Sub35 Att01 Professor Anthony Forsyth

Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2019 [Provisions]
Submission 35 - Attachment 1
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/journals/journal/ajll/vol13/07−00224
Trade Union Regulation and the

Accountability of Union Office-Holders:
Examining the Corporate Model
Anthony Forsyth*
Australian trade unions have traditionally been subjected to high levels of
legal regulation. This has resulted in the development of a substantial body
of federal law imposing standards of accountability on unions, and regulating
the conduct of their officials. In recent years, the federal government has
suggested that unions should be subjected to further regulation. In particular,
the government has proposed that new accountability measures borrowed
from corporations law should be imposed on unions. This article examines
the government’s proposals, focussing on those that would fix union officials
with fiduciary and other duties similar to those applying to company
directors. The conclusion is reached that the many differences between
unions and companies — in terms of the reasons they exist, the purposes
they serve, the interests created in their members and the role and functions
of their managers — are such that the imposition of a corporate model of
regulation on trade unions is inherently flawed. For this and other reasons,
including the decline of the arbitration system and the statutory support it
provided to unions, it is argued no justification can be made out for the
government’s proposals.
Introduction
In recent years, Australian trade unions have been confronted with a series of
legislative changes, at both state and federal level, which have challenged
their traditional role and influence in the workplace. For example, laws have
been introduced with the aim of dismantling some of the pillars of ‘union
security’ (such as preference clauses in awards), and to provide for ‘voluntary
unionism’ or ‘freedom of association’.1 These changes have usually been
implemented as part of ‘reform packages’ that have fundamentally re-shaped
* Centre for Employment and Labour Relations Law, The University of Melbourne. This
article emanates from a research project I conducted between July and December 1999,
which was jointly sponsored by the Centre and my then employer, the Transport Workers’
Union of Australia (Vic/Tas branch). I am extremely grateful to the Branch Secretary, Bill
Noonan and the Branch Committee of Management of the TWU for allowing me to
undertake this research. I also wish to thank those who, in one way or another, assisted me
with the research project including Prof Richard Mitchell (who supervised the research),
Helen Bird (who provided invaluable assistance on the corporate law aspects of the
research), Prof Keith Ewing, Justice Peter Gray, Prof Ron McCallum, Linda Rubinstein and
Susan Zeitz. The comments of the Journal’s anonymous referee were also appreciated.
1 See, eg, R Naughton, ‘Sailing into Uncharted Seas: The Role of Unions under the Workplace
Relations Act 1996 (Cth)’ (1997) 10 AJLL 112; M Otlowski, ‘The Industrial Relations
Amendment (Enterprise Agreements and Workplace Freedom) Act 1992 (Tas)’ (1994) 7
AJLL 77 at 86-8; R J Owens, ‘Legislating for Change: The Industrial and Employee
Relations Act 1994 (SA)’ (1995) 8 AJLL 137 at 150-1; and A Coulthard, ‘Workplace
Relations Act 1997 (Qld) and Industrial Organisations Act 1997 (Qld) — Workplace
Bargaining and Freedom of Choice’ (1998) 11 AJLL 120 at 127.
1
2 (2000) 13 Australian Journal of Labour Law
Australia’s industrial laws and institutions, primarily by weakening (or

altogether abolishing) long-standing conciliation and arbitration systems and
ousting award regulation of terms and conditions of employment in favour of
individual work agreements, with unions being sidelined in these new
bargaining arrangements.2
A feature of this process that has received little attention to date is the extent
to which it has also involved increased legal regulation of the internal affairs
of unions, and the imposition on unions of standards of accountability
borrowed from laws regulating corporations. This has been the effect of
legislative changes introduced in a number of Australian states in the last few
years. These state laws, and recent proposals by the federal government to
adopt a similar approach, invite renewed consideration of the nature and
extent of trade union regulation in Australia. The notion that unions should be
regulated in the same way as companies appears to be based on the premise
that they are similar types of organisations. In this article I wish to question
that premise, and consider whether the ‘corporate model’ of regulation is
really suitable for unions. In this context, I will focus in particular on the legal
duties imposed on union office-holders. Before doing so, it is first necessary
to consider how unions have traditionally been regulated in Australia, and the
rationale for such regulation.
The Historical Context: Trade Union Regulation and

the Arbitration System
From the commencement of the federal conciliation and arbitration system in
1904, Australian unions have been subjected to a much higher degree of state
regulation of their affairs than their counterparts in comparable overseas
countries.3 The types of legal controls imposed on unions over the course of
the last century or so have included: regulation of the scope and content of
union rules; extensive requirements to keep and lodge accounts and records;
measures to ensure accountability of union leaders to their members (such as
provision for the striking down of union rules that are considered ‘oppressive,
unreasonable or unjust’, and allowing members to make application to a court
for observance of the rules); provisions regulating the conduct of union
elections (including supervisory powers for the courts through ‘election
inquiries’) and union amalgamations; and the capacity for unions to be
deregistered in certain circumstances.4
However, unions have traditionally accepted this extensive level of
regulation as the price to be paid for the substantial benefits that they have
obtained from participation in the formal industrial relations framework.
2 See M Vranken, ‘Demise of the Australasian Model of Labour Law in the 1990s’ (1994) 16
Comparative Labor Law Journal 1; and A Coulthard, ‘The Individualisation of Australian
Labour Law’ (1997) 13 International Journal of Comparative Labour Law and Industrial
Relations 95.
3 RC McCallum, ‘Federal Controls Upon Trade Unions: The Australian Enigma’ in Changing
Industrial Law, D Rawson and C Fisher (Eds), Croom Helm, Sydney, 1984, pp 174-5, 194.
4 For a detailed account of the development of these and other legal controls on Australian
unions between 1904 and 1983 see McCallum, above n 3, at pp 177-94. See also A Boulton,
‘Government Regulation of the Internal Affairs of Unions’ in Power, Conflict and Control in
Australian Trade Unions, K Cole (Ed), Penguin Books, Ringwood, 1982, pp 216-36.
Trade Union Regulation and the Accountability of Union Office-Holders 3
Australia’s federal arbitration system, from its inception, promoted and

encouraged unions5 and unionism in a number of ways. Once registered under
the federal statute, unions could force employers into either negotiation or the
making of an award in settlement of a log of claims, giving unions a de facto
right of recognition. Registered unions also obtained corporate legal
personality, exclusive representational rights over all workers within their area
of constitutional coverage, rights of ‘preference’ for their members in respect
of employment and other matters (effectively, a form of compulsory
unionism), and the legal right to enter employers’ premises and inspect records
to ensure compliance with awards and other industrial instruments.6
While ‘(T)he founders of compulsory arbitration supported the participation
of unions in bargaining and awards because they believed that the protection
and representation of workers’ interests could only be achieved on a collective
basis’,7 they also considered it necessary to subject unions to extensive legal
regulation.8 If unions were to enjoy rights and privileges under the system,
they would also have to accept the imposition of legal measures in the public
interest aimed at ensuring that they remained democratic and properly
managed, and did not abuse their power.9 However it has been suggested that,
despite the high level of state interference in their affairs, the considerable
legal and institutional support unions obtained from the arbitration system
contributed greatly to the growth and organisational security of the Australian
trade union movement for much of the twentieth century.10
Current Federal Law on Union Accountability and the

Duties of Union Office-Holders
An important dimension of the legal regulation of Australian unions since the
commencement of the arbitration system has been the development of a
5 In fact it was for many years a principal object of the federal industrial statute to ‘encourage
the organisation of representative bodies of employers and employees’: Conciliation and
Arbitration Act 1904 (Cth) s 2. Mills and Sorrell suggest that the encouragement of
employers’ organisations was a ‘lesser’ purpose of the federal legislation than the
encouragement of unions, while noting there had been early judicial acknowledgement (in
Federated Engine Drivers and Firemen’s Assn v BHP Co Ltd (1911) 5 CAR 9) that ‘the
arbitration system depends on such organisations’: CP Mills and GH Sorrell, Federal
Industrial Law, 5th ed, Butterworths, Sydney, 1974, p 15.
6 The benefits and privileges obtained by registered unions under the arbitration system are
explored in greater detail in A Frazer, ‘Trade Unions under Compulsory Arbitration and
Enterprise Bargaining: A Historical Perspective’ in Enterprise Bargaining, Trade Unions
and the Law, P Ronfeldt and R McCallum (Eds), The Federation Press, Sydney, pp 60-5.
7 Above n 6, p 80.
8 Above n 6, pp 54-6.
9 Boulton, above n 4, at 217; D Yerbury, ‘Legal Regulation of Unions in Australia: The Impact
of Compulsory Arbitration and Adversary Politics’ in Perspectives on Australian Industrial
Relations, WA Howard (Ed), Longman Cheshire, Melbourne, 1984, pp 82-103.
10 McCallum, above n 3, pp 180-1; Boulton, above n 4, at 233; D Peetz, Unions in a Contrary
World: The Future of the Australian Trade Union Movement, Cambridge University Press,
Melbourne, 1998, p 25. For a more qualified analysis of the contribution of the arbitration
system to trade union growth see WB Creighton, WJ Ford and RJ Mitchell, Labour Law:
Text and Materials, 2nd ed, Law Book Company, Sydney, 1993, pp 889-91. On another
aspect of the relationship between unions and the arbitration system see P Gahan, ‘Did
Arbitration Make for Dependent Unionism? Evidence from Historical Case Studies’ (1996)
38 Journal of Industrial Relations 648.
substantial body of law imposing standards of accountability on trade unions

and regulating the conduct of their officials, particularly in respect of financial
matters. In fact, contrary to the view that ‘the law has traditionally refrained
from developing duties for trade union officials’,11 in my view there exists a
comprehensive ‘code’ of overlapping legal standards, consisting of statutory
provisions, the common law, and trade union rules (both express and
implied),12 which I will now turn to examine.
The Workplace Relations Act 1996 (Cth) (‘WR Act’) imposes extensive
financial accounting and reporting obligations on unions (and employer
organisations).13 These include requirements to: maintain accounting
records;14 prepare annual accounts;15 make specified financial information
available to the union’s members upon request;16 appoint auditors;17 provide
audited accounts to the members, and lodge them with the Industrial
Registry;18 and notify the registry of loans, grants or donations exceeding
$1000.19 Breaches of many of these obligations may constitute offences under
the WR Act, resulting in the imposition of fines.20 Further, there are provisions
enabling the Industrial Registrar to investigate the management of unions’
financial affairs,21 for example, where a ‘deficiency, failure or shortcoming’ is
identified in an auditor’s report,22 where a specified number of members of a
union request such an investigation,23 or in a wide range of other
circumstances such as where the registrar believes there are ‘reasonable
grounds’ for doing so.24
This latter provision, which was inserted in the legislation in 1996, really
amounts to a general power of inquiry vested in the registrar ‘where there is
a suspicion concerning the union’s financial affairs’.25 If such an inquiry
reveals breaches by a union of its financial management obligations under the
WR Act or the union’s rules, the registrar can request that action be taken to
remedy the situation and (if that request is not complied with) can make
application to the Federal Court of Australia for orders to ensure that this
occurs.26 In practice, it seems that these new powers have been used only
sparingly by the registrar since s 280A of the WR Act became operative on 31
December 1996.
11 M Christie, ‘Legal Duties and Liabilities of Federal Union Officials’ (1986) 15 Melbourne
University Law Review 591 at 592.
12 Each of these is examined in detail (as at the mid-1980s) in Christie, above n 11, at 594-610,
apparently contradicting his assertion as to the absence of legal regulation in this area.
13 WR Act Pt IX, Divs 10 and 11; see also Workplace Relations Regulations (‘WR
Regulations’) Pt VII, Divs 7 and 8.
14 WR Act s 272.
15 WR Act s 273; WR Regulations reg 107.
16 WR Act s 274; WR Regulations reg 110.
17 WR Act ss 275-8.
18 WR Act ss 279-80.
19 WR Act s 269.
20 See WR Act ss 321-31.
21 As to how such investigations are to be conducted see WR Act s 280B.
22 WR Act s 280(2).
23 WR Act ss 280(5)-(6) and (10).
24 WR Act s 280A; WR Regulations reg 107A.
25 Naughton, above n 1, at 127.
26 WR Act ss 280B(3)-(7).
While these extensive statutory requirements generally apply to unions as

organisations, rather than directly imposing standards of accountability and
financial propriety on individual union office-holders,27 the latter outcome is
achieved through a combination of the common law, union rules, and further
legislative provisions. Christie, writing in 1986, was able to confidently assert
that judicial developments up to that point in time made it clear that ‘the
pillars of fiduciary law — the duty of good faith, the conflict of interest rules
and duty of confidence — apply to officials’28 of trade unions. He pointed to
numerous cases that confirmed the obligations resting on union officials as
‘donees of fiduciary power’,29 and under implied rules based on equitable
duties.30 Further, he suggested that the reach of the common law extended so
far as to impose a duty on union officials to ‘exercise reasonable care when
advising members’ on matters such as long service leave and workers’
compensation.31
More recent decisions have confirmed the position that emerged clearly
from the earlier cases, that union leaders occupy positions of trust vis-à-vis
union members, requiring very high standards of conduct especially in respect
of financial matters. For example, in Robertson v State Public Services
Federation32 French J of the Federal Court expressed the view that:
. . . to hold office in a registered industrial organisation is to hold a position of trust
which involves the maintenance and advancement of the interests of union members.
There are obviously strong fiduciary elements involved in the discharge of the duties
of such office. The legislation is intended to be protective of the interests of union
members and to ensure that high standards are observed in those who are elected to,
or appointed to, office within unions.33
This approach is bolstered by the restraints on financial impropriety
contained in the registered rules of many unions,34 the observance of which is
secured by judicial supervision under s 209 of the WR Act. This provision
allows a union member to apply to the Federal Court for orders requiring ‘the
27 There are some exceptions; see WR Act ss 326-7 and 329, under which fines may be
imposed on individuals for the commission of certain offences.
28 Christie, above n 11, at 598.
29 Above n 28, at 599-601; the main decision Christie refers to is that in Allen v Townsend
(1977) 31 FLR 431.
30 Above n 28, at 601-9, referring to (among other cases) Gordon v Carroll (1975) 27 FLR 129,
Jess v Scott (1984) 1 FCR 40, Scott v Jess (1984) 3 FCR 263 and Porter v Dugmore (1984)
3 FCR 396.
31 Above n 28, at 609-10; see Buckley v NUGMW [1967] 3 All ER 767. See also M Christie,
‘The Union Official and the Age of Superannuation’ (1988) 1 AJLL 208, where it was argued
that developments in the law on negligent misstatement raised the potential for liability on
the part of union officials involved in advising members on their superannuation
entitlements, and managing superannuation funds.
32 (1993) 49 IR 356.
33 (1993) 49 IR 356 at 363. This decision involved consideration of the legislative provisions
(now found in Pt IX Div 6 of the WR Act) disqualifying persons convicted of certain
offences, including those involving fraud or dishonesty, from holding office in registered
organisations for specified periods.
34 See, eg, rr 80-86 of the Rules of the Transport Workers’ Union of Australia, dealing with
(inter alia) banking and expenditure, handling of money, audits, inspection of financial
accounts, and loans, grants and donations. Union rules are required by the WR Act to make
provision for these types of matters: see s 195(1).
performance or observance of any of the rules of an organisation by any

person who is under an obligation to perform or observe those rules’.35 The
s 209 mechanism has commonly been invoked to ensure that the principles of
natural justice are observed in the application of rules to union members,36 and
to restrain the inappropriate use of union resources by incumbent officials
during election campaigns.37 It has also been used to ensure compliance with
union rules relating to the expenditure of funds in a range of other situations,
such as where payments have been made to union officials out of the funds,38
or property of the union has been disposed of,39 in breach of the rules.40
Towards a Corporate Model for Trade Union

Regulation
The WR Act introduced a number of important provisions affecting trade
unions41 which, taken together, amounted to a significant reversal of the
traditionally supportive treatment of unions under the federal industrial
system.42 The changes included: the abolition of union preference
arrangements, or any form of compulsory unionism;43 the introduction of a
legal right not to belong to a trade union (purportedly based on the notion of
‘freedom of association’);44 restrictions on the exercise by union officials of
35 WR Act s 209(9). There are also provisions that may be used to strike down trade union
rules that are considered ‘oppressive, unreasonable or unjust’: WR Act ss 196 and 208. It is
beyond the scope of this article to consider these statutory provisions and the case law that
has developed around them; see, eg, R Tracey, ‘The Legal Approach to the Democratic
Control of Trade Unions’ (1985) 15 Melbourne University Law Review 178 at 185-205;
Creighton et al, above n 10, pp 945-57, 963-73; and B Creighton and A Stewart, Labour
Law: An Introduction, 3rd ed, The Federation Press, 2000, pp 362-3.
36 See R Tracey, ‘The Conduct of Union Disciplinary Hearings’ (1982) 24 Journal of Industrial
Relations 204; Creighton et al, above n 10, pp 1070-3, 1079; and Creighton and Stewart,
above n 35, p 367. For a recent decision in this area see Dodd v Johnston (1999) 91 IR 352.
37 See Tracey, above n 35, at 206; and RC McCallum, ‘A Modern Renaissance: Industrial Law
and Relations Under Federal Wigs 1977-92’ (1992) 14 Sydney Law Review 402 at 413-5.
38 Gordon v Carroll (1975) 6 ALR 579; 27 FLR 396; see also some relevant decisions under
state law, ie. Hope v Australasian Society of Engineers, Moulders and Foundry Workers,
Industrial Union of Workers, WA branch (1985) 12 IR 271, Boner v Anderson (No 1) (1993)
50 IR 406 and West Australian Locomotive Engine Drivers’ Firemen’s and Cleaners’ Union
of Workers v Schmid (1995) 65 IR 15.
39 See Lawrence v Fry (1998) 86 IR 205, which also deals with the interaction between an
application under s 209 and an action at common law for negligence and breach of fiduciary
duty (invoking the Federal Court’s accrued jurisdiction).
40 As to fairness in the process of dealing with allegations of misappropriation of funds by
union officials see, eg, Mellor v Federated Liquor and Allied Industries Employees Union of
Australia, Qld branch (1992) 42 IR 55, Boner v Anderson (No 1) (1993) 50 IR 406, and WA
Locomotive Engine Drivers’ Firemen’s and Cleaners’ Union of Workers v Schmid (1995) 65
IR 15.
41 In point of fact, these provisions were introduced by the Workplace Relations and Other
Legislation Amendment Act 1996 (Cth) (‘WROLA Act’), which substantially amended the
Industrial Relations Act 1988 (Cth) and re-titled it the WR Act.
42 For detail see Naughton, above n 1.
43 The power of the federal industrial tribunal to insert preference clauses in awards was
removed. A further provision was inserted in 1997 to render inoperative all preference
arrangements in both awards and certified agreements: see now WR Act s 298Z.
44 WR Act Pt XA; see especially s 298K and s 298L(1)(b).
their ‘right of entry’ into workplaces;45 and provisions intended to facilitate

the formation and registration of small, enterprise-based unions.46 These
measures were adopted in pursuit of the newly-elected Coalition
Government’s twin desire of exposing unions to competitive forces (or ending
union ‘monopolies’), and promoting the rights of individual union members
over the interests of ‘trade union bureaucracies’.47 The objects of the federal
legislation were also amended to reflect the new-found emphasis on ensuring
that unions are ‘representative of and accountable to their members, and are
able to operate effectively’.48
While the legislative changes introduced in 1996 did not did not deal with
matters of internal union regulation or significantly alter the level of
accountability of unions under federal law,49 these issues seem to have been
a preoccupation of the federal government over the last three years, spawning
a series of reports and now some draft legislation. Early in 1997, the
government announced that it would review the financial accounting and
reporting requirements imposed on unions.50 The national law firm Blake
Dawson Waldron was commissioned to conduct such a review, commencing
on 10 March 1998 and delivering its report and recommendations to the
government in June of that year (‘BDW Report’).51 Consistent with the terms
of reference for the review, the BDW Report contained recommendations as
to how the government should implement its objectives of (inter alia) making
the financial management and reporting obligations of registered organisations
and their officials consistent with the statutory obligations applicable to
corporations and other comparable organisations.
During the 1998 federal election campaign, the Coalition Government
announced that it would ‘increase the accountability of unions to their
members in financial and other matters, and foster the creation of greater
democratic control of union decision making’.52 Following the government’s
re-election in October 1998, the Minister for Employment, Workplace
Relations and Small Business indicated that these proposals would be acted
upon through implementation of recommendations in the BDW Report
‘intended to ensure that the obligations of federally registered organisations
45 WR Act Pt IX Div 11A.

46 WR Act s 188(1)(c) and s 189(4).
47 See Naughton, above n 1, at 112-13, 117-18.
48 WR Act s 3(g); see Naughton, above n 1, at 118. Note also that one of the objects of the
former Pt IX, ie, ‘to encourage and help organisations to develop . . . ’ (see Industrial
Relations Act 1988 (Cth) s 187A(d)), was removed by the WROLA Act.
49 An exception was the insertion of s 280A in the WR Act; see nn 24-6 above and text
accompanying.
50 The Hon Peter Reith MP, Workplace Relations in 1997, Press Release, 6 January 1997.
51 Department of Workplace Relations and Small Business/Blake Dawson Waldron, Review of
Current Arrangements for Governance of Industrial Organisations — Report and
Recommendations, June 1998 (‘BDW Report’); for a brief discussion of the BDW Report
see M Mourell, ‘Industrial Organisations and Corporate Accountability’ (1999) 12 AJLL
136.
52 Liberal/National Coalition, Workplace Relations Policy, More Jobs, Better Pay, September
1998, p 28.
are relevant and satisfy modern accountability and governance standards’.53

The government has since sought to proceed with the implementation of these
measures by issuing a Ministerial Discussion Paper,54 followed by an
exposure draft bill that was released for public discussion and comment in
December 1999.55
The Ministerial Discussion Paper and the Draft RO Bill contain a number
of proposals56 that would impose ‘corporate’ standards of accountability on
unions.57 Of greatest interest, for purposes of this article, are the proposals to
fix union officials with fiduciary and other duties58 similar to those applying
to directors and other company officers under the Corporations Law.59 Thus,
union ‘officers’60 would be required by statute to exercise their powers and
discharge their duties with care and diligence,61 in good faith and for a proper
purpose.62 They would also be prohibited from improperly using their
position, or information acquired by virtue of their position, to gain advantage
for themselves or others or to cause detriment to their union.63 Breaches of
these duties would generally attract civil penalties,64 with the Federal Court
53 The Hon Peter Reith MP, The Continuing Reform of Workplace Relations: Implementation
of More Jobs, Better Pay, Implementation Discussion Paper, May 1999, p 28
(‘Implementation Discussion Paper’).
54 Minister for Employment, Workplace Relations and Small Business, Accountability and
Democratic Control of Registered Industrial Organisations, Ministerial Discussion Paper,
October 1999 (‘Ministerial Discussion Paper’).
55 Registered Organisations Bill 2000, Exposure Draft for Comment (‘Draft RO Bill’).
56 There is a range of other proposals in the Ministerial Discussion Paper and the Draft RO Bill
that will be the subject of only passing consideration in this article, such as those relating to
the registration requirements for registered organisations, deregistration, amalgamations and
withdrawal from amalgamations, and the conduct of elections within organisations; for
discussion, see A Forsyth, ‘Ministerial Discussion Paper — Accountability and Democratic
Control of Registered Industrial Organisations’ (1999) 12 AJLL 193.
57 These proposals would apply to all registered industrial organisations, ie, both employer
bodies and trade unions. However, consistent with the view that the regulation of employer
organisations is really only ‘incidental’ to ‘the real focus of attention’ on unions and union
leaders (see Yerbury, above n 9, p 97), it is my contention that the proposals are directed
primarily at unions. Certainly, my concern in this article is only with the way in which the
proposals might impact upon unions, rather than employer organisations.
58 The statutory duty of care imposed on company directors is thought not to be a ‘fiduciary’
duty; see HAJ Ford, RP Austin and IM Ramsay, Ford’s Principles of Corporations Law,
9th ed, Butterworths, Sydney, 1999, pp 281-2.
59 Ministerial Discussion Paper, above n 54, pp 26-7; Draft RO Bill Ch 5 Pt 4.
60 A term defined as ‘a person holding an office’ in the union: Draft RO Bill cl 8. In the
industrial law context, it seems that this term does not extend to include employees of the
union such as industrial officers: see Creighton and Stewart, above n 35, p 368. Under
company law, however, the term has been construed much more broadly, extending to those
performing a wide range of management activities in companies where there is involvement
in decision-making processes: see CCA (Vic) v Bracht [1989] VR 821, and for a competing
view see Holpitt Pty Ltd v Swaab (1992) 33 FCR 474; see also Ford et al, above 58,
pp 286-7. Note further that any person ‘involved’ in a breach of the duties contained in Draft
RO Bill cll 285-7 may be held liable for such a breach.
61 Draft RO Bill cl 284; see Corporations Law s 180.
63 Draft RO Bill cll 286-7; see Corporations Law ss 182-3. These duties are expressed to apply
not only to officers of the union, but also to employees.
64 Draft RO Bill cll 295-6. As to who would be able to bring an action to enforce the duties,
see below nn 122-7 and text accompanying.
also having the power to award compensation to a union where it has suffered
damage arising from a breach.65 However, where a breach is committed
intentionally or recklessly, and with dishonesty, this may constitute a criminal
offence and criminal penalties may be imposed.66 In addition to the imposition
of these new statutory duties derived from corporate law, the minister would
be able to issue ‘guidelines’ containing ‘model rules about the conduct of
officers and employees’ of unions.67 Changes are also proposed to the
provisions dealing with disqualification from holding office in a union.68
The financial accounting and reporting obligations imposed on unions69
would also be aligned, in many respects, with the requirements applicable to
companies under the Corporations Law.70 For example, union members would
be provided with a right to obtain access to the union’s financial information
where there are reasonable grounds for suspecting financial
maladministration.71 Union management committees would have to prepare
annual ‘operating reports’ detailing matters such as the union’s ‘principal
activities’ in the previous year and any significant changes in its financial
affairs.72 Further, the investigative powers of the Industrial Registrar in respect
of the management of unions’ financial affairs would be enhanced,73 and the
sanctions for non-compliance with the accounting and reporting obligations
significantly strengthened.74
These proposals to impose a further layer of statutory accountability on
trade unions based on the corporate model, particularly those that would
impose ‘directors’ duties’ on trade union officials, are not novel. As well as
having been considered at the federal level on a number of previous
occasions,75 similar laws have been introduced in several Australian states in
recent years. New South Wales was the first state to do so in 1991, introducing
statutory duties on union officers to act honestly and with care and diligence,
to disclose relevant interests, and not to make improper use of their position
or information acquired by virtue of it.76 Western Australia imposed similar
statutory duties on union officials in 1995,77 although restricting the
application of these to those officials ‘who participate directly in the financial
65 Draft RO Bill cl 297.

68 See Draft RO Bill Ch 4 Pt 4, especially cl 217.
69 Draft RO Bill Ch 5 Pts 2 and 3.
70 On the financial reporting and audit obligations of companies generally, see Corporations
Law Ch 2M.
71 Draft RO Bill Ch 5 Pt 3 Div 8; see Corporations Law s 247A.
72 Draft RO Bill cl 248; see Corporations Law ss 298-300.
73 Draft RO Bill Ch 5 Pt 3 Div 6.
74 The sanctions would include referral of the matter to the Director of Public Prosecutions, or
application by the Industrial Registrar for cancellation of a union’s registration under the
WR Act: see Draft RO Bill cll 118, 125 and 269.
75 See, eg, the recommendation in the Final Report of the Royal Commission on the Activities
of the Federated Ship Painters and Dockers Union, Vol III, AGPS, Canberra, 1984,
pp 153-9, that Australia should enact similar legislation to that operating in the United States
imposing statutory fiduciary obligations on labor union officials.
76 Industrial Relations Act 1991 (NSW) ss 483-6, 489; see now Industrial Relations Act 1996
(NSW) ss 267-9, a watered-down version of the earlier provisions.
77 Industrial Relations Legislation Amendment and Repeal Act 1995 (WA).
management’ of a union.78 Queensland followed suit in 1997.79

The retention of these provisions in essentially the same form by the new
Labor Government in Queensland in 1999,80 repeating the earlier experience
in New South Wales, could suggest that there is widespread acceptance of the
corporate model as an appropriate vehicle for the regulation of trade unions
and their officials. However, the fact that some state Labor governments have
retained the ‘directors’ duties’ provisions enacted by their conservative
predecessors may not be based on any real conviction that corporate standards
of accountability are appropriate in the trade union context. It may instead be
based on purely political considerations, such as that the removal of the new
provisions would be seen simply as an attempt to reduce the accountability of
unions to their members, or that (in the case of New South Wales) the repeal
of the previous government’s measures would not pass the Upper House of
Parliament. I now wish to examine the suitability of the corporate model for
the regulation of trade unions. I will then consider whether legislative
intervention in this area at the federal level is necessary or desirable at this
point in time.
An Evaluation of the Corporate Model

While there have been many advocates of the application of corporate
governance principles to trade union regulation in recent years, few have
articulated the rationale for doing so. The BDW Report, for instance, simply
stated that:
Some duties are so clear that they should be addressed in the public arena as it is in
the public interest that certain standards of conduct be required of all office holders
no matter in which entity office is held. This has been clearly recognised in the
Corporations Law and is no less relevant in the (WR Act).81
The federal government has expressed similar sentiments in its many
pronouncements on this subject over the last few years,82 as did those who
were instrumental in the introduction of statutory duties for union officials at
the State level.83
To the extent that arguments have been advanced supporting the extension
of the corporate model to trade unions, they have usually been based on the
suggestion that unions and corporations are similar types of organisations, and
therefore they should be regulated in the same way. According to this view, it
is ‘inaccurate to regard a modern trade union as analogous to a voluntary,
78 Industrial Relations Act 1979 (WA) s 74.

79 Industrial Organisations Act 1997 (Qld) ss 252-3.
80 See now Industrial Relations Act 1999 (Qld) ss 526-9; see also the Report of the Industrial
Relations Taskforce — Review of Industrial Relations in Queensland, December 1998,
pp 85-6.
81 BDW Report, above n 51, p 45.
82 The Ministerial Discussion Paper, above n 54, is replete with references to provisions of the
Corporations Law, without a single explanation as to why these should form the basis for
regulation of trade unions.
83 See, eg, J Fahey, Parliamentary Debates, NSW Legislative Assembly, 28 August 1991,
p 722; S Santoro, Parliamentary Debates, Queensland, 26 November 1996, p 4297.
non-profit association’84 which the law has traditionally subjected to only

minimal legal regulation. Rather, ‘a union is more similar to a company than
to a social club’ and ‘is essentially an economic entity. The fact that a union
may be a separate legal entity, so that the union itself does not derive profits,
does not detract from this proposition’.85 This view of the union as an
‘economic entity’ sees union members as similar to shareholders, with an
economic interest in the union (ie, the achievement of better wages and
conditions) comparable to the proprietary interest that shareholders have in
companies. Further, modern-day trade union officials ‘often administer large
enterprises with large assets and . . . their performance very much determines
the financial well-being of members’.86 It is suggested that this, among other
factors, necessitates the imposition of similar standards of accountability on
union officials as apply to company directors.87
However, in my view, trade unions and companies are very different types
of organisations in terms of the reasons for which they are formed, the
purposes that they serve, and the interests that their members and shareholders
respectively hold. As Elias and Ewing suggest, a consideration of these
differences is necessary in any discussion of the regulatory framework that
should apply to such bodies:
A proper assessment of the role which the law ought to play in the regulation of
groups in society must depend largely on the public significance of the functions of
these groups, and the methods they employ to pursue them. . . . Both Parliament and
the courts should consider the particular needs and objectives of an organization
before deciding what, if any, controls should be exercised over it.88
Companies may serve a number of different purposes, but primarily they
are vehicles for the carrying on of commercial activity in society.89 While
there are a number of different types of companies, the dominant form is the
company limited by shares. The main rationale for forming this type of
company is that it provides the commercial entity with limited liability, ie, the
capacity ‘to conduct an enterprise in such a way that the persons interested in
the enterprise have only limited exposure to the liabilities of the enterprise’.90
Most companies are profit-making enterprises and certainly in the case of
publicly listed corporations ‘the corporation and its shareholders share a
fundamental goal: the generation of revenue by the corporation for the
corporation and on behalf of its shareholders’.91 The owning of shares in a
company can therefore be said to create rights in its shareholders that are
‘proprietary’ in nature.92 The legal regulation of companies has traditionally
84 Christie, above n 11, at 592-3.

87 Christie, above n 11, at 594, 615-6.
88 P Elias and K Ewing, Trade Union Democracy: Members’ Rights and the Law, Mansell
Publishing, London, 1987, p 260.
89 See Ford et al, above n 58, pp 4-7.
90 Ford et al, above n 58, p 4.
91 H Bird, ‘A Critique of the Proprietary Nature of Share Rights in Australian Publicly Listed
Corporations’ (1998) 22 Melbourne University Law Review 131 at 132.
92 Gambotto v WCP Ltd (1995) 182 CLR 432, 446 (per Mason CJ, Brennan, Deane and
Dawson JJ), and 456 (per McHugh J); for a competing view see Bird, above n 91.
been aimed at protecting the interests of shareholders, whom the law views as
the ‘owners’ of the corporation.93 This end has been achieved by providing
shareholders with access to information, and ensuring that management power
within companies is exercised legitimately (eg, by setting standards of
behaviour for companies and their officers).94
Unions, on the other hand, are bodies formed predominantly for the purpose
of improving the working conditions of their members, and the social standing
of workers generally.95 In performing this role, which includes the provision
of industrial representation and a range of other services to their members,
unions participate in the industrial, economic and political processes. Unlike
companies, unions are not formed for the purpose of carrying on commercial
activity, nor for the accumulation of profits for distribution among their
members. Accordingly, the interest that union members hold in their union is
vastly different from the property rights vested in shareholders.96 Christie
attempted to argue that a union member’s interest in the union was a
proprietary one, because union membership was effectively compulsory in
many workplaces — it was necessary to be a union member to obtain ‘the
right to work’, and therefore to earn income.97 However, given that the law
now explicitly recognises that union membership is voluntary and protects the
rights of those who do not wish to join a union,98 this argument is no longer
sustainable (if indeed it ever was). The union member’s interest, rather than
being ‘financial’ or ‘proprietary’, might be described as a ‘democratic’ interest
in ensuring that the union is properly and fairly administered. Certainly, it is
this type of interest that the legal regulation of the internal affairs of Australian
unions has traditionally attempted to advance. But union membership
connotes much more than simply the right to participate in the union’s affairs
and to have the union run fairly. Workers join unions primarily because of the
industrial protection they provide. This creates very different interests from
the economic interests of shareholders in corporations.
At the same time, there are some similarities between unions and
companies. First, in terms of the size and activities of unions, Christie’s
observation that unions (by the mid-1980s) had become ‘large enterprises with
large assets’99 is even more accurate today. Following the intensive
amalgamation process of the early-to-mid 1990s, most Australian trade unions
93 See J Hill, ‘The Shareholder as Cerberus: Redefining the Shareholder’s Role in Modern
Australian Corporate Law’ in Proceedings of the 5th National Corporate Law Teachers
Conference, Business Law Education Centre, Vol One, 1995, pp 7-25 at pp 8-9.
94 Ford et al, above n 58, pp 8-9, 54.
95 See Creighton et al, above n 10, p 887; and DW Rawson, ‘The Law and the Objects of
Federal Unions’ (1981) 23 Journal of Industrial Relations 295 at 299.
96 The Australian Council of Trade Unions (‘ACTU’) has submitted that ‘It needs to be
understood that shareholders in a corporation have property rights in the corporation which
can and are (sic) traded in a manner which is not the case for members of a trade union. For
this reason, the needs of a union member for information are completely different from that
of a shareholder, who may be making daily decisions in relation to trading which are highly
dependent on that information’: ACTU, Submission to the Review of Accounting, Auditing
and Reporting Obligations of Industrial Organisations, April 1998, p 3.
97 Christie, above n 11, at 592-3, 612; for a similar view see A Riches, ‘Union Accounts — A
Three-Ringed Circus’ (1984) 58 Australian Law Journal 96 at 105.
98 See above n 44 and text accompanying.
are now large, industry-based conglomerates.100 In response to the decline in

levels of union membership in recent years,101 many of these ‘super unions’
have begun to provide non-traditional services to their members102 — such as
health insurance, financial advice, discount home loans and other consumer
products — that border on ‘commercial’ activity. While not seeking to ‘turn a
profit’ in the sense that most companies do, modern unions must place
considerable emphasis on their financial viability so that they can continue to
provide their members with these new services, as well as performing their
more traditional industrial role.
Secondly, and of greater relevance here, unions registered under federal
industrial legislation have long been fixed with many of the features of
corporate legal personality. Under the WR Act, a union is considered to be a
‘body corporate’, having perpetual succession, the power at law to own and
deal with property, and the capacity to sue and be sued.103 In Williams v
Hursey,104 the High Court of Australia decided that the effect of the
predecessor to this provision was to endow federal trade unions, upon
registration, with:
. . . a corporate character — an independent existence as a legal person. It is given
a personality, which is distinct from that of all or any of its members, and which
continues to subsist unchanged notwithstanding the changes which are bound to
occur from time-to-time in its membership . . .105
However, this affixation with some of the characteristics of corporate legal
personality does not bestow upon trade unions one of the main benefits of
incorporation — limited liability.106 This is a benefit, which is conferred only
by incorporation under the Corporations Law.107 Further, it does not
automatically follow that the corporate model of regulation should be applied
100 See, eg, B Dabscheck, The Struggle for Australian Industrial Relations, Oxford University
Press, South Melbourne, 1995, pp 123-31; and M Wooden, ‘Union Amalgamations and the
Decline in Union Density’ (1999) 41 Journal of Industrial Relations 35.
101 As to which see further below n 165 and accompanying text.
102 See Peetz, above n 10, pp 188-9.
103 WR Act s 192. A similar provision, although not expressly conferring corporate status on
registered unions, was contained in the original Conciliation and Arbitration Act 1904 (Cth)
(s 58). The situation under Australian law stands in contrast to that in England, where unions
came to be regarded as entities separate and distinct from their members so that they could
be fixed with liability in tort for the wrongful acts of their agents (particularly in relation to
industrial action): see, eg, Taff Vale Railway Co v Amalgamated Society of Railway Servants
[1901] AC 426. English trade unions had been accorded recognition (and even some minor
advantages) under the Trade Union Act 1871 (UK), but not corporate legal status: see Lord
Wedderburn, The Worker and the Law, 3rd ed, Penguin Books, Harmondsworth, 1986,
p 524. The Industrial Relations Act 1971 (UK) gave unions full corporate status under a
registration system: see Wedderburn, pp 528-9. Now, s 10 of the Trade Union and Labour
Relations (Consolidation) Act 1992 (UK) confers ‘quasi-corporate’ status on unions, by
providing that a trade union is not a body corporate, but is able to make contracts, sue and
be sued, and have criminal proceedings brought against it.
104 (1959) 103 CLR 30.
105 (1959) 103 CLR 30, 52. See also Jumbunna Coal Mine, No Liability v Victorian Coal
Miners Assn (1908) 6 CLR 309.
106 It is clear that s 192 of the WR Act does not confer limited liability on unions: see CCH,
Australian Labour Law Reporter, para 7-325.
107 Trade unions are specifically prevented from registering under the Corporations Law:
Corporations Law s 116.
to unions, simply because they have corporate personality.

It is important to understand that the regulation of companies has not only
been directed at protecting the interests of shareholders, but has also been
considered justifiable on broader public interest grounds, given that:
. . . companies, particularly listed public companies, are prominent and powerful
actors in our public life. They are major employers and taxpayers; their actions,
collectively and individually, have considerable impact on our social and economic
structures and the environment.108
In this respect comparisons are often made with trade unions, which (it has
been suggested) ‘have been granted by society the protection and the
privileges which have enabled them to grow into institutions of tremendous
power’.109 According to this view, the activities of unions should be regulated
to ensure that their power is not abused, not only in the interests of union
members but also because of the harmful economic and other effects of
excessive union power on the public at large.110 Of course, to the extent that
unions wield economic power through the taking of industrial action, this has
been for many years, and remains, the subject of extensive legal
restrictions.111 Whatever force there may be in the view that unions are like
companies because they both occupy a powerful and influential position in
society, this does not (of itself) mean that they should be subjected to the same
kind of regulation.
Having explored the many differences and some similarities between
unions and companies, it is now important for the purposes of this article to
consider the role and functions of company directors as against those of trade
union officials. This is necessary in order to consider some of the issues
associated with the application to union officials of the duties that have
traditionally applied to directors. Fundamentally, directors are responsible for
ensuring that companies are properly managed.112 This may include
formulating corporate strategy and business plans, approving budgets,
monitoring performance, reporting to shareholders, and making decisions
about such matters as capital expenditure, business acquisitions, restructuring
and refinancing.113 In carrying out these functions, directors are generally
accountable to the members (shareholders) of the company in general
meeting,114 although the general meeting has no power to intervene in the
day-to-day exercise of managerial power.115
Union officials, especially union secretaries and members of union
committees of management, also have overall responsibility for the effective
108 S Bottomley, ‘From Contractualism to Constitutionalism: A Framework for Corporate

Governance’ (1997) 19 Sydney Law Review 277 at 291.
109 A Turner (Ed), Union Power, Heinemann, Melbourne, 1975, p 55.
110 See, eg, Trade Unions: Public Goods or Public ‘Bads’?, The Institute of Economic Affairs,
London, 1978. For a defence of trade unions against allegations that they possess too much
power, or that they exercise their power irresponsibly, see R Taylor, The Fifth Estate:
Britain’s Unions in the Seventies, Routledge and Kegan Paul, London, 1978.
111 See Creighton and Stewart, above n 35, Ch 13.
115 Bottomley, above n 108, at 280.
management of their union, including financial administration. However,

beyond this over-arching role, they perform very different functions from
company directors. Returning to the raison d’être of unions, the primary duties
of their officials are arguably those relating to the provision of industrial
representation and services to members. In this capacity they carry out a
diverse range of tasks, such as conducting enterprise bargaining negotiations
with employers, making important decisions in the course of industrial
disputes, and providing advice and assistance to members about workplace
issues like unfair dismissal, underpayment of wages, and occupational health
and safety.
Bearing these differences in mind, a number of difficulties may arise from
the application of the standards imposed on company directors to their
‘counterparts’ in trade unions. The first relates to precisely who may be subject
to the duties in the trade union context. I have already noted that the company
law duties apply not only to directors, but potentially to anyone involved in
some way in the management of the company.116 If the duties proposed in the
Draft RO Bill were to be similarly construed, they might conceivably apply to
a wide range of non-elected union officials who perform functions that
somehow relate to ‘management’ of the union’s affairs, such as industrial
officers, in-house legal advisers, and health and safety officers.117
Secondly, there is the question of which functions of union officials the
duties might apply to. On their face, the proposed statutory duties on union
office-holders to act with care and diligence and in good faith118 would appear
to apply to the exercise by officials of all of their powers, and the discharge
of all of their duties, rather than just those relating to financial management of
the union.119 As I have pointed out, the powers and functions of union officials
extend far beyond control over the union’s finances. However, the potentially
broad application of the proposed duties for union officials sits uneasily with
one of the main purposes of directors’ duties in company law. I concede that
these duties restrain the activities of directors in relation to a wide range of
matters, and not simply their financial management role. But the purposes of
directors’ duties largely reflect the position of directors as ‘fiduciaries’, and the
need to protect shareholders in situations where their interests and those of
directors diverge.120 The proposed duties for union officials seem capable of
much broader application than those applying to directors.
Thirdly, practical problems could arise if the proposed statutory duties for
union officials were to apply, say, to decisions that officials might make in the
course of an industrial dispute, or during protracted enterprise bargaining
116 See above n 60 and text accompanying.

117 The ACTU has expressed concern about the potential impact of the duties on the many
unionists who hold office in part-time or honorary capacities: see ACTU, Comments on the
Exposure Draft of the Registered Organisations Bill 2000, February 2000, p 12.
118 Draft RO Bill cll 284-5.
119 This seems to be the deliberate intent of the relevant provisions, as the Ministerial
Discussion Paper, above n 54, p 26, had stated that ‘these duties could apply to the range of
functions that office holders perform or alternatively, a limited range of fiduciary duties
could apply to the powers and functions relating to the financial management of the
organisation’.
120 Ford et al, above n 58, pp 280-2.
negotiations.121 For example, it would be difficult to determine whether an

officer has discharged his or her duties in ‘the best interests of the
organisation’,122 given the myriad of competing interests within unions when
dealing with such matters. More importantly, the duties may have a stultifying
impact on decision-making by union officials, whose focus will inevitably be
upon potential legal liability at the expense of service provision. Given their
potentially broad application, the proposed duties for union officials fail to
strike a balance between ‘accountability’ on the one hand and, on the other, the
decision-making discretion officials require (or what in the company law
context would be called ‘risk-taking’).123
It is also important to consider who would be able to bring an action for
breach of the proposed statutory duties under the Draft RO Bill. It seems that
the union concerned (as well as the Industrial Registrar and the Employment
Advocate) would be able to seek Federal Court orders consequent upon a
union official’s breach of duty.124 That the union should be able to bring such
an action, rather than individual members of the union, is consistent with the
position in company law.125 There, according to the rule in Foss v
Harbottle,126 duties are owed to the corporate entity rather than to individual
shareholders, so that only the corporate entity can bring an action for
enforcement of the duties. The exceptions to this rule seem intended, at least
in part, to protect the interests of minority shareholders.127 No such exceptions
are proposed under the Draft RO Bill, although the Ministerial Discussion
Paper stated clearly that any proposed legislation would ‘ensure the right of
members to seek redress from officials who fail to meet their statutory
obligations through the introduction of statutory fiduciary duties’.128 It is
surprising that the government has not followed through with the provision of
such a right to individual union members,129 given its desire to enhance the
rights of individual unionists.
Interestingly, the proposed application to union officials of the statutory
121 According to the ACTU ‘ . . . the duties should apply only to decisions concerning the
financial management of the organisation, including expenditure, rather than to the full range
of industrial and associated decision-making. (H)owever, . . . many decisions which are not,
on their face, about financial issues, will have financial implications and so would be subject
to the fiduciary duties.’: ACTU, Response to the Ministerial Discussion Paper on
Accountability and Democratic Control of Registered Industrial Organisations, November
1999, p 14.
122 Draft RO Bill, cl 285.
123 See Ford et al, above n 58, p 282.
125 It is also consistent with the position in relation to the common law duties currently owed
by union officials, which are generally only enforceable at the instance of the union ‘so that
aggrieved individual members have no right of recourse unless they gain control of the
organisation’: Creighton and Stewart, above n 35, p 368. See also Christie, above n 11,
at 610-11.
126 (1843) 2 Hare 461; 67 ER 189; for a detailed explanation (including discussion of the
exceptions to the rule) see Ford et al, above n 58, pp 514-7.
127 See E Boros, Minority Shareholders’ Remedies, Clarendon University Press, New York,
1995.
128 Ministerial Discussion Paper, above n 54, p 24.
129 Christie asserts that this would be unnecessary, because ‘unlike a minority shareholder in a
company, a trade union member’s interest in the union will necessarily be tiny’; above n 11,
at 611.
fiduciary duties of directors under company law comes at a time when the
purpose and content of those duties have been the subject of considerable
debate130 and, indeed, recent legislative amendment. Changes were made to
the directors’ duties provisions of the Corporations Law in late 1999,131 with
revised formulations of the duty of care and diligence and the duty of good
faith being introduced.132 A statutory business judgment rule was also
introduced, under which a director is taken to meet the statutory duty of care
and diligence in respect of a ‘business judgment’ if (inter alia) the director
rationally believes that the judgment is in the best interests of the company,
and does not have a material personal interest in the subject matter of the
judgment.133 Also known as the ‘safe harbour’ rule, the new business
judgment rule could be seen as reducing directors’ exposure to liability in
certain circumstances.
The debate over the content of directors’ duties is one aspect of the
‘corporate governance’ debate that has been taking place for some time. The
other aspect of that debate concerns who the duties should be owed to, or what
interests should be taken into account in the management of companies —
those simply of the shareholders, or those also of other ‘stakeholders’ such as
employees,134 and the community generally?135 That the regulation of
corporations has itself been so substantially revisited in recent times136 should
perhaps sound a note of caution to those who would simply adapt the
corporate model to the regulation of trade unions, without proper
consideration of the potential implications.
Rejecting the Corporate Model for Trade Union

Regulation
My examination of the nature and functions of trade unions and companies
respectively has revealed, I believe, a number of important differences
between the two types of organisations. Taken together, these differences are
the major reason for rejecting the notion that unions should be subjected to the
same type of regulation of their internal management as applies to
corporations. It would make little sense to do so, given the fundamental
130 See Ford et al, above n 58, pp 270-5, particularly the discussion of the reports of various
committees formed to examine corporate governance issues in Australia and England in
recent years.
131 Corporate Law Economic Reform Program Act 1999 (Cth); for detail see HAJ Ford,
RP Austin and IM Ramsay, An Introduction to the CLERP Act 1999 — Australia’s New
Company Law, Butterworths, Sydney, 2000.
132 See Ford et al, above n 131, pp 14-8. The statutory duties proposed in the Draft RO Bill are
modelled on these revised formulations of the directors’ duties in the Corporations Law.
133 Ford et al, above n 131, pp 15-6. The duty of care and diligence provision in the Draft RO
Bill contains an equivalent to the business judgment rule: see cl 284(2).
134 See J Hill, ‘The Accountability of Management under Enterprise Bargaining Law’ in
Ronfeldt and McCallum, above n 6, pp 208-31 at pp 214-22.
135 See, eg, S Deakin and A Hughes (Eds), Enterprise and Community: New Directions in
Corporate Governance, Blackwell, Oxford, 1997.
136 This phenomenon should be seen in the context of a broader debate about the proper role and
function of ‘regulation’ generally; see, for example, C Graham, ‘Is There a Crisis in
Regulatory Accountability?’ in A Reader on Regulation, R Baldwin, C Scott and C Hood
(Eds), Oxford University Press, Oxford, 1998, pp 482-522.
incompatibility of the two types of organisations. However, there are a number

of other important reasons for rejecting the application of the corporate model
to the regulation of unions, and therefore for opposing the measures in the
Draft RO Bill that have been the subject of this article. These reasons, which
I will now explore, go to such matters as the role of trade union regulation in
improving democracy within unions, and the place of union regulation in the
broader industrial legislative framework.
First, it is clear that Australian law already makes extensive provision for
the accountability of trade unions and requires high standards of conduct of
union officials, especially in relation to the performance of their financial
management responsibilities. The combination of statutory provisions, the
common law and union rules examined earlier in this article has produced
what I have called a comprehensive code of overlapping legal standards. This
imposes a more than sufficient level of accountability on trade unions and their
officers, and provides several different avenues for legal redress in the event
of financial impropriety or mismanagement. Rather than simply ‘clarifying’
the current legal position,137 the proposed statutory duties for union officials
in the Draft RO Bill would impose higher standards of conduct on union
officials than is now the case.138 None of this is to suggest that unions and their
officials should not be held legally accountable. However, as I have stated
previously:
It is a matter . . . of determining an appropriate level of accountability having regard
to the nature and role of . . . unions . . . in the industrial relations system, rather than
simply adopting a model of regulation applicable to organisations that exist for very
different reasons and perform different functions.139
Secondly, to the extent that the proposals in the Draft RO Bill are motivated
by a perceived need to ensure that unions are ‘genuinely accountable to their
members’ and to make them more ‘democratic’,140 they are in my submission
ill-founded. Apart from the level and sufficiency of unions’ legal
accountability, which I have already addressed, it is unclear what other
possible ‘deficiencies’ the Government’s proposals are intended to remedy.
Unlike the situation in the United States in the 1950s, when a statutory
fiduciary duty on labor union officials was introduced, the government has not
pointed to any examples of financial mismanagement, abuse of power, or
corruption among present-day union officialdom in Australia.141 As for the
argument that the proposed changes are necessary to improve democracy
137 See BDW Report, above n 51, p 46.

138 Because, for example, the statutory duties may apply to a wider range of union officials, and
to all aspects of their ‘management’ functions rather than just those relating to financial
management: see above nn 60 and 117-9 and text accompanying.
139 Forsyth, above n 56, at 197.
140 Implementation Discussion Paper, above n 53, p 28; Ministerial Discussion Paper, above
n 53.
141 Large-scale corruption, coercion and violence were the reasons for the introduction of s 501
of the Labor-Management Reporting and Disclosure Act (1959) 29 USC (the
Landrum-Griffin Act); see JM McEnany, ‘The Fiduciary Duty Under Section 501 of the
LMRDA’ (1975) 75 Columbia Law Review 1189. Similar reasons were behind the
recommendation of the Royal Commission into the Federated Ship Painters and Dockers
Union that a form of s 501 should be adopted in Australia; see above n 75, and Christie,
above n 11, at 612-5.
within unions, this is highly complex, not least because ‘union democracy
remains an elusive concept, and there are almost as many theories about it as
there are writers on the subject’.142 As I have pointed out, the promotion of
democracy within unions has been a central concern of the Australian federal
industrial system since its inception. Whether the extensive legal measures
adopted over the years have achieved this objective in practice is unclear.143
However, it is clear that further regulation of the type proposed in the Draft
RO Bill is no more likely to do so. There is more to ‘union democracy’ than
simply the imposition of controls on union leaders aimed at protecting the
interests of individual members; the position and rights of unions within the
broader industrial relations framework are of equal, if not greater,
significance.144
This brings me to the third, and most important, of the additional reasons
for objecting to the imposition of further legal controls over the internal affairs
of trade unions at this time. Quite simply, given the decline of the federal
compulsory arbitration system over recent years — and with it, the substantial
legal and institutional support that it provided to unions — no justification for
further regulation can be made out. I have observed that, the extensive legal
regulation of Australian trade unions was traditionally justified on the basis
that unions obtained considerable benefits from participation in the arbitration
system, and was largely accepted by unions for this reason. However, the
removal of ‘general statutory support for unions’145 since 1996 — including
legislative interference with traditional union organisational structures, the
abolition of preference arrangements, and reductions in the scope of award
protection — has resulted in a significant diminution of those benefits.
Mitchell, writing in the mid-1980s, suggested that:
If the industrial relations system is to be de-regulated to any substantial degree then
the traditional rationale for trade union regulation disappears, and the whole
question of the legal regulation of trade unions is re-opened.146
Since then, the deregulation of Australia’s industrial relations arrangements
has proceeded apace, including (more recently) a concerted legislative effort
to marginalise trade unions. If this means that the question of the legal
regulation of unions is now ‘re-opened’, then — bearing in mind the
traditional justification for high levels of regulation, and the recent demise of
statutory support for unions — there can be no valid basis for increased
regulation, whether of the type proposed in the Draft RO Bill or otherwise.
Finally, any attempt to subject unions to the level of regulation proposed in
142 Elias and Ewing, above n 88, p 268.

143 See, eg, C Fox, ‘Union Democracy and Collective Bargaining: Public Policy in Transition’
(1999) 41 Journal of Industrial Relations 393 at 415-6.
144 Space does not permit a more comprehensive examination of the concept of union
democracy; for discussion see Elias and Ewing, above n 88, pp 267-79 (in particular, their
examination of union democracy as ‘member protection’ and ‘member control’); Tracey,
above n 35, at 178-82; and Fox, above n 143.
145 See Fox, above n 143, at 415.
146 R Mitchell, ‘Labour Law Research in Australia: A Review of the Literature 1975-85’ in
Contemporary Industrial Relations in Australia and New Zealand: Literature Surveys,
K Hince and A Williams (Eds), Industrial Relations Centre, Victoria University of
Wellington, 1987, Vol One, pp 115-58, at p 132.
the Draft RO Bill will almost certainly fall foul of international labour laws
that allow trade unions to conduct their activities free from intrusive state
supervision. Article 3 of Convention 87 of the International Labour
Organisation (‘ILO’)147 provides that the state ‘shall refrain from any
interference which would restrict . . . or impede the lawful exercise’ of the
organisational rights of unions contained in the Convention. While the ILO
jurisprudence on Convention 87 allows some limits to be placed on unions’
self-governance rights,148 it has been suggested that existing Australian laws
in this area must already ‘sail very close to the wind in terms of interference
with the guarantees of organisational autonomy in Article 3 of Convention
87’.149 Further detailed regulation would in my view amount to improper state
interference in the internal affairs of Australian unions, placing Australia in
breach of international labour standards in an important respect.150
Conclusion
The attempt in the Draft RO Bill to impose on trade unions and their officials
standards of accountability borrowed from company law, while itself
objectionable for the reasons I have outlined, must be viewed in the broader
context of the federal government’s policy and legislative record in relation to
trade unions. I have indicated that the government’s earliest legislative efforts
were directed at dismantling established union organisational structures (eg,
by encouraging the formation of competitors to existing unions), removing
some of the statutory props supporting union involvement in the system, and
promoting the rights of non-unionists. Since then, the government’s antipathy
towards unions has manifested itself in a number of legislative proposals
aimed at further marginalising them in the industrial relations system and
making it difficult for them to function in practice.
The first of these was the ill-fated ‘second wave’ legislation of 1999,151
147 ILO Convention No 87 Concerning Freedom of Association and Protection of the Right to
Organise 1948.
148 See Elias and Ewing, above n 88, pp 264-7; and International Labour Office, Freedom of
Association: Digest of Decisions and Principles of the Freedom of Association Committee of
the Governing Body of the ILO, 4th ed, ILO, Geneva, 1996, pp 89-91.
149 B Creighton, ‘The Workplace Relations Act in International Perspective’ (1997) 10 AJLL 31
at 48.
150 On Australian compliance with ILO standards generally see B Creighton, ‘The ILO and the
Protection of Fundamental Human Rights in Australia’ (1998) 22 Melbourne University Law
Review 239. Note also that Australia has been found in breach of ILO Conventions on
several occasions in recent years. First, because of the primacy that the WR Act accords to
individual agreements over collective bargaining (see Report of the Committee of Experts on
the Application of Conventions and Recommendations, 86th Session, ILC, 1998, Report III
(Pt 1A), pp 223-4; this finding was reiterated in March 2000, see S Long, ‘Reith attacks ILO
finding on Workplace Relations Act’, The Australian Financial Review, 13 March 2000).
Second, because of the failure of Australian law to adequately provide for the right to strike
(see Report of the Committee of Experts on the Application of Conventions and
Recommendations, 87th Session, ILC, 1999, Report III (Pt 1A), pp 204-7). Third, because of
the application of Australian law and practice and the government’s role in the 1998
waterfront dispute (see Report of the Committee on Freedom of Association, 277th Session,
ILO Governing Body, paras 143-241).
151 Workplace Relations Legislation Amendment (More Jobs, Better Pay) Bill 1999 (the ‘1999
Bill’).
which contained a raft of proposals that would have taken the government’s
original attack on unions in the WR Act a great deal further. This would have
been achieved through proposals for mandatory secret ballots to be held prior
to the taking of ‘protected’ industrial action,152 a further crackdown on union
closed shops (or anything remotely resembling a closed shop),153 and the
imposition of substantial new limits on union rights of entry.154 At the same
time, the 1999 Bill would have further downgraded award regulation155 and
entrenched the primacy of individual agreements over collective
bargaining.156 However, these proposals have not passed into law because the
government was unable to secure support in the Senate for the passage of the
1999 Bill.157
Secondly, the government has now come forward with the Draft RO Bill,
which represents the high-water mark (so far) of its sustained campaign to
reduce the power and influence of unions in both the industrial and political
arenas. The Draft RO Bill would achieve this objective not only by
introducing corporate accountability notions into trade union regulation, but
also through a range of other proposals such as those to:158 simplify the
process for registration of ‘enterprise unions’;159 make the process of
‘disamalgamation’, or withdrawal from union amalgamations, easier;160
significantly expand the grounds on which unions can be deregistered;161 and
impose new restrictions on the making of political donations by unions.162
Indeed, the very process of transferring all of the provisions dealing with
registered organisations in the WR Act into a stand-alone statute is
demonstrative of the government’s view that unions are not central to the
industrial relations process, and that their role should be down-played.163
In this article, I have attempted to show that the imposition of a corporate
model of regulation upon trade unions is inherently flawed. I have done this
by comparing unions and companies in terms of their reasons for existence,
the purposes they serve, the interests created in their members, and the role
and functions of those who manage them. This comparison has revealed
152 1999 Bill Sch 12.

153 1999 Bill Sch 14.
154 1999 Bill Sch 13.
155 1999 Bill Sch 6.
156 1999 Bill Schs 8 and 9.
157 C Martin, ‘Reith IR Reforms in Tatters’, The Australian Financial Review, 1 December
1999, p 8.
158 See also the proposed ‘objects’ clause in the Draft RO Bill (cl 6).
159 Draft RO Bill Ch 2 Pt 2 Div 4; ‘enterprise unions’ are the rival form of union representation
allowed under the WR Act, but very few applications for registration of enterprise unions
have been made to date (see Forsyth, above n 56, at 196; for a recent decision involving the
relevant WR Act provisions see Re Postal Delivery Offıcers Union, AIRC Print S3192, 18
February 2000).
160 Draft RO Bill Ch 2 Pt 5.
161 Draft RO Bill Ch 2 Pt 6.
162 Draft RO Bill Ch 3 Pt 2, Div 3 and cl 231. This aspect of the proposals now contained in
the Draft RO Bill has probably generated the most controversy; see S Lewis and S Long,
‘Union Blues: Government Targets Party Donations’, The Australian Financial Review,
11 October 1999, p 1.
163 See M Spry, ‘The Industrial Relations Act 1999 (Qld)’ (1999) 12 AJLL 199 at 208, where the
same point is made in relation to the 1997 legislative changes in Queensland.
substantial differences between the two types of organisations in all of these

areas. I have argued that these differences, combined with a number of other
factors — chief among them the recent decline of the arbitration system and
the statutory support that it traditionally gave to unions — make the case
against further regulation of the type proposed in the Draft RO Bill a
convincing one.
I have also suggested that the proposals considered in this article must be
seen as part of a broader policy design on the part of the current federal
government that is hostile to trade unions, sees them as ‘uninvited third
parties’,164 and seeks to remove them from meaningful participation in the
industrial relations system. By subjecting unions to further detailed regulation,
and continually undermining them by legislative means, it seems that the
government wishes to capitalise on the recent decline of the Australian union
movement,165 and hasten its demise. The proposals to subject trade unions to
corporate-style regulation are an important piece of this ideological ‘jigsaw’.
However, as I have argued in this article, it should not be assumed that the
framework for regulation of corporations can simply be transposed upon trade
unions, given the fundamental differences that exist between the two types of
organisations.
164 See, eg, Liberal/National Coalition, above n 52.

165 For discussion see Peetz, above n 10; S Deery and J Walsh, ‘Union Decline in Australia: The
Role of Human Resource Management Practices and the Union-Hostile Workplace’ (1999)
12 AJLL 21; and T Harcourt, ‘The Future of Australian Unionism in the Global Economy’
in New Voices for Social Democracy, G Patmore and D Glover (Eds), Pluto Press,
Melbourne, 1999, pp 86-99.

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Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2019 [Provisions]

Trade Union Regulation and the

2 (2000) 13 Australian Journal of Labour Law

Australia’s industrial laws and institutions, primarily by weakening (or

The Historical Context: Trade Union Regulation and

Trade Union Regulation and the Accountability of Union Office-Holders 3

Australia’s federal arbitration system, from its inception, promoted and

Current Federal Law on Union Accountability and the

4 (2000) 13 Australian Journal of Labour Law

substantial body of law imposing standards of accountability on trade unions

Trade Union Regulation and the Accountability of Union Office-Holders 5

While these extensive statutory requirements generally apply to unions as

6 (2000) 13 Australian Journal of Labour Law

performance or observance of any of the rules of an organisation by any

Towards a Corporate Model for Trade Union

Trade Union Regulation and the Accountability of Union Office-Holders 7

their ‘right of entry’ into workplaces;45 and provisions intended to facilitate

45 WR Act Pt IX Div 11A.

8 (2000) 13 Australian Journal of Labour Law

are relevant and satisfy modern accountability and governance standards’.53

Trade Union Regulation and the Accountability of Union Office-Holders 9

65 Draft RO Bill cl 297.

10 (2000) 13 Australian Journal of Labour Law

management’ of a union.78 Queensland followed suit in 1997.79

An Evaluation of the Corporate Model

78 Industrial Relations Act 1979 (WA) s 74.

Trade Union Regulation and the Accountability of Union Office-Holders 11

non-profit association’84 which the law has traditionally subjected to only

84 Christie, above n 11, at 592-3.

12 (2000) 13 Australian Journal of Labour Law

Trade Union Regulation and the Accountability of Union Office-Holders 13

are now large, industry-based conglomerates.100 In response to the decline in

14 (2000) 13 Australian Journal of Labour Law

to unions, simply because they have corporate personality.

108 S Bottomley, ‘From Contractualism to Constitutionalism: A Framework for Corporate

Trade Union Regulation and the Accountability of Union Office-Holders 15

management of their union, including financial administration. However,

116 See above n 60 and text accompanying.

16 (2000) 13 Australian Journal of Labour Law

negotiations.121 For example, it would be difficult to determine whether an

Trade Union Regulation and the Accountability of Union Office-Holders 17

Rejecting the Corporate Model for Trade Union

18 (2000) 13 Australian Journal of Labour Law

incompatibility of the two types of organisations. However, there are a number

137 See BDW Report, above n 51, p 46.

Trade Union Regulation and the Accountability of Union Office-Holders 19

142 Elias and Ewing, above n 88, p 268.

20 (2000) 13 Australian Journal of Labour Law

Trade Union Regulation and the Accountability of Union Office-Holders 21

152 1999 Bill Sch 12.

22 (2000) 13 Australian Journal of Labour Law

substantial differences between the two types of organisations in all of these

164 See, eg, Liberal/National Coalition, above n 52.

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