Introduction
A branch of an organisation received money from employers, which it improperly accounted for as membership fees, and entered into the register of members the names of people who had not applied to join the organisation.
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Content
The former Branch Secretary was found to have failed to act in good faith in the best interests of the organisation and failed to have exercised his powers and duties with the care and diligence that a reasonable person would.
Case name
Registered Organisations Commissioner v Australian Workers’ Union and Mr Melhem [2019] FCA 1852
The issues
A branch of an organisation received money from employers, which it improperly accounted for as membership fees, and entered into the register of members the names of people who had not applied to join the organisation.
The former Branch Secretary was found to have failed to act in good faith in the best interests of the organisation and failed to have exercised his powers and duties with the care and diligence that a reasonable person would.
What happened
The former Victorian Branch Secretary of the Australian Workers’ Union (AWU) admitted the Branch received $488,007.50 from employers and membership associations and improperly accounted for this as membership fees. The Branch also added 730 people to its register of members, most of whom did not apply to join the AWU and did not know that they were members.
Adding people to the register who are not entitled to be members is contrary to the AWU’s rules and the Fair Work (Registered Organisations) Act 2009 (the RO Act), which requires organisations to keep accurate registers of members. The behaviour continued throughout Mr Melhem’s time in the role as Victorian Branch Secretary.
Mr Melhem admitted that in the case of three of the employers/associations his actions were not done in good faith in the best interests of the organisation.
What organisations can learn from this case
Officers are responsible for ensuring both their organisation’s rules and the requirements of the RO Act are met.
Officers and organisations must be particularly careful to ensure that people’s names are not added to the membership register unless they have applied to join in accordance with the organisation’s rules. Also officers and organisations must ensure that money received is properly recorded. Money should not be recorded as membership fees if it is not membership fees.
Officers must uphold their duties and can be penalised by the Court if they fail to do so. In particular, senior officers, such as branch secretaries, are expected to set an exemplary standard of behaviour.
What the judge said
Justice Mortimer found at [158] that:
Mr Melhem’s conduct was a clear and serious example of the most senior office holder within the AWU Vic, and a senior office holder within the national AWU structure, failing to discharge his powers and duties in the best interest of the AWU. It could not possibly have been in the best interests of the AWU for its own membership rules, including as to amounts payable for membership, to be bypassed, in a serious and sustained way.
Justice Mortimer also observed at [167] that:
Mr Melhem engaged in contravening conduct while he held the most senior office within the AWU Vic. He should have been setting an exemplary standard of behaviour in terms of his observance of the law, and of the AWU Rules…as the most senior office holder in the Victorian Branch of the AWU he did not even attempt to ensure the rules of the union he was charged with administering in Victoria were observed, on a matter as fundamental to the running of the union as the way that workers become members.
When considering penalty, her Honour noted at [192] that:
The penalty imposed on Mr Melhem should send a strong message to office holders in other registered organisations who might be inclined to see the organisation's rules as optional, and to see membership recruitment as an “ends justifies the means” kind of process, that the law will view such conduct as serious and with significant penalties likely to be imposed.
The outcome and the penalty
Justice Mortimer found that Mr Melhem contravened section 285(1) on five occasions by failing to exercise his powers and discharge his duties with the degree of care and diligence that a reasonable person would exercise if they were in Mr Melhem’s position. The Court also found that he breached section 286(1) on three occasions for failing to exercise his powers and discharge his duties in good faith in what he believed to be in the interests of the organisation.
The total penalty against Mr Melhem was $20,950.
In a separate judgment, Justice Snaden awarded a civil penalty of $148,100 against the AWU for its contraventions of sections 230 and 172 of the RO Act.
Court reference
VID 583 of 2018