Trade Union Reform
Trade Unions: Privilege and Power
David Russell, Q.C.
'Be you ever so high, the law is above you'
---Thomas Fuller, quoted by Lord Denning M.R.
in Gourlet v Union of Post Office Workers (1977)
Thomas Fuller's words of over 300 years ago were directed
to the pretensions of the Stuart Kings, who claimed
to rule by divine right and not be subject to the laws
which bound their subjects.
No one, today, asserts their inviolability from legal
control in as naked a fashion as the Stuart Kings,
no doubt in part because of the catastrophic consequences
to that dynasty of such an unacceptable viewpoint.
But the same result can be had by obtaining formal
recognition, through the law itself, that one is not
bound by it. Charles I was not able to achieve that
state, which no doubt seemed to him most felicitous,
as neither the common law Courts nor Parliament would
oblige with the necessary changes in the law. But as
history shows, the temptations of power without responsibility
are not limited in their reach to hereditary monarchs
of the distant past.
The purpose of this paper is to examine the nature
and extent of the differences between the position
of the ordinary citizen and of trade unions and
to analyse the areas in which there are substantial
benefits conferred upon trade unions. It is no part
of the paper to determine whether or not, either singularly
or taken as a whole, these privileges have, or at the
time of their introduction had, a sound public policy
basis. That is a task for political comment quite beyond
I propose to deal with the differential position of
trade unions from that of citizens generally under
1. Revenue Law
2. Liability in Tort
3. Corporate Law; and
4. Monopoly Powers.
In each of these areas, analysis of the position of
trade unions demonstrates substantial advantages to
those enjoyed by ordinary citizens.
Section 23 of the Income Tax Assessment Act
'The following income shall be exempt from income
(f) The income of a trade union and the income of
an association of employers or employees registered
under any Act or State Act, or under any law enforced
in a Territory being part of Australia relating to
the settlement of industrial disputes.'
This provision, whatever else might be said of it,
at least has the refreshing attribute not enjoyed by
much of the Income Tax Assessment Act that its
meaning is completely clear. No income of any trade
union will be subjected to tax levied under that Act,
which applies also to capital gains.
In these circumstances, it may be thought to lie ill
in the mouths of trade unions and those whose political
gestation occurred in the womb of the trade union movement
to rage about tax avoidance. After all, the most legally
effective and socially acceptable form of tax avoidance
is to procure the Parliament to pass a law exempting
oneself from tax.
This provision of the Income Tax Assessment Act
may well have been included to make clear what would
have been the result of the application of the mutuality
principle to the affairs of trade unions as they operated
at the time of its enactment.
That principly, simply stated, is that a person---
or group of persons---cannot derive income from trading
with themselves. Thus a club is not, on ordinary concepts,
liable to tax on membership subscriptions paid by its
members or the profits of bar trading.
The position of trade unions is, however, very different
now from that which obtained in 1936. In addition to
membership fees, unions could well expect to receive
income from investments, capital gains on sale of property
and income from business related activities such as
commissions paid to them in connection with the management
and operation of superannuation schemes.
Trade unions along with everyone else are liable to
pay the Fringe Benefits Tax and other Commonwealth
taxes save that all of their publications are exempt
from Sales Tax pursuant to Item 51 (1) of the First
Schedule to the Sales Tax (Exemptions and Classifications)
Act 1935. In that respect their position is to
be contrasted with commercial enterprises, many of
whose materials will be liable to that tax.
The exemption from income tax is of major commercial
significance in that it confers a distinct economic
benefit on a trade union wishing to commence or acquire
a business. Any other purchaser, of course, will need
to acquire the business concerned using after tax profits,
whereas a trade union can do so utilising pretax profits.
The scope of tax avoidance by persons other than trade
unions offered by these provisions should not be underestimated.
Liability in Tort
The conduct of an industrial dispute by a trade union
may involve its engaging in acts which are legal wrongs
giving rights of recovery of damages and injunctions
to the persons injured by them. In general terms, the
common law regards the intentional, or negligent, infliction
of harm as a matter which will be the subject of legal
Inducing breach of contract, intimidation, nuisance
and conspiracy are all actionable wrongs and not infrequently
occur in the context of industrial disputes.
It is perhaps worthy of note that the founder of the
Australian conciliation and arbitration system regarded
its existence not as a basis for exempting unions from
the law of the land, but rather as a basis for its
application in its full rigour. In R. v. Archdall
& Roskruge: ex parte Carrigan & Brown (1928)
41 C.L.R. 128 at p. 140-141,Higgins J observed:
'But it is necessary to say something as to 'reasonable
cause or excuse' for the boycott. If there was a reasonable
cause or excuse the offence charged was not committed.
As so often happens in recent legislation, such an
issue as 'unreasonableness' is left to the tribunal,
without any guidance from the Legislature; and the
tribunal has to weigh all the circumstances in order
to decide the issue for itself in each particular case.
It is not a question of law: it is rather a question
of general social standards. Now, I do not think that,
as a Court of appeal, we should, without very strong
grounds, take upon ourselves to differ from the tribunal
below on such a subject; for that is the tribunal which
has heard the witnesses and has had the opportunity
of gauging the character and the motives of the witnesses.
Nor do I think that the tests of reasonableness applied
by other Courts in relation to the breaking of a contract,
as in the Mogul Case (1892) A.C. 25 and in the Glamorgan
Case (1903) 2 K.B. 545, are necessarily or safely to
be applied to such a case as the present, the boycott
of a Government ship carrying on a service which is
essential to the safety of the public and their property.
Hence, the effort was to stop the lighthouse service
on the Australian coast, so far as the unions concerned
could stop it, in order to compel the Government to
alter its determination to employ its own permanent
employees instead of members of the Seamen's Union.
Even assuming that the Government's change of practice
was arbitrary, unfair, hurtful to the men of the Seamen's
Union; even assuming that the Government ought not
in reason to have made such a change knowing of the
opposition of the Union without bringing the dispute
before the Commonwealth Court of Conciliation and Arbitration---the machinery devised by Parliament: the question
still remains, was it reasonable on the part of these
unions to take the extreme step of boycotting the lighthouse
ships, endangering lives and property at sea without
submitting the dispute to that Court? Such a step might
be the only remedy in countries where there is no provision
for such a Court, where the 'right to strike' has to
be treated as within the law. But, in my opinion, the
existence of such a Court in Australia, affording the
opportunity for the play of reason instead of force,
constitutes, in my opinion, a very relevant fact in
the discussion as to the reasonableness of this boycott,
and no explanation has been offered of the Seamen's
Union failure to take the dispute to the Court. It
is to be regretted that the Government did not set
an example to the unions by seeking the sanction of
that Court to such a drastic change in the long established
practice; but this omission of the Government does
not, in my opinion, prevent the conduct of the unions,
in boycotting and thereby hindering this essential
public service, under the circumstances, from being
'without reasonable cause or excuse.''
These considerations no doubt played some part in
the failure of all legislatures in Australia other
than that of Queensland (until recently) to enact legislation
in terms similar to those of the United Kingdom Trades
Disputes Act 1906. That legislation imposed two
restrictions on common law remedies against trade unions,
(a) That an act done in pursuance of an agreement
or combination by two or more persons shall, if done
in contemplation or furtherance of an industrial dispute,
be not actionable unless the act, if done without any
such agreement or combination, would be actionable;
(b) That an act done by a person in contemplation
or furtherance of an industrial dispute shall not be
actionable on the ground only that it induces some
other person to break a contract of employment or that
it is an interference with the trade, business or employment
of some other person, or with the right of some other
person to dispose of his capital or labour as he wills.
Those provisions were repealed in Queensland, partially
in 1972 and finally in 1974.
Of course, the existence of common law rights does
not necessarily mean that a Court will interfere in
an industrial dispute. There are sound reasons in particular
cases why a Court should not do so, not the least of
which is that the operation of conciliation provisions
within the industrial system may bring an end to the
dispute. That has been recognised in New South Wales,
in the case of Harry M Miller v. Actors Equity
(1970) 1 N.S.W.R. 614.
In addition to denying remedies in tort for unlawful
union activity, Parliaments can delay or limit their
availability. The Commonwealth Parliament has done
so in Division 5A of Part III of the Conciliation
and Arbitration Act 1904.
That division empowers the Conciliation and Arbitration
Commission to conciliate disputes involving secondary
boycotts activity relating to work done under a Commonwealth
Award or to which a registered organisation is a party.
The Commission may exercise its powers in relation
to conciliation, including compelling parties to attend
before it. It is to be noted that the proceedings can
be attracted in circumstances where the injured party
has no intention of proceeding under Section 45D or
45E of the Trade Practices Act, preferring to
rely on common law or State statutory remedies. If
the proceedings are brought in the Federal Court, Section
80AA of the Trade Practices Act permits the
issue of an injunction to be delayed pending the completion
of conciliation procedures.
The Commission itself is responsible for the determination
whether or not conciliation proceedings are completed
pursuant to Section 29 of that Act.
Legislation presently before the New South Wales Parliament
seeks to extend this principle even further. That legislation
proposes to insert the following provision in the Industrial
Arbitration Act 1940.
'117G(l) An Act done or omitted to be done by an industrial
union of employees, or by an official or a member of
any such union, in contemplation or furtherance of
an industrial dispute in which the Commission has jurisdiction
is not actionable in tort unless the Commission in
court session has given leave for the action to be
It needs to be noted that this formula is wider than
the formula in the United Kingdom Trades Disputes
Act or the now repealed Queensland legislation.
The Trades Disputes Act operated in two ways:
(1) It provided that the law to be applied to conduct
by persons acting in concert was to be no different
from the law to be applied to a person acting by himself;
(2) It excluded liability for inducement to breach
a contract of employment or interference with trade,
business or employment.
Put another way, it was limited in its operation to
the economic torts and conspiracy to injure.
The Bill before the New South Wales Parliament is
not so limited. It will apply to any tortious
conduct which occurs in contemplation of furtherance
of an industrial dispute except for:
(i) intentional torts causing death or personal injury;
(ii) intentional torts causing physical damage to
property, to the extent that the remedy sought is compensation
for the value of the property only; or
(iii) actions for detinue or conversion.
Amongst the actions which are now to be curtailed
in the manner proposed by the Bill are such matters
(a) actions for recovery of damages for economic loss
flowing upon intentional damage to property in the
furtherance of an industrial dispute;
(b) actions for death or personal injury caused by
negligent conduct in the furtherance of an industrial
(c) actions for malicious falsehood or deceit in the
furtherance of an industrial dispute; and
(d) actions for intimidation in the context of an
The second reading speech of the New South Wales Minister
responsible for the legislation does not set out the
basis upon which it is considered that the traditional
formulation in the United Kingdom legislation is considered
inadequate and one imagines it is scarcely likely that
some, or indeed all, of the above consequences were
Of course, one answer to the foregoing observations
could be that it is intended to confer a discretion
upon the State Industrial Commission to grant leave
for the bringing of the action. The likelihood of favourable
consideration of such an application is at this stage
necessarily a matter of conjecture, but given that
the first of the matters which the Commission is required
to take into account is 'the maintenance of industrial
harmony', the prospect that rights of an individual
will be considered of small account if industrial disharmony
on a substantial scale is threatened is a matter for
some concern, particularly if the conduct of the Commonwealth
Commission discussed in the case of Gibbins &
Ors v. A.M.I.E.U. (1986) ATPR. paragraphs 40-680,
and 40-710, especially at pp. 47,761-2, is typical
of the views of industrial commissioners.
An interesting feature of the proposed exemption from
liability in the Bill is that unlike the provision
in either the United Kingdom or Queensland legislation,
the proposed exemption from liability is limited to
conduct on the part of a registered union, or one of
its officials or members. In other words, the exemption
is not only to be a quality of the conduct in question,
but also is to be limited to the privileged class of
unions and their members. A person who has ceased to
be a member of a union, and thereafter engages in conduct
to which the proposed part will apply which is wholly
justified on conventional industrial relations principles
will not be entitled to avail him or herself of the
A related exemption from tortious liability relates
to conduct which otherwise would constitute a trespass.
I refer to the right of entry onto employers' premises
for union purposes, a matter protected by section 136
of the Industrial Conciliation and Arbitration Act
1961 (Qld), section 129A of the Industrial Arbitration
Act 1940 (NSW) and comparable provisions elsewhere.
Common Law Obligations
Due to the financial power of companies, the State
and Federal Parliaments have legislated extensively
in relation to the election of the controlling bodies
of corporations, their duties towards the company itself,
its members and its creditors, the preparation of accounts,
and the orderly winding up of the affairs of insolvent
In part, the legislative provisions reflect conclusions
reached by the Courts (for example, that Directors
have a fiduciary obligation towards the company of
which they are a Director) but in other respects they
greatly exceed the common law position.
In some States certain of these provisions apply to
trade unions. Thus the provisions of the Companies
Code relating to the winding up of unregistered
companies (Division 6 of Part XII of the Companies
Code, and sections 553 to 557 thereof) apply to
Section 579 of the Companies Code as enacted
in New South Wales, Tasmania, the Australian Capital
Territory and possibly South Australia excludes a trade
union from the application of the Code.
The officials of a trade union are therefore under
significantly different obligations from those of a
company. In the States in which the Companies Code
does not apply to the affairs of a trade union, the
duty of union officials to the union equates to the
duties of directors to a company absent their statutory
responsibilities. In the States in which the Companies
Code does apply to trade unions, there is added
to those duties a liability to criminal prosecution
if the union is wound up under the Code and
thereafter fails to deliver a true accounting of the
affairs of the union to the liquidator, has been involved
in a failure to maintain proper accounts, or has been
involved in the fraudulent incurring of debts or other
There would seem to be no good reason in principle
why the provisions of the Companies Code relating
to directors' and officers' duties and liabilities
should not apply identically to trade unions.
The absence of specified statutory duties on the part
of union officials enables a number of areas of laxity
in the conduct of union affairs. It would be grossly
improper for the directors of a company to deliberately
take steps which incurred a large liability at
civil law upon the Company for no commercial gain.
Such a constraint appears to be absent, at least in
the minds of trade union officials, in their wantonly
engaging in conduct which contravenes sections 45D
and 45E of the Trade Practices Act and attracts
common law consequences. There is likewise a lack of
restraint upon the use of union funds to finance, directly
or indirectly, the conduct of election campaigns for
incumbent officials. Such practice is, to an extent,
limited in the context of companies, and in the context
of takeovers is likely to be further limited as a result
of enquiries by the National Companies and Securities
The Commonwealth Act and the Acts of the various States
differ greatly as to the extent to which a trade union
is required to conduct its affairs democratically and
its controlling body is answerable to its members.
For example, the Queensland Act requires simply that
the rules of a Union shall not be 'tyrannical or oppressive'.
The final matter of distinction under this heading
is the quality of accounts required to be prepared
by a trade union. The Seventh Schedule to the Companies
Regulations sets out in great detail the financial
information required to be furnished by a company.
Part VI of the Conciliation and Arbitration Act
sets out in some detail the matters required to be
the subject of specific reference in the accounts.
However very much less detail is required than that
required under the Companies Regulations. The
position from State to State varies, with the requirements
being virtually non-existent in some jurisdictions.
For example, the accounts required under the Queensland
Act up to and including 30 June 1986 were grossly inadequate
(the Commonwealth accounting format has now been adopted).
A copy of the proforma accounts formerly required in
Queensland is included at the end of this paper.
The traditional view of the common law has always
been that trade should, so far as possible, be free
of legal regulation. Thus agreements in restraint of
trade (as that term was understood by the common law)
were unenforceable. Monopolies, in the sense of a legal
right of sole trading, can only be created by Act of
Parliament by reason of the provisions of the Statue
of Monopolies 1601.
lndeed the patent system arose out of an exception
contained in the prohibition of monopolies by that
In relation to the conduct of companies, Parliament
has supplemented the common law, it being considered
to be inadequate to control the development of monopolies.
Sections 46 and 50 of the Trade Practices Act
are directed to prohibition of the development of monopoly
power and its abuse.
Trade unions, although they also operate in a market
for goods and services, are subject to no such restrictions.
Indeed, applicable industrial legislation tends to
precisely the opposite direction. Thus Section 142
of the Conciliation and Arbitration Act requires
the Registrar as a general rule to refuse to register
a Union if an organisation, to which the members of
the proposed organisation might conveniently belong,
has already been registered. Comparable provisions
exist in State legislation.
Once the privilege of registration is conferred,
various advantages follow, not the least of which is
the exclusive right of access to the employees who
might be convinced to become members of unions which
have been previously discussed.
Such monopoly is enhanced by award provisions conferring
preference in employment to members of unions, and
de jure compulsory unionism where that exists.
Summary and Conclusion
As will be seen from what has gone before, trade unions
in Australia, as participants in a market for goods
and services and as major commercial organisations,
stand in a very different position from other participants
in the market and such organisations. They can carry
on businesses and profitably dispose of property without
liability to tax on the gains. There exist some disincentives
to proceedings in the ordinary courts for conduct which,
if engaged in by any other person, would plainly be
unlawful and proposals are currently in train for that
exemption to be widened. They are not as accountable
to their members, or to creditors, in relation to their
dealings with their assets, and far from discouraging
monopolisation, the law encourages it.
It is, of course, for others to judge whether or not
this situation serves a discernible public interest
but in the face of these privileges it is hardly a
matter for surprise that Mr Justice Higgins could speak
of the unions and their Governments as 'those above
us' in the exchange which led to the adoption of this