ROYAL COMMISSION INTO TRADE UNION
GOVERNANCE AND CORRUPTION
Public Hearing/TWU
(Day 2)
Level 5, 55 Market Street, Sydney
On Wednesday, 2 July 2014 at 10.00am
Before the Commissioner: The Hon. John Dyson Heydon AC QC
Counsel Assisting: Mr Jeremy Stoljar SC
Ms Fiona Roughley
Instructed by: Minter Ellison, Solicitors
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1 THE COMMISSIONER: Yes, Mr Stoljar.
2
3 MR STOLJAR: If it please the court, I appear with my
4 learned friend Ms Roughley as counsel assisting. There are
5 some applications for authorisation to appear.
6
7 THE COMMISSIONER: Yes.
8
9 MR J GLISSAN QC: Yes. May it please your Honour, I am
10 instructed to appear with my learned friend Mr Gibian for
11 the Transport Workers Union. Your Honour has kindly given
12 us leave, in a letter dated 20 May 2014, to appear for the
13 Transport Workers Union of Australia. We have
14 subsequently, but I don't have the letter in front of me,
15 received authorisation to appear on behalf of two witnesses
16 who will be called during the course of this proceeding,
17 but I need to ask your Honour for leave to appear for the
18 Transport Workers Union of New South Wales, a separate
19 organisation, separately constituted, which is also part of
20 the subject of these proceedings as we understand them.
21
22 THE COMMISSIONER: Yes, Mr Glissan. Is there any problem?
23
24 MR STOLJAR: No
25
26 THE COMMISSIONER: That authorisation is granted,
27 Mr Glissan.
28
29 MR GLISSAN: Thank you, Commissioner.
30
31 THE COMMISSIONER: Yes.
32
33 MR HAY: If your Honour pleases, my name is Hay and I seek
34 leave to appear for two witnesses who are to be called
35 today, your Honour. First, John Gerard Berger and the
36 second Michael Ronald Nealer. I am instructed by
37 Maurice Blackburn. We understand there has been some
38 correspondence exchanged but I have just been informed that
39 we have not yet been granted authorisation and need to seek
40 to do so now
41
42 THE COMMISSIONER: Yes. Mr Stoljar?
43
44 MR STOLJAR: There is no objection, Commissioner.
45
46 THE COMMISSIONER: Yes. Leave is granted, Mr Hay.
47
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1 MR HAY: Thank you, Commissioner.
2
3 MR C JUEBNER: If the Commission please, my name is
4 Juebner. I seek leave to appear on behalf of Mr McMillin
5 who is a witness to be called today. I also seek leave to
6 appear on behalf of TWUSUPER,
7
8 THE COMMISSIONER: TWUSUPER, yes. Any problem,
9 Mr Stoljar?
10
11 MR STOLJAR: No, Commissioner.
12
13 THE COMMISSIONER: You have that leave, Mr Juebner. Is
14 there anyone else? It is unusual to have so many
15 applications. Yes, Mr Stoljar.
16
17 MR STOLJAR: Commissioner, the hearings commencing today
18 continue the Commission's inquiries into the activities of
19 the Transport Workers Union of Australia and certain
20 relevant entities associated with it. On 23 June 2014,
21 this Commission held its first hearing into the TWU when it
22 opened in Perth. On that day the Commission heard evidence
23 from a member of TWU, Mr Paul Bracegirdle who is a truck
24 driver employed by Toll Holdings Limited. Mr Bracegirdle's
25 evidence was to the effect that he wished to choose his own
26 superannuation fund but had been required to use TWUSUPER.
27
28 As noted at that hearing, TWUSUPER is a relevant
29 entity within the meaning of the Commission's terms of
30 reference. The evidence heard by the Commission on 23 June
31 2014 raised at least two important issues.
32
33 First, whether an employee covered by an enterprise
34 agreement should be able to choose his or her own
35 superannuation fund and, secondly, the appropriateness of
36 enterprise agreements including terms requiring an employer
37 to pay funds to or contract with a relevant entity in which
38 the union or its officials have an interest. The hearings
39 commencing today will investigate these issues further.
40
41 In particular, they examine the arrangements pursuant
42 to which funds travel between TWUSUPER and the TWU.
43 Another relevant entity within the meaning of this
44 Commission's Terms of Reference will also be considered,
45 namely, the Transport Education Audit Compliance Health
46 Organisation Limited which is known as TEACHO. It will be
47 helpful to consider these two entities in turn.
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1
2 TWUSUPER is an industry superannuation fund. It was
3 established in 1984 by the TWU and the Australian Road
4 Transport Industrial Organisation, ARTIO. The evidence
5 which will be adduced is to the effect that TWUSUPER is
6 Australia's largest industry superannuation fund for the
7 transport and logistics industry. It has funds under
8 management of around $3.8 billion. The trustee of TWUSUPER
9 is TWU Nominees Pty Ltd.
10
11 The board of the trustee consists of an independent
12 chairman and eight directors, four of whom are employee
13 representative directors nominated by the TWU and four of
14 whom are employer representative directors nominated by
15 ARTIO. The TWU and ARTIO each also appoint three alternate
16 directors.
17
18 The precise amounts paid by TWUSUPER to TWU fluctuate
19 somewhat from year to year. However, in broad terms, as
20 was noted in the opening on 23 June 2014, the monies paid
21 by TWUSUPER to TWU each year include approximately $200,000
22 in directors' fees, approximately $500,000 in reimbursement
23 for salaries and expenses of a number of superannuation
24 liaison officers, and $100,000 in sponsorship.
25
26 Among other things, the hearings over the next few
27 days will examine more closely the monies flowing between
28 TWUSUPER and the TWU. A number of present or former SLOs,
29 that's superannuation liaison officers, will give evidence
30 concerning their role and duties and why they were paid.
31
32 These SLOs were employees of the TWU but their
33 salaries were in part paid by TWUSUPER. Clearly, TWUSUPER
34 is an important revenue stream for the TWU. One aim of the
35 hearings over the next few days will be to examine more
36 closely how and why that revenue stream operates.
37
38 TEACHO. TEACHO is a company limited by guarantee.
39 TEACHO is created to replace a fund known as the
40 Transport Industry Training Education and Industrial Rights
41 Fund. I will refer to this as the training fund.
42
43 The circumstances in which TEACHO came into existence
44 may be summarised as follows: the training fund was
45 established in approximately 1999 or 2000. It was
46 established by the Transport Workers Union of New South
47 Wales, an employee association registered under New South
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1 Wales law. Employers paid sums of money or levies to the
2 training fund pursuant to enterprise agreements with some
3 labour hire companies - in this case, the levies were
4 generally 1 per cent of the total payroll covering
5 transport workers - enterprise agreements with other
6 employers, including but not limited to Westgate, Linfox,
7 Startrack Express, TNT and Toll, or deeds entered into
8 between the employer and TWU.
9
10 By reason of the above arrangements, considerable sums
11 were paid to and accumulated in the training fund. As at
12 30 June 2007, the training fund held $1.43 million.
13
14 On 23 September 2007, the training fund attracted
15 considerable adverse public attention following a story on
16 Channel 9 'Sunday' show. The TWU almost immediately
17 engaged through its lawyers the professional services firm
18 Deloitte to prepare a report into the training fund.
19 Deloitte delivered its report on 21 February 2008. The
20 Deloitte report found that although the agreements under
21 which employers contributed to the training fund described
22 that fund as a "council", no council had been formally
23 established as a separate entity distinct from the TWU of
24 New South Wales. The training fund was not separated from
25 an accounting perspective from the general ledger of the
26 TWU of New South Wales.
27
28 No external audit had been performed on the activities
29 of the training fund separate from the external audit of
30 the accounts of the TWU of New South Wales.
31
32 Documentation setting out the governance framework
33 under which the council or fund was intended to operate was
34 limited and a compounding issue was the broad wording of
35 the agreements as to how contributions received from
36 employers would be expended.
37
38 The Deloitte report recommended, in effect, that the
39 training fund be formally established in an entity separate
40 from the TWU. The Deloitte report further recommended that
41 the TWU management take advice on establishing the fund in
42 a more appropriate governance structure. There was also a
43 recommendation that advice be taken on the development of
44 guidelines to define the attributes of expenditure
45 appropriate to the training fund and regular and
46 independent oversight of expenditure incurred.
47
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1 The Deloitte report noted also that, "Our
2 recommendation has been accepted by the management of the
3 TWU and we understand steps are in place for its
4 implementation."
5
6 Nevertheless, implementing the recommendation seems to
7 have taken some time. After the Deloitte report
8 in February 2008, TEACHO was not incorporated until
9 March 2009. On incorporation, the TWU of New South Wales
10 was the sole shareholder and officials of the TWU its only
11 directors. More than a year later, in mid 2010, the
12 Federal TWU replaced the New South Wales union as the sole
13 shareholder. It obtained its first independent share in
14 November 2010, about the same time it obtained its first
15 paid employee.
16
17 TEACHO, being a company established by the TWU of
18 New South Wales and now with the TWU as its sole
19 shareholder, is a "relevant entity" within the Commission's
20 Terms of Reference. Today its board is comprised of three
21 officials of the TWU, four directors drawn from employers,
22 industry and academia and Dr Daryll Hull as its chair. It
23 is a different kind of relevant entity from those that have
24 been the subject of the Commission's previous public
25 hearings.
26
27 TEACHO has two primary sources of revenue. First,
28 TEACHO receives money direct from employers pursuant to
29 provisions in enterprise agreements or contracts with
30 employers. Thus, this inquiry continues the theme of the
31 appropriateness of a union causing to be included in an
32 agreement with an employer a requirement that the employer
33 make contributions to third parties in which the union or
34 its officials have an interest.
35
36 Secondly, since at least 1 July 2011, TEACHO has
37 received revenue from a training scheme known as Bluecard.
38 The precise work carried out by TEACHO in relation to the
39 Bluecard scheme will also be examined.
40
41 That is what I wish to say in opening, Commissioner.
42 Could I foreshadow one issue that will arise today?
43 Various parties have applications for confidentiality
44 regimes of different kinds. If it's convenient to the
45 Commission, I propose to deal with Mr Berger and Mr Nealer
46 first since they're not affected by those issues and then
47 they can get away, and then we can come to legal debate, if
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1 needed, on the confidentiality point.
2
3 THE COMMISSIONER: Very well.
4
5 MR GLISSAN: Commissioner, I wonder if you might hear me
6 in relation to one aspect of the matter about which you are
7 proposing to enquire over the next several days.
8
9 THE COMMISSIONER: Yes.
10
11 MR GLISSAN: That involves the inquiry into TWUSUPER for
12 whom I don't appear but nevertheless raises an issue which
13 my clients, the Transport Workers Union of Australia,
14 regard as a matter of significance and importance and it
15 may be of importance to the Commission itself for this
16 reason.
17
18 I want to make the submission, and make it quite
19 forcefully, that to enquire into TWUSUPER while possibly
20 technically being able to be brought within the Terms of
21 Reference of the Commission - and I don't wish to address
22 you about that - is a matter which is at best inapt, if not
23 inappropriate, by way of a matter of inquiry for the
24 Commission. If I might, I would approach it in this way.
25
26 On 9 April when the Commissioner made his opening
27 remarks about the inquiry, he was at pains to say:
28
29 It is relevant to enquire about the
30 reaction of amongst unions and branches of
31 unions and the practice of unions in
32 relation to relevant entities, structures
33 and rules that have been created in
34 relation to those relevant entities, and
35 the questions of breach of law, regulation
36 or professional standard.
37
38 In his opening address, which took place on the same
39 day, my learned friend, Mr Stoljar, drew in particular the
40 Terms of Reference to the Commission's attention, directing
41 your attention to the government's arrangements, the
42 circumstances in which funds have been sought from third
43 parties, and any conduct which may amount to a breach of
44 law, regulation or professional standard, and so the scheme
45 of the union, of the commission of inquiry, the Royal
46 Commission, has come down, as it has been described in the
47 press, to involve issues of governance, on the one hand,
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1 and corruption on the other. Those are important matters.
2 Those are matters in respect of which, if I may say so,
3 with respect, the Commission has been put on a short leash
4 being asked to report by the end of the year.
5
6 The matter which arises - and arises from
7 Mr Bracegirdle's evidence, as it was opened by my learned
8 friend in Perth last week when we were not present, by
9 choice, I should hasten to say - involves an issue of
10 choice in relation to the joinder of that person with
11 a particular superannuation fund. In opening the case
12 before the Commissioner on that day, Mr Stoljar said his
13 evidence raised two important issues: whether a member of
14 the Transport Workers Union should be able to choose his or
15 her superannuation fund and second, the appropriateness of
16 terms of enterprise bargaining agreements that require an
17 employer to pay funds to or contract with a separate entity
18 in which the union or its officials have an interest.
19
20 He went on to deal with whether an employee covered by
21 an enterprise agreement, he said which was hard to see,
22 should not be free to choose whichever super fund he or she
23 wished and the evidence of Mr Bracegirdle was to that
24 effect.
25
26 Commissioner, we say this in relation to that, that
27 first, that is a matter which is one which is governed by
28 statute. The Howard Government in 2004 passed an Act which
29 was called the Superannuation Funds (Choice Of
30 Superannuation Funds) Act which passed into law, the aim of
31 which was to permit employees to choose where their
32 superannuation contributions are paid. That Act, which
33 governed and governs this situation, contained significant
34 exemptions and exceptions, in particular, by clause 32C(6)
35 and (7) of the Bill which is referred to, and I'm happy to
36 make copies of these available both to the Commissioner and
37 my learned friend, in the explanatory memorandum and then
38 subsequently in other documents, as well as passing into
39 the legislation.
40
41 It was expressly provided that contributions made
42 under or in accordance with an Australian workplace
43 agreement or a certified agreement under the Workplace
44 Relations Act 1996, or a certified agreement under the
45 Industrial Relations Act, was a contribution made in
46 compliance with the choice of funds requirements and in the
47 Bills Digest produced by the Parliament of Australia, it
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1 was expressly noted under the heading "Exclusions from the
2 Choice Regime", "Generally contributions made to the
3 following funds are taken as being in conformity with the
4 choice regime." Included were funds specified in State
5 industrial awards, funds specified under an Australian
6 workplace agreement or certified agreement, and the note
7 was made, "This means that employees who have contributions
8 made on their behalf to such funds will not be offered the
9 specified choice form and will not be able to choose a fund
10 to receive superannuation contributions made on their
11 behalf."
12
13 Commissioner, section 32C(6) and (7) that I referred
14 you to earlier, passed into law. They govern the
15 situation. They answer the complaint in a very real sense
16 that was made by Mr Bracegirdle and so --
17
18 THE COMMISSIONER: I don't see how they do answer the
19 complaint, though. Mr Bracegirdle's evidence was, "I want
20 some other superannuation fund, not this one." He didn't
21 say this but it could be said, perhaps, it may well be the
22 case that the officials who negotiated particular
23 enterprise agreement with a particular employer have very
24 good reasons for acting as they do and it may very well
25 suit the interests of the majority of members, but they
26 don't necessarily suit Mr Bracegirdle.
27
28 MR GLISSAN: Quite so, but as was provided in the Act,
29 that deprivation of choice was a statutory one, as long as
30 there was an Australian workplace agreement, and there will
31 be evidence, which won't be the subject of challenge, that
32 some 7,000-odd members, a vast majority of those who voted
33 in relation to the workplace agreement, the relevant
34 workplace agreement that governs the present situation and
35 deprived Mr Bracegirdle of his choice of fund, elected to
36 support that workplace agreement.
37
38 The first thing we put forward as being a matter which
39 makes this, if you like, a question of policy rather than
40 a question of whether or not there is some act of the union
41 which can be the subject of criticism or even comment
42 arises to be considered, is that statutory regime, and we
43 say that the Commission by embarking on that is moving into
44 an area which is expressly one which was the subject of
45 consideration by the Parliament and expressly one which was
46 the subject of a determination which governed the
47 situation, whatever its operation may have been in relation
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1 to a particular individual.
2
3 The second aspect of the matter which I want to draw
4 to the Commission's attention in relation to this matter is
5 this: the second aspect with which the Commission is
6 properly and, if I may say so, exhaustively engaged, from
7 what we have thus far seen, is the issue of union
8 governance. That issue cannot arise in relation to the
9 Transport Workers Union superannuation fund under the
10 present material that is capable of being before the