Officer’s actions must be transparent and avoid conflicts of interest 

Case Name

General Manager of the Fair Work Commission v McGiveron and Burton [2017] FCA 405 external-icon.png

What were the issues?

The retiring WA Branch Secretary of the Transport Workers’ Union of Australia (TWU), James McGiveron, and McGiveron’s successor as Branch Secretary, Richard Burton, did not act for a proper purpose and in the best interests of the WA Branch when they: 

  • purchased for their own use two luxury Ford F350 utility vehicles at a cost to the Branch of over $300,000 and
  • implemented a generous redundancy policy, which caused McGiveron to receive an increased severance payment when McGiveron’s employment with the TWU was made redundant.

Burton also admitted acting improperly to gain a personal advantage and for others by spending over $2,500 of the union’s money for personal expenses without authority. 
The matter involved contraventions of the officers’ duties under sections 285, 286 and/or 287 of the Fair Work (Registered Organisations) Act 2009.

What happened?

In July 2012 McGiveron intended to resign as Branch Secretary, but to continue employment with the TWU in a non-elected role. Burton took over as Branch Secretary in October 2012.  

Luxury vehicles

McGiveron admitted agreeing with Burton in July 2012 that the Branch should purchase two luxury Ford F350 utility vehicles for $137,000 each, with one to be used by McGiveron while employed by the TWU after stepping down as Secretary. McGiveron also knew that personal ownership of that vehicle might be acquired after employment at TWU had ended. 

McGiveron entered into a contract to purchase the vehicles and paid an $80,000 deposit, without the authority to do so. After taking over as Branch Secretary, Burton without authority completed the purchase of the vehicles and also added optional accessories at an additional cost of over $20,000. 

Burton denied agreeing to purchase the F350s or that they had intended one of the two vehicles to be purchased for their exclusive personal use. However when the vehicles were available for delivery Burton arranged for one vehicle to be registered to McGiveron and the other to Burton. Burton then transferred personalised numberplates to the vehicle and used the car for personal benefit. In cross-examination Burton also admitted to being aware of McGiveron’s intention to purchase the F350s in July 2012.

The Court found that Burton kept details of the purchases secret and did not disclose them to the Branch Committee of Management (BCOM), the Branch Finance Committee or the Branch’s auditors. 

Redundancy payment

McGiveron also admitted to drafting and recommending to the BCOM to adopt a more generous Branch redundancy policy in July 2012, which was passed by the BCOM.  This was a conflict of interest as McGiveron knew that there would be a personal financial benefit from the new policy if employment with the Branch was made redundant. 

In late 2012 McGiveron resigned as Branch Secretary and was replaced by Burton, although McGiveron continued in employment with the Branch. 

In May 2013 Burton made McGiveron’s employment redundant. In July 2013 Burton made a severance payment to McGiveron worth nearly $350,000 on top of accrued entitlements, which was a payment Burton did not have authority to make. This included an extra 27 weeks of severance pay that McGiveron would not have received under the previous redundancy policy.

Personal expenditure

Burton also admitted misusing the position of Branch Secretary for personal advantage by using union money to pay for non-union related expenses, which were a meal at the Rockpool Bar and Grill, vehicle hire to transport items for personal benefit, and a catered box at the WAFL Grand Final.

What can organisations learn from this?

Organisations should have robust policies and procedures to ensure that conflicts of interest are addressed properly and to hold senior office holders to account for the proper expenditure of members’ funds. 

Organisations must develop a strong culture of compliance that recognises that they hold funds solely for the benefit of their members and counters any sense of entitlement by officers that may personally benefit from them.

Officers must avoid conflicts of interests and not make decisions in their own interests or that will result in personal benefit. Executive officers must fully understand their financial authority under the rules and make adequate disclosures to governing bodies and auditors about financial transactions.

What did the judge say?

In referring the purchase of the luxury vehicles Justice Barker stated at [91]:

The fact that the F350s, which after purchase were fitted out with more than $20,000 worth of accessories, were acquired, and the WA BCOM members were not aware of the acquisition, goes to show how serious the breach of the good faith obligation imposed by s 286(1) of the RO Act was.

In this regard Justice Barker stated at [96]:

The actions of Mr McGiveron bespeak a high degree of entitlement to act in the way that he did.

Justice Barker noted that the secretaries held a significant position of trust and this gave them control over substantial revenue and assets. In imposing high penalties despite admissions by the former secretaries Justice Baker, stated that [at 121]:

Senior union officials….must understand that they will feel the full weight of the law if they deliberately contravene the law governing their conduct as union officials.

What was the outcome and the penalty?

McGiveron admitted to all alleged breaches but argued unsuccessfully to acting for a proper purpose. McGiveron was ordered to pay a penalty of $16,000 (reduced to $11,000, if paid within 74 days).

Burton admitted all of the alleged breaches, but denied having agreed with McGiveron to purchase the F350s. This was rejected by the Court, which found that McGiveron and Burton discussed and knew what was proposed and each was involved in the purchase and use of the vehicles. 

Burton was ordered to pay a penalty of $49,900 (reduced to $27,300, if paid within 74 days).

Court reference

WAD 363 of 2016

 

Disclaimer
This information is of a general nature only and is not legal advice. The case summaries are designed to assist in gaining an understanding of the relevant provisions of the legislation and the work of the Registered Organisations Commission.