The focus on corruption in Australia continues: the Royal Commission into Trade Union Governance and Corruption

November 2014 | SPOTLIGHT | FRAUD & CORRUPTION

Financier Worldwide Magazine

The spotlight on corruption in Australia has intensified recently, with a number of high profile investigations at both the state and federal level. The issue of corruption in government and the political sphere has garnered widespread public attention, particularly following the resignation of the New South Wales Premier after hearings of the Independent Commission Against Corruption. The Royal Commission into Trade Union Governance and Corruption continues this focus, having been established on 13 March 2014 in response to allegations of financial irregularities and corrupt governance structures in the Australian trade union movement. This Royal Commission clearly seeks to continue the intense scrutiny of potential corruption in governance, an exercise being similarly conducted across Australia in a number of other sectors.

Terms of reference

Under its terms of reference, the Royal Commission into Trade Union Governance and Corruption (Royal Commission) is tasked with investigating allegations of bribery, secret commissions and unlawful payments and benefits, including improper fundraising, within trade unions in Australia. The terms of reference extend to an examination of separate entities established by unions purportedly for industrial purposes or for the welfare of their members. This includes investigation of alleged activities relating to the establishment or operation of such entities, circumstances in which funds are paid to such entities and the extent to which union members receive benefits from such entities.

In addition, the Royal Commission is examining any conduct amounting to a breach of law, regulation or professional standard by union officers, particularly in relation to the gaining of personal advantage. It is also assessing the adequacy and effectiveness of existing systems of regulation and law enforcement in dealing with unlawful conduct by union officials.

The terms of reference are broad. They reflect the far-reaching aims and powers of the Royal Commission, and the intent for the inquiry to encompass all possible elements of bribery and corruption across union governance structures. There is no time limitation for the historical conduct or activities which may be investigated, which has caused some discontent among critics. Clearly, the Royal Commission has been tasked with a mission to expose corruption at all levels of union governance, and has been given a wide range of tools to do so.

Current developments

Five of Australia’s most powerful unions have been the focus of this Royal Commission, and public hearings are currently underway. A wide range of unions, organisations, individuals and employers across a number of industries have already been called upon to assist the Royal Commission to achieve its aims.

Public hearings to date have provoked controversial accusations relating to the use of ‘slush funds’, standover tactics as well as bribery and corruption at all levels of union governance. A number of union chiefs have been accused of bullying and ‘thuggish’ behaviour, particularly in relation to the building and construction sector.

Significant concerns have also been raised by the Commissioner that union officials have in some cases drawn upon union and related entity funds for their own personal use. In addition, a number of witnesses have alleged cartel-type conduct by unions. Lack of transparency and issues relating to income protection insurance schemes have also been asserted.

A legal issue arising from Royal Commissions

Unlike the judicial system, Royal Commissions are not bound by rules of evidence, and have extensive powers to summon persons to give evidence or produce particular documents. The broad coercive powers conferred by the Royal Commissions Act 1902 (Cth) to compel production of documents is intended to assist Royal Commissions in their various fact-finding missions.

The far reaching extent of these powers was highlighted by the decision of Justice Young in AWB Limited v Cole (2006) 152 FCR 382. Significantly, in that case it was held that Royal Commissions are not proceedings for the purposes of client legal privilege. Therefore, although client legal privilege may apply to documents prepared for the dominant purpose of providing legal advice, client legal privilege may not apply to documents which are prepared in anticipation of proceedings (which, in other litigious proceedings, would be protected by client legal privilege). Therefore, the scope of privilege able to be claimed over documents which are required to be produced to a Royal Commission is drastically reduced.

In relation to documents prepared for the dominant purpose of providing legal advice, section 6AA of the Royal Commissions Act 1902 (Cth) provides that any claim of client legal privilege over documents which are compelled by a Royal Commission must be made directly to the Royal Commission in the permitted timeframe, unless an order that the document is subject to client legal privilege has already been made by a court. The Royal Commission is then entitled to inspect the relevant documents, and decided whether to accept or reject the claim for client legal privilege.

This restriction of client legal privilege in Royal Commissions will undoubtedly impact upon the number and type of documents produced by unions, employers and individuals to the Royal Commission into Trade Union Governance and Corruption. It is particularly important for individuals and organisations called before Royal Commissions in Australia to seek legal advice relating to their production obligations and the ambit of client legal privilege.

Another issue is that Royal Commissions often collate documents which have been received in large databases, significant sections of which may be made available to other parties. It is now common practice for documents tendered during hearings to be made available almost immediately online to the public. Currently a significant number of such documents are located on the Royal Commission into Trade Union Governance and Corruption website. Individuals and organisations involved in Royal Commissions in Australia and other public hearings should therefore also consider whether certain documents should be sought to be produced on a ‘confidential’ basis.

Release of findings

The current Royal Commission is due to release its report and recommendations on 31 December 2014. Although it is still too early to anticipate the findings, it is clear that the Royal Commission has already provoked a range of controversial allegations regarding the conduct of union officials and the use of union funds.

In line with the current Australian focus on uncovering and eliminating corruption and bribery in government and the private sector, it is likely that the findings of this Royal Commission will reflect a zero-tolerance approach when it comes to making its recommendations. Whether the Commissioner chooses to recommend wide-ranging legislative amendments to the governance of trade unions in Australia, or restricts his findings to specific incidents and practices, remains to be seen. It is clear, however, that the focus on corruption in Australia has already identified areas for reform, and practices which should not be tolerated.

Ben Allen is a partner at Norton Rose Fulbright. He can be contacted on +61 2 9330 8190 or by email: ben.allen@nortonrosefulbright.com.

Ben Allen

Norton Rose Fulbright