BILLS DIGEST NO. 45, 2017–18              17 October 2017

Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017

Jaan Murphy
Law and Bills Digest Section 

Date introduced:  16 August 2017

House: House of Representatives

Portfolio: Employment

Commencement: the day after Royal Assent

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill’s home page, or through the Australian Parliament website.

When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the Federal Register of Legislation website.

All hyperlinks in this Bills Digest are correct as at October 2017.

Purpose of the Bill

The purpose of the Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017 (the Bill) is to respond to certain recommendations made by the Royal Commission into Trade Union Governance and Corruption (RCTUGC), implement the Government’s election commitment to ‘effectively deal with registered organisations that are dysfunctional or not serving the interests of their members’ and subject proposed amalgamations of registered organisations to a public interest test by amending the Fair Work (Registered Organisations) Act 2009 (the FWRO Act) to:

•       include serious criminal offences punishable by five or more years’ imprisonment as a new category of ‘prescribed offence’ for the purposes of the automatic disqualification regime which prohibits a person from acting as an official of a registered organisation

•       allow the Federal Court to prohibit officials from holding office where they have:

–      contravened a range of industrial and other relevant laws

–      are found in contempt of court

–      repeatedly fail to stop their organisation from breaking the law or

–      are otherwise not a fit and proper person to hold office in a registered organisation

•       make it an offence for a person to continue to act as an official or in a way that influences the affairs of an organisation once disqualified

•       allow the Federal Court to cancel the registration of an organisation on a range of grounds including:

–      corrupt conduct by officials

–      repeated breaches of a range of industrial and other laws by the organisation or its members and

–      the taking of obstructive unprotected industrial action by a substantial number of members

•       allow applications to be made to the Federal Court for other orders, including suspending the rights and privileges of:

–      an organisation

–      an individual or

–      a branch or division of an organisation

where its officers or members are acting in a manner that is inconsistent with the rights and privileges of registration

•       expand the grounds on which the Federal Court may order remedial action to deal with governance issues in an organisation and expressly provide that the Federal Court may appoint an administrator to an organisation or part of an organisation as part of a remedial scheme and

•       introduce a public interest test for amalgamations of registered organisations, which will allow relevant matters to be taken into account, such as each organisation’s record of compliance with industrial laws.[1]

Structure of the Bill

The Bill is divided into five Schedules:

•       Schedule 1 deals with disqualifying people from holding office in a registered organisation

•       Schedule 2 deals with the deregistration of registered organisations and related matters

•       Schedule 3 deals with the administration of dysfunctional registered organisations

•       Schedule 4 proposes a public interest test for amalgamations of registered organisations and

•       Schedule 5 contains minor and technical amendments.

Background

Organisations registered under the FWRO Act have certain rights under the Fair Work Act 2009 (FW Act) and other legislation, including in relation to bargaining for enterprise agreements. Registered organisations that represent the interests of employees include trade unions and professional associations, whilst registered organisations that represent the interests of employers or an industry are referred to as employer organisations.

Registered organisations (organisations) occupy a unique position within Australia's workplace relations system. Whilst they represent the interests of their members, organisations also seek to advance their own interests, and can have a significant impact on the economy (or segments of it).

There are differing views about appropriate governance structures and standards for organisations.[2] One view is that organisations are more akin to incorporated associations then corporations, and therefore the regulation of organisations should be more like that imposed on incorporated associations.[3]

Another view is that organisations are more like companies, and therefore should be regulated in a manner similar to how corporations are regulated.[4] This was the view accepted by the RCTUGC which concluded:

An approach that denies the equivalence of unions and companies and concludes therefore there should be no changes to statutory duties imposed on officers is an illogical and unthinking approach.[5]

The Bill responds to the recommendations made by the RCTUGC in relation to the integrity of organisations and their officials, responsiveness to members interests and the deregistration of organisations in certain circumstances.[6] The Bill also seeks to give effect to the Government's election commitment to ‘effectively deal with’ organisations that are dysfunctional or not serving the interests of its members and to provide that amalgamations between organisations are subject to a ‘public interest’ test.[7]

Royal Commission into Trade Union Governance and Corruption recommendations

The RCTUGC made a number of recommendations that the Bill seeks to implement. Specifically those recommendations are 36, 37 and 38. These are briefly discussed below.

Amending definition of ‘prescribed offence’ for the purposes of the disqualification regime

Recommendation 36 of the RCTUGC was:

The definition of ‘prescribed offence’ in s 212 of the Fair Work (Registered Organisations) Act 2009 (Cth) be amended to include an offence under a law of the Commonwealth, a State or Territory, or another country, which is punishable on conviction by a maximum penalty of imprisonment for life or 5 years or more.[8]

Proposed paragraph 212(aa) of the FWRO Act, at item 6 of Schedule 1 to the Bill is consistent with this recommendation.

New criminal offence for holding office whilst disqualified

Recommendation 37 of the RCTUGC was:

The Fair Work (Registered Organisations) Act 2009 (Cth) be amended to make it a criminal offence for a person who is disqualified from holding office in a registered organisation to continue to hold an office. The offence should be an offence of strict liability with a maximum penalty of 100 penalty units or imprisonment for two years, or both.[9]

Whilst proposed section 226 of the FWRO Act, at item 9 of Schedule 1 to the Bill is consistent with this recommendation, the quantum of the penalty is inconsistent with principles guiding the creation of strict liability offences set out in the Guide To Framing Commonwealth Offences, Infringement Notices And Enforcement Powers, which provides that:

•       a strict liability offence will generally only be considered appropriate where it is punishable by a fine of up to 60 penalty units for an individual and

•       is not punishable by imprisonment.[10]

The Senate Standing Committee for the Scrutiny of Bills raised concerns about the imposition of strict liability (discussed below).[11] In addition, a number of stakeholders noted the proposed penalty – whilst consistent with the RCTUGC recommendation – is double the comparable offence applicable to directors under the Corporations Act.[12]

New disqualification regime

Recommendation 38 of the RCTUGC was:

The Fair Work (Registered Organisations) Act 2009 (Cth) be amended by inserting a new provision giving the Federal Court jurisdiction, upon the application of the registered organisations regulator, to disqualify a person from holding any office in a registered organisation for a period of time the court considers appropriate. The court should be permitted to make such an order if the conditions set out in paragraph 190 are satisfied.[13] (Emphasis added)

The regime proposed by the Bill differs from the above recommendation in a number of ways, as discussed in detail below in the Key Issues and provisions part of this Digest.

Committee consideration

Senate Education and Employment Legislation Committee

The Bill has been referred to the Senate Education and Employment Legislation Committee for inquiry and report by 9 October 2017. Details of the inquiry are on the inquiry homepage.

The majority of the Committee recommended that the Bill be passed.[14] Labor and the Greens both issued dissenting reports, recommending that the Senate reject the Bill.[15] Labor considers the Bill to be a ‘politically driven attack on the democratic functioning of unions’.[16] The Greens described the Bill as ‘politically motivated’ and ‘reflective of the Coalition’s continued efforts to reduce workers’ rights and undermine unions’.[17] Both Labor and the Greens were concerned with the perceived lack of consultation on the Bill.[18]

Senate Standing Committee for the Scrutiny of Bills

The Senate Standing Committee for the Scrutiny of Bills raised a number of concerns about the Bill including:

•       that the proposed disqualification powers were insufficiently defined

•       the inclusion of strict liability offences and the quantum of the penalties associated with those offences

•       the reversal of the evidential burden of proof in some circumstances and

•       the proposed immunity from civil liability for administrators of organisations.[19]

These concerns are explored in detail below in the Key Issues and provisions part of this Digest.

Policy position of non-government parties/independents

As discussed above, both Labor and the Greens issued dissenting reports on the Senate Education and Employment Legislation Committee inquiry into the Bill, recommending that the Senate reject the Bill.[20]

Before the release of the Committee’s report, media reports had foreshadowed the opposition to the Bill by these parties.[21]

Position of major interest groups

The Senate Education and Employment Legislation Committee inquiry into the Bill attracted 36 submissions, the majority of which were from trade unions.

Position of trade unions

Trade unions oppose the Bill for a number of reasons, including:

•       the Bill is politically motivated[22]

•       the Bill contains measures that go beyond the recommendations of the RCTUGC[23]

•       the Bill is inconsistent with international law and the stated intention in enacting the FWRO Act, particularly in respect of organisational autonomy[24]

•       the Bill would allow excessive political, corporate and regulatory interference in the democratic functioning and control of organisations through expanded standing provisions and grounds for court orders[25]

•       the disqualification regime is unsupported by policy and goes beyond the equivalent provisions applicable to corporations or incorporated associations[26]

•       the cancellation regime proposed by the Bill is unsupported by policy and is not genuinely equivalent to the regulation of corporations[27]

•       the administration regime for dysfunctional organisations is unsupported by policy, not based on any recommendations of the RCTUGC and is not genuinely equivalent to corporate regulation in this area[28]

•       the proposed changes to amalgamation processes (including the ‘public interest’ test) is unsupported by policy and it not based on any recommendations of RCTUGC.[29] Further:

–      the amendments would impose additional requirements (including the consideration of political and corporate interests) that are irrelevant to the merits of the proposed amalgamation from the perspective of the organisations’ memberships and their interests and/or are not comparable to the requirements imposed on companies seeking to merge[30]

–      the proposed ‘public interest test’ is not a true public interest consideration, rather it is predominately focused on economic considerations and the commercial interests of industry and employers.[31]

Position of non-union organisations

Master Builders Australia (MBA), the Australian Industry Group (AIG), Australian Mines and Minerals Association (AMMA), Housing Industry Australia (HIA) and the Australian Chamber of Commerce and Industry (ACCI) all supported the Bill in its current form.[32]

Professor Bradon Ellem, the Australian Conservation Foundation, Australian Youth Climate Coalition, Friends of the Earth Australia, Getup!, Greenpeace Australia, Nature Conservation Council of Australia and Solar Citizens oppose the Bill.[33]

Financial implications

The Explanatory Memorandum states that the Bill will have no financial impact on the Commonwealth.[34]

Statement of Compatibility with Human Rights

As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. Whilst the Government considers that the Bill is compatible,[35] the Parliamentary Joint Committee on Human Rights (PJCHR) raised concerns about the Bill’s compatibility with a number of human rights, as discussed below.

Parliamentary Joint Committee on Human Rights

The PJCHR considered the Bill in its ninth report of 2017.[36] The PJCHR noted that the measures proposed by the Bill will impact on a number of recognised human rights, including the right to freedom of association, and the right to just and favourable conditions of work. The PJCHR noted that those rights are informed by various International Labour Organization (ILO) treaties to which Australia is a signatory. Further, those ILO treaties also provide additional rights including:

•       the right of workers to autonomy of union processes (including electing their own representatives in full freedom)

•       organising their administration and activities without interference and

•       formulating their own programs without interference.[37]

Various ILO treaties also protecting unions from being dissolved, suspended or de-registered and protect the rights of workers to form organisations of their own choosing.[38] The PJCHR noted that various measures contained in the Bill would limit the ability of unions to govern their internal processes and therefore engage and limit those rights.

The specific issues raised by various provisions contained in the Bill, are discussed below.

Key issues and provisions: disqualification of officials

As noted above, the RCTUGC formed the view that the governance requirements of organisations should be more like those imposed on corporations than incorporated associations. As such, to give context to the proposed amendments a brief outline of the disqualification regime applicable to directors of companies provided by the Corporations Act 2001 is provided below.

Disqualifying directors of companies

The Corporations Act contains a number of provisions which provide for the disqualification of directors. This includes:

•       automatic disqualification

•       disqualification by court processes and

•       disqualification by the regulator (the Australian Securities and Investments Commission (ASIC)) in limited circumstances.

Importantly however, none of the processes as described below allow the Minister, shareholders or other stakeholders in the corporation to seek to have directors disqualified. Only ASIC has this power.

In contrast, the regime proposed by Schedule 1 of the Bill will enable the Registered Organisations Commissioner (ROC), the Minister or ‘a person with sufficient interest’ to seek a court order disqualifying a person from being an official of a registered organisation.[39]

Automatic disqualification

Section 206B of the Corporations Act automatically disqualifies a person from being a director of a corporation, if they are convicted of serious criminal offences or are an undischarged bankrupt.[40] Section 206B provides that a person is automatically disqualified from being a director of a company if:

•       they are convicted (by either an Australian or foreign court) of an offence that concerns the making, or participation in the making, of decisions that affect the whole or a substantial part of the business of the company, or concerns an act that has the capacity to significantly affect the corporation's financial standing

•       they are convicted for a contravention of the Corporations Act punishable by imprisonment for a period of greater than 12 months

•       they are convicted of either an Australian or foreign offence that involves dishonesty and is punishable by imprisonment for a period of at least three months

•       they are convicted by a foreign court of an offence punishable by imprisonment for a period of greater than 12 months.

Disqualification by court order

Part 2D.6 of the Corporations Act provides the court with power to disqualify directors in a range of circumstances, including:

•       where a director has contravened certain civil penalty provisions in the Corporations Act (section 206C)

•       where a director is involved in repeated corporate insolvencies and non-payment of debts (section 206D)

•       where a director has repeatedly been involved in contraventions of the Corporations Act, and failed to take reasonable steps to prevent the contraventions (section 206E)

•       to give effect to a disqualification order made under the Competition and Consumer Act 2010 (CCA) or the Australian Securities and Investments Commission Act 2001 (ASIC Act) (sections 206EA and 206EB) and

•       where a person has been disqualified from being a director of, or being concerned in the management of, a foreign company under a law of a foreign jurisdiction (section 206EAA).

The grounds of disqualification most relevant to the regime proposed by the Bill are briefly examined below.

Contraventions of civil penalty provisions contained within the Corporations Act

Section 206C gives the court the power to disqualify a director for any period it consider appropriate where the director breached various civil penalty provisions contained within the Corporations Act and the court is satisfied that the disqualification is justified. Such proceedings can only be commenced by ASIC – not by other stakeholders (such as shareholders or creditors) or the Minister.

Repeated involvement in corporate insolvencies is insolvent and non-payment of debts 

Section 206D gives the court the power to disqualify a director for up to 20 years if:

•       within the last seven years, the director was an officer of two or more failed companies and

•       the court is satisfied that the manner in which the corporation was managed was wholly or partly responsible for the corporation failing and

•       the disqualification is justified.

Importantly however, applications for a disqualification order under section 206D can only be made by ASIC, not by other stakeholders (such a creditors or shareholders) or the Minister.

Repeated contraventions of the Corporations Act

Section 206E provides the court with power to disqualify a director for any period it consider appropriate where:

•       the director has at least twice been an officer of a company that contravened the Corporations Act and the director failed to take reasonable steps to prevent a contravention or

•       the director contravened the Corporations Act at least twice while they were director of the company

•       the director was an officer of a body corporate and did something that would have contravened subsection 180(1) or section 181 (which require directors of corporations to exercise their powers and discharge their duties with care, diligence, good faith and for a proper purpose) if the body corporate had been a corporation and

•       the court is satisfied that the disqualification is justified.

Again however, applications for disqualification under section 206E can only be made by ASIC, and not by the Minister, shareholders, creditors or other stakeholders.

Disqualification under a law of a foreign jurisdiction

Section 206EAA provides the court the power to disqualify a director for any period it consider appropriate where the person is disqualified under the law of a foreign jurisdiction from:

•       being a director of, or being concerned in the management of, a foreign company (or carrying on substantially similar activities) and

•       the Court is satisfied that the disqualification under this subsection is justified.

Again however, applications seeking disqualification under section 206EAA can only be made by ASIC, and not by the Minister, shareholders, creditors or other stakeholders.

Disqualification by ASIC

Section 206F gives ASIC the power to disqualify a director for up to five years. ASIC may give notice to a director under section 206F if:

•       within the last seven years they were an officer of two or more companies that were wound up (liquidated)

•       the person was an officer, or within 12 months after the person ceased to be an officer of those corporations, each of the corporations was wound up and

•       the liquidators lodged reports under section 533(1) about the inability of the company to pay its debts.[41]

The notice gives the person an opportunity to demonstrate why they should not be disqualified as a director, and to be heard on the question.[42]

Once ASIC has considered the director’s response to its notice, it can disqualify the director for up to five years. Importantly, ASIC can disqualify a director under section 206F without the need to show breaches of commercial morality or gross incompetence. It is sufficient that the director was the subject of two or more reports that were lodged by liquidator under section 533 of the Corporations Act.[43]

Disqualifying officials of registered organisations

Key concepts and definitions

The disqualification regime proposed by the Bill is underpinned by three key concepts. Those are: designated findings, designated laws, and wider criminal findings.[44]

Importantly however, the above three concepts are also relevant to other aspects of the Bill such as the proposed cancelation, administration and amalgamation regimes. To aid readers, the concepts are briefly outlined below.

Designated findings

Proposed subsection 9C(1) of the FWRO Act, at item 2 of Schedule 1 to the Bill, defines a designated finding as a finding in criminal proceedings that a person has committed an offence under a designated law, or in any civil proceedings, that the person has contravened, or been involved in a contravention of:

•       a civil penalty provision of the FWRO Act

•       a civil remedy provision of the FW Act

•       a civil remedy provision of the Building and Construction Industry (Improving Productivity) Act 2016 (BCI Act) or its predecessor (as in force at any time before its repeal)[45]

•       a provision of Part IV of the Competition and Consumer Act 2010 (CCA) (which deals with anti-competitive conduct) or a related state or territory law

•       a Work Health and Safety (WHS) civil penalty provision of the Work Health and Safety Act 2011 (WHS Act) or a related state or territory Occupational Health and Safety (OHS) law within the meaning of the FW Act.

Designated laws

Proposed subsection 9C(2) provides a list of designated laws:

•       the FWRO Act and FW Act

•       the BCI Act or its predecessor (as in force at any time before its repeal)[46]

•       Part IV of the CCA or a related state or territory law

•       the WHS Act and each related a state or territory OHS law within the meaning of the FW Act and

•       Part 7.8 of the Criminal Code Act 1995 and any other provision of the Code so far as it applies in relation to that Part (Part 7.8 deals with causing harm to, and impersonation and obstruction of, Commonwealth public officials).

Wider criminal findings

A wider criminal finding is a finding (other than a designated finding) in any other criminal proceeding against the person that the person committed an offence against any law of the Commonwealth, a state or territory.

Automatic disqualification of officials

Currently Chapter 7, Part 4, Division 2 of the FWRO Act deals with the automatic disqualification of officials. In simple terms, if an official has been convicted of a prescribed offence, they are automatically disqualified from holding office in a registered organisation for a certain period of time.

Currently sections 213 and 215 of the FWRO Act provide that a person convicted of one of the prescribed offences set out in section 212 is automatically disqualified from holding office. Those offences include:

•       an offence under a law of the Commonwealth, a state or territory, or another country, involving fraud or dishonesty and punishable on conviction by imprisonment for a period of three months or more

•       an offence under the FWRO Act related to registered organisation elections, criminal breaches of an official’s duties of good faith, use of position and information, and criminal offences related to reprisals against whistleblowers

•       any other offence in relation to the formation, registration or management of an association or organisation or

•       any other offence under a law of the Commonwealth, a state or territory, or another country, involving the intentional use of violence towards another person, the intentional causing of death or injury to another person or the intentional damaging or destruction of property.[47]

Proposed paragraph 212(aa), at item 6 of Schedule 1 to the Bill, will expand the definition of prescribed offence in section 212 to include an offence under a law of the Commonwealth, a state or territory, or another country, punishable upon conviction by imprisonment for life or a period of five years or more. This is consistent with recommendation 36 of the RCTUGC.[48]

Item 15(1) of Schedule 1 provides that automatic disqualification will not apply to a conviction for an offence of the type listed in new paragraph 212(aa) if the conviction occurred before commencement of Schedule 1. This means proposed paragraph 212(aa) will not operate retrospectively in that respect. However, a person convicted after commencement for an offence committed before commencement will be subject to automatic disqualification under proposed paragraph 212(aa).  

It is worth noting that directors of companies can be disqualified for up to five years where they are convicted of an offence against the law of a foreign country or an offence under the Corporations Act punishable by imprisonment for a period of greater than 12 months.[49] In contrast, the Bill proposes that an official will only be disqualified where they are convicted of an offence (other than the specific types of offences discussed above) punishable by imprisonment for a period of greater than five years.[50]

However, both directors of companies and officials of registered organisations can be disqualified where they are convicted of an offence that involves dishonesty that is punishable by imprisonment for at least three months.[51] Further, both the automatic disqualification regimes provided by the Corporations Act and the FWRO Act provide for automatic disqualification where a director or official is convicted of an offence that involves the management of the entity concerned.[52]

Disqualification orders

The Bill proposes to introduce a significantly revised disqualification order regime. Currently the FWRO Act does not provide a comprehensive mechanism by which the regulator or other persons can apply to have an official disqualified. In contrast the Corporations Act allows the regulator (ASIC) to apply for an order to disqualify a director. The regime proposed by the Bill will enable the ROC, the Minister, or any other person with ‘sufficient interest’ to apply to the court for an order to disqualify an official of a registered organisation.[53]

The Explanatory Memorandum notes that ‘sufficient interest’ has been interpreted as ‘an interest beyond that of an ordinary person and includes those whose rights, interests or legitimate expectations would be affected by the decision’.[54] This would appear to allow members of registered organisations, and potentially parties affected by the actions of those organisations (for example, employers) to apply for orders to disqualify an official. In this regard, the regime proposed by the Bill differs substantially from the current regulatory regime imposed on corporations. Further, the Bill differs from recommendation 38 of the RCTUGC, which recommended:

The Fair Work (Registered Organisations) Act 2009 (Cth) be amended by inserting a new provision giving the Federal Court jurisdiction, upon the application of the registered organisations regulator, to disqualify a person from holding any office in a registered organisation for a period of time the court considers appropriate. The court should be permitted to make such an order if the conditions set out in paragraph 190 are satisfied.[55] (Emphasis added)

To illustrate the differences between the model recommended by the RCTUGC and that proposed by the Bill, the table in the Appendix to this Digest sets out in detail the conditions proposed by the RCTUGC and those proposed by the Bill, and their differences.

When can a disqualification order be made?

In relation to disqualification orders, the RCTUGC noted:

Subject to specific situations where the registered organisations regulator should be entitled to disqualify an officer because of certain easily verifiable objective matters, it is preferable that the power to ban be conferred on a court.

First, any decision by the regulator would be subject to judicial review and the reviewing court would be able to review the jurisdictional facts supporting the regulator’s decision. In practice, this would often lead to increased delays, cost and expense. Secondly, the judicial process provides a greater safeguard against the possibility of the power being misused. Thirdly, ASIC only has the power to issue a banning notice in limited circumstances.[56]

The RCTUGC noted that ‘having regard to the problems identified by the Commission, the Federal Court should be permitted to make an order disqualifying a person from holding an office within a registered organisation or branch’[57] where:

•       a ground for  disqualification is made out (discussed below) and

•       the Court is satisfied that the disqualification is justified.[58]

The Appendix to this Digest sets out in detail the grounds justifying disqualification proposed by the RCTUGC and those proposed by the Bill, and their differences. However, in contrast to the RCTUGC’s recommendation, proposed subsection 222(2) of the FWRO Act, at item 9 of Schedule 1 to the Bill, provides that a disqualification order can be made where a ground is made out and the court does not consider that it would be unjust to disqualify the person, having regard to:

•       the nature of the matters constituting the ground (noting that these will have had to occur after the commencement of the amendments in the schedule)

•       the circumstances and the nature of the person’s involvement in the matters constituting the ground and

•       any other matter that the court considers relevant.

The grounds for disqualification proposed by the Bill (discussed below) are more expansive than that proposed by the RCTUGC. Further, Professionals Australia argued that the difference in the drafting between the Bill and that recommended by the RCTUGC ‘has the practical effect of effectively shifting the onus onto the defendant to satisfy the Court why the order is unjust if a ground is made out’ rather than the applicant satisfying the court that because a ground is made out, disqualification is justified.[59]

Differences between the Corporations Act and the Bill’s disqualification regime

The differences between the disqualification regime proposed by the Bill and that contained in the Corporations Act can be briefly summarised. First, the disqualification regime proposed by the Bill is more expansive in its application than that contained in the Corporations Act because:

•       it proposes that not being a ‘fit and proper person’ (the proposed test that takes into account certain civil and criminal findings and ‘any other event the Court considers relevant’)[60] be a ground for disqualification – the Corporations Act applies no equivalent test

•       the range of persons who can seek to apply to have an official disqualified includes the Commission, the Minister and any person with a ‘sufficient interest’ – the Corporations Act only provides standing to ASIC, not the Minister, directors, shareholders or creditors (all persons roughly analogous to a person with a ‘sufficient interest’ in a registered organisation) and

•       the Bill does not contain any provisions that prevent frivolous or vexatious applications to disqualify officials – the Corporations Act does contain provisions that operate to prevent certain frivolous or vexatious applications (but not in relation to disqualification or directors, as standing is reserved for ASIC alone).[61]

Summary of grounds for disqualification

Proposed section 223 of the FWRO Act, at item 9 of Schedule 1 to the Bill sets out the grounds for disqualification. They are:

•       a designated finding is made against the person or the person is found to be in contempt of court in relation to an order or injunction made under a designated law

•       a wider criminal finding is made against the person

•       the person was involved in multiple failures to prevent contraventions by the organisation

•       the person committed an offence related to directors duties or was disqualified from managing a corporation under Part 2D.6 of the Corporations Act or

•       the person is not a fit and proper person to hold office in an organisation.

These are briefly discussed below. The Appendix to this Digest sets out in detail the differences between these grounds for disqualification and those originally proposed by the RCTUGC. As noted above, the grounds for disqualification proposed by the Bill are more expansive than that proposed by the RCTUGC.

A designated finding is made against the person

A ground for disqualification is that a designated finding is made against the person (or the person is found to be in contempt of court in relation to an order or injunction made under a designated law).[62]

The PJCHR noted that the effect of the broad definitions of designated finding and designated law means that the range of conduct that could result in the disqualification of an official is extremely broad. This is because a 'designated finding’ includes a contravention of various industrial laws, and therefore includes contraventions that are potentially of a less serious nature (including the taking of unprotected industrial action).[63]

The PJCHR noted that the right to strike is an aspect of the right to freedom of association– and that the right to strike is specifically protected and permitted under international law.[64] Further, the PJCHR noted that the existing restrictions on taking industrial action under Australian law (that is the framework in relation to ‘protected’ and 'unprotected' industrial action) have been ‘consistently criticised by international supervising mechanisms as going beyond what is permissible’.[65]

The PJCHR concluded that because of the broad application of the concept of a ‘designated finding’, union officials could be disqualified for conduct that may be protected under international law.[66] As such, it noted that the disqualification regime appears to limit the right to strike (and the breadth of conduct captured by a ‘designated finding’ (including non-serious matters) raises questions about the rational connection of this aspect of the disqualification regime to the stated objective of protecting the interests of members of unions, where those members may be of the view that taking particular forms of industrial action (such as unprotected industrial action) are in their interests.[67]

A wider criminal finding is made against the person

A ground for disqualification is that a wider criminal finding is made against the person and the person engaged in the conduct to which the wider criminal finding relates in the course of (or purportedly in the course of) performing functions in relation to any organisation.[68]

For example, this means that a person with a wider criminal finding made in relation to their conduct whilst performing functions as an official for organisation ‘A’ and who subsequently left that organisation, could nonetheless be disqualified from being an official for organisation ‘B’.

In addition, a further ground for disqualification is where a person is found in contempt of court in relation to an order or injunction made under any law of the Commonwealth, a state or territory and the person engaged in the conduct to which the contempt of court finding relates in the course of (or purportedly in the course of) performing functions in relation to any organisation.[69]

Multiple failures to prevent contraventions by the organisation

A ground for disqualification is where two of the following findings are made against any organisation in relation to conduct engaged in whilst the person is an officer of the organisation:

•       a designated finding

•       a wider criminal finding or

•       a finding that the organisation is in contempt of court in relation to an order or injunction made under any law of the Commonwealth, a state or territory.[70]

Importantly however this ground of disqualification only applies where the official failed to take reasonable steps to prevent the conduct in each of the two findings.[71] In relation to the requirement that this ground for disqualification will only apply if the person has 'failed to take reasonable steps to prevent the conduct’, the Scrutiny Committee noted:

Given that disqualification may have a significant impact on an affected individual, it is of concern that the bill does not provide more specificity about the actions it is expected an individual officer would need to take to avoid bearing consequences of a finding which relates to an organisation, rather than to the individual themselves.[72]

The Scrutiny Committee therefore requested that the Minister provide:

… advice as to the appropriateness of including specific guidance in the primary legislation as to the type of reasonable steps that must be undertaken in order to avoid disqualification under this provision.[73]

In addition to concerns about the ‘insufficiently defined’ aspects of this ground for disqualification expressed by the Scrutiny Committee, the PJCHR noted that because of the breadth of the concept of a ‘designated finding’, this ground of the disqualification regime means it is possible that where a union has engaged in two or more such contraventions (which may be minor in nature) the entire elected leadership of a union could be subject to disqualification.[74] The PJCHR specifically noted that this could occur regardless of whether or not the union members in question had agreed to participate in the conduct which led to the 'designated findings’ and whether they considered the relevant conduct to be in their best interests.[75]

Breaches of directors duties and the Corporations Act

A ground for disqualification is where a person is found in any criminal or civil proceedings, to have committed an offence against, or contravened a provision of, Division 1 of Part 2D.1 of the Corporations Act (this relates to directors duties) or the person is disqualified from managing a corporation under the Corporations Act.[76]

This will ensure that where a person commits certain criminal offences or breaches of directors duties that are similar in nature to those imposed on officials of organisations, they can be disqualified. The Explanatory Memorandum argues:

A finding that a person has previously contravened their duties as an officer in relation to a corporation may be indicative that the person is not a suitable person to hold office in an organisation or branch of an organisation.[77]

Likewise, where a person is disqualified as a director proposed subsection 223(4) will allow the person to be disqualified from acting as an official. The Explanatory Memorandum notes that ‘the types of conduct that form the grounds for disqualification under Part 2D.6 of the Corporations Act’ mean where a person is disqualified as a director, the ‘suitability of the person to hold office in an organisation’ comes into question, and hence ‘such disqualification should properly be a ground for disqualification of an official’.[78]

The person is not a fit and proper person to hold office in an organisation

The final ground for the disqualification of an official is where, after having regard to certain events, that person is not a fit and proper person to be an official in a registered organisation.[79] Proposed subsection 223(6) sets out the events that are indicative of not being a fit and proper person to be an official in a registered organisation. The events are:

•       the person is refused an entry permit, or an entry permit held by the person is revoked or suspended under the FW Act

•       a person is refused a WHS entry permit, or a WHS entry permit held by the person is revoked or suspended under the WHS Act (or under a state or territory OHS law)

•       in any criminal or civil proceedings against the person, or any action against the person by an agency of the Commonwealth, state, or territory, the person is found to have engaged in conduct involving fraud, dishonesty, misrepresentation, concealment or material facts, or a breach of duty

•       in any criminal proceedings against the person, the person is found to have engaged in conduct involving the intentional use of violence towards another person, the intentional causing of death or injury to another person or the intentional damaging or destruction of property and

•       any other event the court considers relevant.

The Explanatory Memorandum notes that various rights of entry provisions in the FW Act and WHS legislation that grant significant rights and privileges to permit holders to access premises are subject to the permit holder being a fit and proper person.[80] The Government argues that these rights should only be exercisable by persons who demonstrate appropriate regard for the law.[81] The Government argues that the types of conduct covered by the events above include behaviours that may indicate that a person is neither fit nor proper to hold office in a registered organisation.[82]

The Government notes the FWRO Act places duties on officials of registered organisations including to act with appropriate care and diligence, to act in good faith and not to misuse their position or information gained as a result of holding office. As such, it argues that an official who has been found in any relevant proceedings to engage in conduct involving fraud, dishonesty, misrepresentation, concealing material facts or a breach of those duties may be a person who cannot uphold the duties imposed on an official, and is therefore not a suitable person to hold office in a registered organisation.[83]

In this regard, there appears to be a degree of overlap with existing sections 212 and 215 of the FWRO Act. This is because under these provisions a person is automatically disqualified from being an official if they are convicted of an offence involving fraud or dishonesty punishable by imprisonment for a period of three months or more – that is, conduct involving fraud, dishonesty, misrepresentation, concealing material facts and so forth. However, whilst there is a degree of overlap, nonetheless the proposed amendment would allow persons with the requisite standing to seek the disqualification of an official in circumstances where (for whatever reason) automatic disqualification had not occurred.

Finally, the Government notes that where a person has been convicted of an offence involving the intentional use of violence towards another person, the intentional causing of death or injury of another person or the intentional damaging or destruction of property, such findings may indicate that the person is not suitable to be an official in a registered organisation. This is ‘due to significant and important functions and powers that exercisable by officers’.[84]

A number of stakeholders were critical of the inclusion of the proposed ‘not a fit and proper’ person test as a ground for disqualification.[85] The ACTU argued:

No equivalent test is imposed on company directors or officers of incorporated associations under state legislative regimes. The expansive range of grounds is a significant overreach and invites undue political, corporate and regulatory interference in the democratic and autonomous functioning and control of registered organisations.[86] (Emphasis added)

Offences related to disqualified officials

Proposed Division 4 of Part 4 of Chapter 7 of the FWRO Act contains amendments that provide that a person disqualified from being an official in an organisation may commit an offence if they are a candidate for office, hold office, or act as if they hold office, in an organisation.[87]

Definition of disqualified official

Proposed section 225 defines a person disqualified from holding office in an organisation as:

•       a person who is not eligible to be a candidate for election to, or to hold, an office in an organisation under subsection 215(1) as amended by item 7 of Schedule 1 (that is, a person who has been convicted of a prescribed offence as defined in section 212, discussed above under the heading ‘Automatic disqualification’)

•       a person disqualified from holding office in an organisation under an order made under proposed section 28N, at item 4 of Schedule 2 to the Bill, or proposed section 222. (Proposed section 28N allows the Federal Court to disqualify a person from holding office in an organisation when an application has been made under proposed sections 28 or 28A seeking the cancellation of a registered organisation's registration or alternative orders and the Court determines that a ground set out in the application is established wholly or mainly because of the conduct of the person.)[88]

The note to proposed section 225 states that a person disqualified from holding office in an organisation is also disqualified from holding office in a branch of an organisation.

Offences related to disqualified officials

Proposed section 226 contains three offences, all of which are punishable by a fine of up to 100 penalty units ($21,000), imprisonment for up to two years, or both.[89]

The first offence is where a person is a candidate for election to an office in an organisation and the person is disqualified from holding office in an organisation. The second offence is where the person holds office while disqualified. If the person is disqualified because they committed a prescribed offence and were in office at the time of the conviction, they will commit the second offence if they continue to hold office in an organisation or a branch of the organisation either 28 days after their conviction or when the Federal Court refuses their application for leave to hold office despite the prescribed offence (see subsections 215(2) and (3), 216(3) and 217(3) of the FWRO Act for details).

The third offence is where a person is disqualified from holding office in an organisation and the person acts as if the person holds office. Proposed subsection 226(3) has a number of elements that are required to be met to prove that a disqualified person is acting as an official. The first element is that the person is disqualified from holding office in a registered organisation. In addition the person must also:

•       exercise the capacity to significantly affect the financial standing or other affairs of an organisation or part of an organisation (for example a branch) or

•       gives directions (not including advice given by the person in the proper performance of functions that relate to the person's professional capacity) to the management committee of an organisation or part of an organisation.[90]

In the case of a person giving directions to the management committee of an organisation or part of an organisation, proposed paragraph 226(3)(c) provides that the person must know that the committee of management is accustomed to act in accordance with the person's directions or intends that it will do so.

Proposed subsection 226(4) provides that strict liability applies to the physical element of the offences; that is that the person is disqualified from holding office in a registered organisation, if the person is disqualified under an order made by the Federal Court under proposed sections 28N or 222 of the FWRO Act (discussed above). The Explanatory Memorandum notes that section 206A of the Corporations Act provides a comparable offence in relation to disqualified directors that also applies strict liability to the circumstance of whether or not a person is disqualified from being a director.[91]

The Government argues that as with the Corporations Act offence, strict liability is appropriate in the circumstances as the Federal Court will have made an order disqualifying a person from holding office under proposed sections 28P or 222. The Government argues that applying a fault element, whether intention, knowledge, recklessness or negligence, would unnecessarily weaken the deterrent effect of proposed sections 28P and 222 because a person who has been disqualified by Federal Court order will be aware that they have been disqualified.[92]

Importantly however, the imposition of strict liability does not apply to disqualification under section 215 of the FWRO Act (automatic disqualification). The Government notes that this is appropriate as there may be questions as to whether a person was aware of the automatic disqualification, in the absence of court order.[93]

The Scrutiny Committee noted that the penalties proposed for the offences in proposed section 226 (100 penalty units or imprisonment for two years, or both) are double that in existing section 206A of the Corporations Act.[94] The Scrutiny Committee also reiterated its long-standing view that ‘it is inappropriate to apply strict liability in circumstances where a period of imprisonment may be imposed’.[95] A number of stakeholders also raised concerns about the penalty for continuing to hold office when disqualified being higher than that imposed by the Corporations Act.[96]

Application of amendments

Item 15 of Schedule 1 to the Bill deals with how the proposed amendments to the disqualification regime will apply. Generally, the amendments will apply upon commencement of the provisions in the schedule. However, subitem 15(1) has the effect of providing that the disqualification regime will only offences of the type listed in proposed paragraph 212(aa) if the conviction occurred after the commencement of the amendments contained in Schedule 1. The only exception to this will be where the offence covered by proposed paragraph 212(aa) was already covered by existing section 212.

This will ensure that the changes to the automatic disqualification regime will not apply retrospectively (noting however, that is possible that a person may be convicted of an offence that relates to conduct that occurred before the commencement of the amendments to the disqualification regime).

Item 15(2) relates to the disqualification regime contained in proposed section 222. It provides which conduct or events the court may consider when determining whether any of the grounds for disqualification under proposed section 223 apply to an official. Generally, the effect of item 15(2) is that grounds for disqualification can only be established by conduct or events that occurred after the commencement of the amendments (in other words the amendments will not operate retrospectively).

However there is an important qualification to the operation of item 15(2). Item 15(3) provides the court may have regard to matters that occurred before the commencement of the amendments for the purposes of proposed paragraph 222(2)(b); that is, in determining whether it would be unjust to disqualify the person, having regard to:

•       the nature of the matters constituting the ground

•       the circumstances and the nature of the person’s involvement in the matters constituting the ground, and

•       any other matter that the court considers relevant.

As such item 15(3) will allow the court to consider any relevant convictions, breaches of civil penalty provisions and related conduct when determining whether it would be unjust to disqualify the person from acting as an official of an organisation.[97]

Human rights issues raised by the proposed disqualification regime

In addition to the concerns regarding the strict liability offences already discussed above, the PJCHR noted that as the Bill expands the circumstances in which officials of unions can be disqualified, it engages the rights to freedom of association and to just and favourable conditions at work, both of which also encompass the right to form and join trade unions.[98]

The PJCHR noted that the interpretation of the right to freedom of association and to just and favourable conditions at work is informed by various ILO treaties to which Australia is a signatory. As such, workers have the right to autonomy of union processes which includes:

•       selecting their own representatives without interference

•       freedom to organise their administration and activities without interference and

•       formulating their own programs without interference.[99]

Further, various ILO conventions also protect unions from being dissolved, suspended or de-registered and protect the rights of workers to form organisations of their own choosing.[100] The PJCHR referred to comments from international supervisory mechanisms of the ILO in relation to the human rights engaged by the disqualification regime:

The right of workers' organizations to elect their own representatives freely is an indispensable condition for them to be able to act in full freedom and to promote effectively the interests of their members. For this right to be fully acknowledged, it is essential that the public authorities refrain from any intervention which might impair the exercise of this right, whether it be in determining the conditions of eligibility of leaders or in the conduct of the elections themselves.[101]

The PJCHR noted that the right to freedom of association may be subject to permissible limitations, provided certain conditions are met. Generally a justifiable limitation on the right in question (in this case, to freedom of association) must:

•       address a legitimate objective

•       be rationally connected to that legitimate objective and

•       be a proportionate way to achieve the legitimate objective.[102]

The PJCHR specifically noted that Article 22(3) of the International Covenant on Civil and Political Rights (ICCPR) and Article 8 of the International Covenant on Economic, Social and Cultural Rights (ICESCR) expressly provide that ‘no limitations are permissible’ on the right to freedom of association if they are inconsistent with the guarantees of freedom of association and the right to collectively organise contained in ILO Convention No. 87, to which Australia is a signatory.[103]

Is there a legitimate objective?

The PJCHR noted that the objective of the measures identified in the Statement of Compatibility with Human Rights contained in the Explanatory Memorandum is ‘improving the governance of registered organisations and protecting the interests of members’ and argued that by ensuring the leadership of unions act lawfully, the measure addresses the objectives of improving governance and protecting the interests of members of organisations.[104]

On the basis of this explanation, the PJCHR concluded that the measure is likely to constitute a legitimate objective for the purposes of international human rights law.[105]

Is the disqualification regime rationally connected to the legitimate objective?

The PJCHR noted that it was unclear from information provided in statement of compatibility contained in Explanatory Memorandum, how the breadth and impact of the disqualification regime is rationally connected to the stated objectives of improving the governance of organisations and protecting the interests of members. Further, the PJCHR questioned whether the measure was the least rights restrictive way of achieving the objectives as required in order to be a proportionate limitation on the rights in question (discussed below).[106]

Is the disqualification regime and proportionate way to achieve the legitimate objective?

As noted above, an aspect of the right to freedom of association includes the right to strike – a right specifically acknowledged, protected and permitted under international law. Further, the PJCHR noted that the existing restrictions on taking industrial action under Australian law (that is the framework in relation to ‘protected’ and 'unprotected' industrial action) have been criticised by various international oversight organisations.[107]

The PJCHR noted that because the proposed disqualification regime as provided for in the Bill could lead to union officials being disqualified for conduct that may be protected under international law, it further limits the right to strike and accordingly the right to freedom of association. Further, the PJCHR noted the breadth of conduct (including non-serious matters) that could potentially lead to a union official being disqualified raises questions about the rational connection of the disqualification regime to the stated objective of protecting the interests of members of unions, where those members may be of the view that taking particular forms of industrial action (such as unprotected industrial action) are in their best interests.[108]

The PJCHR concluded:

It is unclear from the information provided in the statement of compatibility how the breadth and impact of this measure is rationally connected to the stated objective of 'improving the governance of registered organisations and protecting the interests of members' and whether the measure is the least rights restrictive way of achieving this objective as required in order to be a proportionate limitation on human rights.[109]

Summary of human rights concerns regarding the disqualification regime

The PJCHR concluded that the disqualification regime proposed by the Bill may not be compatible with the relevant rights for the reasons discussed above and sought further information from the Minister regarding:

•       how the measure is rationally connected to its stated objective and

•       whether the limitation is a reasonable and proportionate measure to achieve the stated objective (in particular, whether the measure is the least rights restrictive way of achieving its stated objective; the extent of the limitation including in respect of the right to strike, noting previous concerns raised by international supervisory mechanisms; and the existence of relevant safeguards).[110]

At the time of writing this Digest, a response from the Minister has not been published.

The Senate Standing Committee Scrutiny of Bills (Scrutiny Committee) also raised concerns about the proposed disqualification regime, noting:

Given that disqualification may have a significant impact on an affected individual, it is of concern that the Bill does not provide more specificity about the actions it is expected an individual officer would need to take to avoid bearing consequences of a finding which relates to an organisation, rather than to the individual themselves… The Explanatory Memorandum suggests that the Final Report of the Royal Commission into Trade Union Governance and Corruption recommended this ground of disqualification on the basis of a similar ground for disqualifying a person from managing a corporation provided for in subsection 206E(1) of the Corporations Act 2001. While the Committee notes this recommendation, the fact that a provision exists in other legislative schemes does not, of itself, address the Committee's scrutiny concerns.[111]

As a result, the Scrutiny Committee requested advice from the Minister as to the appropriateness of including specific guidance in the Bill ‘as to the type of reasonable steps that must be undertaken in order to avoid disqualification under this provision’.[112]

At the time of writing this Digest, a response from the Minister has not been published.

Key issues and provisions: deregistration of organisations

Currently Chapter 2, Part 3 of the FWRO Act deals with the cancellation of registration of organisations. Schedule 2 of the Bill contains a number of amendments to the existing regime in the FWRO Act that are intended to expand the grounds for, and streamline the processes related to, the cancellation of registration of organisations by the Federal Court.

In addition, the amendments contained in Schedule 2 will provide that the Court can, instead of cancelling the registration of an organisation, make various alternative orders where the grounds for cancellation have been made out because of the conduct of the officials or members of a particular part of an organisation. In other words, the Court will have a range of options available to it from the disqualification of officials through to cancellation of registration of a registered organisation.[113]

Grounds for cancelling the registration of an organisation

The effect of the amendments proposed by Schedule 2 is that the Federal Court can cancel the registration of an organisation when certain grounds are established. Broadly speaking, those grounds relate to what would be colloquially understood as corrupt or unlawful conduct by the organisation, its officials, or members. Those same grounds may also form the basis for alternative orders – such as disqualifying particular officials, altering eligibility rules to exclude certain members, and suspension of rights and privileges of the organisation and its members.[114]

Applications to cancel the registration of an organisation

As with the proposed disqualification regime, proposed sections 28 and 28A of the FWRO Act, at item 4 of Schedule 2 to the Bill, provide that any of the following persons may apply to the court for an order cancelling the registration of an organisation or alternative orders:

•       the Commissioner

•       the Minister or

•       a person with a ‘sufficient interest’.

Unlike companies formed under the Corporations Act, the separate legal personality of registered organisations is not solely dependent upon registration under the FWRO Act. This because registered organisations are formed as separate legal entities under other legislation prior to registration under the FWRO Act (for example, incorporated associations). As such, the cancellation of registration of an organisation does not end the existence of the organisation as a separate legal entity in the same way that liquidation under the Corporations Act does in relation to companies formed under that Act.[115]

Those differences aside, the proposed amendments provide standing to a range of person who might seek to have the registration of the organisation cancelled. Whilst there are similarities between the range of persons with standing to deregister an organisation and those with standing to wind up a company, there are also differences.

The Corporations Act provides standing to a range of persons (shareholders, liquidators, creditors and ASIC) seeking to have a company liquidated, who must have a degree of interest in the affairs of the entity.[116] The Bill allows a range of persons to apply to have an organisation deregistered. It is expected that some of these are analogous to the range of persons with standing to apply to have a company wound up, for example:

•       the Commissioner (equivalent to ASIC)

•       an official (equivalent to a director)

•       member (equivalent to a shareholder) or

•       an administrator of the organisation (analogous to a liquidator in some circumstances)

as they are likely to be persons with a ‘sufficient interest’. Other persons that may have standing to apply to have the organisation deregistered arguably have no analogy under the Corporations Act, including:

•       another registered organisation (for example another union or an employer organisation)[117]

•       an employer that is a party to an enterprise agreement negotiated with the organisation or

•       the Minister.

In noting these differences, Professionals Australia expressed the view:

… the regime for the cancellation of registration of an organisation contained in the Bill is far more expansive than the regime for the winding up of companies in the Corporations Act. Further, the amendments regarding cancellation of registration were not recommended by the Heydon Report. There is no policy explanation for why they are appropriate or evidence of any extant policy issue that they address.[118]

Grounds for cancelling registration or making alternative orders

The grounds the cancelling the registration of a registered organisation, or making alternative orders are:

•       corrupt conduct of officials

•       multiple findings against an organisation

•       a serious offence committed by an organisation

•       multiple findings against members

•       non-compliance with orders or injunctions and

•       obstructive industrial action.[119]

These are discussed below.

Corrupt conduct of officials

Proposed section 28C provides that a ground to cancel the registration of an organisation or to make alternative orders is the corrupt conduct of officers of the organisation. For corrupt conduct of officers to exist a substantial number of the officers of the organisation or part of the organisation, or two or more senior officers of the organisation or part of the organisation must have engaged in corrupt conduct as defined in proposed paragraphs 28C(a) to (e).

Abuse of position

Proposed paragraph 28C(1)(a) provides that corrupt conduct includes where officers have engaged in conduct that involved, or was engaged in for the purposes of, abusing their position as officers of the organisation or part of the organisation.

Whilst not stated in the Explanatory Memorandum, it would appear likely that determining whether officials had abused their position would involve considering the conduct of the officials in light of their statutory and fiduciary duties to both the organisation and its members. This is because, as noted by the RCTUGC, one aspect of the fiduciary duties of organisation officials is to avoid a conflict between their personal interests and any duties they have to the organisation or its members, not to make any secret profit from their position, to exercise their powers bona fides and for a proper purpose, and to exercise their powers for purposes honestly and reasonably believed to be in the best interests of the members of an organisation as a whole.[120]

This would appear to suggest that where officers of an organisation had breached their fiduciary duties or related statutory duties, and those breaches reflect a conscious abuse of their position (for example by profiting from their position as officers) this finding is likely to be established.

The Explanatory Memorandum notes that this definition of corrupt conduct is adapted from the definition of 'engages in corrupt conduct' contained in subsection 6(1) of the Law Enforcement Integrity Commissioner Act 2006 (LEIC Act). As such, it would appear that case law decided under that Act or similar state or territory based legislation may be useful in interpreting the provision in any future cases.

Conduct that perverted the course of justice

Proposed paragraph 28C(1)(b) provides that corrupt conduct includes where officers have engaged in conduct that perverted, or was engaged in for the purposes of perverting, the course of justice. As noted above this ground of corrupt conduct is modelled off a provision contained in the LEIC Act.

Corruption of any other kind

Proposed paragraph 28C(1)(c) provides that corrupt conduct includes where officers have engaged in conduct that, having regard to their duties and powers as officers, involved, or was engaged in for the purposes of, corruption or any other kind. It would appear that the reference to having regard to duties and powers of the officers will turn attention to the compatibility of the conduct with their fiduciary and statutory duties. Given that officers owe their fiduciary duties to the organisation itself and in some circumstances also to members, it would suggest that this ground is likely to be established in circumstances where the 'corruption of any other kind' involved conduct that was incompatible with those duties.

As noted above this ground of corrupt conduct is modelled off a provision contained in the LEIC Act.

Acting contrary to the interests of the members of the organisation

Proposed paragraph 28C(1)(d) provides that corrupt conduct includes where officers, as part of their actions in affairs of the organisation or a part of the  organisation, act in their own interests rather than in the interests of the members of the organisation or part of the organisation, as a whole. The Explanatory Memorandum notes proposed paragraph 28C(1)(d) is adapted from paragraph 461(1)(e) of the Corporations Act, which deals with grounds for winding up a company on the basis ‘of the prejudicial manner in which directors are running the affairs of the company’.[121]

This ground of corruption reflects the fiduciary duties of officials of registered organisations to avoid a conflict of interest between their personal interests and any duties they have to the organisation or its members discussed previously.[122]

Conducting affairs of the organisation in an inappropriate manner

Proposed paragraph 28C(1)(e) provides that corrupt conduct includes where officers conducted affairs of the organisation or a part of the organisation in a manner that is:

•       oppressive or unfairly prejudicial to, or unfairly discriminatory against, a member or a class of members (proposed paragraph 28C(1)(e)(i)) or

•       contrary to the interests of the members of the organisation or part as a whole (proposed paragraph 28C(1)(e)(ii)).

Both grounds provided are broadly consistent with section 461 of the Corporations Act (which the Explanatory Memorandum notes proposed paragraph 28C(1)(e) is adapted from).[123] However, as noted by the RCTUGC whilst generally officials of registered organisation owe their fiduciary duties to the entity itself (rather than the members as a whole) there are also circumstances where officials owe fiduciary duties to the members as a whole in addition to, or instead of, the organisation as a separate entity.[124] This is also the case for directors of companies.

As such, there can be instances where the interests of the members of the organisation as a whole (or a part of it) and that of the entity itself do not align or even conflict. The same is true for companies. For example, it has been held that directors may act in what they consider to be the best interests of the company as a separate entity from its members (shareholders) even though this may not be in the (short-term) best interests of shareholders.[125]

However, in most situations the interests of the company as a separate entity from its owners (the shareholders) will coincide because ‘the company as a whole’ does not necessarily mean the company as a separate legal entity distinct from its owners.[126] Further, at least in relation to companies, generally the interests of shareholders are paramount.[127] Put simply, as long as the company is solvent, then as a general proposition the interest of the company are the same interests of shareholders.[128] That said, courts have also acknowledged that there may potentially be situations where what is in the best interests of the company may differ from what is in the best interests of the members as a whole, particular classes of members or individual shareholders,[129] but in such circumstances the duty is to act fairly between different classes of members.[130]

It appears that the Government intends for the Bill to shift the balance of the statutory duties of registered organisation officials in a way that gives greater weight to the interests of the members as a whole over the interests of the organisation as a separate entity[131] (noting that as discussed above, generally the interests of the organisation as a separate entity will align with the interests of the members).

This means that in relation to the measures proposed by the Bill, it is at least theoretically possible that an official could be acting in the best interests of the registered organisation as a separate entity from the members as whole for an honest, bona fide purpose – but those actions may not necessarily be in the (short term) interests of the membership as a whole, or part of the membership. The CFMEU noted:

The idea that it is necessarily ‘corrupt’ or improper for a union or official to elevate the interests of one group of members over another is a nonsense. Trade union affairs involve balancing what are often complex and competing needs and interests of a diverse membership group. Officials are called on to make decisions about pursuing certain claims on behalf of members, including unmeritorious ones, about prioritising scarce union resources and about general policy positions. Not all decisions will satisfy every member or group of members. That does not make those decisions ‘corrupt’ or even ‘oppressive’ or ‘unfairly prejudicial’. By joining a union, most members accept that the merit of union decision making is best judged at the ballot box, not through complex and costly court processes.[132]

Unions NSW argued that ‘the nature of unions requires them to balance the needs and interests of individuals against those of the broader collective’ and that therefore ‘it is impossible to simultaneously meet the interests or members collectively and individually’.[133] The ACTU made a similar point:

For most widely representative unions, it is almost a daily duty to conduct affairs in a manner that may arguably discriminate unfairly between classes of members or part of the organisation. For example, a decision whether to press for and accept a flat rate pay increase instead of a percentage pay increase involves discrimination in favour of the lower-paid members. Almost every contested negotiation – be it about a pay structure, about a redundancy selection process, about conditions or employment or trade-offs – involves the sometimes difficult elevation of the interests of one group of members over those of another.[134]

In such circumstances the Bill may allow either the organisation to be deregistered, or the officials in question to be disqualified despite the fact that they may have made a genuine judgement as to how to fairly balance the types of conflicting interests noted by the CFMEU and ACTU at that point in time and had determined that it was preferable to act in the interests of the organisation as separate entity (as their duties requires them to do) or in the interests of one class of members over another. This is because as drafted the Bill does not provide that acting fairly between different classes of members or parts of the organisation in such circumstances is permitted—as courts have held can, in some circumstances, be the case for directors of companies.[135]

Evidence that can be used to establish corrupt conduct

Proposed subsection 28C(2) provides that a finding of fact in proceedings before any court (this would not include Fair Work Commission decisions, as it is a tribunal, not a court) relating to the grounds for cancelling registration or alternative orders set out in proposed section 28C (such as disqualification of officers), are admissible as prima facie evidence of that fact that the relevant ground occurred.

This means proposed subsection 28C(2) operates  to allow an applicant to use a finding of fact in another proceeding as evidence of the fact that a ground for disqualification occurred. However, it will not prevent the respondent from establishing the contrary by leading their own evidence. The Explanatory Memorandum notes the purpose of proposed section 28C(2) is ‘to expedite’ applications made under proposed sections 28 and 28A where ‘relevant factual findings have been made in other proceedings’.[136]

Multiple findings against an organisation

Proposed section 28D provides that a ground to cancel the registration of an organisation or to make alternative orders exists when in relation to an organisation any two of the following have been made against it:

•       a designated finding or

•       a wider criminal finding.

As noted earlier, a designated finding can relate to less serious contraventions of industrial laws or to taking unprotected industrial action. The PJCHR expressed concern about this ground, noting that where deregistration related to designated findings of a less serious nature, or to taking unprotected industrial action:

it is unclear how the cancellation of union registration would necessarily be in the interests of members or would guarantee the democratic functioning of the organisation. For example, union members may have democratically decided to take unprotected industrial action and hold the view it is in their best interests.[137]

The PJCHR also noted that the existing restrictions on taking industrial action in Australian domestic law have been subject to ‘serious criticisms’ by international treaty monitoring bodies that concluded that they go beyond the permissible limitations on the right to strike as an aspect of the right to freedom of association.[138]

The PJCHR concluded that cancelling the registration of a registered organisation for undertaking conduct captured by designated findings (especially in relation to less serious contraventions of industrial law or taking unprotected industrial action) would further limit the right to freedom of association. The PJCHR also noted that as a potential alternative order to deregistration is excluding particular members from membership of the organisation, such orders would ‘appear to undermine’ the rights of those individuals ‘to be part of a union of their choosing’.[139] The PJCHR also noted that the breadth of the proposed power to deregister an organisation 'raises specific questions about whether it is sufficiently circumscribed with respect to the stated objectives '.[140]

The PJCHR noted that the statement of compatibility with human rights contained in the Explanatory Memorandum 'provides some arguments about the proportionality of the measure’ including the ‘availability of certain safeguards’ including that:

1.       deregistration orders may be limited to a part of an organisation that is undertaking the relevant conduct justifying deregistration and

2.       workers will still be entitled to be represented by a union.[141]

However, the PJCHR concluded ‘these do not appear sufficient to ensure that the limitation is the least rights restrictive way to achieving its stated objectives, in view of the breadth of the grounds for cancellation of union registration set out above'.[142]

The concerns expressed by the PJCHR were echoed by some stakeholders. The ACTU argued that ‘there are no equivalent provisions’ in the Corporations Act that ‘allow for companies to be wound up due to a history of non-compliance with law by the company, its directors or the members (ie shareholders)’ and as a result ‘a company can repeatedly rip off consumers, put workers lives at risk, illegally dump toxic chemicals or produce dangerous products and not be wound up’ but the amendments would allow a union to ‘have its registration cancelled if a small group of members take unprotected industrial action’.[143] The ACTU also argued:

These amendments allow the actions of what may be a very small part of an organisation or its membership to be sheeted home to the whole of the organisation with orders for deregistration or the suspension of rights and privileges etc. It is difficult to conceptualise any way in which such an outcome could be fair to, or properly serve the interests of, members who may find themselves denied certain or all of the benefits of representation by a registered organisation because of conduct in which they had no involvement.[144]

Serious offence committed by an organisation

Proposed section 28E provides a ground to cancel the registration of a registered organisation or to make alternative orders exists where the organisation is found, in criminal proceedings against it, to:

•       have committed an offence against a law of the Commonwealth or a state or territory and

•       the offence is punishable upon conviction by a penalty for a body corporate of (or equivalent to) at least 1,500 penalty units ($315,000).

The Explanatory Memorandum notes that the threshold quantum of penalty units (1,500) establishes ‘the gravity of the offence for a body corporate’ as it ‘equivalent to 5 years imprisonment for a natural person’.[145] Further, the Explanatory Memorandum notes the use of the words ‘or equivalent to’ in proposed section 28E(b) are necessary as:

… not all States and Territories utilise the concept of penalty units and some instead express penalties as fixed amounts. In such a case where the fixed amount is equivalent to the monetary value of at least 1,500 penalty units, it will be sufficient to provide a ground for cancellation.[146]

Multiple findings against members

Proposed section 28F provides a ground to cancel the registration of a registered organisation or to make alternative orders exists where designated findings have been made against a substantial number of members of:

•       the organisation

•       a part of the organisation or

•       a class of members of the organisation.

The phrase ‘substantial number’ is not defined in the Bill, nor does the Explanatory Memorandum provide any guidance as it its meaning. Despite this, it would appear reasonable, based on its ordinary meaning and case law in other areas of law, to conclude that a 'substantial number 'of members of the organisation will be a number that is ‘considerable’ and more than ‘significant’.[147] As such, what constitutes a ‘substantial number’ of members against which designated findings have been made will turn on a case-by-case basis, and will be based on various facts such as the total number of members in the organisation, part of the organisation or class of members of the organisation compared to the number of members against which relevant designated findings have been made.

As noted above in relation to proposed section 28D, the ACTU expressed concern that the effect of proposed section 28F would be that ‘the actions of what may be a very small part of an organisation or its membership’ (because designated findings may be made against a substantial number of members of a small part of the organisation or a class of members that are a very small proportion of the overall membership of the organisation) may be used as a basis for orders for deregistration or the suspension of rights and privileges.[148]

Non-compliance with orders or injunctions

Proposed section 28G provides a ground to cancel the registration of a registered organisation or to make alternative orders exists where the organisation has failed to comply with an order or injunction made under any law of the Commonwealth or a state or territory; or a substantial number of members of:

•       the organisation

•       a part of the organisation or

•       a class of members of the organisation

have failed to comply with an order or injunction made under a designated law (the definition of which is discussed above under the heading ‘Designated laws’).

This means that in effect proposed section 28G provides two grounds for cancelling the registration of a registered organisation, or making alternative orders.

The first is where the organisation itself has failed to comply with any order or injunction made under any law of the Commonwealth, a state or territory.

The second ground is where a substantial number of members of the organisation, a part of the organisation, or a class of members of the organisation, have failed to comply with an order or injunction made under a designated law. This second round is narrower than the first for two reasons. First, the definition of designated law essentially captures industrial, work health and safety and competition laws (as well as criminal conduct related to causing harm to, and impersonating or obstructing, officials), rather than failure to comply with an order or injunction made against ‘any’ law of the Commonwealth, a state or territory. Second, this ground only applies to such breaches by a ‘substantial number’ of members of the organisation, a part of it or a class of members (noting the criticism of the ACTU that this could still potentially mean that ‘the actions of what may be a very small part of an organisation or its membership’ may have repercussions for the broader membership who were not involved in the relevant breaches).[149]

As discussed above what constitutes a 'substantial number 'of members that failed to comply with an order or injunction made under a designated law will turn on a case-by-case basis.

Proposed subsection 28G(2) provides that a finding of fact in proceedings before any court (this would not include FWC decisions, as it is a tribunal, not a court) relating to the grounds for cancelling registration or alternative orders set out in proposed section 28G is admissible as prima facie evidence of the fact that the relevant ground occurred. This means proposed subsection 28G(2) operates to allow an applicant to use a finding of fact in another proceeding as evidence of the fact that a ground for disqualification has occurred. However, it will not prevent the respondent from establishing the contrary by leading their own evidence.

Obstructive industrial action

Proposed section 28H provides a ground to cancel the registration of a registered organisation or to make alternative orders exists where the organisation or a substantial number of members of:

•       the organisation

•       a part of the organisation or

•       a class of members of the organisation

engaged in certain types of industrial action. Proposed subsection 28H(2) effectively provides that obstructive industrial action is any industrial action (other than protected industrial action)[150] that prevented, hindered or interfered with:

•       the activities of a federal system employer

•       the provision of any public service by the Commonwealth or a state or territory or an authority of the Commonwealth or a state or territory or

•       that had, or is having or is likely to have, a substantial adverse effect on the safety, health or welfare of the community or a part of the community.

Proposed subsection 28H(3) provides that a finding of fact in proceedings before any court (this would not include FWC decisions, as it is a tribunal, not a court) relating to the grounds for cancelling registration or alternative orders set out in proposed section 28H is admissible as prima facie evidence of that fact that the relevant ground occurred.

This means proposed subsection 28G(3) operates  to allow an applicant to use a finding of fact in another proceeding as evidence of the fact a ground for disqualification has occurred. However, it will not prevent the respondent from establishing the contrary by leading their own evidence. Likewise it will not prevent an applicant from leading evidence that the organisation, a part of it, or its members engaged in obstructive industrial action, even if there has been no judicial finding to that effect. This means that evidence from FWC proceedings or other evidence could be used to establish this ground, albeit such evidence would not be prima facie evidence of the fact that obstructive industrial action had occurred. The PJCHR noted:

… restrictions on taking industrial action in Australian domestic law have been subject to serious criticisms by international treaty monitoring bodies as going beyond permissible limitations on the right to strike as an aspect of the right to freedom of association.[151]

Therefore the PJCHR concluded that cancelling the registration of registered organisations for obstructive industrial action ‘further limits the right to freedom of association’.[152] The ACTU was also critical of proposed section 28H on the basis that ‘a union could have its registration cancelled if a small group of members take unprotected industrial action’.[153]

Justifying non-deregistration of the organisation

Under proposed section 28K, if the court finds that one of the above grounds is established it must deregister the organisation unless the organisation can satisfy the court that it would be unjust to cancel its registration having regard to:

•       the nature of the matters constituting that ground

•       the action (if any) that has been taken by or against the organisation or its members or officers in relation to those matters

•       the best interests of the members of the organisation as a whole and

•       any other matters the court considers relevant.

Proposed subsection 28K(2) specifically provides that the organisation must be given an opportunity to be heard by the court. In its submission to the Senate Education and Employment Legislation Committee, Professionals Australia noted that proposed section 28K does not impose a ‘requirement to hear from or take into consideration the views of the membership’ as a whole and argued that as such the deregistration regime proposed by the Bill ‘potentially contravene[s] Article 3 of ILO Convention 87’ as it:

… impact[s] significantly on the right of organisations and their members to self-determination and to manage their own affairs without political or industry interference.[154]

Unions NSW also criticised proposed section 28K:

In this instance, if grounds have been established against a union, it must stand before the Court and justify its very existence. In considering if the deregistration is unjust, the Court must have regard to the best interests of the members as a whole. The idea that a court would decide what is in the best interests of union members, when considering whether or not to effectively abolish a union, is offensive and misplaced. Unions are democratic organisations whose membership hold the leadership accountable through elections and internal union structures.[155]

Other powers related to deregistration

The Bill provides a range of additional orders that can be made alongside an order to cancel the registration of a registered organisation under proposed section 28K.

Proposed paragraph 28L(a) allows the court to direct that an application by the de-registered organisation for registration as an organisation is not to be dealt with before the end of a specified period. The purpose of this section is to ensure that de-registration of an organisation is effective, and cannot be undermined by the re-registration of the organisation within a short period of time after deregistration is ordered.[156]

Proposed paragraph 28L(b) allows the court to direct that an application for the registration of an organisation whose officers are the same, or substantially the same, as officers of the deregistered organisation is not to be dealt with before the end of a specified period. The purpose of this section is to ensure that the deregistration of an organisation is effective and cannot be undermined by the re-registration of an organisation that has the same, or substantially the same officers as those in the organisation that was deregistered.[157]

Alternatives to deregistration

The Bill proposes that a court can, as an alternative to ordering deregistration, make various other orders where a ground to deregistration has been established and the court is satisfied that it would be unjust to cancel the registration of the organisation.

When can alternative orders be made?

Proposed section 28M provides that before the court makes an order under proposed sections 28N (disqualification of officers) or 28P (exclusion of certain members), or exercises power under proposed paragraph 28Q(1)(a) (suspension of rights, privileges or capacity) in relation to only part of an organisation (for example, a branch) or only some of its members (for example, those involved in the conduct that led to the relevant ground for deregistration being established) the Court must be satisfied that the relevant ground justifying deregistration of the organisation or making alternative orders was established wholly or mainly because of the conduct of:

•       officers of a particular part of the organisation or

•       members of a particular class of members or of a particular part of the organisation.[158]

However, proposed paragraph 28M(2)(b) and subsection 28M(3) provide that before making an order to disqualify an officer, exclude certain members or suspend rights, privileges or capacity the court must:

•       after having regard to the circumstances and nature of the officers’ or members’ involvement in the matters constituting the ground and any other matters the Court considers relevant

•       be satisfied that it would not be unjust to make the order or exercise the power.

Proposed subsection 28M(4) specifically provides that the organisation must be given an opportunity to be heard by the court. Professionals Australia criticised this aspect of the Bill on the basis that a court should not determine what is in the best interests of an organisations members ‘with no requirement to hear from or take into consideration’ their views.[159] Likewise United Voice argued:

Workers decide what is in their collective interest - there is no place for an external determination of this interest. It is both paternalistic and an undue interference in the internal affairs of workers’ organisations.[160]

Disqualifying officers responsible for conduct justifying deregistration

Proposed section 28N provides that the Court may make an order disqualifying officers mentioned in proposed paragraph 28M(2)(a)(i) (that is, officers of a certain part of the organisation wholly or mainly responsible for the conduct establishing the ground for deregistration) from holding office in an organisation, for a period the Court considers appropriate. As noted above, the effect of proposed subsection 28M(2) is that an order under proposed section 28N can only be made where the Court is satisfied of the relevant matters in that section.

Further, proposed subsection 28N(2) provides that if the Court does make an order disqualifying the officer, the officer is also disqualified from holding office in a branch of an organisation.

Altering membership rules

Currently subsection 28(4) of the FWRO Act allows the Court to alter the eligibility rules of the organisation to exclude certain members, despite the effect of any membership agreement made under section 151 of the FWRO Act. Section 151 of the FWRO Act allows the rules of an organisation to authorise the organisation to enter into agreements with unions registered under state legislation to allow certain members of the state union who are ineligible to be members of that union, to become members of the registered organisation.

Excluding certain members

Proposed section 28P provides that where the Court is satisfied of the relevant matters in proposed section 28M it may make an order altering the eligibility rules of an organisation so as to exclude from eligibility for membership of the organisation persons belonging to the part of the organisation, or the class of members, mentioned in proposed subparagraph 28M(2)(a)(ii) (that is, members of a certain part of the organisation wholly or mainly responsible for the conduct establishing the ground for deregistration). The Court can make an order excluding people belonging to such a part or class of the membership despite any membership agreement made under existing section 151 of the FWRO Act.

Where an order is made to alter the rules of eligibility, those changes take place on the date of the order or a date specified in the order.[161]

Proposed subsection 28P(3) provides that where the Court makes an order to alter the eligibility rules to exclude certain members it may make an additional order prohibiting an organisation, for a specified period of time, from seeking consent under section 158 of the FWRO Act to alter the organisation’s eligibility rules in such a manner as to have the effect of restoring eligibility to the persons who were excluded by the order.

Suspension of rights and privileges

Section 29 of the FWRO Act deals with making alternative orders where deregistration of an organisation is deferred. Currently subsection 29(2) of the FWRO Act allows the Court to make orders suspending the rights, privileges or capacities of the organisation or a part of the organisation, or of all or any of its members under various legislation (or order made under such legislation), an enterprise agreement or modern award. Further, the Court may also:

•       give directions as to the exercise of any rights, privileges or capacities that have been suspended and

•       make orders that restrict the use of the funds or property of the organisation or a part of the organisation, and orders for the control of the funds or property for the purpose of ensuring observance of the restrictions.

Proposed subsection 28Q(1) is consistent with the above.

As with current subsection 29(4), proposed subsection 28Q(2) provides that an order under proposed section 28Q will have effect despite anything in the rules of the organisation, or part of the organisation, concerned. Likewise as provided for in current subsection 29(5), proposed subsection 28Q(3) provides that any orders made under proposed section 28Q:

•       may be revoked by an order of the Court upon the application of a party to the proceedings or

•       expire on the date specified in the order.

Currently subsection 29(3) of the FWRO Act provides that the court must reconsider the question of whether to deregister an organisation once the relevant alternative orders (such as disqualifying officials or excluding members) cease to operate, or upon application of a party to the proceedings (whichever is earlier).

Proposed subsection 28Q(4) is largely consistent with existing subsection 29(3), as it provides that the Court must reconsider an application to deregister an organisation once either:

•       any orders made under proposed section 28Q cease to be in force or

•       one of the existing parties makes an application requesting that the Court consider whether it is just to determine the substantive issues in the application having regard to the evidence given in relation to compliance with any orders made under proposed section 28Q or any other relevant circumstances.

However, unlike existing subsection 29(3), proposed subsection 28Q(4) also applies to applications for alternative orders to deregistration made under proposed section 28A.

Human rights concerns raised by the alternative orders regime

The PJCHR expressed a number of concerns about aspects of the alternative orders regime proposed by the Bill.

First it noted that empowering the court to exclude particular members from union membership (as an alternative to deregistration) 'appeared to undermine the capacity to be part of the union of their choosing'.[162]

Second, it noted that whilst deregistration orders may be limited to the part of an organisation that had been undertaking the conduct justifying the deregistration, employees 'will still be entitled to be represented by union' as a matter of international law and therefore it appears that the alternative orders may not be the least rights restrictive way to achieve the Bill’s stated objectives (this is because of the breadth of the grounds justifying the deregistration of an organisation).[163]

Key issues and provisions: administration of dysfunctional organisations

Currently section 323 of the FWRO Act provides for applications to be made to the Court for a declaration in relation to an organisation or any part of it. If a declaration is made, the Court may approve a scheme for the taking of action to resolve the matters to which the declaration relates, which could include appointing an administrator for a period of time.

Item 4 of Schedule 3 to the Bill repeals existing section 323 of the FWRO Act and replaces it with proposed Part 2A, which deals with the administration of dysfunctional organisations.

Key concepts and definitions

The administration regime proposed by the Bill is underpinned by a number of key concepts set out in item 1 of Schedule 3 (which amends section 6 of the FWRO Act). These are outlined below.

Administrator

The definition of ‘administrator’ includes a person appointed as an administrator or interim administrator under proposed section 323A.

Books

The definition of books is expansive and includes a register, any other record of information, financial reports or financial records, however compiled, recorded or stored and documents.

Financial misconduct

The definition of financial misconduct is defined as including (and is therefore not limited to):

•       a contravention of a provision of Division 2 of Part 2 of Chapter 9 of the FWRO Act (dealing with duties of officers in relation to the financial management of organisations)

•       misuse of funds or false accounting and

•       failure to fulfil duties in relation to financial reports.

The Explanatory Memorandum notes that whether other conduct not specified in the list above constitutes financial misconduct will turn on the facts of each case.[164] What constitutes a ‘misuse of funds’ is not defined, but would appear to capture a range of conduct including using funds in circumstances where the approval of the expenditure or the expenditure itself results in an officer breaching their fiduciary or statutory duties.

Part of an organisation

The definition of a part of an organisation is consistent with current paragraph 323(1)(a) of the FWRO Act and hence includes:

•       a branch or part of a branch of the organisation and

•       a collective body of the organisation or a branch of the organisation.

Who can apply to have an administrator appointed?

Proposed subsection 323(1) enables the Commissioner, Minister, organisation, a member of the organisation and ‘any other person having a sufficient interest’ to seek a court order under proposed subsection 323(3) (discussed below).[165] Proposed subsection 323(1) provides standing to a wider range of persons seeking to have an organisation or part placed under administration in a wider range of circumstances compared to the Corporations Act.

Circumstances that can lead to an administrator being appointed

Proposed subsection 323(3) provides that the circumstances that can lead to an administrator being appointed include where the court is satisfied:

•       that an organisation or part of an organisation has ceased to function effectively

•       one or more officers of an organisation or part of an organisation have engaged in financial misconduct

•       a substantial number of the officers of an organisation or part have acted in their own interests rather than in the interests of members of the organisation or a part as a whole

•       that affairs of an organisation or part are being conducted in a manner that is:

–      oppressive or unfairly prejudicial to, or unfairly discriminatory against, a member or class of members or

–      in a manner that is contrary to the interests of the members of the organisation or part as a whole or

•       that an office or position in an organisation or part of an organisation is vacant and there is no effective means under the organisation or part’s rules to fill it.

These are briefly examined below.

The organisation or a part of it has ceased to function effectively

Proposed paragraph 323(3)(a) provides that circumstances that can lead an administrator being appointed include where the court is satisfied that an organisation or part of it has ceased to function effectively and there are no effective means under the rules of the organisation or part by which the organisation or part can be reconstituted or enabled to function effectively.

The Explanatory Memorandum notes that proposed paragraph 323(3)(a) is ‘modelled on existing paragraph 323(1)(a)’ of the FWRO Act.[166] Proposed subsection 323(4) provides that an organisation or a part is taken to have ceased to function effectively where the court is satisfied officers of the organisation or part have:

•       on multiple occasions, contravened designated laws

•       misappropriated funds of the organisation or part or

•       otherwise repeatedly failed to fulfil their duties as officers of the organisation or part of the organisation.

However, this list is indicative only—it does not limit the circumstances in which an organisation or part ceases to function effectively. Due to the breadth of the definition of designated laws an administrator could be appointed where officers have engaged in conduct leading to minor contraventions of designated laws, a point raised by the PJCHR.[167]

One or more officers of an organisation or part have engaged in financial misconduct

Proposed paragraph 323(3)(b) provides that circumstances that can lead to an administrator being appointed include where the court is satisfied that one or more officers of an organisation or part have engaged in financial misconduct in relation to carrying out their functions or in relation to the organisation or part (that is breaching various financial management duties under the FWRO Act, false accounting or misusing funds).

A substantial number of the officers have acted in their own interests

Proposed paragraph 323(3)(c) provides that circumstances that can lead to an administrator being appointed include where the court is satisfied that a ‘substantial number’ of the officers of an organisation or part have, in affairs of the organisation or part, acted in their own interests rather than in the interests of members of the organisation or part as a whole.

The Explanatory Memorandum notes that proposed paragraph 323(3)(c) is ‘adapted from paragraph 461(1)(e) of the Corporations Act’.[168] However that paragraph deals with applications to have a company wound up (that is, liquidated) rather than appointing an administrator.

That said, section 232 and paragraph 233(1)(c) of the Corporations Act provides that where the conduct of the company’s affairs are contrary to the interests of the members as a whole or oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member or members whether in that capacity or in any other capacity, members or former members of a company (or persons ASIC thinks appropriate)[169] to apply to the court for an order regulating the conduct of affairs of the company in the future, which can include replacing the existing board of a listed company with a board chosen by the court[170] (although this is very rare).

Oppressive conduct contrary to the interests of the members of the organisation

Proposed paragraph 323(3)(d) provides that circumstances that can lead to an administrator being appointed include where the court is satisfied that the affairs of an organisation or part are being conducted in a manner that is:

•       oppressive or unfairly prejudicial to, or unfairly discriminatory against, a member or members or

•       contrary to the interests of the members of the organisation or part as a whole.

The Explanatory Memorandum states that proposed paragraph 323(3)(d) is ‘adapted from paragraph 461(1)(f) of the Corporations Act’.[171] However that paragraph deals with applications to have a company wound up (that is, liquidated) rather than appointing an administrator.

That said, section 232 and paragraph 233(1)(c) of the Corporations Act, as described earlier, allow a court to appoint a new board where the conduct of the company’s affairs are contrary to the interests of the members as a whole or oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member or types of members.[172]

Vacant office or position and no effective means of filling it

Proposed paragraph 323(3)(e) provides that circumstances that can lead to an administrator being appointed include where the court is satisfied that:

•       an office or position in an organisation or part is vacant and

•       there is no effective means under the organisation or part’s rules to fill the office or position.

Proposed paragraph 323(3)(e) reflects existing paragraph 323(1)(b) of the FWRO Act.

Differences between appointing administrators under the Corporations Act and Bill

As noted above, the RCTUGC formed the view that the governance requirements of registered organisations were more like corporations than incorporated associations. However the RCTUGC did not make any recommendations nor provide any detailed commentary on the appointment of administrators to oversee dysfunctional organisations.  The Explanatory Memorandum states that the amendments in relation to placing organisations under administration are:

modelled and adapted from broadly equivalent provisions of the Corporations Act, [to] ensure that governance issues within an organisation, or individual branches or divisions, can be addressed promptly and transparently to ensure that the interests of members are protected.[173]

To give context to the proposed amendments a brief outline of the regime applicable to the appointment of administrators of companies under the Corporations Act is provided below.

Appointing administrators of companies

Voluntary administration involves the appointment of an independent, registered insolvency practitioner (an ‘administrator’) to take control of a company that the Board thinks is insolvent or is likely to become insolvent, for a relatively short period of time.[174] As not all corporate insolvencies are caused by dysfunctional administration this means that voluntary administration only deals with insolvency or potential insolvency, rather than dysfunctional corporate governance generally.

Directors may appoint an administrator where the directors believe that the company is insolvent or is likely to become insolvent at a future time.[175] In most cases the decision to place a company into voluntary administration is made by the directors, and does not require approval of the shareholders, creditors, ASIC or the court. However, the Corporations Act also provides that a company may be placed under voluntary administration by a liquidator or a creditor who has a charge over the whole or substantially the whole of the company's property.[176]

The aim of voluntary administration is to maximise the chances of the company and its business remaining in existence and, failing that, to achieve a better return to creditors than the immediate winding up of the company would achieve.[177] Directors of financially troubled or insolvent companies are able to initiate voluntary administration (and certain other forms of external administration).[178] There are a number of reasons why they may do so, such as:

•       to achieve a better outcome for shareholders and creditors than maintaining the status quo or

•       because they are ‘encouraged’ to take such action by ‘a number of legislative incentives’.[179]

As noted above, once appointed an administrator takes complete control of the company. Further, the directors lose their power to manage the affairs of the company, even though they retain their office.[180] The Corporations Act imposes a number of requirements in relation to administrators including:

•       they must be registered liquidators and

•       they must also be independent of the company, its officers, its creditors and the company's auditor.[181]

One of the key duties of an administrator is to investigate the financial position and circumstances of the company. The administrator must form an opinion as to whether it would be in the creditors’ interests for the company:

•       to enter into a deed of company arrangement

•       end the administration or

•       wind up the company.[182]

Court orders to deal with dysfunctional companies

The Corporations Act contains mechanisms outside the appointment of a voluntary administrator by which certain persons can seek court orders to deal with dysfunctional management of a company (noting this does not automatically correlate to actual or likely insolvency – a dysfunctional company can be solvent, and not every insolvent or potentially insolvent company is managed in a dysfunctional manner).

As discussed above, sections 232, 234 and paragraph 233(1)(c) of the Corporations Act effectively provide that where the conduct of the company’s affairs is contrary to the interests of the members as a whole, or oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member or class of members, or former members of a company (or persons ASIC thinks appropriate)[183] may apply to the court for an order regulating the conduct of the affairs of the company in the future. This can include replacing the existing board of a company with a board chosen by the court.

In essence, this means that in certain situations the administration of a company can be directed or supervised by the court, or the court can (in effect) appoint such persons as it sees fit to manage the corporation. Technically however, this is not voluntary administration per se.

Summary of differences between administration under the Bill and Corporations Act

From the above it can be seen that the range of persons with the power to place a company into voluntary administration is limited to directors and in some (limited) situations, a liquidator or a creditor. Further, voluntary administration deals with insolvency or potential insolvency, rather than dysfunctional management per se.

Importantly, under the Corporations Act neither ASIC, the Minister nor shareholders have standing to initiate proceedings to place a company into voluntary administration.  In contrast, the regime proposed by Schedule 3 of the Bill will enable:

•       the Commissioner, Minister and the organisation

•       a member of the organisation and

•       ‘any other person having a sufficient interest’

to seek a court order to place the organisation or a part of it under administration.[184] Whilst the Corporations Act does provide an alternative mechanism that could be used to deal with dysfunctional corporate management, it is rarely used, is not voluntary administration per se and standing to bring such applications is effectively limited to members and former members of the company or persons ASIC thinks appropriate.[185]

As such, whilst the Explanatory Memorandum notes that the administration regime is modelled off that contained in the Corporations Act, the provisions referred to in the Explanatory Memorandum relate to voluntary administration (which deals with insolvency) rather than court orders to deal with dysfunctional management in and of itself (which is distinct and separate from insolvency). Hence the analogy between the processes proposed by the Bill and those referred to in the Explanatory Memorandum appears somewhat inapt. This is because the Bill provides:

•       standing to apply to the court for a declaration that may result in an administrator being appointed to an organisation or part of an organisation to a wider range of persons than the Corporations Act provides standing to, to appoint either a voluntary administrator or to seek court orders to deal with dysfunctional corporate management

•       a wider range of circumstances that may lead to appointing an administrator than the appointment of a voluntary administrator under the Corporations Act or court orders dealing with dysfunctional management and

•       a wider range of purposes and objectives for the appointment of an administrator than that provided for the appointment of a voluntary administrator under the Corporations Act.

Process to appoint an administrator

The process for appointing an administrator is as follows:

•       a person with the requisite standing applies to the court for a declaration that the circumstances discussed above exist in relation to the organisation or a part of it[186]

•       the court then determines whether to make the declaration.[187] If it does make a declaration then the court must not make an order unless it is satisfied that the order(s) would ‘not do substantial injustice to the organisation or any member of the organisation’[188]

•       if the court determines it is appropriate to make an order, it may make any such orders as it sees fit including:

–      the appointment of an administrator for the organisation or part of it

–      types of reports to be given to the Court under the scheme

–      when the scheme begins and ends and

–      when elections (if any) are to be held under the scheme.[189]

Proposed section 323B provides that such orders made by the Court (and any action taken by an administrator or other person in accordance with them) overrides anything in the FWRO Act or the rules of the organisation or part to which it relates, as well as any previous direction or exemption made under the FWRO Act. However, there are limitations to the operation of orders made under proposed section 323A including:

•       if a scheme provides for its own end, the Court may only approve it where it provides that it does not end unless the Court is satisfied that the circumstances it aims to deal with have been resolved or no longer exist and

•       if a scheme provides for an election for an office, the Court may only approve it if it provides for the election to be conducted by the Australian Electoral Commission (AEC) in accordance with Chapter 7 of the FWRO Act.[190]

Proposed section 323D provides that administrators must advise the court in writing of any interest that could conflict with the proper performance of their duties as an administrator within 21 days of acquiring or becoming aware of the interest.

Proposed section 323E provides that the court may terminate the appointment of the administrator at any time, including where the administrator has notified the court of a conflict of interest under proposed section 323D.

Functions and powers of administrators

Once appointed by the Court proposed section 323F provides the administrator has the power to:

•       control the property and affairs of the organisation or part and manage that property and those affairs

•       dispose of any of that property and

•       perform any function, and exercise any power, that the organisation or part, or any officers, could perform or exercise if it were not under administration.

In addition, proposed subsection 323G(2) provides the administrator with the power to require a person to attend on the administrator at such times and to give them any information about the business, property, affairs and financial circumstances of the organisation or part as reasonably required. In addition, proposed subsection 323H(3) provides the administrator with the power to require a person by written notice to deliver any books specified in the notice that the person possesses.

Finally, proposed section 323K provides that an administrator or person acting under the direction of the administrator, is not liable in any action or proceedings in relation to:

•       an act done, or omitted be done

•       in good faith

•       in the performance or exercise, or purported performance exercise

•       of any function or power of the administrator as an administrator under proposed part 2A.

Offences related to administrators

As noted above, administrators have the power to require certain persons (for example, officers or employees of the organisation or part, or a person who has possession of books related to an organisation or part) to provide information, books or attend on the administrator as reasonably required.[191] Where a person does not comply with those requirements to assist an administrator, the person commits an offence punishable by penalty of up to 50 penalty units, imprisonment for up to 12 months, or both.[192] Further, those offences are strict liability offences.[193]

In a criminal law offence the proof of fault (for example, intent) is usually a basic requirement. However, offences of strict liability remove the fault (mental) element that would otherwise apply.[194]

In relation to the offence of failing to help an administrator, it is a defence if the person has a reasonable excuse, proposed subsection 323G(5) provides that it is a reasonable excuse for a person to refuse or fail to give information on the ground that to do so might tend to incriminate the person or expose them to a penalty. As such, the Bill preserves the privilege against self-incrimination. Further, proposed subsection 323G(6) also preserves legal professional privilege. However, in relation to the offence of failing to provide the books of the organisation or part (or allowing the administrator to inspect and make copies of such books) no such exceptions are provided. (Although the defence of mistake of fact is available for both offences under sections 6.1 and 9.2 of the Criminal Code.)

The Scrutiny Committee raised concerns about the strict liability offences including:

•       it is not evident that the strict liability elements are 'clear and straightforward' (as claimed in the Explanatory Memorandum to the Bill) because the requirements are framed by reference to what the 'administrator reasonably requires'

•       the Guide To Framing Commonwealth Offences, Infringement Notices And Enforcement Powers states that strict liability is only considered appropriate where the offence is not punishable by imprisonment and only punishable by a fine of up to 60 penalty units for an individual, whereas the strict liability offences in question are subject to up to 12 months imprisonment.[195]

As a result the Scrutiny Committee reiterated ‘its long-standing scrutiny view’ that it ‘is inappropriate to apply strict liability in circumstances where a period of imprisonment may be imposed’.[196]

Human rights issues raised by the proposed administration regime

In addition to the concerns regarding the proposed strict liability offences raised by the Scrutiny Committee, the PJCHR noted that by allowing for unions to be placed into administration, the proposed administration regime engages and limits the right to freedom of association and in particular ‘the right of unions to organise their internal administration and activities and to formulate their own programs without interference’.[197] The PJCHR stated that international supervisory mechanisms have noted:

'[t]he placing of trade union organisations under control involves a serious danger of restricting the rights of workers' organizations to elect their representatives in full freedom and to organise their administration and activities'.[198]

The PJCHR noted that the statement of compatibility in the Explanatory Memorandum states that the measure has:

…the sole objective of protecting the interests of members and guaranteeing the democratic functioning of organisations under the stewardship of officials and a membership that respects the law and thus maintains public order.[199]

The PJCHR noted that this objective is the same as that used to justify the measures pertaining to the deregistration of unions[200] and further that as the statement of compatibility ‘appears to identify multiple objectives’ it is unclear ‘whether each of these objectives addresses a substantial and pressing concern as required under international human rights law’.[201]

The PJCHR noted that matters identified in the statement of compatibility do not address the proportionality of the measure ‘but rather address the aims or goals’ of the proposed administration regime.[202] The PJCHR noted that the test of proportionality is:

…concerned with whether a measure is sufficiently circumscribed in relation to its stated objective, including the existence of effective safeguards.[203]

In this respect, the PJCHR expressed concerns regarding the scope of conduct that may lead a union to be placed into administration. This was because ‘the potential breadth of the definition of 'designated laws'’ meant that the proposed administration regime makes it possible for unions to be placed into administration (or other orders made) because of less serious breaches of industrial law or for taking unprotected industrial action.[204] The PJCHR concluded that placing a union under administration ‘may have significant consequences in terms of the representational rights of employees and any current campaigns or disputes’ and therefore sought further advice from the Minister regarding whether the limitation is a reasonable and proportionate measure aimed at achieving the stated objective (and in particular, whether the grounds for placing unions under administration are sufficiently circumscribed).[205]

Key issues and provisions: public interest test for amalgamations

In the second reading speech for the Bill the Minister stated:

…the Bill will create a public interest test to be applied by the Fair Work Commission when unions or employer associations seek to merge. When companies seek to merge, they must first satisfy a regulator—the [Australian Competition and Consumer Commission] ACCC—such a merger won't substantially lessen competition. This competition test is like a public interest test for companies seeking to merge. By comparison, unions and employer associations face no similar test. Currently, the Fair Work Commission has very limited ability to do anything other than effectively rubber stamp a merger approved by just a bare majority of members. There are no general public interest considerations and there is very limited scope for affected parties to raise any concerns about a proposed merger of registered organisations… So this Bill introduces a new public interest test… which will take account of the broader impact of a proposed merger and also the record of the organisations in complying with the law.[206] (emphasis added)

As the Government appears to infer that the proposed public interest test is modelled (at least in part) off the competition test regulating company ‘mergers’, to give context to the proposed reforms a brief background to the current laws pertaining to registered organisation and company ‘mergers’ as well as the current interpretation of the ‘public interest’ within the industrial relations context is provided below.

Currently, Chapter 3 of the FWRO Act deals with the amalgamation of registered organisations. Whilst the term ‘amalgamation’ has no definite legal meaning, it implies the combination of separate things into a homogenous whole.[207] However, this is somewhat of a misnomer as the process of amalgamation under the FWRO Act involves at least one registered organisation being de-registered and ceasing to exist. Whilst it is true that its assets, liabilities and (often) members will ‘merge’ with another registered organisation, in reality one entity remains (often re-named) and the others cease to exist.

Likewise, whilst in Australia, the terms ‘takeover’ and ‘merger’ are used somewhat interchangeably to refer to the acquisition of control of one company by another, the use of the word ‘merger’ is also somewhat of a misnomer—one company acquires the other company itself (and hence control of it) and therefore acquires its assets, liabilities and business. Whilst sometimes the ‘target’ company may cease to exist after a takeover or ‘merger’, unlike the case with union amalgamations, this is not a requirement for the takeover or merger to succeed. The text box below provides a brief summary of the comparative regulation of company and registered organisation ‘mergers’.

Summary of comparative regulation of company and registered organisation ‘mergers’

Currently companies and registered organisations that seek to ‘merge’ are not automatically subject to a ‘public interest’ test or ‘history of lawlessness test’.

Instead, where a company or registered organisation meets the criteria set out in the relevant legislation the ‘merger’ will ordinarily be approved provided the directors/officers and shareholders/members agree to the ‘merger’. However, in the case of companies if the ‘merger’:

·    raises competition issues: the test to be applied is whether or not the ‘merger’ would have the effect, or likely effect, of a substantial lessening of competition in a market in Australia (the ‘competition test’)[208]

·    is disputed by one of the merger parties, ASIC or a person who interests may be affected: the Takeovers Panel can choose to make (or decline to make) a declaration of ‘unacceptable circumstances’ (which can lead to the ‘merger’ being blocked) where it ‘is not against the public interest’ to do so[209] or

·    involves a foreign investor: the Treasurer, on advice from the Foreign Investment Review Board (FIRB) can block the ‘merger’ where it is contrary to Australia’s ‘national interest’ (this requires consideration of whether the investor complies with Australia’s laws—which may include consideration of any ‘history of lawlessness’ of the investor).[210]

Summary of current law in relation to amalgamations of registered organisations

The amalgamation process involves:

•        internal actions and decisions by the management committees of the organisations concerned (thereby enlivening the fiduciary duties of the officers concerned)

•        an application to the FWC and

•        a vote of the affected members.[211]

Relevance of fiduciary duties of union officials

Putting aside specific statutory duties imposed by the FWRO Act,[212] at equity officers of a registered organisation (such as a trade union) have, as noted by the RCTUGC, been recognised by the courts to be fiduciaries and therefore have fiduciary duties.[213]

Fiduciary duties are obligations of trust and confidence which equity will attach to one party in certain relationships whereby the party owing the duty, the fiduciary, is bound to place the interest of his principal ahead of his own.[214] The gist of the fiduciary relationship is that equity will not allow the fiduciary to enter into any engagement in which he has, or could have, a personal interest conflicting with that of his principal.[215] Nor will it allow the fiduciary to retain any benefit or gain obtained or received by reason of his fiduciary position or through some opportunity or knowledge resulting from it.[216] Importantly (and as noted previously) as with company directors, union officials owe their fiduciary duties to the registered organisation directly.[217]

Because union officials are fiduciaries, an officer of an organisation owes a number of important duties to the organisation. Most importantly the common law also imposed a duty to act in good faith and for a proper purpose. However, in addition to those common law duties the FWRO Act imposes the following duties on union officials, but only in relation to the financial management of the organisation:

•        to discharge their duties and exercise their powers:

–      with care and diligence[218]

–      in good faith and ‘in what he or she believes to be’ the best interest of the organisation[219] and

–      for a proper purpose[220]

•        not improperly use his or her position or information obtained because they are or were an officer or employee of the union (or a branch) to:

–      gain an advantage for himself, herself or someone else or

–      cause detriment to the organisation or to another person[221]

Further, officials are also bound by the rules of the organisation of which they are a member.

Essentially this means that whether under the common law, equity or the FWRO Act, officials must exercise their powers bona fide for the benefit of the organisation (or what they believe to be the best interests of the organisation) rather than for personal gain.

In relation to amalgamation, because there will be a transfer of assets from one organisation to another (including for example, membership fee income streams) union officials must be satisfied that it is in the best interests of the organisation to proceed with the amalgamation. Further, they must not proceed with the amalgamation for reasons primarily related to person gain – the amalgamation must be in the best interests of the organisation. No requirement that the amalgamation must also be in the broader public interest is currently imposed under equity, the common law or the FWRO Act.

Application for amalgamation and role of FWC

Once the organisations have resolved to amalgamate, an application must be lodged with the FWC. The application must contain:

•        a joint application in writing[222]

•        resolutions of each Committee of Management in favour of the proposed amalgamation[223]

•        a scheme for amalgamation[224] and

•        an outline of the scheme which contains sufficient information to allow members of the organisations in question to make an informed decision.[225]

The organisations may also lodge:

•        an application for exemption from a ballot which, if successful, would mean that only the members of the smaller organisation would participate in the vote[226]

•        an application for a ‘Community of Interest Declaration’ (CID) which, if successful, lowers the number of votes which have to be cast in favour of amalgamation before the amalgamation is approved[227] and

•        Yes and No statements in relation to the amalgamation.[228]

If the FWC approves the application, a ballot of affected members will be conducted by the Australian Electoral Commission.[229] This will typically be a secret postal ballot and the ballot paper will be accompanied by the outline of the scheme of amalgamation and any Yes or No statements.[230]

Importance of a Community of Interest Declaration

The organisations seeking to amalgamate may apply to the FWC for a CID under section 43 of the FWRO Act.[231]

When determining whether to make the CID, the FWC must be satisfied that ‘there is a community of interest between the existing organisations of employees in relation to their industrial interests’[232] which in turn occurs where the FWC is satisfied that ‘a substantial number of members of one of the organisations’ are:

•        eligible to become members of the other organisation or each of the other organisations

•        engaged in the same work or in aspects of the same or similar work as members of the other organisation(s)

•        covered by the same modern awards as members of the other organisation(s)

•        employed in the same or similar work by employers engaged in the same industry as members of the other organisation(s)

•        engaged in work, or in industries, in relation to which there is a community of interest with members of the other organisation(s)[233] or

•        there are other circumstances that satisfy the FWC ‘that there is a community of interest between organisations in relation to their industrial interests’.[234]

The effect of the FWC making a CID is that it lowers the number of votes which have to be cast in favour of amalgamation before an amalgamation can be approved to ‘more than 50%’ (that is, 50 per cent plus one vote) of formal votes cast in the ballot, rather than the usual two-step test:

•        25% of eligible voters vote and

•        50% of those votes are in favour of the amalgamation.[235]

This means that having the amalgamation approved becomes an easier task where a CID is in force.

Standing of other persons

Submissions under the CID process may be made by a person other than the applicants only with the leave of the FWC and only in relation to any proposed alteration to the name or eligibility rules of an organisation involved in the proposed amalgamation (subsection 54(3) of the FWRO Act and regulation 44 of the Fair Work (Registered Organisations) Regulations 2009).

Standing of the Minister and related powers

Section 351A of the FWRO Act allows the Minister to intervene in ‘proceedings before a court’ in relation to matters arising the FWRO Act (including union amalgamations) if ‘the Minister believes it is in the public interest to do so’. It should be noted however, that this is only standing to intervene and make submissions. Although these may be framed in terms of the broader effect of the amalgamation on the community, the Minister’s standing does not of itself impose a ‘public interest’ test on the proposed amalgamation.

However, the Minister has other powers that may allow them to intervene in amalgamation cases. For example, section 604 of the Fair Work Act 2009 allows a ‘person aggrieved by a decision’ made by the FWC (other than a Full Bench or Expert Panel decision) or the General Manager under the FWRO Act to appeal that decision, with permission from the FWC.

Importantly, the phrase ‘a person aggrieved’ has been broadly defined to extend to people beyond those who have a legal interest at stake in the matter.[236] This means that the Minister may be able to appeal any decision to approve an amalgamation between two registered organisations, on the basis that they are a ‘person aggrieved by a decision’, provided the FWC grants permission.

Section 605 of the Fair Work Act also allows the Minister to apply to the FWC for a review to be conducted by the FWC of a decision, other than that of a Full Bench or Expert Panel, if the Minister believes the decision is ‘contrary to the public interest’. Subsection 605(3) allows the Minister to make submissions to such a review. Again however, this is only standing to request a review and then make submissions. Importantly, this does not, of itself, impose a ‘public interest’ test on the proposed amalgamation.

Despite this however, the grounds for arguing against an amalgamation are currently limited, and the range of matters and issues that can be raised in submissions from persons given leave (including the Minister) are substantially narrower than those proposed by the Bill.

Members approval of the amalgamation

Assuming the members approve the amalgamation, after consultation with the organisations, the FWC will fix ‘an amalgamation day’. On that day:

•        all but one of the amalgamating organisations are de-registered

•        the eligibility rules of the amalgamating organisations are merged and any rule changes set out in the scheme of amalgamation take effect

•        any change of name of the amalgamated organisation takes effect

•        members of a de-registered organisation become members of the amalgamated organisation

•        all assets and liabilities of a de-registered organisation become assets and liabilities of the amalgamated organisation and

•        all pending proceedings involving a de-registered organisation are deemed to instead involve the amalgamated organisation.[237]

It is the responsibility of the amalgamated organisation to take such steps as are necessary to ensure that the amalgamation is fully effective. The Federal Court can resolve any difficulties which arise.[238]

Summary of current law in relation to company ‘mergers’ and takeovers

In Australia, the term ‘takeover’ is often used to refer generically to the acquisition of control of a publicly listed company. However, the takeover rules apply to acquisitions of ASX-listed Australian companies, ASX-listed Australian managed investment schemes (being investment trusts), and also unlisted Australian companies with more than 50 shareholders.

Usually control of a company is obtained upon ownership of more than half of a company’s voting shares. However, in some cases, control can be obtained at a lower shareholding interest if, as a practical matter, a person can determine the composition of a company’s board of directors.

Sometimes, the term ‘merger’ is used in lieu of ‘takeover’. In Australia the term ‘merger’ is a commercial concept used to describe an agreed acquisition of one company by another where the two companies are of similar size. Unlike other jurisdictions (such as the United States), there is no stand-alone process in Australia to effect a true merger which results in the target company (as a separate legal entity) being subsumed into the bidder company and the target company ceasing to exist. Instead, following the transfer of assets and so forth to the bidder company, the target company is wound up – but that process is separate to the takeover process itself (which is about purchasing the target company, or enough of it, to gain control over it).

In other words, the use of the word ‘merger’ is somewhat is a misnomer – one company takes over the other, and acquires its assets, liabilities and business.

Regulatory framework regarding corporate takeovers

Takeovers in Australia are regulated by a combination of legislation (Part 5.1 and Chapter 6 of the Corporations Act 2001) governmental policy (developed by the ASIC and the Takeovers Panel, a specialist tribunal which resolves takeover disputes), and to a lesser extent, the listing rules of the ASX. In addition, Australia has anti-trust rules set out in the Competition and Consumer Act 2010 (CCA) which are administered by the ACCC, foreign investment rules set out in the Foreign Acquisitions and Takeovers Act 1975 (FATA) and accompanying Regulations, where proposed acquisitions requiring approval are examined by the FIRB, and other rules specific to an industry (such as banking, broadcasting, aviation and gaming) which may regulate or otherwise control ‘merger’ transactions are applied.

The focus of this digest, however, is on the rules in the Corporations Act, CCA and FATA as they pertain to company ‘mergers’. Importantly however, currently company mergers are not automatically subject to review unless the proposed merger:

•       is disputed by one of the parties or certain other persons

•       raises competition issues or

•       involves a foreign investor acquiring an Australian company.

In contrast Schedule 4 of the Bill proposes for automatic review of all proposed amalgamations of organisations.

Policy underpinning takeover rules in the Corporations Act

The takeovers rules in respect of corporate entities reflect policies that:

•        the acquisition of control of companies takes place in an efficient, competitive and informed market

•        target shareholders have a reasonable time to consider a proposed acquisition and are given enough information to enable them to assess the merits of the proposal and

•        target shareholders have an equal opportunity to participate in the benefits of a change of control of a company (referred to as a control transaction).[239]

There is no policy of automatically reviewing company take overs / mergers or applying a public interest test to company takeovers in the Corporations Act.

Takeover structures

The most commonly used takeover structures are an off-market takeover bid (for either a friendly or hostile deal), or a scheme of arrangement (for a friendly deal only).[240] The majority of friendly deals are affected via a scheme of arrangement (largely because of their ‘all-or-nothing’ outcome).[241]

Takeover bids

In simple terms, a typical takeover bid involves the making of individual offers to purchase target securities (for example shares) at a specified bid price. There are two types of takeover bid: an off-market bid and a market bid. Virtually all takeover bids are off-market bids, because of the ability to include conditions. Takeover bids are subject to various rules. [242]

When those rules are compared to the amalgamation process for registered organisations, there are some similarities. For example, both require a scheme/bid to be developed and information about the proposed ‘merger’ to be provided to members/shareholders.[243]

Importantly however, unlike the amalgamation of organisations, where the takeover bid is not disputed by the parties, does not raise any competition issues and does not involve foreign investment and the process has complied with the relevant laws, the default position is that takeover is approved without applying a public interest test. Further, the ability of interested persons to prevent the merger from proceeding are limited (discussed below).

Schemes of arrangement

A scheme of arrangement can be used only for a friendly acquisition of a company, and is frequently used to effect 100% acquisitions. A scheme of arrangement is a shareholder and court-approved statutory arrangement between a company and its shareholders that becomes binding on all shareholders by operation of law.[244]

Schemes are subject to fewer prescriptive rules than takeover bids and therefore can be more flexible, but are supervised by ASIC and the courts. A standard scheme involves various steps, and overall has some features in common with amalgamations of organisations: various matters are agreed between the two entities, information is provided to the regulator for review and also provided to shareholders/members, meetings are held and the ‘merger’ then proceeds.[245] 

As with takeovers, the ability of interested persons to prevent the scheme of arrangement proceeding and the resulting merger from eventuating are limited to seeking declarations or orders from the Takeovers Panel (discussed below).

No public interest test

From the above it can be seen that at no stage of a company takeover/merger—be it by a takeover bid or a scheme of arrangement—is any form of ‘public interest’ test automatically applied. Rather the only automatic test that is applied is derived from the duties of the directors: the takeover is in the best interests of the company.

However, certain types of ‘mergers’ may have other tests applied by takeover regulators themselves, or by the regulators as a result of applications by certain persons, as discussed below.

Company takeover regulators

The key takeover regulators are ASIC, the Takeovers Panel, the ACCC and the FIRB.

ASIC

ASIC has general supervision of the Corporations Act including the takeover rules, and has the power to modify and grant relief from the Corporations Act takeover rules (but not retrospectively).[246] ASIC’s regulatory role in the administration and conduct of company takeovers primarily involves:

•       reviewing and monitoring of documentation, disclosures and conduct in relation to bids to ensure compliance with the takeover provisions and the purposes underlying Chapter 6 of the Corporations Act

•       providing regulatory guidance and relief that improves commercial certainty and balances the protections of Chapter 6 of the Corporations Act with the objective of facilitating company takeover transactions and

•       in certain cases, taking enforcement action to protect the interests of investors and promote their confident and informed participation in the takeover process and financial markets generally.[247]

ASIC also has standing to apply to the Takeovers Panel for a declaration of unacceptable circumstances or an order under section 657D or 657E of the Corporations Act (that is, to have the ‘merger’ blocked).

Takeovers panel

The Takeovers Panel is established by Part 10 of the Australian Securities and Investments Commission Act 2001 (ASIC Act) with the powers conferred on it by the Corporations Act. The Takeovers Panel is the primary forum for resolving disputes regarding company takeovers or ‘mergers’. It has the power to declare circumstances unacceptable (even if they do not involve a breach of law) and to make remedial orders. In effect, the takeovers panel can block a ‘merger’.

Subsection 657C(2) of the Corporations Act provides that the bidder, target, ASIC or ‘any other person whose interests are affected by the relevant circumstances’ may apply to the Panel for a declaration of unacceptable circumstances under section 657A or an order under section 657D or 657E (that is, seek to have the ‘merger’ blocked). In turn, section 657A of the Corporations Act provides that the Takeovers Panel can choose to make, or decline to make, a declaration of unacceptable circumstances where it ‘is not against the public interest after taking into account any policy considerations that the Panel considers relevant’ to do so.[248]

There is no definition of the term unacceptable circumstances in the Corporations Act. Instead, the Takeovers Panel is directed to use section 602, Chapter 6 of the Corporations Act and the public interest as reference points to determine when circumstances are unacceptable. Parliament considered that black letter law would be insufficient to deal with all the possible circumstances that might defeat the policy of section 602. Accordingly, it empowered the Takeovers Panel, as an expert body, to address the issues by considering whether circumstances are unacceptable in terms of those reference points.[249]

The Takeovers Panel is required to take the public interest into account when considering whether or not to make a declaration of unacceptable circumstances. Whilst ‘public interest’ is a difficult term to define, the Panel takes its significance to mean that the Panel should not merely consider the commercial interests and convenience of the parties and their shareholders directly involved in a dispute before the Panel. Rather, the Panel should consider wider issues such as: what signals its decision to make, or not make, a declaration of unacceptable circumstances in an individual case, will send to:

•        the market and

•        the wider investing community.

If such signals may improve the standards in the market and the future efficiency of the market for control of companies in Australia, consideration of the public interest in sending such signals may add weight to the choice of making, or not making, a declaration of unacceptable circumstances. Indeed, in some cases, it may sway an otherwise on-balance decision definitely one way or another.[250]

Importantly however, declaration of unacceptable circumstances blocking a merger will only be made by the Takeovers Panel when it is not against the public interest. This means that a disputed merger does not have to be in the public interest to be approved, only that it can be blocked where it is against the public interest.

Australian Competition and Consumer Commission

Section 50 of the CCA prohibits any direct or indirect acquisition of shares or assets that would have the effect, or likely effect, of ‘substantially lessening competition’ in a market in Australia (the ‘competition test’).

There are no mandatory pre-merger notification requirements in the CCA. However, in practice, parties are encouraged to—and do—notify the ACCC about proposed company mergers which may raise competition concerns. In practice, the ACCC can conduct both informal and formal merger review processes.[251] It has been suggested:

The ability of the ACCC to investigate any transaction and the risks of court action to prevent a transaction from closing (or post-closing court action for divestiture, declaration that a transaction is void or penalties) have resulted in the practice in Australia of seeking ‘informal clearance’ from the ACCC where a proposed merger may raise competition concerns. [252]

However, in regards to the informal clearance process it does not provide assurances against subsequent third party litigation. Regardless of the process used however, the parties to a merger are able (in some circumstances) to have decisions relating to merger authorisations made by the ACCC reviewed by the Australian Competition Tribunal (ACT).[253] However, this digest does not consider the role of the ACT in detail.

Competition test

The factors to be taken into account in making a decision about whether a proposed merger has, or is likely to have, the effect of substantially lessening competition make the process an extremely complex one. Readers are referred to the ACCC’s Merger Guidelines[254] and to the Bills Digest for the Competition and Consumer Amendment (Misuse of Market Power) Bill 2016 for further information about the competition test.[255]

Whilst competition in the market is often cited as a factor considered when determining the public interest, this does not mean that the test applied by the ACCC to a particular ‘merger’ is a ‘public interest’ test per se – it is not. Rather it is whether the ‘merger’ would have the effect, or likely effect, of a substantial lessening of competition in a market in Australia. This is a narrower test than the public interest, as competition is only one aspect of the public interest.

Conduct of merger parties

The ACCC does not appear to apply a ‘history of lawlessness’ test per se when evaluating proposed mergers. However the ACCC’s merger guidelines note that when applying the competition test it does consider the conduct of the merger parties, especially in relation to prior coordinated conduct between ‘merging’ businesses (that is, anti-competitive conduct and/or breaches of the CCA) and:

Given the potential complexity of the assessment required, evidence of prior coordinated conduct between firms in the relevant market may be highly relevant, particularly if the merger is likely to reduce the number of participants without undermining the conditions that facilitate coordinated conduct.[256] (Emphasis added).

This would appear to suggest that where one or both of the ‘merger’ parties has a prior history of breaching the CCA or there is evidence of prior coordinated conduct between the merger parties that was anti-competitive (but not tested in court) that factor is given substantial weight within the competition test.

Summary of ACCC merger clearance

Whilst competition can be viewed as a part of the public interest, the competition test itself is not equivalent to a broader public interest test. However, the ACCC does appear to apply a ‘history of potential or actual anti-competitive coordinated conduct’ test when assessing company ‘merger’ proposals, as part of the competition test.

In summary, the competition test applied by the ACCC, whilst not automatically applied to every company merger and narrower than a public interest test per se, nonetheless shares some similarities with proposed subsections 72D(1) (record of compliance with the law) and 72D(3) (impact of the merger on employers and employees in the industry or industries concerned) of the FWRO Act, at item 7 of Schedule 4 to the Bill, in terms of considering the issues of legal compliance and the economic impact of the proposed merger on the industry, sector or economy.

Foreign Investment Review Board

Australia’s foreign investment review framework consists of the FATA, the Register of Foreign Ownership of Water or Agricultural Land Act 2015 and their associated Regulations, and Australia’s Foreign Investment Policy (the Policy).[257]

Triggers for the exercise of the Treasurer’s powers under the FATA

The FATA provides a legislative framework that requires certain acquisitions proposed by foreign investors (such as purchasing an Australian company) to be reviewed by the Treasurer (who receives advice from the FIRB). The FATA also provides the Treasurer with a range of powers, including the ability to order divestment of assets, to block proposals, or to apply conditions to proposals, to ensure that they are not contrary to Australia’s ‘national interest’.[258]

The national interest, and hence what might be contrary to it, is not defined in the FATA. The FATA confers upon the Treasurer the power to decide in each case whether a particular proposal would be contrary to the national interest. The Government’s foreign investment policy statements set out guidelines on national interest matters in relation to foreign acquisitions (such as the purchase of a controlling stake in an Australian company).[259] Ordinarily a proposal that does not meet the requirements set out in the policy would be regarded as being, prima facie, contrary to the national interest and hence subject to rejection.

Whilst there are some similarities between the factors considered in the ‘national interest’ test applied by the FIRB such as the ‘character of the investor’, competition and impact on the economy and the community, and those factors are generally considered when determining the ‘public interest’, the two tests are not entirely the same and vary according to the context in which they are used. This is because the public interest can be viewed as domestically focused, whilst the national interest has international aspects.[260]

Character of the investor

The FIRB policy document notes:

The Government considers whether the investor complies with Australia’s laws, including following both the spirit and the letter of Australian law, and acting in good faith in complying with any conditions imposed by the Government.[261]

This includes, to use the Bill’s terminology, a ‘record of compliance with the law’ aspect: a foreign investor with a history of breaching Australian laws is likely to have their investment either rejected or subject to stringent conditions. For example, the FIRB’s guidance note on tax notes that ‘it is considered contrary to the national interest if foreign investors operating in Australia do not meet their obligations imposed under the tax laws’ and ‘compliance with Australia’s tax laws would be determined by applying the usual legal principles and processes, including reliance on objection or appeal rights by affected entities’.[262]

This means that being involved in disputes with the ATO would not, of itself, lead to the national interest test being failed and the investment being blocked – but failure to comply with the laws and failure to comply with court orders once disputes are resolved would.

As such, it would appear that whilst the term ‘a history of lawlessness’ is not specifically used, compliance with Australian laws is a significant factor applied by the FIRB when determining if an acquisition is in the ‘national interest’ (which as noted above, despite some differences, overlaps at least in part with the ‘pubic interest’).

Summary table

The table below summarises the similarities and differences between the current regime regulating the amalgamations of registered organisations and those regulating company ‘mergers’.

Table 1:              summary of registered organisation and company merger processes and issues

Stage

Registered organisation

Company

Straight takeover (no competition or foreign investment issues or disputes)

Competition issues

Dispute: takeover panel involved

FIRB clearance required

Directors/Officers developing a ‘merger’ proposal

Directors and officials must act in best interests of the company/organisation and therefore any actions to facilitate the merger must be in the best interests of the company/organisation.

N/A if foreign company is developing proposal.

Directors/Officer considering a ‘merger’ proposal

Directors and officials must act in best interests of the company/organisation and therefore any actions related to the consideration of a merger proposal must be in the best interests of the company/organisation.

Regulator consideration or approval

Are the various matters set out in the FWRO Act met?

Do the members approve the merger?

No public interest test applied

Are the various matters set out in the Corporations Act met?

Do the shareholders approve the takeover/scheme/sell the required number of securities?

No public interest test applied.

Only applies where the merger raises competition issues.

Would the merger have the effect, or likely effect, of substantially lessening competition in a market in Australia?

This involves considering any ‘history of potential or actual anti-competitive coordinated conduct’.

No broader public interest test applied.

Only applies where there is a dispute between the takeover parties.

Are there unacceptable circumstances?

This requires the panel to take the public interest into account.

Only applies if merger involves foreign investor.

Is the transaction in the ‘national interest?’

This requires consideration of the ‘character’ of the investor, including whether the investor complies with Australia’s laws.

Appeal of decisions / persons with standing to contest decisions or approvals

Limited – but can extend to a ‘person aggrieved’ by the decision’.[263]

Limited, but a ‘person whose interests are affected’ by the relevant circumstances of the takeover can seek to have the merger blocked by the Takeovers Panel.[264]

The Takeovers Panel is the main forum to resolve disputes about company takeovers until the bid period has ended.[265]

Appeal rights are generally limited to the parties to the takeover, ASIC and persons whose ‘interests are affected by’ the relevant circumstances.[266]

ASIC, the Minister and certain other public office holders and entities may commence court proceedings before the end of the bid period.[267]

No appeals or reviews are possible.

Key issue: new amalgamation regime for registered organisations

Overview of proposed changes

The RCTUGC made no recommendations regarding amending the FWRO Act in relation to the amalgamation of organisations. However, the imposition of a public interest test on ‘mergers of registered organisations’ that would ‘allow relevant matters to be taken into account, such as the organisations’ history of compliance with workplace laws’ was a Liberal Party 2016 election commitment.[268]

Item 2 of Schedule 4 to the Bill and proposed section 72A of the FWRO Act, at item 7 of Schedule 4, require that the Full Bench of the FWC determine whether a proposed amalgamation of two or more registered organisations is in the public interest, before approving the amalgamation. Importantly, the application of the public interest test is – unlike the case for most company mergers – automatic and mandatory for all proposed amalgamations between organisations.

To give context to the proposed public interest test, a brief overview of the interpretation of other public interest tests in industrial relations legislation is provided below.

The public interest test in other industrial relations contexts

Various parts of the FW Act require the FWC to apply a public interest test. For example, subsection 189(2) of the FW Act allows the FWC to approve an enterprise agreement that does not pass the better off overall test if there are exceptional circumstances and doing so would not be ‘contrary to the public interest’. It has been noted that whilst ‘is not contrary to the public interest’ is a lower test than ‘in the public interest’[269] the approach to determining both is the same.[270] Further, when determining whether to terminate an enterprise agreement, section 226 of the FW Act provides that the FWC must be satisfied that the proposed termination ‘is not contrary to the public interest’. In these (and other) regards it has been held that in terms of the application of the FW Act:

•       the expression ‘in the public interest’, when used in legislation, should be treated as a term of art[271] and is to be determined by making a discretionary value judgement on the relevant facts that involves a balancing of interests including competing public interests in a manner constrained only by the subject matter and the scope and purpose of the legislation[272]

•       the public interest is broader than and distinct from the interests or views of parties or persons directly affected (although there may be overlap between the public interest and the interests of the parties) and refers to matters that might affect the public as a whole[273]

•       whilst there is some overlap, the public interest does not embrace considerations which are essentially derivative from the individual interests of the employer, or employees. That is not to deny an individual interest may have an overlapping public interest dimension, such as individual interests in freedom of association or in freedom from certain kinds of discrimination[274]

•       in the context of enterprise agreements, the public interest may include ‘consideration in maintaining a level playing field among employees in a particular industry or sector’[275] and in other contexts includes that the interests of employees are safeguarded, ensuring that the businesses are able to efficiently operate without unnecessary complications in their employment arrangements and facilitating arrangements that permit and encourage the maintenance of employment in company merger situations[276]

•       the public interest refers to matters that might affect the public more broadly as a whole, such as the attainment of the objects of the relevant Act,[277] the pursuit of desirable economic outcomes, or the maintenance of appropriate industrial standards[278]

•       consideration of the public interest might involve balancing countervailing public interests[279] that can include factors such as inflation, employment levels and maintenance of proper industrial standards[280]

•       all of the relevant circumstances should be taken into account in considering what is in the public interest, but the FWC should be guided by the likely foreseeable consequences, rather than being guided by speculation about possible consequences.[281]

Perhaps one of the best summaries of the notion of the ‘public interest’ within an industrial relations context (under the FW Act) is provided in GlaxoSmithKline Australia Pty Ltd v Colin Makin:

The expression ‘in the public interest’, when used in a statute, classically imports a discretionary value judgment to be made by reference to undefined factual matters, confined only by the objects of the legislation in question.[282]

As such it can be seen that the public interest test applied on other contexts under the FW Act’s board, confers wide discretion on decision makes and involves considering various (sometimes competing) factors. This is consistent with a definition of ‘public interest’ provided in a legal dictionary:

A concern common to the public at large, or a significant portion of the public, which may or may not involve the personal or proprietary rights of individual people.[283]

Importantly however, the public interest is generally broader than the issues of parties to a matter under the FW Act, although there can be a degree of overlap. Hence in relation to the Bill it could be argued that the impact of a proposed amalgamation on employees or employers in a particular industry (for example) is both an example of a public interest consideration but is also a consideration that may go to the individual interests of affected persons (for example, the unions seeking to merge, employers that may be impacted by the merger and the employees of companies in the industry as a whole).

Standings of persons to make submissions

Proposed section 72B of the FWRO Act, at item 7 of Schedule 4, provides that the FWC must hold a hearing into the proposed amalgamation and:

•       it must receive submissions in relation to the record of compliance with the law of the organisations seeking to amalgamate and

•       where an amalgamation is not automatically blocked due to the history of non-compliance with the law of the organisations seeking to amalgamate, the FWC must receive submissions in relation to whether the amalgamation is in the public interest.

Proposed subsection 72C(1) provides the following persons and entities with standing at the hearings in relation to the record of compliance with the law of the organisations seeking to amalgamate:

•       the existing organisations

•       any other organisation that represents the industrial interests of employers or employees in the industry or industries concerned or that may otherwise be affected by the amalgamation

•       a body other than an organisation that represents the interests of employers or employees in the industry or industries concerned

•       the Commissioner

•       the Minister and a Minister of a referring state (within the meaning of the FW Act), or of a territory, who has responsibility for workplace relations matters in the state or territory and

•       any other person with a sufficient interest in the amalgamation.

Where an amalgamation is not automatically blocked due to the history of non-compliance with the law of the organisations seeking to amalgamate, standing is granted to the above persons and entities in relation to whether the amalgamation is in the public interest.

Bill provides standing to a wider range of persons than other regimes

Compared to the application of the competition test by the ACCC in relation to company mergers that pose potential competition issues and the range of persons with standing to commence proceedings with the Takeovers Panel, the Bill explicitly confers standing on a wider range of persons.

The Corporations Act allows persons whose ‘interests are affected by’ the relevant circumstances of the takeover to seek a declaration of unacceptable circumstances and/or orders that would prevent the company takeover in question from proceeding. Persons whose ‘interests are affected by’ the relevant circumstances of the takeover could encompass the parties to the proposed company merger, other companies, registered organisations (both employee and employer) associated with the industry or industries impacted by the proposed company merger, and potentially the Minister. As a result, they are comparable to the range of persons and entities granted standing in proposed subsection 72C(1).

This means that the standing provisions in relation to matters before the Takeovers Panel and that proposed by the Bill are roughly analogous. However, the merger regime overseen by the ACCC (which the Second Reading Speech refers to[284]) as noted above, confers standing on a much narrower range of persons. Further, the merger clearance processes imposed by the CCA are not, unlike the regime proposed by the Bill, automatic and mandatory processes that are applied to every proposed company merger – they only apply where the takeover in question raises competition issues. The same is true for the FIRB clearance process – it only applies where a company acquisition involves a foreign investor and then only involves the Minister and relevant parties – no standing to make submissions is granted to any other persons.

Human rights concerns raised by the proposed public interest test

The PJCHR noted that the proposed public interest test engages and limits the right to freedom of association, and ‘particularly the right to form associations of one's own choosing’.[285] Further the PJCHR stated:

International supervisory mechanisms have noted concerns with measures that limit the ability of unions to amalgamate stating that '[t]rade union unity voluntarily achieved should not be prohibited and should be respected by the public authorities'.[286]

After considering the justification for the inclusion of a public interest test, the PJCHR concluded that there were ‘questions as to whether the measure is compatible with the right to freedom of association and the right to just and favourable conditions at work’ and sought further information from the Minister.[287]

In addition, some stakeholders raised concerns about the imposition of a public interest test on amalgamations of registered organisations. For example, in its submission to the Committee Inquiry, the ACTU argued:

The current amalgamation regime is consistent with the emphasis in international law on the self-determination of industrial organisations and the intention of the [FW]RO Act to provide for their democratic functioning and control. The amendments in Schedule 4 are an egregious interference in the internal affairs of industrial organisations.[288]

Further, the ACTU argued that the proposed public interest test ‘is far broader than the competition test’ imposed by the CCA and that under the regimes applicable to company mergers:

Corporations can have an extensive record of not complying with the law, including tax avoidance and wage theft, and not be prevented from merging.[289]

Whilst that is true to a certain extent, as noted above the history of a company complying with various laws is a factor considered by the ACCC when applying the competition test, and by the FIRB when applying the national interest test. Further, it is conceivable that – given the breadth of factors that the Takeovers Panel can consider – that the history of a company complying with various laws may be a factor considered by the Takeovers Panel when determining whether to make a declaration of unacceptable circumstances or to make various orders, which may have the effect of blocking a merger.

When is the public interest test applied?

Proposed subsection 72A(2) allows the FWC to determine whether a proposed amalgamation is in the public interest ‘any time after an application’ for amalgamation is lodged with the FWC. Further, the effect of item 13 of Schedule 4 to the Bill is that the amendments will apply to proposed amalgamations already being dealt with by the FWC prior to the amendments commencing. The ACTU argued:

… the public interest test can be applied at any time after the application is made, including before, during or after the ballot of the organisations’ respective memberships. This drafting is nonsensical, because the public resources expended by the AEC and the resources expended by the organisations in the preparation and conduct of the ballot are wasted if the amalgamation then fails the public interest test.[290]

Whilst theoretically correct, it would appear unlikely that – at least in relation to applications for amalgamation received after the amendments commence – that the FWC would allow a ballot to proceed prior to determining whether the amalgamation is in the public interest. However, such an outcome could occur under the Bill.

Elements of the public interest test

Proposed section 72D sets out the public interest test. The public interest test contains two elements:

•       the record of compliance with the law of the organisations seeking to amalgamate

•       other matters of public interest.

These are outlined below.

Record of compliance with the law

Proposed subsection 72D(1) provides that the FWC must have regard to any compliance record events that have occurred in each of the existing organisations that seek to amalgamate. Proposed subsection 72D(2) provides that if:

•       after having regard to the incidence and age of compliance record events in relation to each of the amalgamating organisations the FWC considers that the organisation has a record of not complying with the law then

•       the FWC must determine that the amalgamation is not in the public interest (therefore preventing the amalgamation from proceeding).

Proposed subsection 72D(2) provides that the FWC is to have regard to 'the incidence and age’ of compliance record events when determining whether the organisation has a record of not complying with the law. Whilst the Explanatory Memorandum is silent on the matter, the ACTU argues that the FWC is:

not permitted to consider the nature or seriousness of the 'compliance record events' (only the 'incidence and age'), let alone the relevance of the events (if any) to the merits of the proposed amalgamation.[291]

An alternative interpretation could be that the phrase 'having regard to' does not restrict the FWC from considering other factors such as those mentioned by the ACTU. It could be argued that the phrase simply requires that the FWC considers the number and age of compliance record events as part of the overall process of determining whether the organisations seeking to amalgamate have a record of compliance with the law.

Compliance record events

Proposed section 72E defines what constitutes a compliance record event. A compliance record event includes where:

•       designated findings or wider criminal findings are made against the organisation

•       findings of contempt of court are made against the organisation relating to an order or injunction or

•       the organisation, part of the organisation or a class of members of the organisation organised or engaged in obstructive industrial action as defined in proposed subsection 28H(2), at item 4 of Schedule 2 to the Bill.[292]

A compliance record event also includes where:

•       a designated finding is made against a person who was an officer of the organisation at the time of the conduct to which the finding relates

•       a wider criminal finding is made against a person who:

–      was an officer of the organisation at the time of the conduct to which the finding relates and

–      the conduct was in the course of, or purportedly in the course of, performing functions in relation to the organisation

•       a finding of contempt of court is made against a person in relation to an order or injunction where:

–      the person was an officer of the organisation at the time of the conduct to which the finding relates and

–      the conduct was in the course of, or purportedly in the course of, performing functions in relation to the organisation

•       a person is disqualified from holding office in an organisation while an officer in the organisation.[293]

The definitions of ‘officer’ and ‘office’ in sections 6 and 9 of the FWRO Act respectively mean that references to officers of an organisation includes officers of branches of organisations. As noted by the Explanatory Memorandum this means:

…a finding that an officer of a particular branch of an organisation organised or engaged in obstructive industrial action is a compliance record event relevant to the FWC’s overall decision about an organisation’s compliance record.[294]

The effect of linking the definition of a compliance record event to designated findings and wider criminal findings is to capture a wide array of conduct, including conduct that has not necessarily attracted a court imposed penalty, or a criminal conviction. Further a compliance record event can occur when a substantial number of members engage in the relevant conduct and also where only a small part of the organisation or a small class of members organises or engages in 'obstructive industrial action'.

Other matters of public interest

Proposed subsection 72D(3) provides that where an amalgamation is not blocked on the basis of the record of non-compliance with the law of one or more of the amalgamating organisations, the FWC must have regard to whether the amalgamation is otherwise in the public interest. In making this determination, the FWC is to have regard to the impact the amalgamation is likely to have on:

•       employees in the industry or industries concerned and

•       employers in the industry or industries concerned.

Proposed subsection 72D(4) then provides that the F WC may have regard to 'any other matters it considers relevant'. The ACTU argues that as drafted the public interest test is 'focused on economic considerations and the commercial interests of industry and employers'.[295] However, proposed subsection 72D(3) also imposes a requirement on the FWC to consider the economic and commercial interests of employees in the industry or industries concerned, not just employers. Further, whilst the Explanatory Memorandum suggests that under proposed subsection 72D(4) other relevant matters could include the 'likely impact upon the industry or industries concerned or the economy or an important part of it',[296] it confers on the FWC wide discretion to consider a range of matters, which, as discussed above, is a common feature of a public interest test.

What happens when the public interest test is failed?

Proposed section 72F provides that where the FWC decides that an amalgamation is not in the public interest:

•       the FWC must not fix an amalgamation day for the amalgamation and

•       the amalgamation does not take effect.

Further, proposed subsection 72F(2) provides that where the FWC decides that an amalgamation is not in the public interest the FWC must not approve the submission of the proposed amalgamation to a ballot of the members of the organisations in question.

Changes apply to amalgamations commenced before amendments commenced

The effect of item 13 is that the amendments contained in Schedule 4 of the Bill will apply to a proposed amalgamation already being dealt with by the FWC prior to the amendments commencing. Further, item 13 also provides that a reference to a compliance event includes events that occurred before the commencement of the Bill.

Whilst this means that when applying the public interest test, the FWC will be required to consider compliance events that occurred before the amendments took effect, it would appear that the effect of the requirement imposed by proposed subsection 72D(2) to consider the age of the compliance record events would allow the FWC some discretion when considering the weight to give compliance events that occurred before the amendments commenced.

Exercise of amalgamation powers only by Full Bench of FWC

Item 4 of Schedule 4 repeals and replaces section 37 of the FWRO Act. Proposed subsection 37(1) provides that the powers of the FWC in relation to the amalgamation of organisations are exercisable only by a Presidential Member of the FWC (that is, the President, a Vice President or Deputy President). However, proposed subsection 37(2) provides that the public interest test for amalgamations function of the FWC is exercisable only by a Full Bench of the FWC.

The Explanatory Memorandum notes that the effect of requiring that the public interest test be applied only by a Full Bench of the FWC is that a decision of a Full Bench on the question of the public interest of a proposed amalgamation is not subject to merits review.[297] The Government states:

The intent is not to restrict the right of organisations affected by a decision to fair decision-making about whether an amalgamation is in the public interest. Rather, the requirement for a Full Bench protects the integrity of the decision-making process by ensuring that a decision on the question of an amalgamation is made by a number of senior members of the FWC. This would not be a new exclusion from merits review, rather, decisions on the public interest test for amalgamations would simply fall into the existing exclusion from merits review that applies to all decisions of the Full Bench of the FWC under the Act and the [Fair Work] Act.[298]

Further, the Explanatory Memorandum notes that the changes contained in proposed section 37 do not exclude a right of judicial review to the Federal Court or High Court, and hence decisions by a Full Bench of the FWC will remain reviewable by the High Court under section 75(v) of the Constitution or the Federal Court under section 39B of the Judiciary Act 1903.[299]

The ACTU was critical of the changes proposed by item 4, arguing that other provisions in the FWRO Act ‘ensure that the powers are exercised by a senior member of the FWC’ whilst still allowing parties access to merits review ‘by way of an appeal to the Full Bench’ and:

It would be preferable and in the interests of access to justice if s 37 did not distinguish powers in relation to applying the public interest test and all FWC powers under Chapter 3, Part 2 of the [FW]RO Act were exercisable only by a presidential member.[300]

This was because, the ACTU argued, judicial review is ‘expensive, time consuming and only available on limited grounds’.[301]

Changes to when amalgamation can take effect

Currently section 73 of the FWRO Act provides that where the FWC is satisfied that the members have approved the proposed amalgamation and satisfied about certain matters, it must fix an amalgamation day (in effect, the day the amalgamation occurs). Paragraph 73(2)(c) provides that one of the current matters that the FWC must be satisfied about before fixing an amalgamation day is that:

c)                there are no proceedings (other than civil proceedings) pending against any of the existing organisations concerned in the amalgamation in relation to:

(i)  contraventions of this Act, the Fair Work Act or other Commonwealth laws; or

(ii)  breaches of modern awards or enterprise agreements; or

(iii)  breaches of orders made under this Act, the Fair Work Act or other Commonwealth laws

The drafting of the current paragraph 73(2)(c) is somewhat internally inconsistent.[302] It requires that there are not any proceedings ‘other than civil proceedings’ pending against the organisations under various laws. In other words, there are no criminal proceedings pending against the organisations seeking to amalgamate. Importantly however, breaches of modern awards or enterprise agreements do not currently attract criminal penalties – they only attract civil penalties (in earlier laws breaches of what are now termed modern awards or enterprise agreements did attract criminal penalties).[303] As such the internal inconsistency is between an apparent purpose of only considering criminal proceedings, whilst specifically including certain proceedings that are civil proceedings only in paragraph 73(2)(c)(ii).

Proposed paragraph 73(2)(c), at item 10 of Schedule 4, provides that one of the matters that the FWC must be satisfied about before fixing an amalgamation day is that ‘there are no proceedings of the kind’ contained in proposed subsection 73(2A) against the organisations seeking to amalgamate. Proposed subsection 73(2A), at item 12 of Schedule 4, then provides that the relevant types of proceedings are:

•       criminal proceedings in relation to contraventions of the FWRO Act, the Fair Work Act or any other law of the Commonwealth

•       breaches of orders related to criminal proceedings for contraventions of the FWRO Act, the Fair Work Act or any other law of the Commonwealth and

•       civil proceedings for a contravention of a provision mentioned in a subparagraph of paragraph (b) of the definition of a designated finding in proposed subsection 9C(1) (at item 2 of Schedule 1). The relevant provisions are: a civil penalty provision of the FWRO Act, FW Act, Building and Construction Industry (Improving Productivity) Act 2016 or its predecessor (as in force at any time before its repeal), Part IV of the CCA (which deals with anti-competitive conduct) or a related state and territory law, a WHS civil penalty provision of the Work Health and Safety Act 2011 or a related a state or territory Occupational Health and Safety (OHS) law within the meaning of the FW Act.

The Government argues that amendments made by item 12 to section 73 of the FWRO Act are:

required to clarify the scope of pending proceedings against organisations which the FWC is satisfied of in determining whether to fix an amalgamation day.[304]

However, after setting out the legislative history of section 73 of the FWRO Act the ACTU argued:

the provision’s original intention, and the evident intention of the existing provision, was to include only criminal proceedings and to exclude civil proceedings.[305]

The ACTU argued that the amendment proposed by item 12 ‘fundamentally alters the provision by extending its scope to civil proceedings’ in a way that ‘is not even limited to breaches of awards or enterprise agreements’ and therefore ‘significantly expands the scope of s 73(2)(c)’.[306]

Appendix: Differences between the disqualification regimes proposed by RCTUGC and the Bill

Table 2:              Differences between the disqualification regimes proposed by the RCTUGC and the Bill

RCTUGC model

The Bill’s model

Notes

Paragraph 190(a)(i):

·    the person has or has been found to have contravened a civil remedy provision of the FW Act, or a civil penalty provision of the FW(RO) Act or the Work Health and Safety Act 2011 (Cth), and

·    the Court is satisfied that the disqualification is justified.

Proposed paragraph 223(1)(a) and 222(2)(b):

·    a designated finding is made against the person, and

·    the Court does not consider that it would be unjust to disqualify the person.

Definition of designated finding means the Bill’s model applies to a broader range of conduct than that proposed by the RCTUGC.

Bill provides that the court must be satisfied that it would not be unjust to disqualify the person, arguably a lower threshold than disqualification being justified.

Paragraph 190(a)(ii):

·    the person has been found liable for contempt, and

·    the Court is satisfied that the disqualification is justified.

Proposed paragraph 223(1)(b) and 222(2)(b):

·    the person is found to be in contempt of court in relation to an order or injunction made under a designated law, and

·    the Court does not consider that it would be unjust to disqualify the person.

Broadly comparable, however the Bill provides that the court must be satisfied that it would not be unjust to disqualify the person, arguably a lower threshold than disqualification being justified.

Paragraph 190(a)(iii):

·    the person has been at least twice an officer of a registered organisation that has, or has been found to have, contravened a provision of the FW Act or the FW(RO) Act or

·    has been found liable for contempt while the person was an officer and

·    each time the person failed to take reasonable steps to prevent the contravention or the contempt, and

·    the Court is satisfied that the disqualification is justified.

Proposed subsection 223(3) and 222(2)(b):

·    Two of any of the following findings are made against any organisation in relation to conduct engaged in while the person is an officer of the organisation:

–    a designated finding

–    a wider criminal finding

–    a finding that the organisation is in contempt of court in relation to an order or injunction made under any law of the Commonwealth or a State or Territory and

·    the person failed to take reasonable steps to prevent the conduct, and

·    the Court does not consider that it would be unjust to disqualify the person.

Definitions of designated finding and wider criminal finding means the Bill’s model applies to a broader range of conduct than that proposed by the RCTUGC.

Bill provides that the court must be satisfied that it would not be unjust to disqualify the person, arguably a lower threshold than disqualification being justified.

Paragraph 190(a)(iv):

·    the person has, or has been found to have, at least twice contravened a provision of the FW Act or the FW(RO) Act, and

·    the Court is satisfied that the disqualification is justified.

Proposed paragraph 223(1)(a) and 222(2)(b):

·    a designated finding is made against the person, and

·    the Court does not consider that it would be unjust to disqualify the person.

Definition of designated finding and the requirement that only one designated finding is required to trigger this ground (compared to two contraventions required in the model proposed by the RCTUGC) means the Bill’s model applies to a broader range of circumstances than that proposed by the RCTUGC.

Bill provides that the court must be satisfied that it would not be unjust to disqualify the person, arguably a lower threshold than disqualification being justified.

Paragraph 190(a)(v):

·    the person is otherwise not a fit and proper person to hold office within a registered organisation or branch, and

·    the Court is satisfied that the disqualification is justified.

Proposed subsections 223(5) and (6), paragraph 222(2)(b):

·    having regard to any events mentioned in subsection (6),[307] the person is not a fit and proper person to hold office in an organisation, and

·    the Court does not consider that it would be unjust to disqualify the person.

Whilst somewhat more directive than the model proposed by the RCTUGC, the models are broadly comparable other than the fact that the Bill provides that the court must be satisfied that it would not be unjust to disqualify the person, arguably a lower threshold than disqualification being justified.

Source: RCTUGC, Final report, vol. 5, op. cit., para 190 (pp. 3396–3397) and Recommendation 38 (p. 3397); proposed sections 222 and 223 of the FWRO Act, at item 9 of Schedule 1 to the Bill.

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[1].              Explanatory Memorandum, Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017, pp. ii; Liberal Party of Australia, The Coalition's commitment to fairness and transparency in workplaces, 17 June 2016, p. 2.

[2].              Royal Commission into Trade Union Governance and Corruption (RCTUGC), Final report, vol. 5, Chapter 3, B–Duties of union officers to their union, RCTUGC, Canberra, 28 December 2015, pp. 3318–3340. [Note, in the hard copy of Volume 5 of the RCTUGC’s Final report, this information is at pages 157–179].

[3].              Ibid., pp. 3318–3327.

[4].              Ibid., pp. 3324–3330.

[5].              Ibid., p. 3327.

[6].              Explanatory Memorandum, Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017, pp. iii.

[7].              The Coalition's commitment to fairness and transparency in workplaces, op. cit., p. 2.

[8].              RCTUGC, Final report, vol. 5, op. cit., p. 3397.

[9].              RCTUGC, Final report, vol. 5, op. cit., pp. 3388, 3397.

[10].              Attorney General’s Department (AGD), A guide to framing Commonwealth offences, infringement notices and enforcement powers, AGD, Canberra, September 2011, pp. 8, 22–23.

[11].              Senate Standing Committee for the Scrutiny of Bills, Scrutiny digest, 10, 2017, The Senate, 6 September 2017, pp. 14–16.

[12].              Section 206A of the Corporations Act 2001. For comment see, for example: Electrical Trades Union (ETU), Submission to the Senate Education and Employment Legislation Committee, Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017 [provisions], 6 September 2017, p. 5; Australian Council of Trade Unions (ACTU), Submission to the Senate Education and Employment Legislation Committee, Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017 [provisions], 8 September 2017, pp. 12–13.

[13].              RCTUGC, Final report, vol. 5, op. cit., p. 3397.

[14].              Senate Education and Employment Legislation Committee, Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017 [provisions], The Senate, Canberra, October 2017, p. 32.

[15].              Ibid., pp. 33–36.

[16].              Ibid., p. 33.

[17].              Ibid., p. 35.

[18].              Ibid., pp. 33–36.

[19].              Senate Standing Committee for the Scrutiny of Bills, Scrutiny digest, 10, 2017, The Senate, 6 September 2017, pp. 13–18.

[20].              Senate Education and Employment Legislation Committee, Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017 [provisions], op. cit., pp. 33–36.

[21].              J Massola, ‘”Union-basher bill” under fire’, The Sydney Morning Herald, 13 September 2017, p. 6: ‘The laws will be debated in the Senate in October at the earliest, and the three votes of the Nick Xenophon Team could prove crucial to deciding the fate of the bill, with Labor and the Greens likely to vote against it’ and ‘Labor workplace spokesman Brendan O’Connor said the bill was another salvo in the Turnbull government’s ‘‘relentless assault on workers and their unions’’. ‘‘. . . it is beyond comprehension that this government would want to further undermine workers and their unions, which is what this bill does,’’ Mr O’Connor said.’; B O’Connor, (Shadow Minister for Employment and Workplace Relations), ABS labour force figures, transcript, 15 December 2016, pp. 4–5: ‘Entirely up to democratically elected registered organisations what they do. If they choose to stay as an entity or they choose to look to merge, I think that's really up to them. We're a democratic society. We should not impede the rights of workers to organise and be parts of unions. That's their fundamental human right. And for those organisations that are democratically structured, it is for the members of that organisation to make that decision. Their destiny is in their hands as it should be … And really, the idea that the Government should intervene and try and attack the rights of workers to democratically decide on the future of their union says everything about the Government. They are obsessed with attacking unions.’

[22].              See the submissions from: ACTU, p. 4; Professionals Australia (PA), p. 1; United Voice (UV), p. 3; Flight Attendants’ Association of Australia, International Division (FAAAID), p. 6; SA Unions (SAU) p. 2; Community and Public Sector Union (CPSU), pp. 1–2; The Australasian Meat Industry Employees’ Union (AMIEU), pp. 4–5; Unions Tasmania (UTAS), p. 1; ETU, p. 10; Construction, Forestry, Mining and Energy Union (CFMEU), pp. 2–3; Unions NSW (UNSW), p. 10; Queensland Council of Unions (QCU), p. 5; Maritime Union of Australia (MUA), pp. 3–4, 10; Australian Nursing & Midwifery Federation (ANMF), pp. 3–4; The Australian Workers Union (AWU), p. 4; Textile, Clothing & Footwear Union of Australia (TCFUA), p. 2.

[23].              See the submissions from: Unions ACT (UACT), p. 1; AWU, pp. 4, 6; ANMF, pp. 8, 13; MUA, pp. 10, 12; CFMEU, pp. 3, 6; ETU, pp. 3, 4–5; UTAS, p. 1; SAU, p. 2; National Tertiary Education Union (NTEU), p. 2; UV, p. 11; PA, pp. 3–6; ACTU, pp. 4, 5, 8, 9–10, 14, 19, 24–25, 27.

[24].              See the submissions from: NTEU, pp. 2–5; Victorian Trades Hall Council (VTHC), p. 1; Financial Sector Union (FSU), p. 2; Queensland Nurse & Midwives’ Union (QNMU), p. 1; National Union of Workers (NUW), p. 2–3; Unions WA (UWA), p. 2; Australian Education Union (AEU), p. 2; Community and Public Sector Union SPSF (CPSU-SPSF), n.d., pp. 5–6.

[25].              See the submissions from: TCFUA, pp. 3, 12, 15; NUW, pp. 4–6; ANMF, p. 13, 16; QCU, pp. 2–4; CPSU-SPSF, pp. 3, 11–15; AEU, pp. 1–2; MUA, p. 12; UNSW, pp. 2, 7, 10; CFMEU, pp. 2–3, 5; UWA, p. 2; NUW, pp. 4–6; UTAS, p. 1; AMIEU, p. 6; CPSU, pp. 2–3; SAU, p. 3; FSU, pp. 2–3; NTEU, pp. 2–5; UV, pp. 3, 6–11; PA, pp. 1–2, 4–5, 7; ACTU, pp. 4–5, 10, 12, 18–24, 26, 29–31, 34.

[26].              See the submissions from: CFMEU, pp. 7–8; ETU, pp. 4–5; UWA p. 1; FSU, p. 3; NTEU, pp. 2–3; UV, p. 6; PA, pp. 3–4; ACTU, pp. 14–17; QCU, pp. 1–3; ANMF, p. 15; AWU, p. 5; TCFUA, p. 6; Health Services Union (HSU), pp. 2–3.

[27].              See the submissions from: ACTU pp. 19–26; AWU, p. 6; ANMF, pp. 7–8, 13; PA, pp. 6–7; FSU, p. 3; UWA, p. 1; ETU, pp. 5–6; CFMEU, pp. 8–9.

[28].              See the submissions from: ETU, pp. 6–7; PA, p. 7; ACTU, pp. 27–29; AWU, p. 6; CPSU, p. 4.

[29].              See the submissions from: AWU, p. 6; ACTU, p. 30; CFMEU, p. 3.

[30].              See the submissions from: ACTU, pp. 5–6, 31–36; CFMEU, p. 6; ETU, p. 8; UWA, p. 1; UV, p. 9; PA, pp. 7–8; UNSW, p. 10; AEU, p. 3; AWU, p. 3; NUW, p. 3; CPSU, p. 4.

[31].              See the submissions from: ACTU, pp. 32–33; TCFUA, pp. 11–12; MUA, pp. 9–10; UNSW, p. 10; PA, pp. 7–8; UV, p. 9; FSU, p. 3; ETU, p. 8; CFMEU, pp. 6–7.

[32].              Housing Industry Association (HIA), Submission to the Senate Education and Employment Legislation Committee, Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017 [provisions], 8 September 2017, p. 1; Australian Mines and Minerals Association (AMMA), Submission to the Senate Education and Employment Legislation Committee, Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017 [provisions], September 2017, p. 2; Australian Chamber of Commerce and Industry (ACCI), Submission to the Senate Education and Employment Legislation Committee, Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017 [provisions], 8 September 2017, pp. 1, 8, 15-16, 18, 21; Australian Industry Group (AIG), Submission to the Senate Education and Employment Legislation Committee, Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017 [provisions], 8 September 2017, p. 1 and Master Builders Australia (MBA), Submission to the Senate Education and Employment Legislation Committee, Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017 [provisions], 8 September 2017, pp. 2–3.

[33].              Professor Bradon Ellem, Submission to the Senate Education and Employment Legislation Committee, Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017 [provisions], n.d., p. 1; GetUp, Submission to the Senate Education and Employment Legislation Committee, Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017 [provisions], 8 September 2017, p. 2; Joint submission from Australian Conservation Foundation, Australian Youth Climate Coalition, Friends of the Earth Australia, Getup!, Greenpeace Australia, Nature Conservation Council of Australia and Solar Citizens, Joint Submission to the Senate Education and Employment Legislation Committee, Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017 [provisions], 8 September 2017, p. 2.

[34].              Explanatory Memorandum, Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017, p. iii.

[35].              The Statement of Compatibility with Human Rights can be found at pages v to xiii of the Explanatory Memorandum to the Bill.

[36].              Parliamentary Joint Committee on Human Rights (PJCHR), Report, 9, 2017, 5 September 2017, pp. 13–24.

[37].              Ibid., p. 13.

[38].              Ibid., pp. 13–14.

[39].              Proposed subsection 222(1) of the FWRO Act, at item 9 of Schedule 1 to the Bill.

[40].              Corporations Act 2001, subsections 206B(1), (3).

[41].              Ibid, paragraph 206F(1)(a).

[42].              Ibid, paragraph 206F(1)(b).

[43].              Laycock v Forbes (1997) 150 ALR 186; (1997) 25 ACSR 659; (1997) 15 ACLC 1814.

[44].              Proposed section 9C of the FWRO Act at item 2 of Schedule 1 to the Bill.

[45].              Fair Work (Building Industry) Act 2012.

[46].              Ibid.

[47].              Fair Work (Registered Organisations) Act 2009, section 212.

[48].              RCTUGC, Final report, vol. 5, op. cit., p. 3397.

[49].              Corporations Act 2001, subsection 206B(1).

[50].              Proposed paragraph 212(aa) of the FWRO Act, at item 6 of Schedule 1 to the Bill.

[51].              Corporations Act 2001, subparagraph 206B(1)(b)(ii); Fair Work (Registered Organisations) Act 2009, paragraph 212(a), section 215.

[52].              Corporations Act 2001, paragraph 206B(1)(a); Fair Work (Registered Organisations) Act 2009, paragraph 212(c), section 215.

[53].              Proposed subsection 222(1) of the FWRO Act, at item 9 of Schedule 1 to the Bill.

[54].              Explanatory Memorandum, Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017, p. 6.

[55].              RCTUGC, Final report, vol. 5, op. cit., p. 3397.

[56].              RCTUGC, Final report, vol. 5, op. cit., pp. 3395–3396.

[57].              RCTUGC, Final report, vol. 5, op. cit., p. 3396.

[58].              RCTUGC, Final report, vol. 5, op. cit., pp. 3396–3397.

[59].              Professionals Australia, Submission to the Senate Education and Employment Legislation Committee, inquiry into the Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017 [provisions], n.d., p. 3.

[60].              Proposed paragraph 223(6)(f) of the FWRO Act, at item 9 of Schedule 1.

[61].              Section 236 of the Corporations Act 2001 permits a member (shareholder) or director of a company to bring proceedings on behalf of the company, or intervene in any proceedings to which the company is a party, for the purpose of taking responsibility on behalf of the company for those proceedings. The criteria for the operation of this section are provided in section 237: it must be probable that the company will not itself bring proceedings; the applicant must be acting in good faith; it must be in the best interests of the company that the applicant be granted leave; there must be a serious question to be tried and written notice must be provided to the company of the intent to apply. In essence, sections 236 and 237 allow the shareholders and directors who are in a minority position on the Board to usurp the authority that the corporate entity has vested in the board of directors as a whole by allowing them to ‘act as some form of corporate watchdog, to pursue an action against a wrongdoer, when the board refuses to act’: L Griggs, ‘A statutory derivative action: lessons that may be learnt from its past’, University of Western Sydney Law Review, 6(1), 2002 at [1.1].

[62].              Proposed subsection 222(1) of the FWRO Act, at item 9 of Schedule 1 to the Bill.

[63].              PJCHR, Report, 9, 5 September 2017, p. 16.

[64].              Ibid.

[65].              Ibid.

[66].              Ibid.

[67].              Ibid.

[68].              Proposed subsection 223(2) of the FWRO Act, at item 9 of Schedule 1 to the Bill.

[69].              Ibid.

[70].              Proposed paragraph 223(3)(a) of the FWRO Act, at item 9 of Schedule 1 to the Bill.

[71].              Proposed paragraph 223(3)(b) of the FWRO Act, at item 9 of Schedule 1 to the Bill.

[72].              Senate Standing Committee for the Scrutiny of Bills, Scrutiny digest, 10, 2017, The Senate, 6 September 2017, p. 14.

[73].              Ibid.

[74].              PJCHR, Report, 9, 2017, op. cit., p. 17.

[75].              Ibid.

[76].              Proposed subsection 223(4) of the FWRO Act, at item 9 of Schedule 1 to the Bill.

[77].              Explanatory Memorandum, Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017, p. 8.

[78].              Ibid..

[79].              Proposed subsection 223(5) of the FWRO Act, at item 9 of Schedule 1 to the Bill .

[80].              Explanatory Memorandum, Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017, p. 9.

[81].              Ibid.

[82].              Ibid.

[83].              Ibid., pp. 9–10.

[84].              Ibid., p. 10.

[85].              See Submissions to the Senate Education and Employment Legislation Committee, Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017 [provisions], from: ACTU, p. 16; TCFUA, p. 6; PA, p. 6; CFMEU, p. 8.

[86].              ACTU, Submission to the Senate Education and Employment Legislation Committee, Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017 [provisions], 8 September 2017, p. 16.

[87].              Proposed section 224 of the FWRO Act, at item 9 of Schedule 1 to the Bill.

[88].              Explanatory Memorandum, Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017, p. 10.

[89].              Section 4AA of the Crimes Act 1914 (Cth) provides that a penalty unit is equal to $210.

[90].              Proposed subsection 226(3) of the FWRO Act, at item 9 of Schedule 1 to the Bill.

[91].              Explanatory Memorandum, Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017, p. 11.

[92].              Ibid.

[93].              Ibid.

[94].              Senate Standing Committee for the Scrutiny of Bills, Scrutiny digest, 10, 2017,op. cit., p. 15.

[95].              Ibid., p. 16.

[96].              See for example: ETU, Submission to the Senate Education and Employment Legislation Committee, Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017 [provisions], 6 September 2017, p. 5; UV, Submission to the Senate Education and Employment Legislation Committee, Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017 [provisions], nd, p. 6; Australian Conservation Foundation, Australian Youth Climate Coalition, Friends of the Earth Australia, Getup!, Greenpeace Australia, Nature Conservation Council of Australia and Solar Citizens, Joint Submission to the Senate Education and Employment Legislation Committee, Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017 [provisions], 8 September 2017, p. 2; PA, Submission to the Senate Education and Employment Legislation Committee, Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017 [provisions], n.d., pp. 3–4.

[97].              Explanatory Memorandum, Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017, p. 14.

[98].              PJCHR, Report, 9, op. cit., pp. 13, 15.

[99].              Ibid., p. 13.

[100].              Ibid., pp. 13–14.

[101].              Ibid., p. 15.

[102].              Ibid.

[103].              Ibid.; ILO Convention (No. 87) Concerning Freedom of Association and Protection of the Right to Organise, done in San Francisco on 9 July 1948, [1974] ATS 31 (entered into force for Australia 28 February 1974).

[104].              PJCHR, Report, 9, op. cit., p. 15.

[105].              Ibid.

[106].              Ibid., p. 17.

[107].              Ibid., p. 16.

[108].              Ibid., p. 17.

[109].              Ibid., p. 17.

[110].              Ibid.

[111].              Senate Standing Committee for the Scrutiny of Bills, Scrutiny digest, 10, 2017, op. cit., p. 14.

[112].              Ibid.

[113].              Explanatory Memorandum, Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017, p. 15.

[114].              Proposed section 27A of the FWRO Act, at item 4 of Schedule 2 to the Bill.

[115].              Corporations Act 2001, sections 601AA, 601AB, 601AC and 601AD (see for example subsection 601AD(1): ‘A company ceases to exist on deregistration’).

[116].              Corporations Act 2001, section 459P.

[117].              Professionals Australia, Submission to the Senate Education and Employment Legislation Committee, inquiry into the Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017 [provisions], n.d., p. 7.

[118].              Ibid., p. 6.

[119].              Proposed sections 28C to 28H of the FWRO Act, at item 4 of Schedule 2 to the Bill .

[120].              RCTUGC, Final report, vol. 5, op. cit., pp. 3320–3321, 3379.

[121].              Explanatory Memorandum, Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017, p. 17.

[122].              This includes not to make any secret profit from their position, to exercise their powers bona fides and for a proper purpose, and to exercise their powers for purposes honestly and reasonably believed to be in the best interests of the members of an organisation as a whole: RCTUGC, Final report, vol. 5, op. cit., pp. 3320-3321, 3379.

[123].              Explanatory Memorandum, Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017, p. 17.

[124].              RCTUGC, Final report, vol. 5, op. cit., pp. 3320–3321, 3379.

[125].              Darvall v North Sydney Brick & Tile Co Ltd (1988) 6 ACLC 154 .

[126].              Ngurli Ltd v McCann (1953) 90 CLR 425 at 438, [1953] HCA 39.

[127].              Darvall v North Sydney Brick & Tile Co Ltd [No. 2] (1989) 7 ACLC 659 as per Hodgson J.

[128].              Greenhalgh v Arderne Cinemas Ltd [1951] Ch 286 as per Evershed MR.

[129].              Percival v Wright [1902] 2 Ch 421 (where it was held that directors only owe fiduciary duties to the company as a whole and not individual shareholders); Brunninghausen v Glavanics (1999) 17 ACLC 1,247 (where it was held that whilst a director’s fiduciary duties are generally owed to the company, there may be special circumstances where directors must act in the best interests of particular shareholders).

[130].              Allen v Townsend (1977) 16 ALR 301 as per Evatt and Northrop JJ; Mills v Mills (1938) 60 CLR 150, as per Latham J at 164, [1938] HCA 4.

[131].              See for example: pages i, ii, vi, viii-x, 4, 17, 20, and 25 of the Explanatory Memorandum, where references are made to ensuring ‘the integrity of registered organisations and their officials, for the benefit of members’; issues raised by organisations and officials ‘not serving the interests of members’, the desirability of promoting ‘democratic governance in the interest of members’ and ‘improving the governance of registered organisations and protecting the interests of members’ (emphasis added); expanding ‘the grounds for a remedial scheme to be approved by the Federal Court, including the appointment of an administrator, when officers of an organisation or branch are no longer serving members’ interests’; that organisations and officers that do not comply with work-place relations obligations ‘cannot be considered to be lawfully and effectively representing the interests of organisation members as a whole’; ‘each of the grounds for cancelling an organisation’s registration set out in new Division 3 relates to an organisation that has ceased to function in the best interests of members as a whole’, and the desirability of ensuring ‘governance issues within an organisation, or individual branches or divisions, can be addressed promptly and transparently to ensure that the interests of members are protected’.

[132].              CFMEU, Submission to the Senate Education and Employment Legislation Committee, Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017 [provisions], September 2017, p. 9.

[133].              UNSW, Submission to the Senate Education and Employment Legislation Committee, Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017 [provisions], 12 September 2017, p. 7.

[134].              ACTU, Submission to the Senate Education and Employment Legislation Committee, Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017 [provisions], 8 September 2017, p. 23.

[135].              Allen v Townsend (1977) 31 FLR 431 as per Evatt and Northrop JJ; Mills v Mills (1938) 60 CLR 150 as per Latham J at 164, [1938] HCA 4.

[136].              Explanatory Memorandum, Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017, p. 17.

[137].              PJCHR, Report, 9, 2017, op. cit., p. 20.

[138].              Ibid.

[139].              Ibid.

[140].              Ibid.

[141].              Ibid.

[142].              Ibid.

[143].              ACTU, Submission to the Senate Education and Employment Legislation Committee, Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017 [provisions], 8 September 2017, p. 24.Ibid.

[144].              Ibid.

[145].              Explanatory Memorandum, Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017, p. 17.

[146].              Ibid.

[147].              Radio 2UE Sydney Pty Ltd v Stereo FM Pty Ltd (1982) 44 ALR 557 (`substantially lessening competition'), [1982] FCA 206; Dowling v Dalgety Australia Ltd (1992) 34 FCR 109 (`substantial degree of power'), [1992] FCR 35; Macquarie Dictionary, online, ‘substantial’, n.d.

[148].              ACTU, Submission to the Senate Education and Employment Legislation Committee, Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017 [provisions], 8 September 2017, p. 24.

[149].              Ibid.

[150].              Section 408 of the Fair Work Act 2009 defines ‘protected industrial action’ in such a way as to limit it to industrial action taken in relation to a proposed enterprise agreement (see also section 413 of the Fair Work Act 2009). It is called ‘protected’ industrial action because a limited immunity applies, meaning that remedies that might otherwise be sought by (usually) the employer in relation to the industrial activity are generally not available (see section 415 of the Fair Work Act 2009).

[151].              PJCHR, Report, 9, op. cit., p. 20.

[152].              Ibid.

[153].              ACTU, Submission to the Senate Education and Employment Legislation Committee, Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017 [provisions], 8 September 2017, p. 24.

[154].              Professionals Australia, Submission to the Senate Education and Employment Legislation Committee, inquiry into the Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017 [provisions], nd, p. 4.

[155].              UNSW, Submission to the Senate Education and Employment Legislation Committee, Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017 [provisions], 12 September 2017, p. 9.

[156].              Explanatory Memorandum, Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017, p. 20.

[157].              Ibid.

[158].              Proposed paragraph 28M(2)(a) of the FWRO Act, at item 4 of Schedule 2 to the Bill.

[159].              Professionals Australia, Submission to the Senate Education and Employment Legislation Committee, inquiry into the Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017 [provisions], n.d., p. 4.

[160].              United Voice, Submission to the Senate Education and Employment Legislation Committee, inquiry into the Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017 [provisions], n.d., p. 7.

[161].              Proposed subsection 28P(2) of the FWRO Act, at item 4 of Schedule 2 to the Bill.

[162].              PJCHR, Report, 9, op. cit., p. 20.

[163].              PJCHR, Report, 9, op. cit., p. 20–21.

[164].              Explanatory Memorandum, Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017, p. 25.

[165].              Proposed subsection 323(1) of the FWRO Act, at item 4 of Schedule 3 to the Bill.

[166].              Explanatory Memorandum, Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017, p. 26.

[167].              PJCHR, Report, 9, op. cit., p. 22.

[168].              Explanatory Memorandum, Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017, p. 26.

[169].              Corporations Act 2001, section 234.

[170].              See, for example, Re Spargos Mining NL (1990) 8 ACLC 1,218 where Justice Murray of the Supreme Court of Western Australia ordered the appointment of a new board, the amendment of the company’s constitution and for the new board to report to the court every three months.

[171].              Explanatory Memorandum, Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017, p. 27.

[172].              See footnote 172.

[173].              Explanatory Memorandum, Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017, p. 25.

[174].              Corporations Act, Part 5.3A.

[175].              Corporations Act 2001, subsection 436A(1).

[176].              Corporations Act 2001, sections 436B and 436C.

[177].              Australian Securities and Investments Commission (ASIC), ‘Creditors: voluntary administration’, ASIC website, 1 September 2017.

[178].              Lipton, Herzberg and Welsh, Understanding company law, op. cit., pp. 620–626.

[179].              Ibid., p. 626.

[180].              Corporations Act 2001, sections 437A and 437B.

[181].              Corporations Act 2001, sections 448B, 448C.

[182].              Corporations Act 2001, section 438A.

[183].              Corporations Act 2001, section 234.

[184].              Proposed subsection 323(1) of the FWRO Act, at item 4 of Schedule 3 to the Bill.

[185].              Corporations Act 2001, section 234.

[186].              Proposed section 323 of the FWRO Act, at item 4 of Schedule 3 to the Bill.

[187].              Proposed subsection 323(2) of the FWRO Act, at item 4 of Schedule 3 to the Bill.

[188].              Proposed subsection 323A(3) of the FWRO Act, at item 4 of Schedule 3 to the Bill.

[189].              Proposed subsection 323A(2) of the FWRO Act, at item 4 of Schedule 3 to the Bill.

[190].              Proposed subsection 323A(4) and (5) of the FWRO Act, at item 4 of Schedule 3 to the Bill.

[191].              Proposed subsections 323G(1), (2) and 323H(3) of the FWRO Act, at item 4 of Schedule 3 to the Bill.

[192].              Proposed subsections 323G(3) and 323H(5) of the FWRO Act, at item 4 of Schedule 3 to the Bill.

[193].              Ibid.

[194].              Australian Law Reform Commission (ALRC), Traditional rights and freedoms—encroachments by Commonwealth laws, Report, 129, 2 March 2016, pp. 285–289.

[195].              Senate Standing Committee for the Scrutiny of Bills, Scrutiny digest, 10, 2017, The Senate, 6 September 2017, p. 16; Attorney General’s Department (AGD), A guide to framing Commonwealth offences, infringement notices and enforcement powers, op. cit., p. 23.

[196].              Ibid.

[197].              PJCHR, Report, 9, 5 September 2017, p. 21.

[198].              Ibid., pp. 21–22.

[199].              Ibid., p. 22.

[200].              Ibid.

[201].              Ibid.

[202].              Ibid.

[203].              Ibid.

[204].              Ibid.

[205].              Ibid.

[206].              C Pyne, ‘Second reading speech: Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017’, House of Representatives, Debates, 16 August 2017, p. 8607.

[207].              J Catanzariti et. al, Annotated Fair Work Act and related legislation , 2017 edn, LexisNexis, Chatswood, NSW, 2017, p. 1604.

[208].              Competition and Consumer Act 2010, section 50.  See also Australian Competition and Consumer Commission (ACCC) Merger guidelines, ACCC website.

[209].              Takeovers Panel, Summary of Takeover provisions in Australia, Takeovers Panel website. Corporations Act 2001, section 657A.

[210].               Foreign Acquisitions and Takeovers Act 1975, subsection 67(1). See also Foreign Investment Review Board, National interest test             

[211].              FWRO Act, Chapter 3, Part 2, Division 5 generally and sections 42 and 44.

[212].              FWRO Act, sections 285 and 286 impose statutory duties on officers of an organisation in relation to the financial management of the organisation.

[213].              RCTUGC, Final report, vol. 5, op. cit., pp. 3320-3321, 3379; Allen v Townsend (1977) 31 FLR 431, 483; Ludwig v Harris (1991) 30 FCR 377, 379 (FC).

[214].              M Evans, Outline of equity and trusts, Butterworths, Sydney, 1988, p. 75.

[215].              Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41, [1984] HCA 64.

[216].              Chan v Zacharia (1984) 154 CLR 178, [1984] HCA 36.

[217].              Scott v Jess (1984) 3 FCR 263, 287, [1984] FCA 289.

[218].              FWRO Act, subsection 285(1).

[219].              FWRO Act, subsection 286(1), 290A(1).

[220].              Ibid.

[221].              FWRO Act, sections 287, 288, subsections 290A(2), (3).

[222].              FWRO Act, section 44.

[223].              FWRO Act, section 42.

[224].              FWRO Act, section 40.

[225].              FWRO Act, subsection 44(3).

[226].              FWRO Act, section 63.

[227].              FWRO Act, section 43.

[228].              FWRO Act, subsection 44(3), sections 48, 60.

[229].              FWRO Act, Chapter 3, Part 2, Division 4 generally.

[230].              Ibid.

[231].              FWRO Act, subsection 43(1).

[232].              FWRO Act, subsection 43(5).

[233].              FWRO Act, subsection 43(5).

[234].              FWRO Act, subsection 43(7).

[235].              FWRO Act, section 66.

[236].              See: Tweed Valley Fruit Processors Pty Ltd v Ross and Others [1996] IRCA 407; Australian Industry Group and Pacific Brands Limited t/a Dunlop Foams [2010] FWAFB 4337.

[237].              FWRO Act, sections 73, 74, 81 and Chapter 3, Part 2, Division 6 generally.

[238].              FWRO Act, sections 81, 87.

[239].              Corporations Act 2001, section 602.

[240].              Australian Securitites and Investments Commission (ASIC), Schemes of arrangement, Regulatory Guide 60, 22 September 2011.

[241].              Other, less commonly used takeover structures include: a selective capital reduction or a security holder-approved transaction.

[242].              Those rules include: all offers must be the same; the bid price cannot be lower than the price which the bidder paid for a target security within the previous four months; the offer period to be no less than one month and no more than 12 months; there are no special deals for individual target security holders; there are no self-triggering bid conditions (for off-market bids); the bidder must issue a ‘bidder’s statement’ containing the offer terms and other information; the target must issue a ‘target’s statement’ containing the target board’s recommendation; and the bidder is entitled to compulsory acquisition if it obtains a relevant interest in at least 90% of the target securities (and has acquired at least 75% of the securities it offered to acquire): Allens Linklaters, The Allens handbook on takeovers in Australia, 27 April 2017, p. 7.

[243].              Section 638 of the Corporations Act provides that the target’s statement must include: (1) all the information that shareholders and their professional advisers would reasonably require to make an informed assessment whether to accept the takeover bid, (2) a recommendation by each of the of company’s directors that the takeover bid should or should not be accepted and the reasons for that recommendation, and, if the bidder is connected with the target company (3) an expert report: section 640 of the Corporations Act provides that this must include a statement as to whether the independent expert is of the view that the takeover offer is ‘fair and reasonable’ and the reasons for that opinion. The inclusion of the recommendations by each and every director links back to the duties of company directors and registered organisation officials discussed earlier in this digest: they must believe the takeover or amalgamation is in the best interests of the company or organisation, and when making the recommendation to proceed, they must do so in good faith and for a proper purpose (that is, for the benefit of the organisation).

[244].              Allens Linklaters, The Allens handbook on takeovers in Australia, op. cit., p. 7.

[245].              Those steps are: developing a scheme implementation agreement between the bidder and the target; the preparation by the target, with input from the bidder, of a draft ‘scheme booklet’ which is given to ASIC for review; the target seeking court approval for the despatch of the scheme booklet to target shareholders and court orders for the convening of the shareholders’ meeting to vote on the scheme (that is, the scheme meeting); holding the scheme meeting; the target seeking court approval for the implementation of the scheme; implementing the scheme; and de-listing the target from ASX: Allens Linklaters, The Allens handbook on takeovers in Australia, 27 April 2017, p. 7.

[246].              ASIC, ‘Apply for relief’, ASIC website.

[247].              ASIC, Takeover bids, Regulatory guide, 9, December 2016, pp. 6–8.

[248].              Takeovers Panel, Unacceptable circumstances, Guidance note, 1, 5th issue, 21 September 2010.

[249].              Takeovers Panel, Unacceptable circumstances, Guidance note, 1, Draft guidance note, 4th issue, 18 April 2008.

[250].              Takeovers Panel, Unacceptable circumstances, Guidance note, 1, 5th issue, 21 September 2010.

[251].              Australian Competition and Consumer Commission (ACCC), Informal merger review process guidelines 2013, Canberra, 26 September 2013; ACCC, Merger guidelines, Canberra, 21 November 2008.

[252].              P Armitage, A Tesvic and R Zaurrini, ‘Australia’, in IK Gotts (ed), The merger control review, 4th edition, Law Business Research, United Kingdom, July 2013, pp. 1-16, pp. 2, 4, 7-8.

[253].              Australian Competition Tribunal (ACT), ‘About the Tribunal’, ACT website.

[254].              Australian Competition and Consumer Commission (ACCC), Merger guidelines, ACCC, Canberra, November 2008.

[255].              P Davidson, Competition and Consumer Amendment (Misuse of Market Power) Bill 2016, Bills digest, 87, 2016–17, 29 March 2017.

[256].              ACCC, Merger guidelines, op. cit., p. 34.

[257].              Foreign Acquisitions and Takeovers Regulation 2015; Register of Foreign Ownership of Water or Agricultural Land Rules 2017; Foreign Investment Review Board (FIRB), ‘Policy’, FIRB website.

[258].              Foreign Acquisitions and Takeovers Act 1975, section 3 and Part 3 generally. Specifically the FATA empowers the Treasurer to examine proposals by foreign persons that are a significant action or a notifiable action (noting that notifiable actions are, in effect, a sub-set of significant actions). See also: Foreign Investment Review Board, Significant actions and notifiable actions, Guidance Note 35, 1 November 2015: ‘Some significant actions, called notifiable actions, must also be notified to the Treasurer before the actions can be taken … If the significant action is also a notifiable action, the Treasurer must be notified before the actions can be taken.’

[259].              Foreign Investment Review Board (FIRB), ‘Policy documents’, FIRB website.

[260].              The overlap between ‘national interest’ and ‘public interest’ and the differences between them have been noted in a variety of different contexts. See: J Kinslor and J English, ‘Decision-making in the national interest’, AIAL Forum, 79, January 2015, pp. 35–51; V Bath, ‘Foreign investment, the national interest and national security — foreign direct investment in Australia and China’, Sydney Law Review, 34(1), March 2012, pp. 5–34; M Penny, ‘Defining and refining the concept of practising in “the public interest”’, Alternative Law Journal, 28(1), February 2003, pp. 3–12, which argued that the term ‘public interest’ is indeterminate, but also noted that ‘public interest’ can be viewed domestically whilst ‘national interest’ has international aspects.

[261].              Treasurer, ‘Australia’s foreign investment policy’, 1 July 2017, p. 9.

[262].              Foreign Investment Review Board (FIRB), Tax conditions, Guidance note, 47, 24 November 2016, Attachment B, ‘Additional information on the tax conditions’.

[263].              Section 604 of the Fair Work Act 2009 allows a ‘person aggrieved by a decision’ made by the FWC (other than a Full Bench or Expert Panel decision) or the General Manager under the FWRO Act to appeal that decision, with permission from the FWC. In addition, section 56 of the FWRO Act provides limited grounds for a person to object to an amalgamation involving the extension of eligibility rules.

[264].              Subsection 657C(2) of the Corporations Act provides that the bidder, target, ASIC or ‘any other person whose interests are affected by the relevant circumstances’ my apply to the Panel for a declaration of unacceptable circumstances under section 657A or an order under section 657D or 657E (that is, seek to have the ‘merger’ blocked).

[265].              Corporations Act 2001, section 659AA.

[266].              Section 657EA of the Corporations Act 2001 provides that standing to have a Takeover Panel decision reviewed is confined to ASIC and ‘party to the proceedings in which the decision was made’ (inferring a person who applied under section 657E may also have standing).

[267].              Corporations Act 2001, section 659B.

[268].              Liberal Part of Australia, The Coalition’s commitment to fairness and transparency in workplaces, media release, 17 June 2016.

[269].              Top End Consulting Pty Ltd re Top End Consulting Enterprise Agreement 2010 [2010] FWA 6442 as per DP Bartel at [46].

[270].              Ibid., at [44].

[271].              Joy Manufacturing Co Pty Ltd - re Joy Mining Machinery (Moss Vale Site) Certified Agreement 1998 - T1133 [2000] AIRC 335 at [34].

[272].              Top End Consulting Pty Ltd re Top End Consulting Enterprise Agreement 2010 [2010] FWA 6442 as per DP Bartel at [44]; Application by Agri Labour Australia Pty Ltd [2015] FWC 5332 as per DP Bartel at [24]; Stratco (NSW) Pty Ltd re Hunter Timber and Building Supplies Pty Ltd Collective Agreement 2008 [2010] FWA 7036 at [42].

[273].              Top End Consulting Pty Ltd re Top End Consulting Enterprise Agreement 2010 [2010] FWA 6442 as per DP Bartel at [45]; Application by Agri Labour Australia Pty Ltd [2015] FWC 5332 as per DP Bartel at [24]; Re Kellogg Brown and Root, Bass Strait (Esso) Onshore/Offshore Facilities Certified Agreement 2000 [2005] AIRC 72 ; Application by Aurizon Operations Limited & Aurizon Network Pty Ltd and Another [2015] FWCFB 540 at [131] (affirmed in Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Aurizon Operations Ltd [2015] FCAFC 126, (2015) 233 FCR 301.

[274].              Joy Manufacturing Co Pty Ltd - re Joy Mining Machinery (Moss Vale Site) Certified Agreement 1998 - T1133 [2000] AIRC 335 at [34].

[275].              Agnew Legal Pty Ltd re CLB No. 1 Pty Ltd - Enterprise Agreement 2012 [2012] FWA 10861 as per C Asbury at [12].

[276].              Re Kellogg Brown and Root, Bass Strait (Esso) Onshore/Offshore Facilities Certified Agreement 2000 [2005] AIRC 72 at [23]-[26].

[277].              Stratco (NSW) Pty Ltd re Hunter Timber and Building Supplies Pty Ltd Collective Agreement 2008 [2010] FWA 7036 at [42].

[278].              The Australian Workers' Union [2015] FWCA 3956 as per C Gregory at [12].

[279].              Ibid., at [13].

[280].              Re Kellogg Brown and Root, Bass Strait (Esso) Onshore/Offshore Facilities Certified Agreement 2000 [2005] AIRC 72at [23]-[26].

[281].              The Australian Workers' Union [2015] FWCA 3956 as per C Gregory at [14].

[282].              GlaxoSmithKline Australia Pty Ltd v Colin Makin [2010] FWAFB 5343 at [26]; citing Comalco v O’Connor (1995) 131 AR 657 at p. 681 per Wilcox CJ & Keely J; and O’Sullivan v Farrer; (1989) 168 CLR 210, [1989] HCA 61.

[283].              Encyclopaedic Australian legal dictionary, ‘public interest’, as at 8 October 2017.

[284].              C Pyne, ‘Second reading speech: Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017’, House of Representatives, Debates, 16 August 2017, p. 8607.

[285].              PJCHR, Report, 9, 5 September 2017, p. 23.

[286].              Ibid.

[287].              Ibid., p. 24.

[288].              ACTU, Submission to the Senate Education and Employment Legislation Committee, op. cit., pp. 29–30.

[289].              Ibid., p. 31.

[290].              Ibid., p. 36.

[291].              ACTU, Submission to the Senate Education and Employment Legislation Committee, op. cit., p. 33.

[292].              Proposed subsection 72E(1) of the FWRO Act, at item 7 of Schedule 4 to the Bill.

[293].              Proposed subsection 72E(2) of the FWRO Act, at item 7 of Schedule 4 to the Bill.

[294].              Explanatory Memorandum, Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017, p. 37.

[295].              ACTU, Submission to the Senate Education and Employment Legislation Committee, op. cit., p. 33.

[296].              Explanatory Memorandum, Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017, p. 36.

[297].              Ibid., p. 33.

[298].              Ibid.

[299].              Ibid.

[300].              ACTU, Submission to the Senate Education and Employment Legislation Committee, op. cit., p. 32.

[301].              Ibid.

[302].              Explanatory Memorandum, Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017, p. 38.

[303].              Ibid.

[304].              Explanatory Memorandum, Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017, p. 38.

[305].              ACTU, Submission to the Senate Education and Employment Legislation Committee, op. cit., p. 35.

[306].              Ibid.

[307].              Proposed subsection 223(6) of the FWRO Act, at item 9 of Schedule 1 to the Bill provides that those events are: (a) the person is refused an entry permit, or an entry permit held by the person is revoked or suspended, under Part 3-4 of the Fair Work Act; (b) the person is refused a WHS entry permit, or a WHS entry permit held by the person is revoked or suspended, under Part 7 of the Work Health and Safety Act 2011; (c) the person is refused an entry permit (however described), or any such permit held by the person is revoked or suspended, under a State or Territory OHS law (within the meaning of the Fair Work Act); (d) in any criminal or civil proceedings against the person, or in any action against the person by an agency of the Commonwealth or a State or Territory, the person is found to have engaged in conduct involving fraud, dishonesty, misrepresentation, concealment of material facts or a breach of duty; (e) in any criminal proceedings against the person, the person is found to have engaged in conduct involving the intentional use of violence towards another person, the intentional causing of death or injury to another person or the intentional damaging or destruction of property; and (f) any other event the Court considers relevant.