Re Holmes; Ex p Manchester Unity Independent Order of Oddfellows (Vic) [1980] HCA 46

High Court of Australia|1975-04-11|Before: Wilson JJ, Stephen J, Mason J, Aickin J

The applicant presents in this Court the same case that was presented in the Commission, namely, that the activities of the friendly societies are not "industrial" within the meaning of s. 51 (xxxv.) of the Constitution and that consequently the dispute which has arisen is not an industrial dispute which satisfies the constitutional conception. The case presented by the respondent does not seek to take advantage of the extended definition of "industry" which is contained in s. 4 of the Conciliation and Arbitration Act 1904, as amended ("the Act"). By the extended definition the word "industry" includes, amongst other things, the "calling employment industrial occupation or vocation" of employees. If we were to view the terms of the statute in isolation, without regard to any limitations inherent in s. 51 (xxxv.) of the Constitution, the extended definition might provide in itself an answer to the applicant's case. The dispute might be described as a dispute in the clerical industry, if that be the correct description of the calling, employment, industrial occupation or vocation of clerks. However, there is a question whether the extended definition falls within the constitutional conception of "industrial dispute". I leave this question in abeyance because there are in my opinion other and solid grounds for rejecting the applicant's case.

By way of preliminary I voice a very strong protest at the inadequacy of the evidence so far as it relates to the health fund activities of the friendly societies, notably their insurance activities, for, as will appear, their insurance activities are a matter of critical importance, as the decisions of the Commission so clearly indicate. Unfortunately, in this case, as in so many other industrial cases which are brought to this Court, the evidence has been left in an unsatisfactory and disordered condition.

Nevertheless, with the aid of counsel we have been able to piece together a picture of the relevant activities of the societies from the evidence and from the relevant legislation. The societies operate hospital and medical benefits funds as well as providing some other services for their members, which include additional health services. In the operation of these funds the societies employ clerical and administrative officers. The dispute in question relates to the terms and conditions of employees engaged in the health funds operations of the societies. It is therefore to these operations that we must look in deciding whether the dispute is industrial in character.

The unique or special character of friendly societies has little or no relevance to the issue. It matters not that they are regulated by State and Territory legislation, that their rules and rates of contribution are controlled by legislation or that there are limits on the transactions into which they may enter and on the investments which they may make. Nor does it matter that they provide a variety of services to members, quite apart from their operation of the health funds. They are not permitted to distribute surplus profits, though this is a matter which may require to be taken into account.

What is critically important is what they do in the operation of these funds. In this respect they enter into contracts with their member contributors by which, in consideration of members paying stipulated contributions, the societies indemnify the contributors against liability which they may incur for hospital and medical services up to specified amounts for particular items, the amounts varying according to the rate of contribution which the member agrees to pay. It was not, and could not be, disputed that in ordinary circumstances this activity would amount to the carrying on of insurance business. And it is in the pursuit of this activity that the friendly societies have built up the hospital benefits and medical benefits funds which they operate. Although the evidence is not altogether clear, it appears that the societies have treated these funds in their accounts and dealt with the funds in much the same manner as companies carrying on traditional insurance business do. The evidence indicates that money standing to the credit of the funds is invested in the short term money market or in longer term trustee securities.

The applicant urges that none the less the operation of the funds does not constitute the carrying on of insurance business. The argument is that what seems at a distance to be insurance business at closer quarters is seen to be an administrative or quasi-governmental function when full account is taken of the legislative regime established by the National Health Act 1953, as amended, over medical and hospital benefit organizations. These organizations are regulated by Pt VI of that Act. The societies are registered organizations pursuant to the relevant provisions. They are registered as medical benefits organizations under s. 67 and as hospital benefits organizations under s. 68. It is unnecessary to set out the precise manner in which registered organizations are subject to ministerial and departmental control and supervision. It is enough to say that the Minister has power to grant or reject an application for registration (s. 73) and to revoke registration, that he may impose conditions on registration (s. 73A), that the National Health Act itself makes registration subject to certain conditions (ss. 73B and 73BA) and that the Permanent Head has power to examine an organization's books and records and to require information (s. 75) and that the organizations are required to furnish him with annual accounts (s. 76).

Of greater importance is the Minister's power to give a direction to a registered organization with respect to rates of contribution, the scope and level of benefits, the provision of a service to a contributor and other matters (s. 73BE) and his power to direct a registered organization to admit a person as a contributor (s. 73BF). The organization is bound to conduct its health funds in accordance with any such direction (s. 74B(c)). The Minister also has power to require registered organizations to keep records and furnish information (s. 74C).

A point which the applicant makes is that the citizen who elects to have public hospital treatment in a public ward will have his public hospital costs paid by the Commonwealth, even if he is not a contributing member of a registered organization. To such a person there is no benefit in becoming a contributing member of a registered organization, save that, if he does become a member he may choose his own doctor and may, by subscribing at a higher rate, secure a private room or other private hospital treatment. The important consequence according to the applicant, is that public hospital treatment in a public ward is paid for by the Commonwealth and the citizen is not at risk in relation to it. The applicant submits that, in relation to hospital benefits, membership of a registered organization is only effective to confer financial benefits when the member contributes so as to entitle him to treatment in a non-public room in a public hospital or to treatment in a private hospital. However, apart from saying that the proportion of public to private hospital beds is 3: 1, the applicant is unable to adduce evidence which supports the conclusion that the cases in which the contributor secures an additional financial benefit are of little significance. Certainly, so far as the friendly societies are concerned, the operation of their health funds, which involves the receipt of contributions from members and the payment of the members' hospital expenses on an indemnity basis, appears to be a very significant element in their activities.

In the case of medical services the Commonwealth bears that part of the schedule fee for an item which exceeds $20. If the member of the registered organization contributes on the basic rate and receives a medical service for which he is charged a schedule fee of $30, the Commonwealth will contribute $10, the member may contribute $15 and the registered organization $5. If the member contributes on a higher scale, then his reimbursement by the organization will be greater. The existence of the Commonwealth benefit does not deny that the relevant character of the societies' activities is insurance.

But, as a registered organization, a friendly society performs another function in relation to an uninsured person who is not a contributing member of the organization. The uninsured person is entitled, as is the contributing member of an organization, to the Commonwealth subsidy in the example already given. What the uninsured person does is to register with a friendly society, but not as a contributing member. On producing his bill and receipt for the medical service which he has received, he is paid the Commonwealth subsidy by the society, which then seeks and obtains reimbursement from the Commonwealth. A fee in the nature of a commission is paid by the Commonwealth to the society the amount of which is based on the number of claims which the society submits to the Commonwealth. No doubt it is administratively convenient for the Commonwealth to make use of the friendly societies in this way so that they process the uninsured person's claim on the footing that they will be reimbursed and that they will receive the commission which is payable for the service which they provide for the Commonwealth.

This activity on the part of the societies is the latest, if not the ultimate, step in a development which, according to the applicant, marks an alteration in the character of the function of friendly societies from insurance to government or quasi-governmental administration in which they are in substance providing a social welfare service on behalf of the State. There is no doubt that the health funds (including the friendly societies) are institutions which have been caught in an evolutionary process which makes them increasingly subject to government control and direction.

None the less, the facts remain that the friendly societies are institutions independent of government and that, in operating their health funds, they engage in insurance activities on such a scale that it constitutes insurance business. Indeed, it is their insurance business which has brought about the establishment of the health funds which they operate. And it is their operation of these funds and the fact that they indemnify their contributors against hospital and medical expenses that has brought them under government direction and control, even to the extent that in some respects they perform administrative activities for the Commonwealth.

The current dispute is a dispute that relates to the terms and conditions of employment of employees engaged by the friendly societies in the operation of their health funds. Although the evidence is meagre and sketchy, it indicates that those employees are engaged in those activities which I have described as insurance activities. The evidence does not enable us to say that some employees employed in the operation of health funds are exclusively engaged in activities which do not constitute insurance.

The conclusion that the friendly societies in operating their health funds carry on insurance business disposes of the applicant's case. It is now well settled that the carrying on of insurance business is relevantly "industrial" for the purposes of s. 51 (xxxv.). It was so held in Australian Insurance Staffs' Federation v. Accident Under-writers' Association [1] . This decision has been accepted and applied in a long course of decisions culminating in Reg. v. Marshall; Ex parte Federated Clerks Union of Australia [2] , and Reg. v. Cohen; Ex parte Motor Accidents Insurance Board (Tas.) [3] . In the last of these cases the Court held that, in characterizing the functions of the Board as involving the business of insurance, it mattered not that the Board was not out to make a profit.

(1923) 33 C.L.R. 517, at p. 527. 2. (1975) 132 C.L.R. 595, at pp. 607-608. 3. (1979) 141 C.L.R. 577, at p. 590.

It remains only to say that this Court's decision in Reg. v. Holmes; Ex parte Public Service Association (N.S.W.) [4] , is to be distinguished on the ground that here the friendly societies are carrying on insurance business and that their functions are not "bare administrative functions" carried on by a governmental organization or statutory body.

The application is for an order of prohibition directed to a Commissioner of the Australian Conciliation and Arbitration Commission to restrain him from proceeding further to hear and determine an industrial dispute so far as the prosecutors are alleged to be parties to it. The bases of the application are the familiar ones that the dispute is not an industrial dispute within the meaning of s. 51 (xxxv.) of the Constitution or, if it is, it is not one within s. 4 of the Conciliation and Arbitration Act 1904, as amended ("the Act"). To succeed, the prosecutor must prove clearly that the Commission lacks authority to hear and determine that part of the dispute which is in question.

The prosecutor claims that, although some of its activities may be regarded as being within the insurance industry and therefore as part of the industrial dispute over which the Commissioner has jurisdiction (see s. 25 of the Act), other parts of its activities are not within the insurance industry and are therefore outside the scope of the Commissioner's authority.

There is an industrial dispute in the constitutional sense in regard to the activities in question. Unlike Reg. v. Cohen; Ex parte Motor Accidents Insurance Board (Tas.) [5] where the union was restricted to representing employees in the business of insurance, here the union is unquestionably capable of representing the employees: it represents clerks generally and the relevant activities are clerical.

The constitutional description, "industrial disputes", is not to be translated as "disputes in an industry"; it embraces "a dispute as to the terms and conditions of work or related matters". I have stated my views on this in Reg. v. Holmes; Ex parte Public Service Association (N.S.W.) [6] . This is such a dispute and therefore falls within the constitutional description. It also falls within the statutory definition of industrial dispute (see s. 4 of the Act).

Even if the Constitution and the Act do require the existence of a dispute in an industry, there is one here. Where the industrial relationship of the disputants is one of employment, "industry" is not confined to the industry of the employer. The Act was amended long ago to authorize the Commission and its predecessors to settle disputes in the industry which was that of the employees. Section 4 states that, except where otherwise clearly intended, "industry" includes: -

(a) any business, trade, manufacture, undertaking, or calling of employers;

(b) any calling, service, employment, handicraft, or industrial occupation or vocation of employees; and

Clauses (b) and (c), as well as (a), are applicable to ss. 28 and 25 of the Act, which empower the Commission to prevent and settle industrial disputes and require its members to endeavour to do so (R. v. Galvin; Ex parte Metal Trades Employers' Association [7] . The dispute is one in the clerical industry and the employees are seeking the making of an award to be described as the Clerical Officers' (Health Funds Industry) Award, 1975. This case is to be distinguished from Reg. v. Holmes [8] , in which the question was whether an industrial dispute (in the constitutional and statutory senses) existed in respect of the work performed by clerks employed by the Department of Motor Transport, as there is no complicating factor of administrative work carried out by employees of a government department. 1. (1949) 77 C.L.R. 432, at pp. 445-446. 2. (1977) 140 C.L.R. 63.

The prosecutor has failed to prove that the Commissioner has no authority to deal with the dispute so far as it concerns the prosecutor.

I have had the advantage of reading the reasons for judgment prepared by my brother Mason with which I am in full agreement. I would therefore dismiss the application.

I would dismiss the application, for the reasons given by Mason J.

High Court of Australia Stephen, Mason, Murphy, Aickin and Wilson JJ. Re Holmes; Ex p Manchester Unity Independent Order of Oddfellows (Vic) [1980] HCA 46

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Judgment (28 paragraphs)

Cases Cited (1)