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United Kingdom Employment Appeal Tribunal


You are here: BAILII >> Databases >> United Kingdom Employment Appeal Tribunal >> UNITE The Union v Mills (Certification Officer) [2017] UKEAT 0148_16_0902 (09 February 2017)
URL: http://www.bailii.org/uk/cases/UKEAT/2017/0148_16_0902.html
Cite as: [2017] WLR(D) 189, [2017] UKEAT 0148_16_0902, [2017] ICR 693

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Appeal No. UKEAT/0148/16/LA

 

 

EMPLOYMENT APPEAL TRIBUNAL

FLEETBANK HOUSE, 2-6 SALISBURY SQUARE, LONDON EC4Y 8AE

 

 

At the Tribunal

On 8 November 2016

Judgment handed down on 9 February 2017

 

 

 

Before

THE HONOURABLE MRS JUSTICE SLADE DBE

PROFESSOR K C MOHANTY JP

MR M WORTHINGTON

 

 

 

 

 

 

 

UNITE THE UNION APPELLANT

 

 

 

 

 

MRS K MILLS   RESPONDENT

 

 

 

JUDGMENT

 

APPEAL AND CROSS-APPEAL

 

 


 

 

 

 

 

 

 

APPEARANCES

 

 

 

 

 

For the Appellant

MR ROBIN ALLEN

(One of Her Majesty’s Counsel)

and

MR MICHAEL POTTER

(of Counsel)

Instructed by:

Unite the Union

Unite House

Theobalds Road

Holborn

WC1X 8TN

 

 

For the Respondent

MR JODY ATKINSON

(of Counsel)

Bar Pro Bono Scheme

 

 

 

 


SUMMARY

CERTIFICATION OFFICER

HUMAN RIGHTS

 

The Certification Officer did not err in holding that Unite had failed to comply with Trade Union and Labour Relations (Consolidation) Act 1992 (‘TULRCA’) section 30(1) by not giving her access to accounting records showing ‘stand down’ payments to each trade union official of her branch which together totalled a substantial monthly amount.  Under sections 28 and 29 the Union was obliged to keep available for inspection accounting records of its transactions necessary to give a true and fair view of the state of affairs of the trade union and to explain its transactions.  On the facts the Certification Officer did not err in holding that the cumulative amounts in the accounts relating to ‘stand down’ payments which had been made available did not comply with this obligation.  Previous decisions of the Certification Officer in Mortimer v Amicus (D/1/03) and Foster v Musicians Union (D/13-17/03) considered.  Nor did the Certification Officer err in refusing to redact the names of the officials in receipt of such payments.  Article 8 ECHR considered.  Further, on the cross-appeal, the Certification Officer did not err in refusing the application by the union member for access to bank statements when she had been given access to the accounting records regarding sundries to which they relate.

 

Appeal and cross-appeal dismissed.

 


THE HONOURABLE MRS JUSTICE SLADE DBE

 

1.                  Mrs Mills is a member of the Unite the Union (‘Unite’).  By an application received at the Office of the Certification Officer (‘the CO’) on 14 March 2014, Mrs Mills made a complaint against Unite of a breach of the Trade Union and Labour Relations (Consolidation) Act 1992 (‘TULRCA’) relating to ‘sundries’ and ‘stand down payments’ their not giving her access to the accounting records of branch LE/2000, the BASSA branch of Unite.  Unite appeals from the decision of the CO issued on 12 January 2016 that:

“Unite the Union is ordered to give the claimant access to the accounting records of the BASSA branch of the Union (LE/2000) which show the individual transactions which together constitute the aggregate amounts that are entered in the quarterly and annual accounts of the branch for the years 2008 to 2013 under the headings ‘stand-down’ or ‘stand-down allowance’. …”

 

Mrs Mills cross-appeals from the decision of the CO not to order Unite to give her access to inspect the statements of the Union’s bank accounts relating to the BASSA Central Fund, the Worldwide Section and the Eurofleet Section relating to, ‘sundries’.

 

2.                  The decision from which Unite appeals and Mrs Mills cross-appeals was made by the CO under TULRCA section 31(2) on an application made to him made under section 31(1).

 

The Relevant Statutory Provisions

3.                  Trade Union and Labour Relations (Consolidation) Act 1992

“28. Duty to keep accounting records

(1) A trade union shall -

(a) cause to be kept proper accounting records with respect to its transactions and its assets and liabilities, and

(b) establish and maintain a satisfactory system of control of its accounting records, its cash holdings and all its receipts and remittances.

(2) Proper accounting records shall not be taken to be kept with respect to the matters mentioned in subsection (1)(a) unless there are kept such records as are necessary to give a true and fair view of the state of the affairs of the trade union and to explain its transactions.

29. Duty to keep records available for inspection

(1) A trade union shall keep available for inspection from their creation until the end of the period of six years beginning with the 1st January following the end of the period to which they relate such of the records of the union, or of any branch or section of the union, as are, or purport to be, records required to be kept by the union under section 28.

This does not apply to records relating to periods before 1st January 1988.

(2) In section 30 (right of member to access to accounting records) -

(a) references to a union’s accounting records are to any such records as are mentioned in subsection (1) above, and

(b) references to records available for inspection are to records which the union is required by that subsection to keep available for inspection.

30. Right of access to accounting records

(1) A member of a trade union has a right to request access to any accounting records of the union which are available for inspection and relate to periods including a time when he was a member of the union.

In the case of records relating to a branch or section of the union, it is immaterial whether he was a member of that branch or section.

(2) Where such access is requested the union shall -

(a) make arrangements with the member for him to be allowed to inspect the records requested before the end of the period of twenty-eight days beginning with the day the request was made,

(b) allow him and any accountant accompanying him for the purpose to inspect the records at the time and place arranged, and

(c) secure that at the time of the inspection he is allowed to take, or is supplied with, any copies of, or of extracts from, records inspected by him which he requires.

(4) An “accountant” means a person who is eligible for appointment as a statutory auditor under Part 42 of the Companies Act 2006.

31. Remedy for failure to comply with request for access

(1) A person who claims that a trade union has failed in any respect to comply with a request made by him under section 30 may apply to the court or to the Certification Officer.

(2B) Where the Certification Officer is satisfied that the claim is well-founded he shall make such order as he considers appropriate for ensuring that the applicant -

(a) is allowed to inspect the records requested,

(b) is allowed to be accompanied by an accountant when making the inspection of those records, and

(c) is allowed to take, or is supplied with, such copies of, or of extracts from, the records as he may require.

 

32. Annual return

(1) A trade union shall send to the Certification Officer as respects each calendar year a return relating to its affairs.

(3) The annual return shall contain -

(aa) details of the salary paid to and other benefits provided to or in respect of -

(i) each member of the executive,

(ii) the president, and

(iii) the general secretary,

36. Auditors’ report

(1) The auditor or auditors of a trade union shall make a report to it on the accounts audited by him or them and contained in its annual return.

(3) It is the duty of the auditor or auditors in preparing their report to carry out such investigations as will enable them to form an opinion as to -

(a) whether the trade union has kept proper accounting records in accordance with the requirements of section 28,

(b) whether it has maintained a satisfactory system of control over its transactions in accordance with the requirements of that section, and

(c) whether the accounts to which the report relates agree with the accounting records.

(4) If in the opinion of the auditor or auditors the trade union has failed to comply with section 28, or if the accounts do not agree with the accounting records, the auditor or auditors shall state that fact in the report.

37. Rights of auditors

(1) Every auditor of a trade union -

(a) has a right of access at all times to its accounting records and to all other documents relating to its affairs, …

37A. Power of Certification Officer to require production of documents etc

(1) The Certification Officer may at any time, if he thinks there is good reason to do so, give directions to a trade union, or a branch or section of a trade union, requiring it to produce such relevant documents as may be specified in the directions; and the documents shall be produced at such time and place as may be so specified.

(2) The Certification Officer may at any time, if he thinks there is good reason to do so, authorise a member of his staff or any other person, on producing (if so required) evidence of his authority, to require a trade union, or a branch or section of a trade union, to produce forthwith to the member of staff or other person such relevant documents as the member of staff or other person may specify.

(6) In subsections (1) and (2) “relevant documents”, in relation to a trade union or a branch or section of a trade union, means accounting documents, and documents of any other description, which may be relevant in considering the financial affairs of the trade union.

37B. Investigations by inspectors

(1) The Certification Officer may appoint one or more members of his staff or other persons as an inspector or inspectors to investigate the financial affairs of a trade union and to report on them in such manner as he may direct.

(2) The Certification Officer may only make such an appointment if it appears to him that there are circumstances suggesting -

(c) that the trade union has failed to comply with any duty imposed on it by this Act in relation to its financial affairs, …

37E. Sections 37A and 37B: supplementary

(1) Where -

(b) a member of a trade union has complained to the Certification Officer that there are circumstances suggesting any of the state of affairs specified in section 37B(2)(a) to (d),

the Certification Officer shall consider whether it is appropriate for him to exercise any of the powers conferred on him by sections 37A and 37B.

45. Offences

(1) If a trade union refuses or wilfully neglects to perform a duty imposed on it by or under any of the provisions of -

… sections 28 to 30 (accounting records), …

it commits an offence.

…”

 

Outline Relevant Facts

4.                  Mrs Mills is an air hostess.  She is a member of Unite and belongs to the LE/2000 branch at Heathrow known as the BASSA branch.  She was concerned about the financial operation of the branch and made a request to inspect its accounting records.  She was sent the annual branch accounts which, she contended, showed very large ‘sundry payments’ of over £500,500.  Mrs Mills was told by the Union that the sundry payments are in large part accounted for by the way in which Unite records intra branch transfers.  Mrs Mills asked to inspect the branch’s bank statements to check this.  Unite refused to permit her to inspect the bank statements and the CO did not order them to do so.

5.                  In the BASSA branch of Unite, in addition to the payment which union officials receive from their employer under TULRCA section 169 in respect of time taken off for trade union duties, the branch pays them an additional amount of ‘stand down’ pay.  This is because the employer only pays the officials their basic wage.  Much of the income of air hostesses and stewards is made up of travel and anti-social hours allowances.  Accordingly Unite pays officials of the BASSA branch ‘stand down’ payments to compensate for the loss of these allowances whilst they are carrying out trade union duties.

 

6.                  Mrs Mills was concerned at the level of the stand down payments made by Unite to branch officers.  For the period 2008 to 2013 with National Insurance these were between £149,513 and £207,585 per annum in particular she questioned whether stand down money was being paid when union duties were not being carried out and whether they were paid at a higher rate than that to which the official was entitled.

 

7.                  Unite explained that officials claim stand down pay and other expenses by filling in an online form.  They contended that the forms are not accounting records.  This argument was not accepted by the CO.  However Unite have agreed to disaggregate the stand down payments showing how much is attributable to expenses.  The CO ordered Unite to allow Mrs Mills access to inspect print-outs of the claim forms and records of payment which he held to be accounting records of the BASSA branch relating to stand down allowances.

 

The Judgment of the Certification Officer

8.                  The CO directed himself in paragraph 29 that in order to determine the application made by Mrs Mills under TULRCA section 31 (1) he must consider what are accounting records and what records are kept by the Union.  Both Mrs Mills and Unite invited the CO to reconsider the meaning of the term ‘accounting records’ in TULRCA which had been previously considered by him in Mortimer v Amicus 14 February 2003 and Foster v Musicians Union 22 May 2003.  The CO summarised the competing challenges to his previous interpretation.  The CO stated that Mr Atkinson, counsel for Mrs Mills before us, contended that his previous interpretation was too narrow or restrictive and that source documents such as bank statements should come within the meaning of accounting records, adopting the same interpretation as the term has been given in company law.  Mr Potter, counsel for Unite before the CO and junior counsel led by Mr Robin Allen QC before us, contended that his previous interpretation was too wide and had given rise to the disclosure of financial information, which does not come with the term ‘accounting records’.

 

9.                  In paragraph 31 the CO considered whether ‘accounting records’ in TULRCA should be given the same meaning as is attributed to that phrase in Companies Acts (‘CA’) of 1976 and 2006.  After engaging in an analysis of the phrase in the CAs the CO concluded:

“31. … Accordingly, in reconsidering my observations on the nature of accounting records in Mortimer and Foster I have had regard to the equivalent provisions of the Companies Act but I am not persuaded that I should interpret section 30 of the 1992 Act in such a way as to give ‘accounting records’ the same meaning as it has in the differently worded provisions of the Companies Act.”

 

10.              The CO also considered relevant passages from Hansard.  He concluded at paragraph 33:

“33. Having considered the more detailed material that is now before me, it remains my judgement that the meaning of ‘accounting records’ in section 30 of the 1992 Act is as I determined it to be in Mortimer and Foster for the reasons that I gave in those cases.  I find that accounting records are those created or kept principally for the purposes of accounting and that primary or source documents created for effecting or evidencing a transaction, such as a bill, an invoice or a receipt may be described as a record of financial information but they are not ordinarily an accounting record.  In certain circumstances, however, source materials such as invoices and receipts may have been retained principally for the purposes of accounting and thus be categorised as accounting records. … I find that it is consistent with the intention of Parliament that judicial authorities are to be left with the task of determining what is an accounting record within the meaning of the relevant statutory provisions.  Accordingly, I reject the submission of the claimant that I should widen the meaning of accounting records to include all source material and perhaps even all documentation containing financial information.  I also reject the submission of the Union that I should narrow the meaning of accounting records to exclude accounting information not yet transferred to a formal accounting record.”

11.              In paragraph 35 the CO held that Mrs Mills has had access to the accounting records of the BASSA branch with regard to the sundry items which appear in the quarterly and annual accounting records of the branch.  The CO recorded that late in the hearing Mrs Mills mentioned that she should also have access to the bank statements of the branch and of its Worldwide and Eurofleet Sections in order to check that the entries in the relevant accounting records were correct.  The CO held that:

“35. … Consistent with my decisions in Mortimer and Forster, I find that such bank statements in the circumstances of this case are not accounting records and accordingly are not documents to which the Union is required to give Mrs Mills access to inspect.”

 

12.              The CO recorded that the sums which appear in the quarterly and annual accounting records of the branch as ‘stand down’ or ‘stand down allowance’ are aggregate sums.  They are composed of the aggregate of individual sums claimed through on online system by each union representative.  The CO accepted that there was no separate written document which was an accounting record of the individual payments making up the aggregate sum but that Unite could generate a report from the computerised system which would be an accounting record.

 

13.              Having referred to TULRCA sections 28(1)(a) and 28(2), at paragraph 38 the CO held:

“38. … In my judgement, the payment to members of the sums claimed online is a transaction and accordingly proper accounting records of these payments must be kept. …”

 

14.              The CO rejected the contention on behalf of Unite that the requirement in TULRCA section 28 is to be contrasted with the equivalent provision in the CA 2006 which requires the accounts of companies to both “show and explain the company’s transactions”.  Secondly the CO held that:

“38. … the transactions of a trade union cannot be explained if the payment made in respect of each transaction is not recorded and described in brief.  Indeed, this is consistent with the duty of a union under section 28(1)(b) to “establish and maintain a satisfactory system of control of its accounting records … and all its receipts and remittances”. …”

 

Thirdly the CO held, that the heading ‘stand down allowances’ does not correctly describe all payments.  The aggregated sum consists not only of stand down payments but also all other expenses claimed by the means of the online system and paid by BACS.  The CO held at paragraph 38:

“38. … Accordingly, I find that the Union has a duty to separately record each payment or remittance that it makes in such a way as to explain that transaction.”

 

15.              The CO concluded that Unite had breached TULRCA section 30(2)(a) by failing to give Mrs Mills access to the accounting records which record the individual transactions that had been aggregated and appear in the quarterly and annual accounts of the branch as ‘stand down’ or ‘stand down allowance’.

 

Accordingly in paragraph 44 the CO ordered that:

“44. … on or before 26 February 2016 Mrs Mills is given access to inspect print-outs of the accounting records of the BASSA branch for 2008 to 2013 which include the individual transactions which together constitute the aggregate amounts that are entered in the quarterly and annual accounts of the branch under the heading ‘Stand-Down’ or ‘Stand-down Allowance’.  The print-outs are to show the date each payment was made, the identity of the recipient and a brief description of the expenditure category or reason for the payment, consistent with the accounting conventions of the Union. …”

 

16.              The CO rejected the argument advanced by Mr Potter on behalf of Unite that requiring the naming of the lay representatives who received stand down allowances would infringe their rights to privacy under Article 8 of the European Convention on Human Rights.  He held that the union representatives had no reasonable expectation that the payments they receive from the union will remain private from other union members.  Further the CO concluded that even if Article 8 were engaged the disclosure of the records of claims made for stand down payments without redaction was necessary and proportionate in the circumstances of the case.

 

 

Submissions of the Parties

17.              At the outset of the hearing before us Mr Allen QC made it clear that Unite recognised that Mrs Mills is entitled to a disaggregation of the stand down payments into expenses and stand down allowance.  Counsel submitted that a lower level of detail was not required to comply with the obligation imposed by section 28.  The overarching submission made on behalf of Unite that was TULRCA does not require the ‘lower’ level of detail imposed under different statues.  On a proper construction of section 28 it was submitted that documents supporting the figures in accounts are not ‘accounting records’.  Mr Allen QC contrasted the requirements for placed on a trade union by TULRCA with the obligations placed on other organisations by different statutes.

 

18.              Mr Allen QC contrasted the obligation imposed by TULRCA section 30 to provide access to accounting records with obligations in relation to accounting records imposed by the Political Parties, Elections and Referendums Act 2000 (‘the Political Parties Act’) and the CA 2006.

 

19.              The Political Parties Act section 41 requires the treasurer of a registered party to ensure that accounting records are kept “which are sufficient to show and explain the party’s transactions”.  Mr Allen QC contended that section 41(3)(a) which provides:

“(3) The accounting records must in particular contain -

(a) entries showing from day to day all sums of money received and expended by the party, and the matters in respect of which the receipts and expenditure takes place; …”

specifies a level of detail not seen in TULRCA section 28.

 

The CA 2006 provides by section 386:

“386. Duty to keep accounting records

(1) Every company must keep adequate accounting records.

(3) Accounting records must, in particular, contain -

(a) entries from day to day of all sums of money received and expended by the company and the matters in respect of which the receipt and expenditure takes place, …”

 

Mr Allen QC submitted that TULRCA does not contain the particularity required by the CA 2006.  TULRCA does not for example require as does section 386 CA 2006 accounting records to contain entries from day to day of all sums of money received and expended by the company.  Whereas TULRCA in section 30(4) adopted the definition of the accountant from CA 2006 it did not do so in relation to the duty to keep accounting records.  Accordingly the judgment of the Deputy High Court Judge Michael Crystal QC in DTC (CNC) v Sargeant & Co (a firm) [1996] 2 AER 369 that “sales invoices, purchase invoices, cheque books, paying in books and branch statements were accounting records” within the meaning of section 221 of CA 1985, the predecessor of CA 2006 section 386, could not be relied upon to interpret TULRCA section 28.

 

20.              Mr Allen QC relied upon other provisions of TULRCA to submit that where Parliament had intended TULRCA to require details of income and expenditure to be given it had so provided.  For example section 32(3)(aa) provides that the union’s annual accounts should contain:

“(aa) details of the salary paid to and other benefits provided to or in respect of -

(i) each member of the executive,

(ii) the president and,

(iii) the general secretary,

…”

 

21.              Counsel submitted that TULRCA provides various routes for ensuring the integrity of the accounts of trade unions.  By section 33 a trade union is required to appoint auditors.  By section 34(1) the auditor must be eligible for appointment as a statutory auditor under Part 42 of the CA 2006.  The auditor of a trade union is required to make a report to it on the accounts audited by them and contained in the annual return.  By section 36(2) the annual return is to state whether, in the opinion of the auditor the accounts give a true and fair view of the matters to which they relate.  The auditor has a duty under section 36(3)(a) in preparing their report on the accounts audited by them contained in the annual return to carry out such investigations as will enable them to form an opinion as to:

“(a) whether the trade union has kept proper accounting records in accordance with the requirements of section 28,

(b) whether it has maintained a satisfactory system of control over its transactions in accordance with the requirements of that section, …”

 

Further, in accordance with section 37(1) the auditor has the right of access to accounting records and other documents and to require union officers to give them such information and explanations as they think necessary for the performance of their duties.

 

22.              Mr Allen QC referred to the additional safeguard and requirement of particularity to the power given by section 37A to the CO to require a trade union to provide relevant documents.  The production is without prejudice to any lien on them.  Counsel referred to the distinction made in section 37A(6) between accounting records and other documents.  It was submitted that there is no right for members to see documents which are behind accounting records which is the right given to the CO.

 

23.              There is no authority apart from the previous cases decided by the CO of Mortimer v Amicus 14 February 2003 and Foster v Musicians Union 22 May 2003 on the meaning of ‘accounting records’ in TULRCA.  Mr Allen QC referred to the judgment of the Court of Appeal in Macquarie Internationale Investments Ltd and Glencore UK Ltd [2010] EWCA Civ 697 in which in considering CA 1985 section 227A the Court of Appeal at paragraph 49 referred to the opinion of ‘true and fair view’ written by Leonard Hoffman QC and Mary Arden (both subsequently appointed to high judicial office).  They referred to guidance by the relevant professional body which should be taken into account by the courts in any given case.  Counsel contended that ‘accounting records’ do not include source documents if the secondary records give a true and fair view.  Mr Allen QC referred to what he contended was a distinction drawn in TULRCA between ‘accounting records’ to which member has a right to access under section 30 and the ‘proper accounting records’ in section 28(2) compared with the right of the CO under section 37(1) to have access to a wider class of documentation.  Accordingly Mr Allen QC contended that the CO but not a member of the union has a right to inspect documentation such as receipts and bank statements which lie behind the accounts.  Mr Allen QC accordingly contended that the difference between the right to inspect documents given to members and the obligations which arise in the annual audit and the powers of the CO to require the production of documents to him are considerable.  The Union adopted the approach in this regard of the CO in paragraph 32 of Foster.

 

24.              It was submitted on behalf of Unite that in the instant case the CO went beyond the requirements of section 28 and failed to distinguish between ‘accounting records’, the subject of section 28(1)(a) and ‘control of accounting records’ that of section 28(1)(b).  Accordingly it was said that in paragraph 38 of his judgment the CO erred in holding that the transaction of a trade union cannot be explained if the payment in respect of each transaction is not recorded and described in brief.  Reference to ‘all receipts and remittances’ is included in section 28(1)(b) but not 28(1)(a).  The Union therefore submitted that categorising transactions and providing cumulative totals can provide a sufficient explanation of transactions for the purpose of section 28.  It was said that the CO erred in holding that the Union has a duty to separately record each payment or remittance that it makes in such a way as explains that transaction.

 

25.              Whilst Unite agreed that it should disaggregate expenses and allowances included in stand down allowances it was contended that statements of payments to individuals should not be required or if they were to be required they should be anonymised.  Reliance was placed on Article 8 of the European Convention on Human Rights (‘ECHR’), the right to private life.  It was said that the CO erred in holding at paragraph 49 that Article 8 was not engaged on the facts of the case.

 

26.              Mr Allen QC relied upon the judgment of the ECHR in Niemietz v Germany [1993] 16 EHRR 97 paragraphs 29 and 31 to contend that Article 8(1) protection which was held to include certain business activities should be interpreted to include trade union activities.  It was submitted that the CO erred in holding that union members had no expectation of privacy in respect of sums they received from the union in stand down allowances.  Further it was said that the CO erred in holding that if he were wrong about the expectation of privacy in such information he erred in concluding that protecting privacy of recipients of such allowances was not justified and in holding that the disclosure of their names was necessary and proportionate.

 

27.              Accordingly Mr Allen QC contended that if the Union were required to give access to the print out of amounts claimed by individuals and paid to them as stand down allowances their names should be redacted.

 

28.              Mr Jody Atkinson for Mrs Mills emphasised that the Union’s money is the members’ money.  The Union has a record of the stand down payment made to each individual.  It was said there is a whole range of matters the CO would not be interested in but a member would, such as whether a stand down payment was more than the recipient would have received in wages and allowances if at work.  It was contended that if a member is only allowed to see secondary accounting documents without seeing source documents they would be unable to challenge such expenditure.

 

29.              It was submitted that an accounting document is something you keep for accounting reasons.  Mrs Mills wants to see bank statements of the Union showing the recipients of stand down payments.  The information currently ordered by the CO to be available for inspection does not enable scrutiny of the rate of payments to each individual.

 

30.              Mr Atkinson contended that TULRCA section 28(2) requires a union to keep accounting records of each transaction it makes not as Unite contends, each category of transaction.  Counsel submitted that if Parliament had just wanted members of a union to see the accounts it could have said so.  The fact that TULRCA section 30(2)(b) enables the member to be accompanied by an accountant when access is given to the accounting records shows that some expert auditing of the records is anticipated.

 

31.              Counsel for Mrs Mills disagreed with the conclusion of the CO in Mortimer v Amicus.  A member of the union applied under TULRCA section 31 for access to inspect accounting records relating to a termination payment to a Mr Chowcat.  Mr Atkinson took issue with paragraph 33 of the judgment in which the CO held that any receipt given by Mr Chowcat for the money he allegedly received is not an accounting record.  The CO held that “the use of the word ‘receipts’ in section 28(1)(b) is a reference to all invoices received by the Union, not a reference to individual acknowledgments of receipt given by persons to whom the Union has made a payment”.

 

32.              Further, counsel took issue with the judgment of the CO in Foster in which he held at paragraph 31:

“It will be a question of fact in each case whether any particular document has been retained principally for the purposes of forming part of the accounting records of the union.”

 

Counsel challenged the observation of the CO that in most cases the necessary accounting information in source material would be transferred as soon as it was practicable into secondary records which were the accounting records for the purposes of section 28.  He contended that it was illogical that something which was originally an accounting record would cease to be so when it was entered into a secondary record.  Once source material was incorporated into accounts there would be no entitlement to inspect them.  On this basis Mr Atkinson submitted that an approach that whether material was an accounting record was a question of fact in each case would cause difficulties.  Such an approach would cause uncertainty which would be difficult to resolve without litigation.

 

33.              Mr Atkinson referred to the decision in Mr G King and Mr M King v TGWU 20 December 2006 in which the Assistant CO held at paragraph 38 that the second page of a quarterly report which detailed all items of income and expenditure was compiled from source material and ‘as such’ constitutes an accounting record.  Counsel asserted that in King the union kept no ledger at all.  It would be perverse to reward a union for not keeping a ledger of income and expenditure which would be the case if the union were not obliged to give a member access to source documents.  Counsel pointed out that if such documents were not ‘accounting records’ to which a member was entitled to have access their only remedy would be under TULRCA section 32A(6)(a) to raise a concern on the annual return with, amongst others, the CO.

 

34.              Mr Atkinson contended that the approach of the Deputy High Court Judge in DTC (CNC) Ltd to ‘accounting records’ within the meaning of section 221 CA 1985 should be applied to that term in TULRCA.  In DTC (CNC) Ltd it had been accepted that sales invoices, purchase invoices, cheque books, paying-in books and bank statements were capable of being accounting records.  The issue was whether they ceased to be so after they were summarised in other documents.  It was held that the source documents did not cease to be accounting records for the purposes of an accountant’s lien.  Similarly Mr Atkinson contended that source documents constituted ‘accounting records’ for the purposes of TULRCA section 28.

 

35.              Mr Atkinson therefore submitted that the CO did not err in ordering Unite to give Mrs Mills access to print outs of the electronic accounting records of the BASSA branch for 2008 to 2013 to include the individual transactions which together constitute the aggregate amounts in the quarterly and annual accounts under the heading ‘Stand-Down’ or ‘Stand-Down Allowance’.

 

36.              Counsel further contended that the CO did not err in refusing the application of Unite for redaction of the names of claimants and recipients of the stand down allowances.  The power of the CO is circumscribed by TULRCA section 31.  Mr Atkinson contended that the CO did not err in his consideration of ECHR Article 8.  In his skeleton argument Mr Atkinson contended that if the right of inspection of accounting documents would invade a member’s Article 8 rights, their only remedy would be to seek a declaration of incompatibility from a Court with competence to make such an order.  This was not the CO or the EAT.  Rightly Mr Atkinson did not pursue this argument in his oral submissions.

 

37.              Mrs Mills cross-appealed the judgment of the CO.  It was contended that the CO erred in holding that Unite’s bank statements relating to the BASSA Central Fund, the Worldwide Section and the Eurofleet Section and the stand down payments claim forms submitted by Union representatives were not ‘accounting records’ to which she was entitled to access pursuant to TULRCA section 30.

 

38.              In answer to the cross-appeal, Mr Allen QC relied on the arguments in support of the appeal.  Counsel emphasised that a trade union is heavily regulated.  It is not like a company although pursuant to TULRCA section 10 it has quasi corporate status.  The requirement of record keeping by a company is different from that imposed on trade unions.  It was said that the approach in DTC (CNC) Ltd to records kept by companies was not to be applied to the scheme under TULRCA.  Accordingly the cross-appeal seeking to overturn the denial of access by Mrs Mills to the bank statements and claim forms for recipients of the stand down allowances was resisted.

 

Discussion and Conclusion

39.              The outcome of the appeal and the cross-appeal turns on the meaning and effect of TULRCA section 28.  TULRCA imposes the following duties on a trade union relevant to this appeal.  Pursuant to section 23(1)(a) a trade union is to cause to be kept proper accounting records with respect to its transactions and its assets and liabilities.  By section 28(2) proper accounting records shall not be taken to be kept with respect to those matters unless there are kept such records as are necessary to give a true and fair view of the state of affairs of the trade union and to explain its transactions.  By section 29(1) such records are to be kept available for inspection ‘from their creation’ until the end of the period of six years beginning with the 1st January following the end of the period to which they relate.  TULRCA gives members of a trade union two different rights in relation to accounts of a trade union and to complain to the CO.

 

40.              It is the accounting records which are to be made available for inspection under section 29 to which a member of a trade union has the right under section 30 to request access.  These are records required to be kept under section 28.  The trade union is to make arrangements for the member to be allowed to inspect the records accompanied by the member’s accountant.  The obligation imposed by section 28(1)(b) to establish and maintain a satisfactory system of control is different from that imposed by sections 29(1) and 28(1)(a).  Section 28(1)(b) differentiates between accounting records, cash holdings, receipts and remittances.  The union is required to maintain a system of control over these.  The right under which Mrs Mills complained to the CO under section 31(1) was infringed was to have access to the accounting records required to be kept available for inspection which is those to be kept in accordance with section 28 (1)(a).  Accordingly the documents Unite was obliged to give Mrs Mills access were those necessary to give her a true and fair view of the state of the affairs of the trade union, its assets and liabilities and to explain its transactions, the requirement of section 28(2).  If a member alleged breach of section 30 they may apply to the CO under section 31(1).

 

41.              Where on an application to him the CO is satisfied that the claim is well founded pursuant to section 31(2) he shall make such order as he considers appropriate for ensuring that the applicant - (a) is allowed to inspect the records requested (b) is allowed to be accompanied by an accountant when making the inspection of those records.

42.              Further a member of a trade union may complain to the CO under section 37E(1)(b) that there are circumstances suggesting a state of affairs set out in section 37B(2)(a) to (d), broadly misconduct including at (c) that the union has failed to comply with any duty imposed by TULRCA relating to its financial affairs.  The CO may then require the union to produce of documents under section 37A or to appoint an investigator under section 37B.

 

43.              Under section 33 a trade union is required to appoint auditors and under section 32 to send to the CO an annual return.  Within eight weeks of the annual return being sent to the CO the union is required to send a statement to members specifying various matters including at 32A(3)(d):

“… the salary paid to and other benefits provided to or in respect of -

(i) each member of the executive,

(ii) the president, and

(iii) the general secretary,

by the trade union during that period.”

 

44.              Under section 37A(1) the CO has power, if he thinks there is good reason to do so, to require a trade union to produce relevant documents to him.  By section 37A(6) ‘relevant documents’ mean ‘accounting documents’ and documents of any other description, which may be relevant in considering the financial affairs of the trade union.  Further, the CO has the power under section 37B to appoint an inspector to investigate the financial affairs of the union.  He may only make such an appointment if it appears to him that there are circumstances falling within section 37B(2).  These circumstances are serious wrongdoing including:

“(c) that the trade union has failed to comply with any duty imposed on it by this Act in relation to its financial affairs, …”

 

45.              By section 37E in situations which include a member complaining to the CO that there are circumstances suggesting any of the state of affairs specified in section 37B(2)(a) to (d), the CO shall consider whether it is appropriate for him to exercise any of the powers conferred to him by sections 32A and 37B.  Where the CO directs an inspector or inspectors to make a final report he will publish the report and make it available to the trade union, the auditor of the trade union if he so requests and to a member if he has made a complaint to the CO of circumstances falling within section 37B(2)(a) to (d).

 

46.              In our judgment a different meaning is to be given to the different terms: ‘accounting records’ in sections 28 and 29, ‘accounting documents’ and documents of any other description which may be relevant in considering the financial affairs of the union in sections 37A(6) and 37B(3)(a).  These are to be produced to the CO or to his staff if there is good reason for him to direct the trade union to do so or to an inspector, if appointed, if the CO so decides on a member of the trade union complaining under section 37E(1)(b) of circumstances suggesting a state of affairs specified in section 37B(2)(a) to (d).

 

47.              The structure of the legislation leads to the conclusion that accounting records are the records compiled from primary documents such as receipts, invoices and bank statements.  Those accounting records must give sufficient information as is necessary to give a true and fair view of the trade union and to explain its transactions.

 

48.              The statutory entitlement to inspect documents lying behind the accounting records is expressly provided in TULRCA to auditors, the CO and inspectors but not to members.  TULRCA gives power, if they did not have it in any event, for auditors to have access to all other documents relating to the union’s as well as accounting records.  If he thinks there is good reason to do so the CO under section 37A has the right to require accounting documents and other relevant documents of any other description to be produced.  An inspector appointed by the CO has similar power to require the production of ‘relevant documents’.

 

49.              Counsel referred to an opinion of Martin Moore QC of 21 April 2008 in which he considered whether any revision to the approach to be taken to the concept of ‘true and fair view’ as articulated in the opinions of Leonard Hoffman QC and Mary Arden (as they then were) written in 1983 and 1984 was required in the light of EU Directives and Regulations and the requirements of the CA 2006.  In short, the answer was no.  Martin Moore QC included in his summary of the essence of the opinions that:

“(c) In determining that question (whether the accounts give a true and fair view), the courts will rely very heavily upon the ordinary practices of professional accountants in determining whether accounts show a true and fair view.

(e) The application of the concept involves judgement on questions of degree.”

 

50.              In our judgment the CO was right to have regard to but not to treat as determinative in the construction of ‘accounting records’ in TULRCA that of the term in section 221 of the CA 1985 considered in DTC gave greater particularity of what was required for accounting records than does TULRCA section 28(1)(a) and (2).  Section 221 provides:

“(2) The accounting records shall in particular contain -

(a) entries from day to day of all sums of money received and expended by the company, and the matters in respect of which the receipt and expenditure takes place …”

 

51.              Unlike CA section 221, TULRCA section 28 does not specify what the accounting records are to contain.  It does require that they explain its transactions.  In our judgment it must be a question of fact and degree in each case as to what records are necessary to explain the transactions of a trade union.  We accept that, as submitted by Mr Atkinson, there is an element of uncertainty in applying such a test.  It was stated of ‘true and fair view’ in the joint opinions of Leonard Hoffman QC and Mary Arden summarised by Michael Moore QC “the application of the concept involves judgment on questions of degree” and “there may be more than one view of a financial position, any of which could be described as true and fair”.  Similar observations can be made as to what records are necessary to explain the transactions of a trade union under TULRCA section 28(1)(a) and (2).  Where, as on the facts of this case, the issue about what material is an accounting record necessary to explain the transactions of a trade union was for the CO to decide.

 

52.              Mr Atkinson contended that the construction of ‘accounting records’ contended for by Mr Allen QC would lead to the conclusion that once primary documents are entered into a secondary schedule of income and expenditure they would cease to be documents which a member of a trade union would be entitled to inspect.  Counsel submitted that this would be inconsistent with the requirement imposed on a trade union by section 29 to keep accounting records for six years.

 

53.              Counsel submitted that the statutory right of a member of a trade union to be accompanied by a qualified accountant when exercising their statutory right to inspect accounting records shows that the intention of the legislature is to confer the right to inspect source documents.  Otherwise, it is said, what role would an accountant fulfil on such an inspection?

 

54.              The duty imposed by section 29(1) is to keep for six years accounting records the subject of section 28.  The union is to keep such records as are to be made available for inspection by a member exercising rights of access under section 30.  These are likely to include but not be limited to documents a trade union may be called upon to show an auditor exercising rights under section 37 and, no doubt, his professional duty as a statutory auditor.

 

55.              There has been no judgment of this or a higher court on the meaning of ‘accounting records’ within TULRCA section 28(1)(a) and (2).

 

56.              In Mortimer the CO decided whether a termination agreement with an official and any receipt for money paid under the agreement was a document to which the union member had a right of access under section 30.  The CO held that he did not.  At paragraph 32 the CO held:

“… an accounting record for the purposes of Section 30 of the 1992 Act is, in my judgement, a record which is created or kept principally for the purposes of accounting”

 

57.              A similar approach was adopted by the CO in Foster.  The CO held at paragraph 31 that:

“In most cases … the necessary accounting information on such source material [receipts and evidence of petty cash expenditure] will be transferred as soon as practical to an accounting record, such as a day book, a sales or purchase ledger or a nominal ledger.  It will be a question of fact in each case whether any particular document has been retained principally for the purposes of forming part of the accounting records of the union.”

 

The CO posited that where a trade union has no secondary records the source documents may be the accounting records.

 

58.              ‘Accounting records’ within the meaning of TULRCA section 28(1)(a) and (2) to which a member has a right under section 30 to access and inspect are records which give a true and fair view of the state of affairs of a trade union, its assets and liabilities and those necessary to explain its transactions.  The question of ‘true and fair view’ is a matter of accounting practice, hence the right of a member to be accompanied by an accountant when inspecting accounting records under section 30.  The CO did not accept the submissions of counsel for the union and for Mrs Mills that he should reconsider his approach to in Mortimer and Foster on the meaning of ‘accounting records’ within section 28.

 

59.              Where we differ from the CO in Mortimer and Foster is that in our judgment the question of whether accounting documents are records within the necessary sections 28(1)(a) and (2) and 29 does not depend on the purpose for which they are created or kept.  The adjudicator, in this case the CO, is to apply an objective test as to whether the records are necessary to give a true and fair view of the state of affairs of the trade union and to explain its transactions.  In circumstances in which such records do not exist or have not been retained the CO has the power to appoint an inspector under section 37B(2)(c).  Source documents may not be adequate to meet the requirements of section 28(1)(a) and (2).

 

60.              In our judgment the CO did not err when he held at paragraph 33:

“33. …primary or source documents created for effecting or evidencing a transaction, such as a bill, an invoice or a receipt may be described as a record of financial information but they are not ordinarily an accounting record.  In certain circumstances, however, source materials such as invoices and receipts may have been retained principally for the purposes of accounting and thus be categorised as accounting records. …”

 

However we disagree with his observation that “accounting records are those created or kept principally for the purpose of accounting”.  Whether something is an accounting record an objective test is to be applied.  It may be that invoices and receipts are retained for the purpose of accounting.  They may need to be made available to the auditor for checking the accounts.  The fact that documents are kept for the purposes of accounting does not transform them into accounting records within the meaning of TULRCA section 28(1)(a)and (2).

 

61.              Proper accounting records within the meaning of section 28 are those which are “necessary to give a true and fair view of the state of affairs of the trade union and explain its transactions”.  A pile of receipts and invoices kept in a drawer or plastic bag may not fulfil the section 28 obligation.  Whether they do so in a particular case, perhaps in the circumstances of a small union posited by the CO at paragraph 31 of Foster, will be a question of fact and degree.

 

62.              The findings of fact made by the CO relevant to the appeal by the union are concerned with stand down payments.  The CO recorded at paragraph 11 that representatives who wish to claim a stand down allowance would fill in an online form and would receive payments at the end of the month by BACS if authorised.  At the hearing we were told that the purpose of the stand down payments was to make good to officials performing union duties those allowances would have received had they been at work.  These officials were airline cabin crew.  Typically these would be for food and allowances for overnight stays away from home.  The BASSA branch has some 38-40 lay representatives.  The entries on sheets provided by Unite showed that significant sums were paid to such representatives, typically around £40,000 a month in total.  The sums included not only stand down allowances but also expenses.  Unite agree that these should be shown separately.  Mrs Mills was concerned that some officials were receiving more by way of stand down allowances than they would have been paid by their employer if they had been at work.  She therefore wished to have access to and inspect the claims made and payments to each official.

 

63.              On those facts the CO held at paragraph 38 that “the payment to members of the sums claimed online is a transaction and accordingly proper accounting records of these payments must be kept”.  He stated that section 28(2) “provides for an outcome that the accounting records must achieve”.  The CO held:

“38. … In my judgement, the transactions of a trade union cannot be explained if the payment made in respect of each transaction is not recorded and described in brief. …”

Accordingly the CO concluded at paragraph 41 that Unite was in breach of TULRCA section 30(2)(a) by failing:

“41. … to give her [Mrs Mills] access to the accounting records which record the individual transactions that had been aggregated and appear in the quarterly and annual accounts of the branch as ‘stand-down-‘ or ‘stand-down allowance’.”

 

The CO ordered at paragraph 44:

“44. … that on or before 26 February 2016 Mrs Mills is given access to inspect print-outs of the accounting records of the BASSA branch for 2008 to 2013 which include the individual transactions which together constitute the aggregate amounts that are entered in the quarterly and annual accounts of the branch under the heading ‘Stand-Down’ or ‘Stand-down Allowance’.  The print-outs are to show the date each payment was made, the identity of the recipient and a brief description of the expenditure category or reason for the payment, consistent with the accounting conventions of the Union.  My more detailed order appears under paragraph 2 of my decision above.”

 

64.              An appeal to this Court lies under TULRCA section 45(d) from the decision of the CO on an application under TULRCA section 31(1) on a question of law.  In paragraph 33 the CO rejected the submission that he should depart from his previous interpretation of ‘accounting records’ in section 30 which included what is in our judgment an error in applying section 28 by considering whether the document is created or retained for ‘accounting purposes’.  Not all documents created or retained for accounting purposes ‘are accounting records’.  However when the CO applied section 28 to the facts of this case in paragraphs 38 to 41, he reached a permissible conclusion on the material before him.  The individual claims for stand down allowances by and remittances to officials were necessary for explaining the transactions of payments to them of substantial sums of money and were ‘accounting records’.  It cannot be said that such a conclusion was perverse.

 

65.              The CO considered whether he should order the redaction of the names of the recipients of stand down payments in order to respect their right to privacy under Article 8.  He decided not to do so.  He did not reach his decision on the basis advanced before us by Mr Atkinson: that the CO had no power to direct redaction because he could only order inspection and access to documents in the form in which they already existed and that in any event he had no power to read section 31(2) contrary to its language so as to render it compatible with Article 8.

 

66.              In our judgment Niemietz v Germany [1993] 16 EHRR 97, Societe Colas Est v France [2004] 39 EHRR 17, Campbell v MGN Ltd [2004] 2 AC 457 and Wypych v Poland application 2428/05 relied upon by Mr Allen QC do not assist Unite.  The CO properly considered whether Article 8 rights were engaged by giving access to documents showing the names of those who received stand down payments.  He came to an entirely permissible conclusion that Article 8 rights were not engaged for the reason that the union members had no expectation of privacy.

 

67.              Despite this conclusion, if he were mistaken the CO undertook a proper balancing exercise in deciding that the interference with privacy was necessary and proportionate in the specific circumstances of the case for the reasons he gave.  The CO held that having regard to his finding with regard to Article 8(1) of the Convention it was not necessary that he consider Article 8(2). However he found at paragraph 50 that disclosing the identity of recipients of stand down payments was “necessary and proportionate in the specific circumstances of a voluntary organisation which is funded by members’ contribution and which pays expenses to other members from those contributions”.  The CO concluded that “the protection of the statutory right of other members to have access to those accounting records requires that they be produced without redaction”.  In order to comply with TULRCA section 28 and which, in particular explains its transactions in a sufficiently transparent manner.  The CO concluded that having carried out the balancing exercise required by Article 8(2):

“50. … I find that section 30 of the 1992 Act and an order which requires the disclosure of accounting records that reveal the identity of persons to whom payments in respect of stand-down allowances and/or expenses do not amount to interference by a public authority with the exercise of the Article 8(1) rights of the named individuals, should they (contrary to my primary finding) have any such rights.”

 

For those reasons the CO rejected Unite’s submission that he should make an order redacting the names of the recipients of stand down payments.  Not only did the CO correctly direct himself as to the effect of Article 8 but he reached a permissible conclusion on the evidence, one with which this Court would also reach if it were asked to consider afresh the application for redaction.

 

Accordingly the appeal is dismissed.

 

68.              As for Mrs Mills’ cross-appeal, that the CO erred in holding that bank statements which lie behind the figures for sundry items which appear in the quarterly and annual accounting records of the branch are not accounting records within the meaning of that term in TULRCA section 21(1)(a) and (2), in our judgment the CO correctly applied section 28 (1)(a)and (2).  The CO held at paragraph 35 that Mrs Mills was given access to accounting records of the BASSA Branch with regard to sundry items.  These appeared in the quarterly and annual accounting records.  The basis of the late application by Mrs Mills for bank statements was to enable her to check that the entries in the accounting records are correct.  The obligation in section 30(1) is met by giving access to accounting records.  As the entries regarding sundries in the quarterly and annual accounting records satisfy section 28(1) (a) and (2), which the CO held they did, there is no breach of section 30(1).  Just before the handing down of this Judgment we were informed that Mrs Mills applied, as provided by section 37E(1)(b), on 1 April 2015 and at the hearing before the CO for him to carry out an investigation under section 37B of the accounts as not being compliant with TULRCA section 28.

 

69.              The cross-appeal is dismissed.

 

70.              No doubt in light of the pending appeal and cross-appeal Unite has not yet complied with the Order from which they appealed and the CO has not yet decided whether to exercise his discretion to carry out the investigation of the accounts of the Union requested by Mrs Mills.  The effect of this Judgment is that the Order of the CO for inspection of accounting records remains in place and the decision whether to carry out an investigation under section 37B is outstanding.  The CO had allowed six weeks from the date of his Judgment for compliance.  We are asked by Mr Atkinson that eight weeks from the seal date of the Order of the Employment Appeal Tribunal be given.  We make an Order varying that of the CO requiring compliance by Unite with the Order of the CO by a date eight weeks from the seal date of the Order of the Employment Appeal Tribunal be given or such other date as may be agreed by the parties or further Order.  

 


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