Consideration
59 I turn first to the respondents' contentions about the scope of remittal and whether the points of claim went too far.
60 There is, with respect, nothing in either contention.
61 The purpose of the remittal order (order 10), in light of the Full Court's ruling on the question of eligibility, was for me to determine the final form of relief, and in particular to consider the relief sought in [7]-[13] of the further amended originating application. There was no express qualification involved. And the relief that is now sought by the applicant is the same as the relief that was sought at the outset. The fact that the Full Court allowed the appeal on the basis that there had been a breach of National Rule 7(viii) cannot, as the respondents contended, impliedly limit what relief should follow. Accordingly, it is for me now to determine any remaining issues of law or fact. See by way of example only, Minister for Immigration and Multicultural Affairs v Wang (2003) 215 CLR 518 at 522 (Gleeson CJ).
62 Further, and in any event, the respondents' submission that the court should confine the remitter to consideration of National Rule 7 only is inconsistent with the established principle that the power to make orders under s 164 (and s 164A) "is not confined to the making of orders directing the performance or observance of a particular rule or particular rules of the organization". See R v Joske; Ex parte Shop, Distributive & Allied Employees' Association (1976) 135 CLR 194 at 212 (Mason and Murphy JJ).
63 I should also add that, contrary to what the respondents asserted in their written submissions dated 8 November 2021, nothing that Mr O'Connor sought at the remitted hearing involved inviting the court to make orders, or undertake any task, inconsistent with the remitter order, or proving a case that he had failed to prove at trial.
64 As to the respondents' argument about the scope of the points of claim, at the hearing on 8 November 2021, Mr Dowling's only objection was that Mr O'Connor's pleaded case under s 164A of the RO Act defied Mr Borenstein's earlier assurance that his case was "very targeted" and would not involve any plea about the subjective state of mind of any of the respondents in not following the procedure set out in Rule 7(viii). As I understood the position, that objection fell away when Mr Borenstein agreed to the deletion of [32] of the points of claim. In those circumstances, I do not propose to say anything more about the point.
65 I now turn to the substantive issues.
66 The applicant relies on s 164 of the RO Act, or alternatively, the broader provision contained in s 164A.
67 Section 164 is headed "Directions for performance of rules" and provides:
164 Directions for performance of rules
Application for order directing performance of rules
(1) A member of an organisation may apply to the Federal Court for an order under this section in relation to the organisation.
Note: For the meaning of order under this section, see subsection (9).
(2) Before making an order under this section, the Court must give any person against whom the order is sought an opportunity of being heard.
(3) The Court may refuse to deal with an application for an order under this section unless it is satisfied that the applicant has taken all reasonable steps to try to have the matter that is the subject of the application resolved within the organisation.
Court may make interim orders
(4) At any time after the making of an application for an order under this section, the Court may make any interim orders that it considers appropriate and, in particular, orders intended to further the resolution within the organisation concerned of the matter that is the subject of the application.
(5) An order under subsection (4) continues in force, unless expressed to operate for a shorter period or sooner discharged, until the completion of the proceeding concerned.
Definition
(9) In this section:
order under this section means an order giving directions for the performance or observance of any of the rules of an organisation by any person who is under an obligation to perform or observe those rules.
68 Section 164A is headed "Directions to rectify breach of rule of organisation" and provides:
164A Directions to rectify breach of rule of organisation
Application for order
(1) A member of an organisation may apply to the Federal Court for an order under subsection (4) in relation to the organisation.
(2) Before making the order, the Court must give any person against whom the order is sought an opportunity of being heard.
Conditions for making order
(3) The Court may make an order under subsection (4) in relation to an organisation if the Court is satisfied that:
(a) a person was under an obligation to perform or observe a rule or rules of the organisation; and
(b) the person breached the rule or rules; and
(c) the person acted unreasonably in so breaching the rule or rules.
Nature of order
(4) Subject to section 164B, the Court may make an order directing one or more persons (who may be, or include, the person who breached the rule or rules) to do specified things that will, in the opinion of the Court, as far as is reasonably practicable, place the organisation in the position in which it would have been if the breach of the rule or rules had not occurred.
(5) The Court may make the order whether or not, at the time of making the order, the person is a member or officer of the organisation.
69 Section 164B is headed "Orders under sections 164 and 164A" and relevantly provides:
164B Orders under sections 164 and 164A
…
Order must not require compensation
(2) An order under section 164A does not include an order directing one or more persons to compensate an organisation for any loss or damage suffered by the organisation caused by the breach of the rule or rules.
Note: An application for a compensation order may be made under Part 2 of Chapter 10.
70 Part 2 of Chapter 10 deals with the power of the court to order a person to compensate an organisation for damage suffered by it if the person has contravened a civil penalty provision and damage has resulted from the contravention, so it has no application here.
71 Sections 164A and 164B were introduced by the Workplace Relations Amendment (Registration and Accountability of Organisations) Act 2002 (Cth). As the Senate Revised Explanatory Memorandum to the corresponding Workplace Relations Amendment (Registration and Accountability of Organisations) Bill 2002 (Cth) explained (emphasis in original):
5.88 In Darroch and Ors v Tanner (1987) 74 ALR 559, a Full Court of the Federal Court held that it only had the power to give directions to persons who, at the time of the giving of the directions, were under an obligation to perform or observe the rules. The Court found that it did not have the power to make orders directing a person to take action to rectify a past breach of the rules, unless there was a continuing obligation on the relevant person to perform or observe the relevant rules. Clause 164A will give the Court such a power.
5.89 New clause 164A will give the Federal Court power to make an order in circumstances where a person, who was under an obligation to perform or observe rules of an organisation, has breached those rules and has acted unreasonably in doing so (subclause (3)).
5.90 The Court will have the power to order the person to take actions to rectify the effects of the breach of the rules. In effect, the provision is directed to placing the organisation in the position that it would have been if the breach had not occurred (subclause (4) refers).
72 In relation to s 164B, the Revised Explanatory Memorandum provided:
5.94 New subclause (2) provides that the Court cannot make an order under section 164A directing a person to pay compensation for any loss or damage suffered by the organisation. That is, any order under new clause 164A must be limited to rectification of the effect of the breach. (An application for a compensation order may be made under Part 2 of Chapter 10 of the Registration and Accountability Schedule in the context of a breach of a penalty provision - see notes on clause 307.)
73 The phrase "to compensate … for any loss or damage" in s 164B(2) of the RO Act is not defined, but in its ordinary meaning the notion of compensation means an amount of money payable in satisfaction of a liability. See, by way of example only, Gil v T & G Fire & General Insurance Co Ltd (1976) 10 ACTR 65 at 73 (Northrop J), approved in FAI Insurances Ltd v Zoric (1991) 28 FCR 250 at 264-265 (Neaves, Spender and von Doussa JJ).
74 It seems to me that s 164A is the obvious starting point for the relief that Mr O'Connor seeks. The gist of that relief is the making of orders that restore the status quo ante - that is to say, in the words of s 164A(4), the making of orders "directing one or more persons … to do specified things that will, in the opinion of the Court, as far as is reasonably practicable, place the organisation in the position in which it would have been if the breach of the rule or rules had not occurred".
75 Here, there are two "specified things" that would place the Union in the position in which it would have been if the breach of Rule 7(viii) had not occurred - (i) putting the disputed members back where the Full Court said they belong (in the Manufacturing Division); and (ii) remitting back to the Manufacturing Division the dues wrongly collected, which would have been the property of the Manufacturing Division had the breach not occurred.
76 Here, in my view, the three conditions for the making of orders effecting those things are satisfied, namely the respondents (or some of them):
(a) were under an obligation to perform or observe the rules of the Union;
(b) breached the rules of the Union; and
(c) acted unreasonably in breaching the rules of the Union.
77 The first two conditions are obviously met.
78 As to the third condition, in my view, the respondents (or some of them) did act unreasonably within the meaning of s 164A(3)(c) in breaching the rules of the Union because they failed to invoke the process under National Rule 7(viii) (see [36] above) and instead induced, encouraged and advised the disputed members to resign their membership in the Manufacturing Division and enrol as members in the Construction Branch.
79 The respondents submitted that I should "proceed on the basis that the relevant facts are that the transfer process in Rule 7(viii) was not followed and that some of the respondents encouraged the Members to resign from the [Construction and General] Division to join the Manufacturing Division"; that "[c]onsequently, Mr O'Connor's submission amounts to nothing more than a contention that the breach was unreasonable because the Rules were not followed"; and that "as a matter of statutory construction, a mere breach of the rules is not enough to establish unreasonableness".
80 I disagree. No authority was cited for the "statutory construction" assertion, and I can see no reason of statutory construction or principle why the notion of unreasonableness should be hidebound in that way.
81 The National Rules contain a tolerably straightforward mechanism for the resolution of demarcation disputes. That mechanism is contained in Rule 7(viii). As set out above, where a relevant Divisional Secretary or Divisional Branch Secretary forms a view that a person is, in substance, attached to the wrong Division or Branch, he or she must then seek agreement that the member be transferred. And where agreement cannot be reached, the matter may then be referred to the National Secretary and be determined by the National Executive or an officer designated by the National Executive, in accordance with the principles established by sub-rules 42(i) and 42(iii) (which, in substance, deal with transitional arrangements for the various amalgamations of the Union that have occurred since 1991). See O'Connor v Setka [2020] FCAFC 195 at [41]ff.
82 It was, in my view, unreasonable within the meaning of s 164A(3)(c) of the RO Act for the respondents (or some of them) to have acted unilaterally by encouraging members of the Manufacturing Division in Victoria to "resign" from that Division and to "join" the Construction and General Division instead, without any regard to the internal dispute resolution mechanism provided for in the National Rules, the obvious purpose of which is to make the decision as to who belongs where one for the National Executive (subject, of course, to review by the court in an appropriate case).
83 As Starke J said in R v Commonwealth Court of Conciliation and Arbitration; Ex parte Barrett (1945) 70 CLR 141 at 160, it is "implicit that the rules of the organization shall be performed and observed by its members; the rules impose a duty upon the members of the organization to observe and obey them". Not doing so, and instead embarking on drawn out and costly litigation, it seems to me, is readily capable of being characterised as unreasonable.
84 The respondents submitted that "[i]f … the Court finds … in relation to some [or] all of the rules relied on, that an identified person has breached an identified rule and, in doing so, acted unreasonably, it should nonetheless decline to exercise discretion to grant further relief". No explanation was given as to why that should be the case, so I put that (mere assertion) to one side.
85 In their written closing submissions, the respondents had a laundry list of reasons why proposed order 1 should not be made. The list included the following:
(a) there are 315 individuals who made a choice, whether encouraged or not, to join the Construction and General Division, some of who filed statements in the proceeding saying they wanted to remain where they were;
(b) the National Rules contemplate that a member may be "eligible" for membership of more than one Division and the question of eligibility is separate to the question of to which Division a member is to be "attached", citing Rule 7(iv) ("A member shall be attached to the Division of the Union covering the industry or employment of the member and shall be in only one such Division");
(c) the National Rules do not mandate or require that a member attached to the "wrong" Division be transferred to the "correct" Division, but operate to regularise, for all purposes, that member's attachment to the "wrong" Division, citing Rule 7(v)(b) ("no membership or attachment to a Division, Branch or Divisional Branch of the Union shall be invalidated, void or otherwise treated as irregular on account of the member being attached to a Division, Branch or Divisional Branch which, in accordance with the Rules, may not be the correct Division");
(d) the processes prescribed by the National Rules are "facultative" and no person is directed or required to apply to have a member transferred from one Division to another and the Rules do not allow a member to request such a transfer;
(e) any irregularity in the process by which a member came to be in one Division rather than another, including a failure to follow the Rule 7(viii) process, is "cured" by Rule 7(viii) ("Nothing in these paragraphs shall affect or detract from the provisions of subrule(s) 42(i), (iii) and (xii) and membership of a Division or a Divisional Branch shall be valid notwithstanding an irregularity in, breach of or failure to comply with the procedures in either one or both paragraphs (a) or (b) herein"); and
(f) the outcome of the National Executive's deliberations is "uncertain" and the court should not make an order that would, in effect, usurp the role of the National Executive under Rule 7(viii).
86 None of those submissions can be accepted. Taking each in turn:
(a) the wishes of the transferees have nothing to do with the question of attachment, which the Full Court has ruled on;
(b) that might be so, but again, here the question of attachment has been resolved in the Full Court's declaration (see [17] above);
(c) that is simply not so - the National Rules do not operate to regularise, for all purposes, a member's attachment to the "wrong" Division;
(d) to say that because the National Rules do not expressly provide for a member to make a "request" of a Divisional Secretary or Divisional Branch Secretary is to read Rule 7(viii) in an impermissibly artificial and narrow way, because the Rule self-evidently assumes or implies that such people may "form a view" about which Division a member ought belong to, based on things that they are told or requested to examine - were it otherwise, the Rule could be rendered largely unworkable;
(e) again, that simply is not so (see (b) above); and
(f) the making of proposed order 1 would not usurp the role of the National Executive under Rule 7(viii), because the question of attachment in the terms of the declaration made by the Full Court is, and remains, "until … a contrary decision by the National Executive".
87 The respondents contended that the court has no power to make proposed order 2 because the order would be to "compensate" the organisation (and thus proscribed by s 164B(2)), not one (as Mr O'Connor contended) that would "place [it] in the position it would have been if the breach of the rule … had not occurred" (and thus within the power granted by s 164A(4)).
88 The respondents submitted that rule 7(viii) was a "complete answer" to Mr O'Connor's contention, as follows:
134. In support of his contention that monies are not sought by way of "compensation" but as part of an order for "rectification", Mr O'Connor submits that the findings of the Full Court mean that "the Construction Branch has wrongly collected and [is] wrongly retaining the membership dues which have been paid to it" by the Members. He also submits that the respondents are in breach of the Rules by collecting and retaining those [membership dues].
135. Rule 7(viii) is a complete answer to these contentions. Rule 7(viii) operated to perfect the transfer of the Members to the C&G Division notwithstanding the breach of Rule 7(viii). From the time that this perfection occurred, the Members ceased to be members of the Manufacturing Division and ceased to be obliged to pay dues under Manufacturing Division Rule 6[(vi)] and 14A(i). Instead, they became liable to pay dues to the C&G Division in accordance with the C&G Divisional Rules.
136. Mr O'Connor points to National Rule 8(i) in support of his contention that the Members were required to be pay [sic] dues to the Manufacturing Division. However, National Rule 8(i) says only that the fees payable by any given member are to be in accordance with the Division to which they are assigned. By reason of Rule 7(viii), the Members were, on joining the C&G Division assigned to that Division. Accordingly, National Rule 8(i) only reinforces that the obligation on the Members was, from that time, to pay dues to the C&G Division.
137. Accordingly, the C&G Division did not "wrongly collect" dues from the Members and did not "wrongly retain" those dues. The Members were obliged to pay dues to the C&G Division because they were (by operation of rule 7(viii)) members of the C&G Division.
138. If there was no obligation on the Members to pay dues to the Manufacturing Division, then any payment of monies by the C&G Division to the Manufacturing Division can only be by way of compensation. For the reasons given above, the Court cannot make such an order.
89 I disagree. Rule 7(viii) is no answer at all. To read the rule as "operat[ing] to perfect the transfer of the Members to the [Construction and General] Division notwithstanding the breach of Rule 7(viii)" seems to me to fly in the face of the Full Court's ruling that the transfer, far from being perfected by the National Rules, absent a ruling to the contrary by the National Executive or alteration of the Rules, was contrary to them. It is the declaration made by the Full Court that under the Rules of the CFMMEU the persons eligible for membership pursuant to Rule 2(F) are attached to the Manufacturing Division, not the Construction and General Division, that is the starting point. Given that the Rules were found to have been breached in that regard, s 164A(4) asks in the context of this case: how in the opinion of the court is the Union to be placed in the position in which it would have been if the disputed members had, as the Rules required, remained where they were, in the Manufacturing Division?
90 The answer to that question, if I may say so with respect, was provided by Mr Borenstein in his closing address:
MR BORENSTEIN: … Our reply is that we ask for no order for payment to the organisation. We ask for no payment to compensate for any loss or damage. Rather, we ask for an order that would adjust internally the funds of the organisation in order to rectify an erroneous transaction or series of transactions. It's not a claim for compensation.
HIS HONOUR: Now, in the revised explanatory memorandum in relation to clause - subclause (2) of what was clause 164B of the Bill, it refers - having referred to the new subclause, it says, "That is, any order under new clause 164A must be limited to rectification of the effect of the breach".
MR BORENSTEIN: Yes. And that's precisely what we are seeking to do, that 164A in its own terms makes that point, your Honour will recall, because you're seeking to put the organisation back in the position it would have been in but for the breach, and 164B advances that proposal and what we say is - as I just said, we are not asking for damages for loss of - compensation. We are asking for, effectively, a rectification in relation to the collection of the dues, that within the organisation the dues went into one of the internal accounts. It should have gone into another. And we're seeking rectification of that situation. So what we're seeking is entirely consistent with what your Honour has read.
91 In my view, for the reasons that Mr Borenstein submitted, the making of proposed order 2 is not an order directing the respondents "to compensate" an organisation. First, it is in substance to order the making of a book entry in the internal accounts of the one organisation. Secondly, the making of such an order does not constitute an order that an amount of money is ordered to be paid in satisfaction of a liability (cf Gil v T & G Fire & General Insurance Co Ltd (1976) 10 ACTR 65 at 73).
92 The respondents next urged another long list of reasons why the discretion to order remittal of the contributions should not be exercised, assuming it were enlivened, including the following:
(a) the evidence was that during the lifetime of this dispute, the Construction and General Division had been representing the industrial interests of the disputed members while the Manufacturing Division had not, and to take all contributions from them fails to acknowledge the work that the Construction and General Division had done;
(b) Mr Graauwmans in his 19 May 2021 affidavit gave detailed evidence about the services available to the disputed members, including access to organisers, the maintenance of a system of designated shop stewards, a dedicated telephone inquiry service, a membership centre and access to specialised industrial and legal staff;
(c) Mr Graauwmans also gave evidence that the Construction and General Division employed two new organisers to service the members, and evidence of the substantial body of work undertaken on behalf of the members during the relevant period, including negotiating enterprise agreements covering the members employed by ten different employers, recovering more than $20,000 in underpayments, conducting compliance checks, assisting members with disputes about JobKeeper, negotiating wage increases, representing some members in a dispute about intrusive tracking technology and assisting at least one member to find new employment;
(d) the Construction and General Division thus expended the dues obtained from the members for the purpose of providing them with a high level of representation and sophisticated industrial services;
(e) the contributions paid by the members are not severable so as to be referrable to the provision of any particular services, but are paid in exchange for the right to be represented, and the Construction and General Division represented the members, and thus earned the dues; and
(f) the Manufacturing Division cannot now go back in time and represent the members' interests, and requiring the contributions to be paid to the Manufacturing Division "would give it a windfall and overcompensate it".
93 Such factual matters may be accepted, at least for the sake of the debate. But in my view, they are not relevant to the question of the discretion to be exercised under s 164A(4), because as Mr O'Connor submitted, "any burden on the Construction Branch occurred because of a breach of the rules of the Union".
94 In those circumstances, in my view, the power to make proposed orders 1 and 2 is enlivened and this is an appropriate case to exercise the discretion to make those orders under s 164A of the RO Act.
95 The whole point of the introduction of s 164A was to obviate the need to deal with the sometimes thorny question of whether an order was sought directing a person to rectify a past breach, and whether there was a "continuing obligation" to perform or observe the relevant rules. In those circumstances it is unnecessary, in this case, to consider the issues that may be said to arise under s 164 and about which much ink was spilled in written submissions.
96 If it matters, however, I would have made the same orders under s 164 in any event. Darroch v Tanner was a case far removed from this one. There, the court had been asked to order the appellants personally to repay union funds which they had wrongfully spent. The problem was that the respondent "was not able to refer the court to any rule of the Union which imposed upon any of the appellants … an obligation to reimburse the Union out of their own funds any money paid to a third party in accordance with the resolution which has been held to be null and void". See (1987) 16 FCR 368 at 375.
97 But as Mason and Murphy JJ said in R v Joske; Ex parte Shop, Distributive & Allied Employees' Association (1976) 135 CLR 194 at 212:
The judgments … in R v Commonwealth Court of Conciliation and Arbitration; Ex parte Barrett [(1945) 70 CLR 141] make it perfectly clear that sub-s. (1) of s 141 [the equivalent of s 164] is not confined to the making of orders directing the performance or observance of a particular rule or particular rules of the organization, as the prosecutors would have it, and that it extends, as its words explicitly state, to the giving of directions for the performance or observance of any of the rules of an organization, that is, for the doing of acts which will conduce to the performance or observance of such rules.
98 Here, it seems to me, as Mr O'Connor contended, proposed order 1 will conduce to the performance and observance of the rules of the Union by returning the disputed members to the Manufacturing Division to which they were properly attached in accordance with the National Rules, as interpreted by the Full Court, before they were procured by the respondents, in breach of the Rules, to leave that Division and join the Construction and General Division.
99 And proposed order 2 will conduce to the performance and observance of the Rules because it will put an end to the ongoing contravention of the Rules by the respondents. Further, again as Mr O'Connor submitted, an order for the respondents to remit the membership dues which they have collected, and continue to retain, from the disputed members, addresses a contravention which flows directly from the contravention whereby the respondents wrongly procured the enrolment of the disputed members into the Construction and General Division.
100 In those circumstances, it is neither here nor there that various of the rules referred to in the points of claim, and microscopically analysed in the schedule to the respondents' closing submissions, may be said, standing alone, not to impose any obligation, or not to be capable of being breached or being observed or performed.
101 It remains to deal with proposed order 3. In my view, as the respondents submitted:
… even if the Members are transferred to the Manufacturing Division, order [3] would impose on the respondents an obligation that they could not comply with absent cooperation from the Manufacturing Division.
For example, Proposed order [3] attaches to the Members. If those Members are transferred to the Manufacturing Division, the respondents will not know, and will have no means of finding out, where those members are employed at any point in the future. The respondent would be forced to ask the Manufacturing Division for this information each time it proposed to commence negotiations for an enterprise agreement covering an employer that might possibly employ one of the Members. If the Manufacturing Division failed or refused to provide that information (which it might well do, including for privacy reasons), the respondents would be left in the position of not knowing, and being unable to determine, whether order [3] operated in relation to a particular enterprise agreement. It is not appropriate for the Court to make an order that is not capable of being complied with by the respondents or an order that requires the cooperation of a third party. The consequence of doing so would be that the respondents would be exposed to contempt of court in circumstances where their ability to comply with the orders of the Court was dependent on matters beyond their control.
Further, order [3] is impractical. It does not only operate where the Members continue to be members of the Manufacturing Division. It would operate where the Member left the CFMMEU altogether, and where the Member joined another union entirely (including because they changed occupations, such as by moving from a trades classification into an administrative or professional classification within the same workplace).
102 For those reasons, I decline to make proposed order 3.