Eric Gordon Arthur Dixon v Australian Society of Accountants [1989] ACTSC 12 (16 March 1989)

SUPREME COURT OF THE ACT

ERIC GORDON ARTHUR DIXON v. AUSTRALIAN SOCIETY OF ACCOUNTANTS
S.C. No. 1302 of 1987
Administrative Law

COURT

IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Miles C.J.(1)

CATCHWORDS

Administrative Law - domestic tribunal - decision - professional accountant - rules of accounting association - professional misconduct - whether facts supported decision - jurisdiction of Court - contractual force of rules - reasons for decision - whether duty to provide.

Cameron v. Hogan [1934] HCA 24; (1934) 51 CLR 358

Hickman v. Kent or Romney March Sheep Breeders Association (1915) 1 Ch 811

Plenty v. Seventh-Day Adventist Church of Port Pirie (1986) 43 SASR 121

McKinnon v. Grogan (1974) 1 NSWLR 295

Finlayson v. Carr (1978) 1 NSWLR 657

Lee v. The Showman's Guild of Great Britain (1952) 2 QB 329

Edwards v. Sogat (1971) Ch. 354

Enderby Town Football Club Ltd. v. Football Association Ltd. (1971) Ch 591 at 606

Calvin v. Carr (1977) 2 NSWLR 308 at 332, per Rath J.

Forbes v. New South Wales Trotting Club Ltd. [1979] HCA 27; (1979) 143 CLR 242 at 275, per Murphy J.

Australian Workers' Union and Others v. Bowen and Others [1948] HCA 35; (1947) 77 CLR 601

Sunil Chandra Bhattacharya v. General Medical Council (1967) 2 AC 259

Mercer v. Pharmacy Board of Victoria (1968) VR 72

Breen v. Amalgamated Engineering Union (1971) 2 QB 175 at pp 186-194

Public Service Board of NSW v. Osmond [1986] HCA 7; (1985-1986) 159 CLR 656 at 664

HEARING

CANBERRA
16:3:1989

Counsel for the Plaintiff : Mr. T.J. Higgins, Q.C.

Mr. J. Purnell

Solicitors for the Plaintiff: Vandenberg Reid Pappas &
MacDonald

Counsel for the Defendant: Mr. G. Nash
Mr. R. Berglund

Solicitors for the Defendant: Maliganis Edwards Johnson

ORDER

There be judgment for the defendant.

The order nisi be discharged.

The plaintiff pay the defendant's costs.

DECISION

The defendant (the Society) is a company incorporated in the Australian Capital Territory and limited by guarantee. The plaintiff was at all material times a practising accountant and a member of the Society. The plaintiff's claim was commenced by writ issued on 29 October 1987. On the same day Kelly J. made an order nisi for the issue of a writ of certiorari and adjourned the hearing to 11 November 1987 for the return of the order nisi. On the latter date various orders were made and the matter thereafter proceeded by way of pleadings and affidavit evidence. At the hearing before me counsel for the plaintiff abandoned the application for a writ of certiorari.

2. The amended statement of claim seeks declarations that certain findings of the Disciplinary Committee of the Society relating to the plaintiff are unlawful and void. Other relief was sought in the amended statement of claim, but that also was abandoned at the hearing.

3. The objects for which the Society was established include the following:

"1. To support protect and advance the
character status and interest of the
accountancy profession generally and
particularly of Accountants being members of
the Society.
2. To promote honourable practice, to repress
mal-practice, to settle disputed points of
practice and to decide all questions of
professional usage, etiquette or courtesy
and all disputes between or amongst
Accountants."

4. In accordance with the Articles of Association of the Society, the Disciplinary Committee had delegated to it the power to impose one or more of specified penalties where in accordance with Article 26(1) a member of the Society, in the opinion of the Disciplinary Committee:

"(b) has been guilty of dishonourable practices
or conduct derogatory to the profession of
an Accountant or conduct which is not in the
best interest of the Society or its members;
(c) has failed to observe a proper standard of
professional care, skill or competence."

5. The findings under attack are to the effect that the plaintiff was guilty of professional misconduct as an accountant. The plaintiff contends that the material before the Disciplinary Committee was incapable of supporting a finding of professional misconduct and that at the time of delivering its decision the Disciplinary Committee declined to give reasons.

6. There was no oral evidence before me and the factual background was not in dispute. It may be stated shortly as follows.

7. The plaintiff had been in practice as an accountant for approximately twenty years. Amongst his clients were a Mr. and Mrs. Jordan. The plaintiff prepared and filed their tax returns. The plaintiff helped the Jordans set up a family trust in 1983 and in 1986 helped prepare documents for the proposed sale of a milk bar that they owned at Pambula in New South Wales.

8. On 9 March 1987 the Jordans made a complaint to the Society about the conduct of the plaintiff in handling their affairs.

9. In accordance with the Articles of Association the Investigatory Committee of the Society enquired into the conduct of the plaintiff and he was charged by means of what was called a "case to answer". The charges were laid by sending a copy to the plaintiff's solicitor on 15 July 1987. The two charges were in the following terms:

"(a) In relation to a Deed of Trust dated
129th June 1983 for a Trust known as the
"Jordan Family Trust" pursuant to which the
members then clients Sebastian Jordan and
Audrey Ursula Jordan ("the clients") were
the trustee, the member did on 29th June
1983 without the knowledge or authority of
the clients execute a document described as
a Deed of Variation of the said trust which
purported to substitute himself for the
clients as trustee and as a consequence of
which the member became a trustee de son
tort,
(b) The member prepared or caused to be prepared
two sets of income and expenditure accounts
for the year ended 30th June 1986 for Rinbit
Pty Ltd trading as Pambula Milk Bar, the one
revealing gross sales of $410,800, stock at
30 June 1986 of $20,547.00, wages of
$49,161.00 and a nett profit of $17,390.00
and the other revealing gross sales of
$369,524.00, stock at 30th June 1986 of
$27,064.00, wages of $29,161.00 and a nett
profit of $2,631.00 and representing falsely
in relation to the former "This Statement
forms part of and accompanies the Company
Income Tax Return in respect of the year
ended 30 June 1986" and in relation to the
latter "This Statement forms part of and
accompanies the Company Income Tax Return in
respect of the year ended 30 June 1986."

10. A hearing of the charges took place before the Disciplinary Committee in Canberra on 10, 20 and 27 August 1987. The plaintiff was represented by counsel. The Disciplinary Committee made a general finding that the charges had been proved. In relation to the first charge the Disciplinary Committee further found that the plaintiff had failed to observe a proper standard of professional care, skill and competence. In relation to the second charge the Disciplinary Committee further found that the plaintiff was guilty of conduct derogatory to the profession of an accountant. On both charges he was censured, fined and the costs of the proceedings were awarded against him. The Disciplinary Committee gave the plaintiff until 2 November 1987 to pay the fines and awards of costs.

11. It is not disputed that the material before the Disciplinary Committee established or was capable of establishing the following facts.

12. By Deed bearing dated 29 June 1983 one Joseph Hassan established what became known as the Jordan Family Trust. Sebastian Jordan and Audrey Ursula Jordan were appointed the trustees and a number of other persons were named as the beneficiaries. Whether 29 June 1983 was the true date of execution, is not clear. After the Deed was executed and when it was in the possession of the plaintiff it was discovered that the true intention of the parties was not effected by the Deed because it had been intended that Mr. and Mrs. Jordan should be included amongst the beneficiaries of the trust. The plaintiff spoke to the solicitors who had drawn up the Deed and as a result of the conversation he himself drew up a Deed of Variation which he alone executed on 29 June 1983 purporting to appoint himself as the trustee in substitution for Mr. and Mrs. Jordan and to add Mr. and Mrs. Jordan to the list of beneficiaries.

13. In taking this step the plaintiff did not gain any personal advantage and as it turned out, neither the Jordans nor the previous beneficiaries suffered any prejudice.

14. The Jordans conducted their milk bar business through the medium of a company known as Rinbit Pty. Limited. In a document attached to the company income tax return for the year 30 June 1986, prepared by the plaintiff, the income and expenditure account showed a net profit after deduction of operating expenses from gross sales of $2,631.

15. Later in 1986 the Jordans considered selling the milk bar business. They enlisted the services of the plaintiff to provide financial statements for production to persons interested in buying the business. The plaintiff spoke to Mr. Van Severen, who managed the business. This was when the plaintiff was on a visit to the area and when he did not have with him the income and expenditure account attached to the income tax returns for the year ended 30 June 1986. Relying on the information given to him there and then by Mr. Van Severen, the plaintiff prepared a document purporting to set out the figures for gross sales and gross profits for the year ended 30 June 1986. He did not check to see whether the figures Mr. Van Severen gave him coincided with those in the 1986 income tax return. The figures supplied by Mr. Van Severen showed a net profit after deduction of operating expenses from gross sales of $17,390, a much higher profit than that shown in the document attached to the 1986 income tax return. The plaintiff caused the document showing the net profit at the higher figure to bear the heading "This statement forms part of and accompanies the income tax return in respect to year ended 30 June 1986". On 25 September 1986 he sent copies of this latterly prepared income and expenditure account to Mr. Van Severen under cover of letter in which he stated that the document was for "distribution to all prospective purchasers". He added that copies had already been sent to an accountant who was presumably acting for one such prospective purchaser.

16. The material before the Disciplinary Committee did not establish that the so-called income and expenditure account sent under cover of the letter of 25 September 1986 showed a false picture of the company's financial position. Where it was undoubtedly false was in its presentation as a copy of what had accompanied the 1986 income tax return. A purchaser might have taken a different view of the financial affairs of the company if a true copy of what accompanied the 1986 income tax return had been furnished.

17. In the proceedings before me it was submitted on behalf of the plaintiff that on no view of these facts was the Disciplinary Tribunal entitled to come to the conclusion that the plaintiff had, in relation to the deed of variation, failed to observe a proper standard of professional care, skill or competence and, in relation to the financial statements of Rinbit Pty Limited, had indulged in conduct derogatory to the profession of an accountant. It was further submitted that as the facts could not support the conclusions of the Disciplinary Committee, the decision of the Disciplinary Committee should be declared void.

18. The plaintiff claims on the general principle that the Court will act to overturn the decision of a tribunal such as the Disciplinary Committee where the tribunal has made a decision to the plaintiff's detriment which was not open upon the material which the tribunal took into consideration. On the contrary, the defendant submits that the Court has no power to intervene in the decision of a domestic tribunal like the Disciplinary Committee unless the decision affects property rights, or the decision is in breach of contract or the decision significantly affects the plaintiff's right to work. The defendant places basic, if somewhat unenthusiastic reliance on Cameron v. Hogan [1934] HCA 24; (1934) 51 CLR 358. There has been much discussion about the true ratio of that case, but whatever the ratio might be, the view was taken by the High Court that the rules of the association concerned (the Australian Labor Party) did not give rise to contractual rights among members. On the contrary, in my view, it cannot be said that persons who become members of a company incorporated under the Companies Act or its predecessor do not intend to enter into contractual relations with the company: Hickman v. Kent or Romney March Sheep Breeders Association (1915) 1 Ch 811.

19. In any event, Cameron v. Hogan has been distinguished on many occasions in recent years, for instance by the Full Court of the Supreme Court of South Australia in Plenty v. Seventh-Day Adventist Church of Port Pirie (1986) 43 SASR 121, and by single Judges of the Supreme Court of New South Wales in McKinnon v. Grogan (1974) 1 NSWLR 295, Finlayson v. Carr (1978) 1 NSWLR 657. In McKinnon's case Wooten J. said at p 299:

"Despite Cameron v. Hogan, the courts frequently
deal with disputes between individual members and
social clubs, such as RSL Clubs. This seems
to be both proper and desirable, and the court
should be willing to assist in resolving disputes
in organizations, whatever their size, in which
parties have deliberately adopted formal rules to
govern their relations."

20. In Lee v. The Showman's Guild of Great Britain (1952) 2 QB 329, Denning L.J., as he then was, discussed the powers and duties of domestic tribunals established by agreement amongst the members and contrasted them with statutory tribunals which derive their powers and duties from legislation. Lee's case has received approval in both Great Britain and Australia Edwards v. Sogat (1971) Ch 354, Enderby Town Football Club Ltd. v. Football Association Ltd. (1971) Ch 591 at 606, Calvin v. Carr (1977) 2 NSWLR 308 at 332, per Rath J., Forbes v. New South Wales Trotting Club Ltd. [1979] HCA 27; (1979) 143 CLR 242 at 275, per Murphy J.

21. The defendant sought support from the decision of the High Court of Australia in Australian Workers' Union and Others v. Bowen and Others [1948] HCA 35; (1947) 77 CLR 601. The headnote to the report states that when considering the findings of a domestic tribunal the duty of a Court is to determine whether the tribunal has observed the rules of the association and complied with the rules of natural justice and a court has no jurisdiction to review the findings of the tribunal only for the purposes of examining their correctness. However, Bowen's case was concerned with the powers of the Court of Conciliation and Arbitration under the Conciliation & Arbitration Act 1902 in relation to rules and decisions of an industrial organization registered under that Act. As Latham C.J. observed at p 608, whilst the Arbitration Court had a much wider jurisdiction than that of a Court of Equity, it was not its province to determine whether the organization was correct in what it did but only whether it observed the rules and acted in good faith.

22. In Lee v. The Showman's Guild, Denning L.J. said that all domestic tribunals were required to observe the principles of natural justice, for instance giving the person charged due notice of what was alleged against him and an opportunity of meeting it and further that any stipulation to the contrary, or seeking to make the tribunal's decision unexaminable by the Courts, would be void. In the present case no complaint is made about any matter of that nature. Denning L.J. went on to say that where a domestic tribunal sits in judgment of a member of a trade or profession, the Courts will always examine the decision to see that the tribunal has observed the law, including a correct interpretation of the rules. The rules, according to Denning L.J., are the contract between the members. The tribunal cannot extend the jurisdiction given to it by the members by placing a wrong construction upon the contract, no matter how honest it may be. It is true, as was submitted on behalf of the Society in the present case, that neither the Disciplinary Committee nor indeed the Society itself has the power to prevent a member from carrying on practice as an accountant. Nevertheless its powers are, in my view, sufficiently wide and drastic in relation to the conduct of the practice of an accountant by a member that Denning L.J's comments should be taken to apply to it.

23. However, as Denning L.J. said, the tribunal has not only to apply the rules as construed, it must apply them to the facts as found. When the construction of the rules is bound up with the application of the rules, then:

"the question whether the committee has acted
within its jurisdiction depends, in my opinion,
on whether the facts adduced before them were
reasonably capable of being held to be a breach
of the rules. If they were, then the proper
inference is that the committee correctly
construed the rules and have acted within their
jurisdiction. If, however, the facts were not
reasonably capable of being held to be a breach,
and yet the committee held them to be a breach,
then the only inference is that the committee
have misconstrued the rules and exceeded their
jurisdiction. The proposition is sometimes
stated in the form that the court can interfere
if there was no evidence to support the finding
of the committee; but that only means that the
facts were not reasonably capable of supporting
the finding."

24. It seems to me, with respect, that this passage sums up the law on the subject as it relates to the present case and is wholly consistent with the Australian decisions. I conclude that the Court has the power to make the declarations sought if it can be shown that the facts as found and as already stated above were not reasonably capable of supporting the decision of the Disciplinary Committee. It was also argued, as I understand it, on behalf of the plaintiff, that it cannot be shown that the Disciplinary Committee correctly interpreted and applied the rules because it did not give reasons for its decision. In my view, this is a wholly different question from whether the facts as found were capable of supporting the decision. The decision to be made on the facts found was whether, first, the plaintiff's conduct in relation to the deed of variation of trust involved a failure to observe a proper standard of professional care and skill and, secondly, whether his conduct in relation to the financial statements amounted to conduct derogatory to the profession of an accountant. I interpolate that the Disciplinary Committe was peculiarly well suited to decide matters relating to professional standards and misconduct of its members (see Sunil Chandra Bhattacharya v. General Medical Council (1967) 2 AC 259).

25. It is clear, in my view, that on the facts it was well open to the Disciplinary Committee to arrive at its decision that its member had transgressed the standards of competence, skill and integrity that the general body of practising and experienced accountants regard as appropriate to the discharge of the professional duties owed by a member of the accountancy profession to a client and necessary for the maintenance of the confidence of the public in the profession as a whole. Professional misconduct of that nature does not necessarily involve fraud or immorality or what has in some cases been referred to as "infamous" conduct (see Mercer v. Pharmacy Board of Victoria (1968) VR 72) particularly where what is to be established is conduct which is improper "in the opinion" of the tribunal: see Bowen's case at 606 and Lee's case at 349.

26. I would add that in executing the deed of variation the plaintiff not only acted without instructions and purported to appoint himself as trustee, he purported to appoint additional beneficiaries. The conflict of interest and the potential prejudice to those affected by the deed is obvious. It was fortunate that no actual detriment appears to have been suffered, although I was not informed about how the difficulties were eventually resolved.

27. The representation by the plaintiff that the financial position of the company was such that its income tax return for 1986 showed an operating profit of $17,390 when in fact the income tax return showed a much lower profit, was made in the knowledge that prospective purchasers would be furnished with the financial statement showing the higher profit. It can hardly be argued, in my view, that that did not amount to professional misconduct of some sort. The Disciplinary Committee considered his conduct derogatory of the profession, that is tending to lower its members in the eyes of reasonably minded members of the public. That view was well open.

28. The final matter for decision is whether the Disciplinary Committee was required to give reasons. In fact it declined to give reasons when asked by counsel for the plaintiff. If the Disciplinary Committee was under a duty to give reasons either because of the provisions of the rules or because fairness so required, then it may well be that its decision should be regarded as void: Breen v. Amalgamated Engineering Union (1971) 2 QB 175 at pp 186-194, per Denning M.R., Public Service Board of NSW v. Osmond [1986] HCA 7; (1985-1986) 159 CLR 656 at 664.

29. However, it is quite clear, in my view, that it was under no such obligation. No reliance was placed on the rules, but it was submitted that fairness or natural justice, which may be the same thing, entitled the plaintiff to know the reasoning which led to the Disciplinary Committee's decision. It is hardly necessary on this aspect to go beyond the decision of the High Court in Osmond. Although that was a case concerned with a statutory tribunal where the duties of the tribunal might depend at least in part on the terms of the statute, Gibbs C.J., with whom the other members of the Court agreed, said at p 663 that domestic tribunals are not bound to give reasons for their decision. The general principle was expressed thus at p 663:

"Where the rules of natural justice require that
a body making a decision should give the person
affected an opportunity to be heard before the
decision is made, the circumstances of the case
will often be such that the hearing will be a
fair one only if the person affected is told the
case made against him. That is quite a different
thing from saying that once a decision has been
fairly reached the reasons for the decision must
be communicated to the party affected."

30. It may be that in the case of a domestic tribunal established not under statute but under rules or articles of a body such as the Australian Society of Accountants, the rules or articles may themselves require the tribunal to give reasons, but that is not the case here.

31. Finally, in Osmond Gibbs C.J. said at p 667 that the suggestion that an administrative tribunal must give reasons in order to enable its decision to be tested by judicial review:

"would undermine the rule, well established at
common law ..... that reasons do not form part of
the record, for the purposes of certiorari,
unless the tribunal chooses to incorporate them."

32. In Lee v. The Showman's Guild Denning L.J. said at p 346 that certiorari does not lie to domestic tribunals. Counsel for the plaintiff properly conceded that there was no case to support a claim for certiorari.

33. The statement of claim sought, in addition to declarations, orders in the nature of injunctions restraining the defendant from acting upon the Disciplinary Committee's decisions. In accordance with my findings and rulings above, these orders will be refused.

34. There will be judgment for the defendant. The order nisi is discharged. The plaintiff is to pay the defendant's costs.