Nature, extent and characterisation of Mr Melhem's conduct
141 Although the parties both accepted that there were eight contraventions, they submitted, and I am prepared to accept, that the appropriate way to view Mr Melhem's conduct is by dealing with it by employer or organisation, and looking at each set of events and transactions with one employer or organisation as one course of conduct. That is an approach which is favourable to Mr Melhem.
142 As I note below, in relation to Geotech there was only one invoice, one "transaction" and one episode of 18 employees being added to the Register of Members without compliance with the AWU Rules. The parties accept that is a single contravention of s 285(1) and s 286(1)(a), and that one penalty should be imposed on Mr Melhem for that conduct. This, they submit, is the necessary result of the application of s 306(3). I accepted that submission at [37] above. Yet, in respect of Cleanevent, there were three payments made by Cleanevent to the AWU between 2010 and 2013, and two episodes of names and details of Cleanevent employees being entered on the AWU Register of Members. Nevertheless, on a "site" basis, the pleading is alleged as a single contravention of s 285(1) and s 286(1)(a), for which one penalty should be imposed. I have some difficulty in accepting that is the most rational characterisation of Mr Melhem's conduct for the purposes of liability, but it is a foundation of the way the applicant's case was pleaded and of the parties' settlement of the issues on liability in this proceeding, and the Court should be cautious in imposing penalties in a way which contradicts such an agreed position, even if it has power to do so. Otherwise, the considerable benefits of encouraging settlement of allegations of liability in penalty proceedings, and the concomitant savings in resources to the parties and the Court - especially publicly funded resources - could be undermined.
143 Mr Melhem's overarching submission, in terms of the characterisation of his conduct, is that his contravening conduct concerned union governance, not corruption or self-dealing, and that this was a principal factor to consider in determining the appropriate level of penalty. Senior counsel for Mr Melhem emphasised that the provisions of the FWRO Act in respect of which Mr Melhem has admitted contraventions, are focused on union governance. Senior counsel for Mr Melhem submitted the contravening conduct here was about "record keeping, systems, accountability, functioning and control", and far removed from the line of cases where the person prosecuted had profited personally, or sought to profit personally, from non-compliance with obligations in the FWRO Act (such as McGiveron; General Manager of the Fair Work Commission v Thomson (No 3) [2015] FCA 1001 and Health Services Union v Jackson (No 4) [2015] FCA 865; 108 ACSR 156).
144 The absence of any "disputing" of the invoices by any of the employers or organisations, which was highlighted in Mr Melhem's submissions, is not especially significant, where it is clear the facts agreed have been the subject of careful negotiation and agreement, and there are many gaps in the evidentiary narrative, including no real explanation of why much of the admitted conducted occurred. On the one hand, as senior counsel for Mr Melhem submitted, the absence of any dispute may indicate that no employer or organisation felt misled by the descriptions in the invoices. On the other hand, it may also indicate that whatever the explanation for the practices which are the subject of the contraventions, the employers or organisations knew about the explanation and did not object.
145 Having carefully considered the parties' respective submissions, I do not consider it is appropriate to describe what Mr Melhem did as failures in "record keeping, systems, accountability, functioning and control". I do not consider there is much of a comparison at all with the circumstances in Registered Organisations Commissioner v Australian Nursing and Midwifery Federation (No 2) [2018] FCA 2004 (ANMF).
146 In General Manager of the Fair Work Commission v Thomson (No 4) [2015] FCA 1433 at [20], Jessup J relevantly stated:
The respondent's conduct in this area involved no momentary lapse in judgment: rather, it involved a consistent, focussed and, one would have to say, businesslike diversion of the services of an employee of the HSU to activities which were to the advantage of the respondent. There is no way in which this conduct could be dressed up to present a persuasive case for leniency.
147 I accept the nature of the contravening conduct by Mr Melhem is quite different to that of the respondent in Thomson (No 4). However, the point of referring to Jessup J's findings is to illustrate that in assessing seriousness, factual matters such as whether the contravention was momentary, inadvertent, or negligent but not conscious, are the kinds of factors which legitimately inform the Court's assessment of seriousness.
148 In the present case, the evidence establishes there was conscious and deliberate conduct by Mr Melhem in seeking out and facilitating the recruitment of new members to the AWU outside the process set out in the AWU Rules, and the payments of significant sums of money for those recruitments, which amounts generally bore little if any correlation to the membership rates set by the AWU Rules. For reasons that remain unexplained, almost all of the payments were attributed to services which were not provided, or were provided in a limited way. All this conduct, in my opinion, was not inadvertent, or negligent, or careless; it was deliberate.
149 Mr Melhem's involvement was not peripheral. Nor was it intermittent. The evidence shows he was regularly, closely and personally involved in the communications which led to the provision of lists of employees or individuals (in the case of the Jockeys' Associations); and he was personally involved in securing payments which were attributed to membership contributions although the amounts overwhelmingly bore no relationship to the amounts prescribed for membership fees in the AWU Rules. He was also directly involved in, and authorised, the issue by the AWU of invoices which described the payments to be made to the AWU in a way which did not conform to the purpose to which the AWU put the funds once received.
150 Contrary to the submissions made on behalf of Mr Melhem, I do not consider there is any binary distinction, in terms of characterisation of the contravening conduct, between "record keeping" errors (such as those considered in the ANMF case) and "self-dealing". Characterising conduct like this risks the error identified by the plurality in Weininger, of identifying two extremes and choosing between them. The conduct of individuals which constitutes the contraventions is not so binary in nature. While I do accept that there is no evidence of any personal profiting by Mr Melhem, and no suggestion of any corrupt behaviour designed to advance his personal interests, that does not mean the only way to describe the contravening conduct is as a failure of record keeping, or systems.
151 This is, again, where the absence of any explanations about why Mr Melhem took the steps he did, precludes any firm characterisation of either the minor or extreme categories of behaviour.
152 Senior counsel for Mr Melhem submitted the correct characterisation of Mr Melhem's conduct was:
As your Honour will have seen working through the agreed statement of facts, the gravamen of the offending and the contravening which is admitted across all five sites or associations with respect to section 285 comes to this: of course, the precise language of the agreed facts is important, but if a theme can be extracted, in my submission, it is fairly put as follows, that the entry of names on the membership register of the union other than in accordance with the rules has occurred. That has been admitted. And that with respect to the entry of those names there was also receipt of income which was attributed at the union's end or in the union's books as membership income.
Those two facts or admitted matters may tend to undermine the integrity that the register of members has been acknowledged. And it has been admitted that that falls short of the degree of care and diligence that a union official - reasonable union official in the second respondent's position might be expected to display. Now, it is only with respect to three sites that there is also a cognate admission pertaining to the first limb of section 286(1)(a). And it's important to go back time and time again to the wording of that first limb, as your Honour has no doubt done, to see what it says and what it does not say. 286(1)(a) refers to an officer of an organisation who must exercise his powers and discharge, in this case his duties, in good faith in what he believes to be the best interests of the organisation.
153 With respect, Mr Melhem's conduct amounted to more than a failure to maintain the "integrity" of the AWU's Register of Members. He was involved in deliberate conduct to add employees and individuals to that Register otherwise than in accordance with the AWU's own, carefully drafted rules. He was involved in deliberate conduct which directed the preparation and submission of invoices to three of the four employers and to the Jockeys' Associations which could not be said in any substantive way to reflect the purpose of the payments made by the employers and the Jockeys' Associations, or to reflect the way the AWU Vic accounted for those payments.
154 The fact that none of the employers, nor the Jockeys' Associations, apparently complained about the descriptions on the invoices, or about other aspects of these arrangements, does not mitigate the seriousness of the contravening conduct. There is simply an absence of evidence about why the four employers and the Jockeys' Associations were apparently content with the misdescriptions, to use a relatively neutral term.
155 Mr Melhem's powers, duties and functions as Secretary of the AWU Vic relevantly included, pursuant to Rule 39 of the AWU Rules:
Cause to be kept a correct account of all moneys received and expended but must not pay, lend or otherwise appropriate any of the funds of the Union except in accordance with the Rules, resolutions and Minutes of the Branch Executive and Delegate or General Meetings.
…
As far as practicable and subject to Rule 17(11) having been complied with, keep a correct Register of the names, postal addresses and occupations of all Officers and of the name, postal address and number of ticket of each member in the Branch and the date on which each person became a member of the Union, and must supply a copy of the Branch Register of members to the National Secretary when required.
…
Endeavour to increase the membership of the Branch.
156 Mr Melhem's duty and function as Secretary to endeavour to increase the membership of the AWU Vic was not to be achieved at all costs, by any means, and certainly the AWU Rules should not be read as encouraging a Branch Secretary to do so by bypassing or ignoring the union's own rules about membership.
157 For the purposes of s 285(1), Mr Melhem's conduct fell far short of the standard required by a senior union official in his position, and who was directly involved in these events and transactions. Indeed, it fell far short of the standard required and reasonably expected of any union official involved in such events and transactions, let alone the most senior union official in the AWU Vic. Any reasonable AWU official, holding the position of Secretary of the AWU Vic, the Branch to which these payments flowed and in respect of which these membership arrangements were made, could not possibly have engaged in the kind of conduct Mr Melhem admits he engaged in, if that person had shown any degree of care and diligence for the rules and processes of the AWU, in a matter as central to the union as its membership.
158 For the purposes of s 286(1)(a), and accepting that possession of a proper purpose is not an element of the statutory obligation in that subparagraph, in my opinion Mr Melhem's conduct was a clear and serious example of the most senior office holder within the AWU Vic, and a senior office holder within the national AWU structure, failing to discharge his powers and duties in the best interests of the AWU. It could not possibly have been in the best interests of the AWU for its own membership rules, including as to amounts payable for membership, to be bypassed, in a serious and sustained way. Mr Melhem has conceded that admitting people as members otherwise than in accordance with the AWU Rules was not in the best interests of the union.
159 Mr Melhem has admitted he did not act in good faith, in what he believed to be the best interests of the AWU, because he did not confirm himself or through any AWU officer that the membership rules had been followed. He has also admitted that he directed, caused or permitted payments from Cleanevent, Geotech and the Jockeys' Associations to be applied on account of membership contributions, even though the "members" in respect of whom those payments were made had not been admitted in accordance with the AWU Rules.
160 It is not clear what the Court is to take from the admission of a lack of good faith on Mr Melhem's part. In my opinion, this is one of the areas where gaps in the evidence do not enable the Court to draw any inferences about what is meant, in substance, by this admission, aside from it being an acceptance of a contravention of s 286(1)(a). How the absence of good faith is said to manifest itself is not explained on the evidence.
161 "Good faith" is a phrase which may have various meanings, or various emphases in meaning, depending on the context in which it is used. It includes matters such as cooperation, honesty and reasonableness: see the discussion by Colvin J in Australian Competition and Consumer Commission v Geowash Pty Ltd (Subject to a Deed of Company Arrangement) (No 3) [2019] FCA 72 at [715]-[716], albeit his Honour was there dealing with a contractual context. When used in conjunction with the performance by an office holder of powers and duties, it at least includes notions of honesty and transparency, and faithfulness or allegiance to the purposes for which a person has been appointed or elected to the office she or he holds: see, albeit in a slightly different context, the observations of the High Court in SZFDE v Minister for Immigration and Citizenship [2007] HCA 35; 232 CLR 189 at [13], and the authorities there referred to. In Mr Melhem's case, one of those purposes was to uphold and observe the AWU Rules, and not expose the AWU to foreseeable risks of harm. Such purposes are likely to be common to the appointment of many if not most office holders.
162 Mr Melhem's conduct has, as he has admitted, exposed the AWU itself to proceedings for contravention of s 230 of the FWRO Act and its equivalent in the predecessor legislation, and, I infer, to findings of contravention and the imposition of penalties for that contravention. He placed the interests of his union, and the funds of his union, in jeopardy. The evidence does not permit the Court to make any findings about why, precisely, Mr Melhem considered it was acceptable to do this.
163 Other features of Mr Melhem's conduct can also be noted here. The conduct persisted, and was repeated, over the course of around five years. It was neither isolated, nor of short duration. The applicant describes this as a "culture of non-compliance". Whether or not that is an accurate description, the important point for the purposes of fixing penalty is that it was conduct repeated, in something of a pattern and with an apparent method, over a number of years, across a range of employers and a state and national association. These features add to the deliberateness of the conduct.
164 The conduct involved significant numbers of people being added to the AWU's Register of Members, and being treated as members, in substantial non-compliance with the AWU Rules. The numbers of people added to the Register were as follows:
(a) 164 Cleanevent employees;
(b) 347 Winslow employees;
(c) 45 BMD employees;
(d) 156 jockeys; and
(e) 18 Geotech employees.
165 The findings I have made above indicate that at least some of these individuals ultimately filled out membership forms, and can be taken to have made a conscious decision themselves to join the AWU. However, the findings I have made, and Mr Melhem's admissions, indicate that the overwhelming majority of these individuals did not themselves decide to join the AWU. The decision whether to join a union is a personal decision. Individual workers may have different views. The clear intent of the AWU Rules as to membership is to reflect the personal nature of the decision. It is not the kind of decision that others should make for an individual.
166 The amount of money paid to the AWU, and accounted for by the AWU as membership fees was:
(a) Cleanevent: $12,500 paid in December 2010 (allocated to pay membership fees of 100 Cleanevent employees); $27,500 paid in June 2012 (allocated to pay membership fees of 66 Cleanevent employees); and $27,500 paid in March 2013 (allocated to pay membership fees of 66 Cleanevent employees);
(b) Winslow: $9,945 paid in March 2008 (allocated to pay membership fees of 85 Winslow employees); $43,650 paid in June 2009 (allocated to pay membership fees of 97 Winslow employees); $23,166 paid in January 2010 (allocated to pay membership fees of 99 Winslow employees); $44,401.50 paid in August 2010 (allocated to pay membership fees of 117 Winslow employees); two invoices for $38,857.50 (totalling $77,715) paid in July 2011 (allocated to pay membership fees of 237 Winslow employees); $81,640 paid in June 2012 (allocated to pay membership fees of 192 Winslow employees); and $85,280 paid in April 2013 (allocated to pay membership fees of 189 Winslow employees);
(c) BMD: $14,300 paid in December 2007 (allocated to pay membership fees of 45 BMD employees);
(d) Jockeys' Associations: $7,500 paid in June 2010 (allocated to pay membership fees of 156 jockeys); $7,500 paid in June 2011 (allocated to pay membership fees of 156 jockeys); and $8,250 paid in May 2012 (allocated to pay membership fees of 156 jockeys); and
(e) Geotech: $17,160 paid in March 2013 (allocated to pay membership fees of 18 Geotech employees).
The total amount of money paid to the AWU pursuant to the above invoices was: $488,007.50.
167 Mr Melhem engaged in the contravening conduct while he held the most senior office within the AWU Vic. He should have been setting an exemplary standard of behaviour in terms of his observance of the law, and of the AWU Rules. Why he did not do so remains a matter on which the evidence is silent. However, the fact is that as the most senior office holder in the Victorian Branch of the AWU he did not even attempt to ensure that the rules of the union he was charged with administering in Victoria were observed, on a matter as fundamental to the running of the union as the way that workers become members.