. All that the amendment would do would be to make clear that, so long as the Branch continued in existence as an administrative unit under the rules of the Union, the officials elected to office in the Branch in the October 2009 elections would continue to hold office until the elections, scheduled under the Rules, in 2014. The paragraph was never intended to act as a barrier to the reorganisation of the Branch structure within the Union. 18 I have considered carefully the submissions made on behalf of the individual member and former members who have been represented before me today and of the two firms of solicitors who acted for them in the principal proceeding. I am not persuaded that they will be prejudiced by the making of the order sought by the Union. This is because of the combined effect of the undertaking and the transitional rules to which I have referred. In any event, I am far from persuaded that any such prejudice would justify a refusal of the motion. This is because the granting of the motion will have no direct effect on the interests of any of the individuals or firms involved. All that the amendment will do is, as I have said, give effect to the original intention of the scheme, and thereby alleviate any concern on the part of the General Manager of Fair Work Australia that the proposed amendments to the Rules would be inconsistent with the terms of the scheme. 19 I do not know whether, even once this issue is clarified, the General Manager will be minded to certify the amended Rules. That, under the Act, is a matter for him. If any of the parties represented before the Court consider that their interests would be prejudiced by some or all of the amendments then they will have the opportunity, and, in fact, already have the opportunity, of making submissions to the General Manager, which he will, no doubt, take into account in making his decision. But the decision of the Court will cause, as I have indicated, no immediate prejudice, and, at worst, only indirect prejudice, which can be ameliorated in the way that I have just indicated. 20 Upon the giving of the proffered undertaking by the Union, the order amending the scheme, which is sought in the Union's notice of motion, will be made.