Organisations must prepare financial reports regardless of their size

Case Name

General Manager of the Fair Work Commission v Musicians’ Union of Australia [2016] FCA 302 external-icon.png  

What were the issues?

On 17 occasions between 2007 and 2012 reporting units of the Musicians’ Union of Australia (MUA) failed to prepare financial reports and provide those reports to their members. 

The Federal Secretary of the MUA was responsible for ensuring compliance by each reporting unit and admitted that they had failed to exercise their duties with the care and diligence that a reasonable person would. 

The matter involved breaches by the MUA of sections 253, 265(5) and 266 and by the Secretary of section 285(1) of the Fair Work (Registered Organisations) Act 2009 and its predecessor legislation.

What happened?

The Federal Office, Melbourne Branch and Sydney Branch of the MUA were required to prepare financial reports as soon as reasonably practicable after the end of each financial year and by no later than 10 December in any year. 

Every year between 2007 and 2012 each reporting unit failed to prepare a financial report and provide it to its members within time (with the exception of the Melbourne Branch in 2007).

The Federal Secretary of the MUA was also the Secretary of the Melbourne Branch. The Federal Executive of the union also gave the Federal Secretary of the MUA responsibilities for the Sydney Branch. The Federal Secretary was responsible for ensuring each reporting unit prepared financial reports in a timely manner.

The regulator sent numerous and repeated correspondence to the Federal Secretary in which the MUA was notified of the breaches and encouraged to fix them. In reply the Federal Secretary offered various explanations, and made a number of promises, but nothing was done until early 2014, well after the time required for compliance. 

The Federal Secretary accepted that in allowing the three reporting units to breach their reporting obligations on 17 occasions they failed each time to exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise in the circumstances. 

What can organisations learn from this?

The obligations on organisations to prepare financial reports on time are serious and must be complied with even if the organisation is small or has limited resources.

Officers with responsibility for ensuring that financial reports are prepared on time must use care and diligence to ensure that reasonable steps are taken to do so in a timely way. 

What did the judge say?

Justice Jessup referred to the length of the conduct as a factor that increased its seriousness, noting at [21] that the reporting units:

… had become repeat, if not serial, contraveners. Their inaction in the face of repeated reminders from the regulator speaks not only with respect to the years to which the reminders related: it speaks, quite loudly, in my view, with respect to the later years where the [MUA’s] inaction is that much less excusable.

In relation to the MUA’s resources, Justice Jessup noted at [23] that: 

The Union is a small organisation, with insubstantial resources and a limited (and, it seems diminishing) membership base. … given the number of contraventions involved, the imposition of penalties that may, in the case of a much larger organisation, be regarded as appropriate would present a real risk to the ongoing viability of the Union. … I must recognise that the members of the Union have been badly let down by the officers who served them but that does not mean that the Union might not … continue to be a force for good in those activities and in the other areas in the music industry where … it has a legitimate and useful role.

Justice Jessup noted at [24] that the obligations imposed by sections 253, 265(5) and 266 are to be taken seriously and at [26] that this case should alert other small organisations to the importance of compliance’. 

What was the outcome and the penalty?

The MUA was ordered to pay civil penalties totaling $236,865, but reduced to $76,500 if paid within four months because of the MUA’s limited resources. 

His Honour described the penalty as a “real burden” for the MUA, but one that was appropriate due to the length of time that it breached its statutory obligations.

The Federal Secretary was ordered to pay civil penalties totaling $52,635, reduced to $17,000 on the same basis as the MUA. 

Court reference

VID 620 of 2014

 

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.