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High Court of New Zealand Decisions |
SEARCH OF COURT FILE PROHIBITED WITHOUT LEAVE OF A JUDGE
IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY
CIV 2005-404-2642
BETWEEN P K BEATON
Plaintiff
AND INSTITUTE OF CHARTERED
ACCOUNTANTS OF NEW ZEALAND
Defendant
Hearing: 29 July 2005
Appearances: M Muir and C Baker for the Plaintiff
M P Reed QC and P A Morten for the Defendant
Judgment: 17 November
2005
JUDGMENT OF ALLAN J
Solicitors: Price Baker Berridge, PO Box 21463, Henderson, Auckland
Kensington Swan, PO Box 10246, The Terrace, Wellington
BEATON V INSTITUTE OF CHARTERED ACCOUNTANTS OF NEW ZEALAND
HC AK CIV 2005-404-
2642 17 November 2005
[1] Body Corporate Administration (BCA) offers secretarial services to bodies
corporate
and participants in cross-lease developments. It has been doing so since
1985.
[2] In 1990, the plaintiff became a 50% shareholder
in BCA, and in 1996 the sole
director and shareholder. Subsequently, her shareholding was transferred to a trust.
[3] With
effect from 1 April 2005, the trust sold its shareholding and the plaintiff
resigned as a director but she remains involved in BCA
as its general manager.
[4] Since 1984, the plaintiff has been a member of the Institute of Chartered
Accountants of New Zealand
(the Institute). Membership of the Institute is
voluntary in that it is possible to offer accounting services to the public
without
membership, but there are significant advantages of membership. They include a
degree of quality assurance which the public
associates with members of the Institute
and which the Institute itself works hard to perpetuate.
[5] The rules of the Institute
(r 18.2) require that every member who offers
accounting services to the public must hold a Certificate of Public Practice. The
plaintiff
does not have a Certificate of Public Practice.
[6] In 2003, a question arose as to whether she was offering accounting services
to the public and after detailed correspondence between the plaintiff (and her
solicitors) and the Institute, the latter commenced
an investigation into the plaintiff's
practice, aimed at determining whether she was offering accounting services to the
public and
thus required a Certificate of Public Practice.
[7] In the course of that investigation, the Institute personnel identified
several
matters which concerned them and which ultimately formed the basis of a complaint
made to the Institute's Professional Conduct
Committee, a body which has the power
to investigate complaints and to refer them, if appropriate, to the Institute's
Disciplinary
Tribunal for hearing. The Professional Conduct Committee may,
instead of so referring the matter, admonish a member or impose,
with the written
agreement of the member, one or more of a limited range of sanctions.
[8] The plaintiff has launched this
judicial review proceeding in order to
challenge the validity of certain steps taken to date by the Institute through its
delegates.
The plaintiff claims that the Institute has acted otherwise than in good
faith, that those involved in the investigation of her practice
acted in excess of
jurisdiction, that there have been breaches of natural justice, that the Institute has
failed to act in accordance
with the plaintiff's legitimate expectations as to process,
that those processes are unreasonable and/or unfair, and that the Institute
has acted in
breach of the provisions of the New Zealand Bill of Rights Act 1990.
[9] The plaintiff seeks declaratory and injunctive
relief, together with orders
quashing the decisions to initiate the investigation and to lodge the complaint
referred to earlier.
[10] The plaintiff's amended statement of claim dated 22 July 2005 includes as a
seventh cause of action an allegation that at all
material times the services offered by
the plaintiff and/or BCA to its clients were not "accounting services" within the
terms of
the Institute r 18.1. A declaration to that effect is sought. The issue so
raised is, of course, the very same issue as that which
lay at the heart of the
Institute's investigation. No argument was addressed to the court on this seventh
cause of action by either
counsel and I accordingly put it to one side. The arguments
advanced at the hearing related to matters of process rather than substance.
The Institute Rules
[11] It is convenient before turning to a consideration of the relevant factual
matrix to set out those
of the Institute's rules which are relevant to the matters for
determination. It is not in dispute that both parties are bound by
the provisions of the
rules and of the Institute of Chartered Accountants of New Zealand Act 1996 (the
Act), which established the
Institute and which provided the statutory framework for
the enactment of the rules.
[12] Section 4 of the Act declares the Institute
to be a body corporate with
perpetual succession and a common seal. It may exercise all the rights, powers and
privileges and may
incur all the liabilities and obligations of a natural person with
full age and capacity.
[13] Section 5 provides that the functions
of the Institute are:
a) To promote quality, expertise, and integrity in the profession of
accountancy
by its members in New Zealand;
b) To promote, control, and regulate the profession of accountancy by its
members in New Zealand;
c) To promote the training, education, and examination of persons
practising,
or intending to practise, the profession of accountancy in
New Zealand or elsewhere;
d) Any other functions
that are conferred on it by the rules.
[14] Section 6 requires the Institute to have rules that provide for:
a)
A Council and for the powers of the Council; and
b) The admission of members of ICANZ and the cessation of
membership; and
...
e) An Executive Board of the Institute; and
f) A Professional Conduct
Committee to investigate complaints against
members and former members of ICANZ and the powers and
procedure of that Committee; and
g) A Disciplinary Tribunal to hear complaints and matters referred to it
by the Professional Conduct Committee and the powers and
procedure of that Tribunal; and
h)
An Appeals Council to hear appeals from decisions of the
Disciplinary Tribunal and the powers and procedure of
that Council;
and
i) The kinds of conduct, including criminal offences, professional
misconduct, and financial misconduct, for which a member or former
member may be disciplined; and
j)
The actions that may be taken in respect of, and the penalties that may
be imposed on, a member or former member
by the Professional
Conduct Committee or the Disciplinary Tribunal for such conduct.
[15] Section 7 requires
the Institute to maintain a code of ethics governing the
professional conduct of its members and to be in terms prescribed by the
Council.
[16] Section 9 provides that in the exercise of their functions and powers the
Professional Conduct Committee and each
disciplinary body shall observe the rules
of natural justice.
[17] Sections 10 to 13 make further provision for the detail of
the conduct of
disciplinary proceedings but it is unnecessary to consider them having regard to the
limited progress made by the
Institute to date in the course of the investigation now
under challenge.
[18] I turn now to the relevant provisions in the rules. Rule 7 establishes a Council
which carries primary
responsibility for carrying out the functions of the Institute,
including setting strategic objectives and managing and controlling
the affairs of the
Institute.
[19] Rule 7.2 provides that the Council shall elect an Executive Board from its
membership and
may delegate to the Board any of its functions and powers.
[20] Rule 9.1(a) provides that the Executive Board is to act as the
Executive Body
of the Institute, implementing the policy decisions of the Council and carrying out
the functions delegated to it.
[21] Rule 11.1 provides that the Executive Board shall, at its first meeting after a
general meeting, appoint members to a number
of permanent bodies including the
Practice Review Board, the Professional Conduct Committee, and the Disciplinary
Tribunal.
[22]
At the heart of this proceeding are certain of the matters provided for in rr 18,
20 and 21 respectively.
[23] Rule 18.1 provides:
a) "Accounting services" shall be deemed to be services relating to
i) the preparation of financial
information;
ii) auditing;
iii) taxation;
iv) insolvency.
b) "Offering accounting services to the public" shall include any conduct
from which it may be reasonably inferred
that the member is offering
or providing accounting services to, or accepting assignments from,
the
public.
[24] Rule 18.2 requires that every member who offers accounting services to the
public shall hold a Certificate of Public
Practice.
[25] Importantly, r 18.9 provides that "The Executive Board may instruct the
Practice Review Board to investigate and
report on whether a member is offering
accounting services to the public in circumstances which require the member to hold
a Certificate
of Public Practice". Where required to do so by the Executive Board or
the Practice Review Board, a member is required by r 18.10
to produce any evidence
either Board may specify to enable it to determine whether the member is offering
accounting services to
the public in circumstances which require the member to hold
a Certificate of Public Practice.
[26] Rule 18.11 empowers the Executive
Board where it has determined that a
member is offering accounting services to the public in circumstances which require
the member
to hold a Certificate of Public Practice, to issue a Certificate of Public
Practice or to lodge a complaint with the Professional
Conduct Committee, or both.
[27] Rule 20 deals with practice reviews. So far as is material, r 20 provides:
20.1 The
Practice Review Board shall review the operation of a member's
practice from time to time to ensure that professional standards
are being
maintained.
20.2 The Council may from time to time set out the professional
standards and the procedures
in a manual of procedure to be followed by the
Practice Review Board.
20.3 The Practice Review Board shall also perform
any other functions
set out in these Rules or that the Council may direct from time to time.
20.4 The Practice
Review Board may:
(a) Require the production of any document or other material in the
member's possession
or power which may be required for a practice
review.
(b) Interview any member and examine any document
or other material
or undertake any other form of enquiry which may be required for a
practice review.
(c) Employ any person to undertake a practice review, on the Board's
behalf.
(d) Charge the
member a fee for the review of their practice.
(e) Delegate any functions and powers it thinks fit.
20.5 Where
required by the Practice Review Board under r 20.4, a
member shall produce documents or other material in the member's
possession or
power and shall co-operate in any interview.
20.6 On completion of a practice review, the Practice Review Board may
do one or more of the following:
(a) Determine that no further action is required.
(b) Determine that further
action should be taken in accordance with the
powers given, and the procedures set, by the Council from time to
time.
(c) Lodge a complaint with the Professional Conduct Committee where
it considers that a
member (irrespective of whether that member is
the person whose practice is under review) has failed to maintain
professional standards or has breached the Institute's Act, Rules or
Code of Ethics.
(d) Direct
the member or the members practice not to undertake
specified assignments (such as audits or receiverships) except
under
the supervision of a member approved by the Board and/or after
having undertaken a period of training
as specified by the Board.
[28] It will be observed that rr 18 and 20, while each aimed at overall quality
assurance, fulfil quite
different functions. Rule 18 deals with Certificates of Public
Practice and makes provision for the circumstances in which such Certificates
may
be issued and the enquiries which may be undertaken in circumstances where the
need for a member to hold a Certificate of Public
Practice may be in question.
[29] Rule 20, on the other hand, is of much wider application and is an important
vehicle by which
the Institute may review individual practices for the purpose of
ensuring that professional standards are being maintained. It applies
to all members
and the evidence is that all members are in fact from time to time reviewed. As
Mr Reed put it: "the good and the
great" are subjected to review in just the same
way as all other members.
[30] There appears to be no reason why a practice review
under r 20 could not, in
an appropriate case, be combined with an investigation under r 18.9.
[31] It will be observed that rr
18 and 20 each provide for the lodging of
complaints where matters of concern are identified but the procedure to be followed
in
respect of such complaints varies according to the rule under which the complaint
is lodged.
[32] Rule 18.11 empowers the Executive
Board, where it determines that a
member is offering accounting services to the public in circumstances which require
the member
to hold a Certificate of Public Practice, to lodge a complaint with the
Professional Conduct Committee. That sub-rule is confined
to a complaint arising
out of the conduct of a member who is offering accounting services to the public
without an appropriate Certificate.
It does not authorise the Executive Board to
lodge a complaint about other matters.
[33] Rule 20.6(c) empowers the Practice Review
Board (not the Executive Board
as in r 18.11) to lodge a complaint with the Professional Conduct Committee on
completion of a practice
review in respect of the alleged failure of a member to
maintain professional standards or to comply with the Institute's Act, rules
or code
of ethics. The scope of the Professional Conduct Committee's power to lodge a
complaint under r 20.6(c) is broad and indeed
would appear wide enough to cover all
matters which might call for disciplinary action. But the powers of the Professional
Conduct
Committee under r 20 may be exercised only upon completion of a practice
review.
[34] Rule 21 provides for the proceedings of
the Professional Conduct Committee
which is primarily an investigative body having the responsibility of managing and,
to some extent,
filtering complaints. Serious matters are to be referred to the
Disciplinary Tribunal for hearing. Less serious matters may
result in a member
being admonished or in a range of lesser sanctions being imposed, but only with the
written agreement of the member.
[35] Relevant
provisions of r 21 are as follows:
Lodging a complaint
21.1 Any person may lodge a complaint with the Institute concerning
a
member. Every complaint shall be:
(a) In writing.
(b) Supported by any statutory declaration or
additional information the
Professional Conduct Committee may require.
Initial investigation and decision
21.2 On receipt of a complaint, the Professional Conduct Committee
shall, unless the complaint is frivolous, vexatious,
and/or of an insufficient
nature to warrant being referred to the member and is able to be resolved
without being so
referred:
send to the member concerned copies of:
(a)
(i) the complaint;
(ii) any supporting statutory
declaration;
(iii) any supporting additional information;
(b) require the member within 14 days to respond in writing
to all
matters raised in the complaint and any other matters required by the
Professional Conduct Committee.
21.3 The Professional
Conduct Committee shall investigate the complaint
and make a decision and adopt one or more of the following courses of
action:
(a) Decide that no further action be taken.
(b) Require the member, subject to the agreement of the complainant, to
submit any fee dispute to the Fees Resolution Service.
(c) Informally admonish the member, whether or not they have
breached
the Act, Rules and the Code of Ethics.
(d) Set the matter down for final determination, and decide whether the
Professional
Conduct Committee requires the member to attend at
the final determination.
(e) Where the matter is not set down for final
determination, order the
member to pay costs to the complainant and/or the Institute of such
amount (if any), as the
Professional Conduct Committee thinks fit.
(f) Investigate and make a decision in regard to any other matter arising
out
of the complaint or the Professional Conduct Committee's
investigation of the complaint.
21.4 For the purposes of any investigation,
the Professional Conduct
Committee may:
(a) make, or employ any person to make, such preliminary inquiries as
the Professional
Conduct Committee considers necessary; and
require any member or former member of the Institute or the New
(b)
Zealand
Society of Accountants to whom the investigation relates to
provide the Professional Conduct Committee or any person so
employed within 14 days or such longer period of time as the
Professional Conduct Committee thinks fit any documents,
things or
information that are in the possession or under the control of that
member or former member and that relate
to the subject matter of
the investigation; and
(c) take copies of any documents that are provided to the Professional
Conduct Committee; and
(d) require the member at the member's own cost to attend before the
Professional Conduct
Committee on at least 14 days notice to confer
regarding the complaint; and
(e) request the complainant at the complainant's
own cost to attend
before the Professional Conduct Committee on at least 14 days
notice to confer regarding the complaint.
Final determination
21.5 If the Professional Conduct Committee decides that the complaint or
any matter arising out of the complaint
or the Professional Conduct
Committee's investigation of the complaint be set down for final
determination, it shall send a notice
of the decision to the member
concerned:
(a) setting out the reasons why the complaint has been set down for final
determination;
(b) advising (if the Professional Conduct Committee has so decided
under r 21.3(d)) that the member is required to attend the final
determination;
(c) advising (if the Professional Conduct Committee has not decided to
require the
member to attend the final determination) that the
member has 14 days to notify the Committee if the member wishes
to attend and be heard at the final determination.
21.6 In making the final determination in respect of a complaint, the
Professional
Conduct Committee shall adopt one of the following causes
[sic] of action:
(a) Determine that no further action should be taken.
(b) Admonish the member and enter the details of the admonishment on
the member's record held by the Institute.
(c)
When a complaint would otherwise warrant being referred to the
Disciplinary Tribunal, with the written agreement of the
member,
make one or more of the following orders:
(i) the member shall waive the whole or part of any fee agreed
to or invoiced;
(ii) the member shall return the whole or part of any fee already
paid;
(iii) appointing another member to undertake or complete work
that the member had been engaged to perform;
(iv) the member shall be reprimanded;
(v) the member shall be severely reprimanded;
(vi)
the member shall pay to the Institute a sum as may be
determined;
(vii) the member
shall pay costs to the complainant and/or the
Institute;
(viii) the member shall complete
any professional development
course or the member shall engage an adviser or tutor at the
member's own expense.
(d) Refer the matter to the Disciplinary Tribunal for hearing.
(e) Where the
matter has not been referred to the Disciplinary Tribunal
for hearing, order the member to pay costs to the complainant
and/or
the Institute of such amount (if any), as the Professional Conduct
Committee thinks fit (which
amount may include part or all of the
costs to the complainant of attending before the Professional
Conduct Committee pursuant to r 21.4).
[36] Rule 21 goes on to make detailed provision for further disciplinary
proceedings including
the proceedings of the Disciplinary Tribunal. It is
unnecessary, however, to consider those later provisions because
in this proceeding
the Court is concerned only with the progress of a complaint up to the point at which
it is received by the Professional
Conduct Committee. It is sufficient simply to note
that the Disciplinary Tribunal is required to convene a hearing and that, if a
complaint is proved, it may impose one or more of a range of penalties, including
removal of a member's name from the register, or
suspension from membership.
Events prior to the investigation
[37] It is necessary to commence by referring briefly to discussions
which
occurred between the plaintiff and the New Zealand Society of Accountants (as the
Institute was then known), in 1993. On 9
July 1993 the Society wrote to the plaintiff
suggesting that she was in breach of r 60 of the Society's Rules as they then were,
and asking for the plaintiff's comments on the suggestion that BCA offered services
consistent with those offered in the chartered
accounting profession. If that was
indeed the case then the plaintiff required a Public Practice Certificate.
[38] Correspondence
ensued between the plaintiff's solicitors and the Society, but
ultimately the Society accepted that in light of the rules as they
then stood, the
plaintiff was not obliged to hold a Public Practice Certificate.
[39] There matters stood until 29 January 2003
when the issue was revived by
way of a letter written by the Institute to the plaintiff, in which the plaintiff was
advised that
it had come to the attention of the Institute that she "may be offering
accounting services to the public through a company that manages body corporate
entities".
[40]
The plaintiff was warned that she appeared to be in breach of the Rules and
could face disciplinary action. She was accordingly
asked to provide details of the
nature of the services she provided, the vehicle through which they were provided
and the level of
annual fees derived from her activities. The letter was signed by
Mr Mark Shennan, who held the post at the Institute of director
(professional
assurance/head of practice review). The letter was the first communication received
by Ms Beaton on this topic for
some 10 years.
[41] Although the letter came to her without prior warning, it is a reasonable
inference that Mr Shennan's decision
to write was prompted by an inquiry made by a
member of the public about a week earlier, of Mr T H L Davies, who is director
(professional
support) at the Institute. His file note, produced in evidence and dated
22 January 2003, discloses that on that day he had received
an inquiry from a person
who had been engaged in a dispute with BCA, as to whether a levy in respect of a
body corporate administered
by BCA had or had not been paid. Mr Davies' work
sheet reveals that, having received the complaint on that day, he checked the
plaintiff's
file and noted that an issue, ultimately resolved, had arisen the previous
year. A further note in the work sheet indicates that
Mr Davies reviewed that old
complaint file and the plaintiff's file on 29 January 2003. That is the date of Mr
Shennan's letter to
the plaintiff. The juxtaposition of these activities within the
Institute suggests that it is a proper inference that Mr Shennan's
letter was generated
in the light of Mr Davies' investigations.
[42] Understandably enough, the plaintiff took the initial view
that the matters
raised in Mr Shennan's letter simply revisited an issue which had been settled some
10 years earlier. She referred
the letter to her solicitors who wrote to the Institute to
remind it of the resolution achieved on 12 February 1993.
[43] On
26 March 2003, the Institute wrote again to the plaintiff. This letter is
signed by Mr Davies, rather than Mr Shennan. It commences
by acknowledging
receipt of the letter from the plaintiff's solicitors, but says simply that:
The present inquiry by Mr Shennan
has no connection with that earlier
complaint, but relates to information recently received which gives
reasonable
cause for the Institute to inquire as to the services offered by your
company, and to consider these in terms of the current
Rules of the Institute
and their interpretation in today's business environment.
[44] The letter concludes with a renewal
of the request made by Mr Shennan in
his earlier letter for the information set out in that letter. The "information recently
received"
referred to by Mr Davies would appear to consist of the complaint to
which I have earlier referred. That of course related to a dispute
about payment of a
levy, and did not relate in any way to the extent of the services being provided by
BCA. There is no evidence
from the Institute as to there being any other basis upon
which Mr Davies was able to say that the Institute was acting upon "information
recently received".
[45] This is borne out by Mr Davies' work sheet which plainly relates the course
of correspondence with the
plaintiff and her solicitors to the complaint received by
him, and indeed, there is a note to the effect that he e-mailed the complainant
at the
end of March 2003 reminding her that he was still seeking information from the
plaintiff. So at least in Mr Davies' mind the
inquiries the Institute was making of the
plaintiff were related to the complaint the Institute had received.
[46] On 17 April
2003 the plaintiff's solicitors responded to Mr Davies. They
asked that the Institute correspond with them, the plaintiff having
instructed them to
receive and respond to such correspondence. The solicitors expressly asked what
information had been "recently received" by the Institute,
in order that they may
provide the information sought by the Institute.
[47] On 29 April 2003, the Institute responded to the
plaintiff's solicitors by way
of a letter signed by Mr Shennan. It commences by expressing bemusement at the
plaintiff's willingness
to incur legal costs in response to the Institute's inquiry, a
comment which is perhaps somewhat surprising. The correspondence from
the
Institute to date had raised matters of some importance, and the plaintiff was
undoubtedly entitled, if she wished, to take
legal advice and to have her solicitors
correspond with the Institute on her behalf.
[48] The 29 April letter from the Institute
then refers to "discussion of another
matter", in the course of which it had come to the Institute attention that the plaintiff
might
require a Certificate of Public Practice, although the other matter was not
identified. The letter notes also that BCA described
itself in its literature as New
Zealand's largest body corporate secretariat. If that is so, then it is understandable
that the Institute
would regard the issue as one of real importance. By the same
token, the plaintiff's decision to instruct solicitors is readily understandable
on that
score alone.
[49] The letter then sets out a number of activities which the Institute understood
were of the type which
an entity providing body corporate services would undertake,
and indicates that the Institute regarded such activities as falling
within those
commonly carried on by chartered accountants in public practice. The letter
expresses the view that
the fact the services might be provided only to a narrow
segment of the public, such as body corporates, was not relevant to the
determination
of whether a Certificate of Public Practice was required. The letter concludes by
indicating that the rules had changed
since 1993 to the extent that it was appropriate
to revisit the matter now, and by once more seeking relevant information from the
plaintiff.
[50] Importantly the letter included the following assurance which has assumed
some importance in the litigation.
Mr Shennan said:
It is not our intention, despite the wording of an earlier letter, to initiate
disciplinary proceedings
against Ms Beaton for failing to have a certificate
up to now.
[51] The plaintiff was asked for confirmation or otherwise
that she and/or BCA
provided services of the nature listed earlier in the letter, and was advised that if such
services were provided,
then the Institute would require the plaintiff to obtain a
Certificate of Public Practice. There was then something of a hiatus.
Neither the
plaintiff nor her solicitor replied immediately to the Institute's letter of 29 April
2003.
[52] On 16 July 2003
Mr Davies received another inquiry from a member of the
public. The inquirer sought advice as to whether it was appropriate that
body
corporate financial statements prepared by BCA and presented to a body corporate
AGM, should be accompanied by an audit report
which related to a period earlier
than that under review.
[53] Mr Davies' work sheet indicates that, over a period of about
a week in July
2003, he made a number of inquiries culminating in his advice to the first inquirer, to
the effect that the Institute
had a "jurisdictional problem" in that the plaintiff did not
have a Certificate of Public Practice. His note indicates that he told
that inquirer that
the Institute was giving the plaintiff until the end of August to obtain one. That such
was the intention of the
Institute had not at that time been notified to the plaintiff.
[54] On 28 July 2003 Mr Shennan wrote again to the plaintiff's
solicitors, pointing
out that no reply had been received to his letter of 29 April 2003, that the Institute
proposed to proceed on
the basis that the plaintiff was in public practice, but not the
holder of a Certificate of Public Practice, and that the plaintiff was required to seek
a
Certificate immediately. This letter contained the following paragraph:
We said in our earlier letter that it was not
the Institute's intention to initiate
disciplinary proceedings against Ms Beaton for failing to have a certificate
up to now, but clearly that position cannot hold into the future. Accordingly,
we expect Ms Beaton to apply for a Certificate
of Public Practice by 31
August 2003, failing which the Institute will consider disciplinary
proceedings.
[55]
On 29 August 2003, the plaintiff's solicitors responded in writing. They
advised that the plaintiff wished to apply for a Certificate
of Public Practice and
sought assistance as to the appropriate form of application. The letter concludes by
indicating that:
We wish to now pursue this to a conclusion as soon as possible.
[56] There followed an e-mail correspondence between the
Institute and the
plaintiff's solicitors over a period of some months. The necessity for the provision
of references was identified,
but there was apparently a delay in obtaining one
reference. It seems from the documentary material before the Court, that the delay
arose at least largely in the office of the plaintiff's solicitors.
[57] By early February 2004, it appears that the Institute
had had enough, because
on 11 February 2004, the Chief Executive of the Institute, Mr Muriwai, wrote direct
to the plaintiff as follows:
Dear Ms Beaton
CERTIFICATE OF PUBLIC PRACTICE
You will recall correspondence last year between the Institute
and you and
with your solicitor, Clinton Baker, regarding the nature of the services
offered by your company, Body
Corporate Administration Limited, and
whether they were such that you should hold a certificate of public practice
(CPP). the Institute was concerned that your activities were such that you
should hold a CPP, and your solicitor indicated
on 29 August that you
wished to apply for a CPP. Michael Algar of the Institute advised Mr Baker
on 2 September how
you should do this.
To date, five months on, we have not heard further from you, and
accordingly the Institute's
Executive Board has decided, under the terms of r
18.9, to instruct the Institute's Practice Review Board to investigate
and
report on the services you are providing via your company.
A member of the Institute's practice review team
will contact you shortly,
and I ask that you provide whatever information and access to records that
that person
requires to complete the investigation.
Yours sincerely,
`Garry Muriwai'
Chief Executive
[58] On 18
February 2004 the plaintiff's solicitors responded to the effect the
delay had arisen by reason of the solicitor's inadvertence in
not chasing up one of the
referees who was to supply a document accompanying the plaintiff's application for
a certificate, and promising
expedition. On the same date, the solicitors separately
sent the plaintiff's application to the Institute.
[59] On 24 February
2004, Mr Muriwai wrote to the plaintiff's solicitors
acknowledging that progress was being made in respect of the plaintiff's application
for a Certificate of Public Practice but advising that:
In the circumstances, the Institute still considers it appropriate
that a review
be undertaken as advised in our letter of 11 February 2004.
[60] Thereafter, there appears to have been
no communication between the
plaintiff and the Institute until early August 2004 when contact was made with the
plaintiff by an investigator
appointed by the Institute.
[61] Presently I will turn to deal with the detail of the investigation. In the
meantime it is necessary
to refer briefly to the formal arrangements made within the
Institute in respect of the proposed review of the scope of the plaintiff's practice.
The
letter of 11 February 2004 from the Institute to the plaintiff recorded the
decision of the Executive Board of the Institute "under
the terms of r 18.9" to
instruct the Practice Review Board to investigate and report on the services provided
by the plaintiff through
BCA. That was a decision only the Executive Board could
make.
[62] The Institute is unable to locate the relevant resolution.
Mr Keith Wedlock,
then a member of the Executive Board, has produced a copy of a resolution he
signed on 10 February 2004, and which
was returned by him by facsimile to the
Institute. That resolution reads as follows:
That under r 18.9 the Board instructs
the Practice Review Board to
investigate and report on whether member Paula Beaton (Membership No.
20542) is offering
accounting services to the public in circumstances which
require the member to hold a Certificate of Public Practice.
[63]
Mr Wedlock further says that in his experience on the Executive Board no
investigator would have been appointed unless a resolution
had been passed by the
Executive Board.
[64] The Administrative Officer of the Institute responsible for procuring the
resolution
is now overseas and has no independent recollection of the matter apart
from the records of the Institute. Before the Court, there
is an e-mail from the person
concerned dated 15 July 2005, confirming that all Executive Board members, save
for one who did not
reply, approved the appointment of the investigator. While the
e-mail is not strictly admissible evidence, I am satisfied in any
event on the basis of
Mr Wedlock's evidence that the Institute did indeed prepare a resolution and that it
would not have proceeded
as it did had the resolution not been approved by the
requisite number of members of the Executive Board.
[65] At this point
it is appropriate to note that the proposed investigation was to be
conducted in terms of r 18.9. That is the way in which the Institute
approached the
matter internally, by procuring a resolution of the Executive Board expressed to
invoke the powers contained in r
18.9, and the basis upon which the investigation
was notified to the plaintiff. Accordingly, the investigation which followed was
both
intended by the Institute to be a r 18.9 investigation, and understood by the plaintiff
to be so. It was therefore, in terms
of that sub-rule, an investigation into whether the
plaintiff was offering accounting services to the public, in circumstances which
required her to hold a Certificate of Public Practice.
The Investigation
[66] Oddly enough, as noted above, the flurry of activity
which produced the
resolution of the Executive Board, and the letter to the plaintiff of 11 February 2004,
was followed by a period
of some six months during which no progress whatever
was made. Ultimately, the plaintiff was contacted by an investigator appointed
by
the Institute, Ms Tracy Grant. On 13 August 2004, Ms Grant, along with a
colleague, visited the plaintiff at BCA's offices.
There was a further attendance by
Ms Grant alone on 6 September 2004.
[67] Ms Grant herself was not a member of the Practice
Review Board. She was
appointed by the Board to conduct the investigation on its behalf. She says her
instructions came from Mr Shennan
(presumably orally), and they were to
investigate the operations of the plaintiff and BCA in order to determine whether or
not accounting
services were being provided to the public. Ms Grant is a member of
the Institute and holds a Certificate of Public Practice, has
a Bachelor of Commerce
from Auckland University, has been a member of the Institute since 1988, and has
gained significant experience
since that time working in New Zealand and overseas.
She has worked for the Practice Review Unit since October 2000. She says that
the
investigation she conducted accorded with that notified to the plaintiff by Mr
Muriwai in his letter to her of 11 February 2004.
[68] There is a measure
of agreement between Ms Grant and the plaintiff, in that
both confirm that Ms Grant sought access to a wide range of documents relating
to
BCA's business and asked for explanations about aspects of BCA's systems and
procedures. Both documents and explanations were
readily provided by the plaintiff.
[69] Ms Grant explains in her affidavits that, in order to determine the nature of
the services
provided by BCA, she was required to investigate precisely what BCA
did, how its services were carried out and whether they were
performed in
accordance with the documented procedures explained to her by the plaintiff. She
says she simply followed the same process
as she normally followed when required
to carry out such an investigation by the Practice Review Board. Ms Grant says she
received
no instructions whatever from Mr Davies in relation to her investigation,
had no preconceived ideas about what to look for, and had
no views about what she
might find at any stage of her investigation. In particular, she says she had not been
briefed to undertake
an undisclosed practice review; that is, she understood from the
outset that she was conducting a r 18.9 review and not a practice
review properly so-
called. Having said that, it is worth noting that her evidence is to the effect that the
procedures she undertook
were materially the same as those she would undertake in
the course of a practice review.
[70] For her part, the plaintiff says
that she readily co-operated with Ms Grant and
took no further legal advice (although she had had extensive legal assistance up to
that point), because she regarded the investigation as confined to that mandated by
r 18.9, in respect of which she already had assurances
to the effect that the Institute
would not take disciplinary action under r 18. Further, the plaintiff says, she had
taken steps
to obtain a Certificate of Public Practice, and that was another factor
which justified her as regarding the investigation as routine.
[71] On 23 September 2004, Ms Grant wrote to the plaintiff setting out her
findings and inviting the plaintiff to provide written
comments thereon. The findings
were contained in a schedule of some 13 pages.
[72] It is relevant to note at this point that
the plaintiff was charged a fee for the
investigation. the Institute is authorised to charge a fee in respect of a practice
review
(r 20.4(d)) but there is no equivalent power to charge for an investigation
conducted under r 18.9.
[73] The 13 page schedule
reviewed the plaintiff's practice in copious detail and
commented on a significant number of issues identified by Ms Grant. The question
of whether the plaintiff was providing accounting services to the public the issue to
which the plaintiff believed the investigation
was confined is the very last matter
discussed in the report, and receives only brief mention on the last page. The
plaintiff provided
a detailed response by letter dated 21 October 2004.
The complaint
[74] On 25 November 2004, Mr Gray (the acting head of practice
review) wrote to
the Practice Review Board setting out his view that there appeared to be instances of
breaches by the plaintiff
of certain of the Institute's professional standards. It is
unnecessary in this judgment to set out the detail of that complaint.
It is sufficient
merely to say there are differences of opinion between the plaintiff and the Institute
as to the way in which interest
has been accounted for, as to the operation of certain
client trust accounts and in respect of the manner in which accounting for
professional fees was undertaken.
[75] On 9 December 2004, the Practice Review Board conducted a telephone
conference in which
Ms Grant and others participated. The Board recommended
that a complaint be laid with the Professional Conduct Committee.
[76]
On 19 January 2005, the Practice Review Board laid a written complaint,
expressed to be in accordance with r 20.6(c). That sub-rule authorises
the Board to
lay a complaint but only, of course, in the context of a practice review conducted
under the provisions of r 20. It
is not apposite where r 18.9 is relied upon.
[77] In addition to the topics of concern mentioned above, the complaint referred
expressly to the offering of services that would qualify as accounting services to the
public without holding a Certificate of Public
Practice (the issue which had
generated the Institute's initial interest in the plaintiff), and the alleged operation of
the plaintiff's
business through a corporate structure without approved company
status.
[78] On 31 January 2005, the plaintiff was advised
of the complaint laid by the
Professional Conduct Committee, and was required to respond within 14 days. On
14 February 2005, the
plaintiff's legal advisers provided a detailed written response
which in addition to addressing the substantive issues arising from
the complaint,
gave notice of challenge on administrative law grounds. Further correspondence
ensued.
[79] On 13 April 2005,
solicitors acting for BCA (not the plaintiff's solicitors),
wrote to the Institute advising that the plaintiff's shareholding in
BCA had been
acquired by their client, a Mr G H Kwok, formerly the general manager of the
company and now its Executive Director,
and that the plaintiff had resigned her
directorship. Mr Kwok was not a member of the Institute. The solicitors sought the
return
of documents which had been supplied by the plaintiff to Ms Grant, arguing
both that the Institute had had no power to take copies
of the documents in the first
place, and that without prejudice to that contention, the change in shareholding
deprived the Institute
of any further jurisdiction in the matter.
[80] The Director/Professional Conduct of the Institute replied on 20 April 2005,
returning the original documents but retaining photocopies. Correspondence during
May 2005 between the plaintiff, BCA's new solicitors
and the Institute firmly
established BCA's future position: it was not prepared to co-operate in any way
with the Institute's investigation
and would not supply any further information or
documents to that body.
[81] The complaint to the Professional Conduct Committee
has made little
progress. This proceeding was commenced on 19 May 2005. the Institute has
undertaken to the Court that the Professional
Conduct Committee will not advance
its investigation or utilise the documents obtained from the plaintiff, pending the
outcome of
the proceeding.
Threshold issue: the motives of the Institute
[82] At this point it is appropriate to consider an argument
which underpinned
much of the plaintiff's case. It lay at the heart of the plaintiff's third cause of action
and was at least a factor
in certain other arguments advanced for the plaintiff. The
issue in question is whether in launching and pursuing its investigation,
the Institute
was acting in good faith. Because the issue is pivotal to some aspects of the
plaintiff's argument, it is convenient
to deal with it at the outset, and in so doing, to
consider in particular the plaintiff's third cause of action.
[83] The plaintiff
pleads that the Institute's decision to initiate a r 18.9
investigation was simply a pretext to conduct a general practice review
in the light of
the two inquiries from BCA clients to which I have earlier referred, with a view to
lodging a complaint not necessarily
related to the question arising under r 18.9. The
plaintiff claims that, in so doing, the Institute exercised its powers unreasonably
and/or for an improper purpose. Accordingly, the plaintiff seeks an order quashing
the decision of the Executive Board to initiate
a r 18.9 investigation into the plaintiff,
a further order quashing the decision of the Practice Review Board to lodge the
complaint
laid under r 20.6(c), and an injunction restraining the Professional
Conduct Committee from further inquiring into and adjudicating upon the complaint
of the Practice Review Board.
[84] There is no doubt that a decision reached fraudulently, in bad faith or
otherwise improperly,
may be held to be exercised invalidly: see for example R v
Leigh (Lord) [1897] 1 QB 132, and New Zealand Wool Board v Commissioner of
Inland Revenue,(1999) 19 NZTC 15,082 at 15,108-15,110. Even where a decision-
making entity acts responsibly in the sense that its motives are proper, it is not
entitled
to adopt a particular procedure when there exists an alternative procedure
which is designed to accommodate the real objectives of
that entity: Poananga
v State Services Commission [1985] 2 NZLR 385, 394-5 per Cooke J. It is necessary
to distinguish between alternative powers where they differ in their purpose and the
occasions
upon which each is exercisable: per Somers J at p 397.
[85] Here, Mr Muir submits that the purported objective of the Executive
Board
was to conduct an investigation into whether the plaintiff was providing accounting
services to the public, but that its real
and self confessed objective was to conduct a
review of the plaintiff's practice with a view to preferring a complaint against her,
if
its suspicions, aroused by the inquiries received from two of her clients, were
thought to be confirmed by the results of the
investigation. The inquiries concerned
were made to Mr Davies, and they were largely unrelated to the issue of whether the
plaintiff
through BCA was practising in breach of r 18. One inquiry related to
BCA's claim to a levy said by the client to have already been
paid. The other related
to the currency of an audit report which was annexed by BCA to a statement of
receipts and payments.
[86]
In advancing this argument, Mr Muir relies heavily on the role of Mr Davies,
and in particular upon Mr Davies' memorandum of 9
February 2004, in which,
having referred to the two informal complaints mentioned above, he says:
I was concerned that the
Institute look into the informal complaints as they
had undertones of dishonesty on the part of Ms Beaton.
Later in the same
memorandum he says:
I believe the Institute should look into Ms Beaton's operations as soon as
possible. Under r 18.9
the Executive Board can instruct the Practice Review
Board to investigate and report on whether a member is offering services
to
the public. If the member is found to be doing so without a CPP the Board
can either issue a CPP or lodge a complaint.
If the Board wants to request an investigation to confirm that Ms Beaton's
activities required a CPP, a practice reviewer
could be sent to examine her
activities, including the state of her trust account. If this was found not to
comply
with the requirements of PS-2, then a complaint could be lodged by
the Institute itself, and the matter fully looked into.
[87] The memorandum concludes with a request that, because the Executive
Board was not to meet again until March, the Board delegate
to the Chief Executive
the authority to request an investigation. It concludes:
If this could be put in place quickly, the
operations of Ms Beaton's trust
account could be examined more speedily.
[88] The Executive Board did indeed move with
considerable speed. Its members
signed a resolution authorising the Chief Executive to request an investigation, and
all was accomplished
within 48 hours of Mr Davies' memorandum. Curiously, as I
have earlier observed, nothing was thereafter done for some six months.
[89] Mr Muir is highly critical of Mr Davies' memorandum and the steps which
immediately followed it. He points out that the
plaintiff was neither informed of the
suspicions of dishonesty already entertained by Mr Davies, nor what he claimed to
be the "collateral
purpose" of the r 18.9 investigation. He further submits that the
plaintiff co-operated fully in what she believed was a r 18.9 investigation,
on the
basis that:
a) It was necessary for her to afford full access to BCA's records
because that was
a corollary of the r 18.9 investigation which was to
precede the grant of a Certificate of Public Practice;
b) The investigation was taking place against the background of previous
assurances that no disciplinary consequences
would follow from a
finding that BCA was indeed offering accounting services to the
public.
[90]
Mr Muir argues that Ms Grant simply embarked on a practice review from
the outset, paying no more than lip service to the nominal
terms of the Executive
Board's r 18.9 appointment. That much is plain he submitted, from Ms Grant's
report, which speaks of her "review of your
[ie the plaintiff's] practice", and he says
that Ms Beaton was simply "set up" - the Institute purported to act for one purpose
(to
determine whether the plaintiff required a Certificate of Public Practice), when its
real purpose was to conduct a full practice
review, and to lay a complaint if
deficiencies were identified.
[91] The need, or possible need, for the plaintiff to have a
Certificate of Public
Practice was first revived by Mr Shennan in his letter to the plaintiff of 21 January
2003. Correspondence
followed, and on 28 July 2003 a deadline was imposed of 31
August 2003. The plaintiff was notified that an inquiry could be commenced
if she
had not applied by the latter date for a Certificate. The plaintiff elected to make an
application but was dilatory in proceeding
with it so that, five months having elapsed
after the deadline, the Executive Board determined to appoint an investigator and to
proceed under r 18.
[92] The immediate trigger for that decision was, clearly enough, Mr Davies'
memorandum. Mr Davies' interest
in the plaintiff plainly had its genesis in the
inquiries received from the plaintiff's clients.
[93] It is important that the
Court does not automatically impute to the Executive
Board the motives or objectives of Mr Davies who is not a member of the Executive
Board, nor of the Practice Review Board. He is an Institute employee whose role
appears to be to field and screen initial inquiries
from clients of the Institute's
members. While Mr Davies' memorandum of 9 February 2004 is before the Court,
there is little to indicate
the precise steps taken within the Institute which led to the
making of a decision by the Executive Board to conduct an investigation
into the
plaintiff's practice. It is not known whether Mr Davies' memorandum was provided
to members of the Executive Board, nor
indeed is it known whether any of the
material appearing in the memorandum was otherwise made known to members of
the Board. What
is known is that in July 2003, the plaintiff was put on notice that an
investigation under r 18 would be commenced if she did not
make application for a
Certificate of Public Practice by 31 August 2003, and although she notified an
intention by that date to make
an application, the formalities surrounding it had still
not been completed on her part by February 2004.
[94] Mr Muir asks me
to draw an inference that the Executive Board authorised a
r 18 investigation with the real purpose of conducting a full scale practice
review,
which might result in a complaint to the Institute if matters of concern were revealed.
That is not an inference I am prepared
to draw, for three reasons. First there is little
to support the suggestion that Mr Davies' concerns ought to be regarded as those
of
members of the Executive Board.
[95] Second, the Executive Board is the executive body of the Institute. It carries
into effect
the policy decisions of the Council, is elected by the Council of the
Institute at every national conference, and comprises the
President, the First Vice
President, the Second Vice President, the Chief Executive Officer and six other
members. So it is a senior
body, comprising, it is to be assumed, experienced
members of the Institute who have the confidence of the profession. An improper
motive such as that for which the plaintiff argues, is not lightly to be attributed to
such a group.
[96] Third, there is evidence
which strongly suggests it would not be right to find
that the Executive Board was acting duplicitously. Despite the celerity with
which
the Institute employees acted in procuring a resolution of the Executive Board
authorising the investigation, nothing occurred
thereafter for a full six months. Had
the Executive Board shared Mr Davies' concerns, then it is reasonable to assume it
would have
ensured that the investigation would be undertaken with some speed.
That did not occur. The delay is consistent with a proposed investigation which was
thought
to be of a routine nature.
[97] I do not overlook the fact that members of the Board were asked to assent to
a resolution by
return facsimile, rather than wait until the Board's regular monthly
meeting in March, but in the circumstances already known to
the Institute a
correspondence extending over more than a year it is not unnatural that, a decision
having been taken by the
Institute officers to seek an authorising resolution from the
Executive Board, the paperwork would be attended to without delay.
[98] Even more compelling however, is the evidence of Ms Grant. It appears that
she is an investigator employed by the Institute
to undertake assignments such as
arose here. She is not a member of the Executive Board, or the Practice Review
Board. Her undisputed
evidence is that she had never seen Mr Davies'
memorandum before this litigation was commenced, and had never been advised of
its
contents. She received her instructions from Mr Shennan. Those instructions
presumably were oral, because no relevant document has
been produced to the
Court. Neither is there any explanation for the delay in the commencement of the
investigation. Ms Grant says
she took no instructions from Mr Davies.
[99] In her detailed affidavits, Ms Grant says her instructions were simply to carry
out an investigation under r 18.9 in order to assist the Executive Board to determine
whether the plaintiff was carrying on a practice
which required her to hold a
Certificate of Public Practice. She received no detailed instructions as to how she
should embark upon
her task, and had no preconceptions about what she might find.
She says she was obliged to look at the financial records of BCA in
detail, in order to
assess whether or not the plaintiff was supplying accounting services to the public.
That involved, for example,
a detailed examination of the relevant trust accounts. In
the course of undertaking that exercise she identified matters of possible
concern,
which she included in her report.
[100] There is nothing in Ms Grant's evidence which in any way suggests she was
under
orders from the Executive Board to carry out her investigation in such fashion
as to identify deficiencies in the plaintiff's practice.
Had the Board intended from
the outset that she conduct a wide-ranging review with a possible disciplinary
outcome, then a reasonable
inference is there would have been at least some
communication to Ms Grant of the Board's purposes.
[101] It is relevant to note
Ms Grant's evidence to the effect that the investigation
she undertook was not materially different from a practice review which
she would
undertake under r 20 where the Practice Review Board determines to conduct a
review in respect of a member's practice.
That is an issue to which it is necessary to
return later in this judgment. But for present purposes it does not follow at all that
Ms Grant's apparently common approach to both r 18 investigations and r 20
practice reviews suggests impropriety of purpose on the
part of the Executive Board.
[102] In order to accept the plaintiff's argument that the Institute, through the
Executive Board,
has acted unreasonably and/or for an improper purpose, it is
necessary for me to reject Ms Grant's account of the instructions she
received from
Mr Shennan and her account of the manner in which she undertook her investigation.
Her evidence is unchallenged and
I am not prepared to reject it.
[103] The third cause of action is not supported by the evidence and therefore fails.
My view of
the evidence is relevant also to certain of the plaintiff's other causes of
action to which I now turn.
Allegedly unauthorised
investigation
[104] As a first cause of action the plaintiff pleads that there was no Executive
Board resolution by which the Practice
Review Board was authorised to conduct an
investigation under r 18.9. It is further pleaded that there was no valid delegation in
place pursuant to which an investigation
could be commenced by any individual in
the employ of the Institute or any of its bodies or committees.
[105] I have held on the
evidence that, there was indeed a resolution of the
Executive Board which authorised the Chief Executive to commence an
investigation
under r 18.9. That factual finding disposes of the first cause of action.
Alleged absence of jurisdiction
[106] The investigation
authorised by the Executive Board and as undertaken by
Ms Grant was under r 18.9. The r 18 procedure mandates a report by the Practice
Review Board to the Executive Board, which may then, in terms of r 18.11, issue a
Certificate of Public Practice and/or lodge a complaint
with the Professional Conduct
Committee. On its face, r 18 confines the role of the Practice Review Board, post
investigation, to
reporting to the Executive Board.
[107] Given the limited scope of r 18, complaints under r 18.11 by the Executive
Board, are likewise
confined to matters coming to the attention of the Executive
Board by means of a report from the Practice Review Board. In other
words, a
r 18.11 complaint by the Executive Board will necessarily be to the effect that the
member investigated has been offering
accounting services to the public without a
Certificate of Public Practice. Rule 18.11 does not authorise a complaint couched in
wider terms.
[108] The restrictions imposed by the r 18 procedure no doubt lay behind the
decision of the Practice Review Board,
in lodging its complaint, to invoke r 20.6(c)
which authorises the Practice Review Board (rather than the Executive Board), to lay
a complaint at the completion of a practice review. Such a complaint may be lodged
with the Professional Conduct Committee following
completion of a practice review,
wherever the Practice Review Board considers that a member has "... failed to
maintain professional
standards or has breached the Institute's Act, Rules or Code of
Ethics". So the scope of a r 20 complaint may be much wider than
that available
under r 18. Moreover, it may be laid by the Practice Review Board itself. But
r 20.6(c) may be invoked only where
a practice review has been undertaken and
completed.
[109] In her second cause of action the plaintiff pleads that, having been
empowered to conduct a r 18.9 investigation and report thereon to the Executive
Board, the Practice Review Board instead invoked
r 20.6(c) which it had no
entitlement to do. The plaintiff accordingly claims that the Practice Review Board
acted outside the jurisdiction
conferred by its appointment under r 18.9, and seeks an
order quashing the decision of the Practice Review Board to lodge a complaint
under
r 20.6(c).
[110] It is not in dispute that the powers exercisable by the Practice Review Board
are statutory powers, and
that the exercise of those powers constitutes the exercise of
statutory powers of decision in terms of the Judicature Amendment Act
1972:
Institute of Chartered Accountants of New Zealand v Bevan [2003] 1 NZLR 154
(CA). The decision to conduct the investigation and the subsequent decision to lay a
complaint under r 20.6(c), although steps precedent
to possible disciplinary
proceedings (which may of course never ensue), nevertheless fall under the umbrella
of the jurisdiction
to review conferred by the Judicature Amendment Act: see
Polynesian Spa Limited v Osborne [2005] NZAR 408 [53]-[54] and [58]-[60].
[111] It is trite to observe that the Institute has an obligation to act in accordance
with its own rules;
and if it fails to do so, that failure may be reviewable.
[112] There is no detailed evidence as to the ordinary practice of the
Institute with
respect to the procedures adopted when initiating a practice review. Ms Grant
simply deposes to adopting,
in relation to her investigation under r 18.9, the same
procedures as she would ordinarily undertake in respect of a practice review.
Mr
Reed told me from the bar that such reviews are often undertaken without warning.
But even with unheralded reviews, it must logically
be the case that those who are
subjected to review will be aware of it, even if only at the time at which investigators
present themselves
at the offices of the practitioners concerned. In other words, as a
matter of common sense, those who are subjected to a practice
review will be aware
the review is being undertaken, and the requirements of procedural fairness of
themselves dictate that such
notice must be given.
[113] A practice review may lead to the lodging of a complaint under r 20.6(c).
Further, a practitioner whose
practice is reviewed under r 20 is required to comply
with r 20.4(a) which relates to the production of documents or other material
in the
member's possession or power, and with r 20.4(b) which requires a member to
submit to an interview by the Institute investigators
if required. Rule 20.5 imposes
on members a positive obligation to co-operate generally in a practice review. It
follows that a member
upon whom such obligations are imposed must be made
aware that a review is under way, before he or she can be expected to comply
with
those r 20 requirements.
[114] Mr Reed submitted that r 20 did not, of itself, require that the Institute give
formal notice
to a member of a practice review, and urged me not to place a "gloss"
upon the rules. While there may be no formal provision for
notice, the rules will
simply not work if in practice a member is not entitled to notice of a practice review.
No such notice was
given, and indeed that is not surprising, because the Practice
Review Board did not purport to conduct a practice review. Instead
it understood
itself to be acting upon an authorisation from the Executive Board to conduct a r 18
investigation, confined to the
issue of whether the plaintiff was offering accounting
services to the public without a Certificate of Public Practice. That was
also how
Ms Grant understood her task.
[115] While, as submitted by Mr Reed, it may well be that a r 18 investigation in a
particular
case might be conveniently carried on in conjunction with a r 20 practice
review, the evidence does not suggest that that is what
occurred here.
[116] Having said that, Ms Grant undertook a wide ranging investigation. It will be
recalled that she approached
her task on precisely the same basis as she would have
approached a practice review itself. She said in evidence that it was necessary
to do
that in order properly to conduct her task under r 18. For example, she said the
question of whether, and to what extent, BCA
was acting for private clients required
a detailed examination of BCA's trust account and the operation of that account.
[117]
Mr Muir argued that that approach was not supportable. The difficulty for
the plaintiff, however, is that there is no evidence to
contradict what Ms Grant says.
She has worked for the Practice Review Board since 2000 and will doubtless have
acquired a good deal
of experience since then. More widely, she has more than 15
years experience as a member of the Institute and has worked both here
and overseas
as a chartered accountant. In the absence of evidence to the contrary I am bound to
accept what she says, namely that
her task under r 18 necessarily involved a detailed
examination of the plaintiff's practice, including in particular the state of
the trust
accounts maintained by her and by BCA.
[118] Ms Grant duly reported to the Practice Review Board but that Board, rather
than reporting to the Executive Board
as it was required to do under r 18.11, laid a
complaint by letter dated 19 January 2005, with the Professional Conduct
Committee.
That complaint expressly invoked r 20.6(c), and commenced by
advising that:
a) A practice review of BCA had
been conducted as the result of an
inquiry into BCA by a member of the public;
b) The matter of
operating without a Certificate of Public Practice
became secondary after a number of other issues were identified
(in
the course of the practice review investigation).
[119] Earlier, on 23 September 2004 Ms Grant had written
direct to the plaintiff,
advising "practice review has completed a review of your practice", attaching a copy
of the report, seeking
the plaintiff's written comments and enclosing an interim
account for the cost of the review time to date. Such costs are payable
in terms of
r 20 where a practice review is undertaken. There is no equivalent provision under
r 18.
[120] In the result, an investigation
which commenced life under the umbrella of
r 18.9, had apparently become transmuted into a r 20 practice review. That seems to
be
the only explanation for:
a) The apparent failure of the Practice Review Board to report under r
18.11
to the Executive Board;
b) Ms Grant's reference in her covering letter of 23 September 2004 to
the plaintiff,
to the completion of a practice review;
c) The charging of a fee by the Institute to the plaintiff in respect of the
work undertaken by Ms Grant;
d) The express reference in the complaint lodged by the Practice Review
Board with the Professional Conduct Committee to r 20.6(c) and to
the fact that a practice review had
been conducted;
e) The scope of the complaint which goes well beyond matters falling
within r 18, and
expressly refers to r 18 matters as having become
"secondary after a number of other issues were identified".
[121]
While the Practice Review Board undoubtedly has jurisdiction to initiate and
conduct practice reviews, there is no evidence that
a formal review under r 20 was
ever contemplated or authorised by that Board. Mr Reed did not contend otherwise.
Instead, he submitted
that the Court ought to construe rr 18 and 20 in a manner
which gave effect to the clear purpose of the Act, namely to protect the
public and
the profession. In developing that argument he contended that the complaint ought
to be treated as being laid under
r 21.1, and if the Court should hold that the Practice
Review Board had no specific power to lay such a complaint, then it should
find that
the Board had incidental or implied powers to do so.
[122] In order to deal with the first of these two arguments it
is necessary to
consider first the scope of r 21 and then to determine whether the complaint in issue
may be brought within it. Rule
21 provides that "Any person may lodge a complaint
with the Institute concerning a member". There follows a detailed procedure which
involves a preliminary assessment of such complaints by the Professional Conduct
Committee and then if necessary a determination
by the Disciplinary Committee.
The relevant portion of r 21 has been set out earlier in this judgment.
[123] Mr Muir submitted
that r 21 is directed to external complaints by natural
persons (including natural persons acting on behalf of corporate entities),
and not by
committees or boards of the Institute itself. He accepted however that the Practice
Review Board may lodge a complaint
pursuant to r 20.6(c) following completion of
a practice review, and that such a complaint may relate to virtually any aspect of
the
member's practice. The Executive Board likewise has a right to lodge a complaint,
but it is confined to the r 18.11(b) procedure in respect of Certificates of Public
Practice.
[124] Mr Muir
pointed to the careful distinction made in the rules between the
phrase "any person" and references elsewhere in the rules to the
various boards and
committees of the Institute, and argued that the choice of the phrase "any person"
necessarily excluded the boards
and committees of the Institute from the class of
complainant who may lodge a complaint under r 21.1, in that they are simply
creatures
of the Institute and are not "any person" for the purposes of r 21. He
further referred to the provision in r 21.1 for the lodging
of statutory declarations, a
requirement he claimed to be inappropriate where an entity within the Institute is the
complainant.
He drew the Court's attention to the form of complaint provided by the
Institute, which expressly refers to complaints by persons
against "your chartered
accountants", and other references in the complaint form to the question of whether
there had been a discussion
with the chartered accountant and to the acceptability of
mediation. None of that, he argued, fits the case of a complaint by the
Practice
Review Board in the circumstances existing here.
[125] Mr Reed pointed out that the Institute is a body corporate, entitled
to exercise
all the rights, powers and privileges of a natural person: s 4 of the Act. He argued
that a complaint lodged with the
Professional Conduct Committee by the Practice
Review Board is lodged by the Institute itself acting by a properly appointed Board.
He said that given its entitlement to exercise all the rights, powers and privileges of a
natural person, the Institute must be entitled
to act under r 21 by lodging a complaint
through a properly authorised board.
[126] In advancing that argument he relied generally
on The Auckland District Law
Society v Leary HC AK, M1471/84 12 November 1985, in which Hardie Boys J
referred to a general principle
applicable in disciplinary proceedings against law
practitioners (and by implication as I understood Mr Reed, to similar proceedings
against accountants). The principle is that persons being investigated were obliged
properly to answer the substance of the charge
against them and not simply to take
shelter behind the burden of proof or to engage in a battle of tactics; the interests of
justice,
said Hardie Boys J, extend far beyond the interests of the practitioner
concerned.
[127] While that is certainly a proper consideration
it does not authorise the Court
to declare to be valid, a complaint which otherwise does not fit within the Institute's
rules. I
accept however, that where a doubt arises as to the proper construction of the
rules, then the Court should adopt that construction
which gives effect to the evident
purpose of the rules, and which advances the public interest in an effective
complaints procedure.
That was an approach adopted by Randerson J in B v
Canterbury District Law Society [2002] 3 NZLR 113.
[128] It cannot be doubted that any natural person may lodge a complaint under r
21.1 and indeed I was informed from the bar by
Mr Reed, that in practice the Chief
Executive of the Institute regularly lays complaints in his own name, but in
circumstances where
the complaint is in truth that of the Institute itself. Such a
procedure is adopted, for example, in cases where a member of the
Institute has been
convicted of a criminal offence, but there is no available independent complainant.
[129] But the rules, read
as a whole, do not on their face authorise bodies such as
the Executive Board and the Practice Review Board to lodge complaints under
r
21.1. They are unincorporated bodies, appointed by the Council of the Institute, for
the purpose of undertaking specific tasks
within the administration of the Institute.
[130] Although the term "person" is defined in s 29 of the Interpretation Act 1999
as including an unincorporated body for the purposes of statutory construction, the
structure of the rules leads to the conclusion
that the jurisdiction of the various
administrative bodies within the Institute to lay a complaint is limited. The
Executive
Board may lodge a complaint under r 18.11(b), but the Practice Review
Board may not do so. On the other hand, the Practice Review
Board may lodge a
complaint under r 20.6(c), following completion of a practice review. If either body
had a general entitlement
to lodge a complaint under r 21.1, the elaborate procedure
laid down by rr 18 and 20 would be unnecessary.
[131] I conclude that
the rules do not intend that either the Executive Board or the
Practice Review Board have unrestricted power to lodge a complaint
under r 21, but
of course any member of either Board may do so since such a member would be
"any person" for the purposes of r 21.
I do not accept, as argued by Mr Muir, that
the complaint form and information on the Institute web site suggest that the Institute
itself and its members are precluded from making a complaint under r 21. That sort
of argument was put forward in B v Canterbury
District Law Society and rejected as
a matter of construction of the Law Practitioners Act and the Rules of Professional
Conduct
relating to the legal profession. In his analysis of the Act and the Rules,
Randerson J took into account the manifest objectives
of the relevant provisions and
satisfied himself that a construction which included practitioners within the phrase
"members of the
public" would give effect both to the statutory scheme and to the
relevant complaints procedure.
[132] Similar considerations apply
here. It is inevitable that many complaints
received under r 21 will be from members of the Institute itself. Mr Muir's argument
would exclude such complaints from consideration under r 21, and would leave an
undesirable lacuna in the Institute's rules.
[133] I therefore conclude that neither the Executive Board nor the Practice Review
Board has a general power to lay a complaint
under r 21, and indeed, it is appropriate
to observe that the Practice Review Board does not purport to have done so. Instead,
it
has relied upon its powers under r 20.6(c). The difficulty about that reliance is
that, as discussed above, there has been no properly
authorised and notified r 20
practice review.
[134] Mr Reed argued that if the Court should find that the Practice Review Board
has no express power to lodge a complaint under r 21, the Court should nevertheless
imply such a power. There is no doubt that, as
a general rule, a power will be held to
have been conferred by implication where its exercise is incidental to, or
consequential
upon, the proper exercise of a power expressly conferred upon a
public body: see eg Attorney General v Great Eastern Railway
Co (1880)
5 App Cas 473 (HL), Commerce Commission v Telecom (NZ) Ltd [1994] 2 NZLR
421, 430.
[135] Mr Reed submitted that a liberal interpretation of the rules was called for, to
enable the Court properly give effect
to the legislative scheme of the Act and the
rules, including the objectives set out in s 5 of the Act, and in r 1. Those objectives
include those of promoting, controlling and regulating the profession of accountancy
by the Institute members.
[136] But to imply
a consequential power of the Practice Review Board to lay a r
21 complaint, in the context of a r 18 investigation, would in my view
simply render
otiose the carefully constructed scheme of r 18. The Practice Review Board is,
where authorised by the Executive Committee,
empowered to conduct an
investigation, and then to report to the Executive Board. It is for the Executive
Board and not for the Practice
Review Board to lay such complaint as may then be
authorised by r 18.11. To imply the power for which Mr Reed contends, would
simply
be to fly in the face of the scheme of r 18.
[137] Mr Reed submitted that unless such an incidental power was confirmed by
the
Court, the profession's disciplinary process would be brought into disrepute.
I do not accept that. A complaint might properly be
laid by, for example, the Chief
Executive of the Institute, if it was thought necessary to lay a r 21 complaint, as the
result of
matters arising out of a r 18 investigation. Of course, the Executive Board
itself might lay a complaint under r 18.11 where the
complaint was confined to
issues arising out of the failure of the member concerned to hold a Certificate of
Public Practice.
[138]
Moreover, the Practice Review Board could simply resolve to initiate a
practice review under r 20. Following the completion of such
a review, the Practice
Review Board itself would enjoy the wide powers of complaint contained in
r 20.6(c). As a matter of practice,
no doubt, a r 20 practice inquiry could be
engrafted upon an existing r 18 investigation, but that did not occur here.
[139] I
return to the plaintiff's pleading. In her second cause of action the plaintiff
alleges that in purporting to lodge a complaint pursuant
to r 20.6(c), the Practice
Review Board acted outside the jurisdiction conferred on it by its appointment under
r 18.9. In my view,
the plaintiff has made out her case to that effect.
Legitimate expectations/natural justice
[140] The plaintiff pleads as her
fourth cause of action that, having regard to the
advice contained in the Institute's letters of 29 April 2003 and 11 February 2004,
she
entertained the legitimate expectation that:
a) The sole purpose of the Practice Review Board's investigation was
to
determine whether the plaintiff and/or BCA was offering accounting
services to the public;
b) All documents requested and uplifted by the Practice Review Board
during the course of its investigation
would be used in furtherance of
that inquiry and no other;
c) Provided that the plaintiff applied for
a Certificate of Public Practice
no disciplinary proceedings would be initiated against her in the event
of a finding that she and/or BCA were offering accounting services to
the public.
[141] The plaintiff further
pleads that neither the Institute nor the Practice Review
Board put her on notice that it was conducting a general practice review
pursuant to r
20, or that the documents or information sought to be obtained were to be used for
any purpose other than that specifically
identified in the Institute's letter of 11
February 2004. The plaintiff pleads that the Institute's failure to do so amounts to a
breach of an obligation to the plaintiff to observe the requirements of the principles
of natural justice.
[142] In argument Mr
Muir was inclined to expand the range of legitimate
expectations held by the plaintiff beyond those pleaded. In carrying this part
of the
argument for the Institute, Mr Morten as he was entitled to, argued that the plaintiff
was bound by her pleadings and that the Court ought not to entertain
arguments
which were not founded on the statement of claim.
[143] There is force in Mr Morten's complaint. In any event, much of
the material
discussed by Mr Muir in argument was subsumed in the legitimate expectation
grounds pleaded. Accordingly, I propose
to focus upon the pleadings.
[144] Both counsel relied upon judgment of Randerson J in New Zealand
Association for Migration and
Investments Inc. v Attorney General HC AK
M1700/02 16 May 2003. At paragraph [139] of his judgment, His Honour said:
[139]
Having said that, there are at least some principles in this field which
may, with reasonable confidence, be regarded as
settled. The general
principle was formulated by the Privy Council in Attorney-General of Hong
Kong v Ng Yuen Shiu
[1983] UKPC 2; [1983] 2 All ER 346, 351:
... when a public authority has promised to follow a certain procedure, it is
in the interests of good administration
that it should act fairly and should
implement its promise, so long as it does not interfere with its statutory
duty.
... The principle [is] that a public authority is bound by its
undertakings as to the procedure it will follow, provided
they do not conflict
with its duty. ...
[145] As His Honour observed (paragraph [158]), the intensity of the Court's
scrutiny
of an impugned decision may vary. Where a very specific promise is made
the Court is likely closely to examine a decision to ensure
that legitimate
expectations are not unfairly thwarted. To amount to a legitimate expectation, it
must in the circumstances be reasonable
for the affected person to rely on the
expectation (paragraph [143]). While it is not settled whether detrimental reliance
by the
affected party is required, the presence or absence of such reliance is
undoubtedly a relevant factor (paragraph [144]). The first
question will be the extent
to which a public authority has committed itself, whether by practice or by promise
(paragraph [146]).
Overall, the concept of legitimate expectation is an aspect of the
administrative law principle which requires governments and public
authorities to act
fairly and reasonably (paragraph [141]).
[146] In the present case, the plaintiff says that by promulgating
its rules, the
Institute has created a legitimate expectation that the Institute itself will observe the
provisions of the rules
and act in accordance with their requirements, and that those
expectations have not been met in the respects pleaded in her statement
of claim.
[147] I turn to consider the detail of her pleading immediately below, but pause to
observe that in some cases, notably
those involving a significant element of public
policy, difficult questions can arise in respect of the nature of the appropriate
relief,
even if a plaintiff's claim is made out: see for example the discussion in R v North
and East Devon Health Authority, ex
parte Coughlan [2001] QB 213 and R (Bibi) v
Newham London Borough Council [2001] EWCA Civ 607; [2002] 1 WLR 237.
[148] In the present case however, if the plaintiff is able to establish a breach of
legitimate expectation based upon the Institute's
failure to follow the procedures
prescribed by its own rules, then the issue of relief may perhaps not present
difficulties of the
sort discussed in these and other cases. Rather, the Court's task
would be to formulate relief designed to ensure that the legitimate
expectations of
the plaintiff were fulfilled.
[149] The first pleaded legitimate expectation relates to the purpose of the Practice
Review Board's investigation. The plaintiff pleads that she was entitled to expect
that the sole purpose of that investigation
was to determine whether she and/or BCA
were offering accounting services to the public. The focus is upon the purpose of the
Practice
Review Board's investigation, which harks back to the motives of the
Institute, and so to the discussion which I undertook earlier
in this judgment. I then
held that there was no duplicity on the part of the Institute, and that the investigation
was undertaken
for the bona fide purpose of determining whether or not the plaintiff
was offering accounting services to the public, and so required
a Certificate of Public
Practice. On the facts, the first legitimate expectation pleaded is met by the Institute.
[150] The second
pleaded ground is that the plaintiff had a legitimate expectation
that documents requested and uplifted from the plaintiff during
the investigation
would be used in furtherance of that inquiry and no other. That pleaded expectation
is likewise legitimate in the
sense that the Practice Review Board was confined, at
least in the first instance, to seeking and obtaining copies of documents related
to the
question of whether the plaintiff was offering accounting services to the public.
[151] But if in the course of so doing
the Practice Review Board's investigator
identified documents which gave rise to concerns outside the confines of the r 18.9
inquiry,
it cannot reasonably be contended that the investigator was bound to set
those documents to one side and simply to ignore these concerns
thereafter. To take
an example having no application to this case at all, suppose that documents were
discovered which revealed criminal
activity within a member's practice, it cannot be
contended that those documents could not be deployed by the Institute for the
purposes
of maintaining discipline and standards within the profession, and indeed,
in pursuance of the proper administration of the criminal
law. Of course, a fishing
expedition (of the type Mr Muir argued that Mr Davies wanted to pursue) cannot be
justified, but I have
held that no such thing occurred here.
[152] So if an investigator develops in the course of a r 18.9 investigation, a
concern
regarding some aspects of the conduct of a member's practice not directly
related to the purpose of that investigation, it cannot
sensibly be suggested that the
investigator is bound simply to ignore the material concerned. It will be appropriate
for her, as
Ms Grant did in this case, to report both to the Practice Review Board and
to the plaintiff, and for such further steps consistent
with the rules to be taken as may
be appropriate.
[153] In the light of that analysis, it cannot be said the plaintiff was entitled
to
expect all of the documents uplifted by the Practice Review Board during the
investigation would be used only in respect of the
r 18.9 inquiry. Where wider
issues arguably arose, as here, the plaintiff must have understood that the
investigator would be entitled
to deal with the documents, and to raise her concerns,
in such manner as the rules permit.
[154] Accordingly, the legitimate expectation
pleaded by the plaintiff must be
regarded as framed too widely. If upheld it would tend to stultify the proper
investigation
processes of the Institute.
[155] Finally, the plaintiff claims that she entertained a legitimate expectation that
by reason of
the correspondence that had passed between the Institute and the
plaintiff/her solicitors, there would be no disciplinary proceedings against
her, even
in the event that she was found to be offering accounting services to the public. In
my view, she cannot have legitimately
entertained any such expectation for two quite
separate reasons.
[156] First, irrespective of what had gone before, the terms of
the Institute's letter
to Price Baker of 28 July 2003 provided a clear indication for the future of the
Institute's position. Ms
Beaton was advised that the earlier indication given by the
Institute to the effect that it was not its intention to initiate disciplinary
proceedings
against the plaintiff for failing to hold a Certificate of Public Practice, would not
apply "into the future". The plaintiff
was put on notice in that letter that she must
"apply for a Certificate of Public Practice by 31 August 2003 ... failing which the
Institute will consider disciplinary proceedings".
[157] Just prior to 31 August 2003, the plaintiff's solicitors took certain
steps with
a view to making application for a Certificate of Public Practice, but the matter was
not followed through. It appears
that the plaintiff's solicitors may have been
responsible, at least in part, for that.
[158] Almost six months elapsed before the
Institute brought the delay to the
attention of the plaintiff's solicitors. While the Institute did not formally withdraw
the assurance
earlier given, the plaintiff cannot legitimately have entertained the
continuing belief that the Institute was prepared to stand
by its initial assurances.
The letter of 28 July 2003 provided a clear indication that the Institute's patience was
exhausted. The
subsequent delays can only have exacerbated the situation, so far as
the Institute was concerned.
[159] There is a second reason
for rejecting the third claim of legitimate
expectation. It arises from a matter discussed earlier in this judgment. Ms Grant's
evidence
is to the effect that in order to undertake an investigation under r 18.9, it
was necessary for her to obtain and review a substantial
number of documents,
including those relating to the operation of the plaintiff's trust account. That
evidence is challenged
by Mr Muir, but there is no expert evidence to the contrary,
and I am bound to accept it.
[160] Moreover, it seems to me substantially
in accordance with the requirements
of practical reality that an investigator appointed to determine whether a member of
the Institute
is offering accounting services to the public, will need to consider both
the scope of the services provided and the persons to whom
they were being
provided. On the face of it, that would entail an inquiry that would necessarily
include at least a partial review
of trust account operations.
[161] In the course of undertaking her investigation Ms Grant identified a number
of matters not directly
associated with the r 18.9 issue, which raised concerns in her
mind. Accordingly, she included those matters in her detailed and
lengthy report.
The matters concerned came to her notice, not because she widened her investigation
beyond its authorised scope,
but simply because they came to light in the course of
her r 18.9 investigation. It cannot have been a legitimate expectation of
the plaintiff
that matters so identified by Ms Grant would not be the subject of her report, and of
consequential action by the appropriate
the Institute body if that was thought to be
warranted.
[162] In summary, the plaintiff's claim based upon breach of legitimate
expectation
is that she was entitled to expect the Institute investigator to conduct her
investigation solely under r 18.9, not to
use the documents in the furtherance of any
inquiry other than under r 18.9, and to be free of disciplinary proceedings at the
conclusion
of the investigation.
[163] I hold that Ms Grant did indeed investigate the plaintiff under r 18.9, but such
an investigation was
of necessity largely co-extensive with that which would be
conducted in the course of a practice review, and that the plaintiff was
not justified in
expecting that no disciplinary proceedings would be initiated against her in the event
of a finding that she and/or
BCA were offering accounting services to the public.
[164] This case is quite different from University of Auckland v Tertiary
Education
Commission [2004] 2 NZLR 668, upon which Mr Muir relied by way of comparison.
There, the use to which the commission proposed to put the data in question was
different from that which the University had understood would be the case,
following consultation. Here, the plaintiff ought to have
been aware that further
steps might be taken by the Institute if, in the course of its investigation under r 18.9,
matters of concern
were identified.
[165] The cause of action based on legitimate expectation and/or natural justice
accordingly fails.
Section
27: New Zealand Bill of Rights Act
[166] While the plaintiff's statement of claim pleaded breaches of s 27 of the New
Zealand Bill
of Rights Act 1990 (BORA) Mr Muir accepted in argument that s 27
was, at least for present purposes, co-extensive with the plaintiff's
common law
entitlement to natural justice. It therefore requires no separate discussion.
Section 21: New Zealand Bill of Rights
Act
[167] Section 21 of the BORA provides:
21. Unreasonable search and seizure
Everyone has the right to be
secure against unreasonable search or seizure,
whether of the person, property, or correspondence or otherwise.
[168] Section
3 of the BORA provides:
3. Application
This Bill of Rights applies only to acts done--
(a) By the legislative,
executive, or judicial branches of the government of
New Zealand; or
(b) By any person or body in the performance
of any public function,
power, or duty conferred or imposed on that person or body by or pursuant
to law.
[169] Section
3(b) is addressed to bodies or persons who perform a public function,
power or duty conferred by or pursuant to law. The BORA will
apply only to acts
done in the performance of those functions. Acts in the performance of non-public
functions are not covered. Guidance
as to the circumstances in which s 3(b) may be
applicable is provided in the judgment of Randerson J in Ransfield v Radio Network
Ltd [2005] 1 NZLR 233, 247-248, where a significant number of non-exhaustive
considerations are listed. Randerson J concludes his analysis by commenting
that the
matters listed amount to no more than a range of possible considerations and that a
flexible and generous approach is required.
To the same effect is R v N [1999]
1 NZLR 713, 721 (CA).
[170] While the Institute is a private body, privately funded by levies, the source of
both its powers and functions
is statutory. The government has prescribed the broad
functions of the Institute by statute, and accordingly the Institute performs
a
regulatory function without which direct government involvement would have been
required. Those regulatory functions are performed
in the broader public interest
and in the interests of the profession as a whole. the Institute has coercive powers
under the rules
including the powers to summon witnesses and to require the
production of documents. It has a monopoly over regulation in the profession,
although not all accountants must be members to practise.
[171] Of course, not all acts done by the Institute in the performance
of its
functions will attract the application of s 3(b), but rr 18 and 20 are regulatory in
nature and therefore relate to the performance
by the Institute of a public function.
Both are inherently part of the disciplinary or coercive function of the Institute.
These
conclusions lead to the view that in exercising its powers under rr 18 and 20,
the Institute will be subject to the BORA by reason
of s 3(b) of that Act.
[172] In assessing unreasonableness for the purposes of s 21, a Court will ordinarily
conclude that a search
conducted pursuant to a valid consent will be reasonable: R v
Bradley (1997) 15 CRNZ 363; R v Fletcher (2002) 19 CRNZ 399.
[173] By contrast, if a consent is obtained only by reason of an investigator's
misrepresentation as to entitlement, then there
is no effective consent: R v Sanders
[1994] 3 NZLR 450, 474 (CA).
[174] The leading case on unreasonableness is R v Shaheed [2002] 2 NZLR 337
which mandates a two stage process: first
an inquiry as to reasonableness and then if
there is a finding of unreasonableness, separate consideration of whether documents
or
things seized should be admitted in evidence.
[175] Here, Mr Muir argues that the most compelling features which suggest
unreasonableness
in this case are the alleged absence of good faith on the part of the
Institute in appearing to conduct a r 18.9 investigation when
in truth it had embarked
upon a r 20 practice review, and the consequent misleading of the plaintiff as to the
basis upon which she
was providing documents.
[176] In considering that argument, I bear in mind the assistance to be derived from
the decision of the
Court of Appeal in R v Grayson and Taylor [1997] 1 NZLR 399,
in which a number of non-exhaustive factors were set out as a guide to the
assessment of potential breaches of s 21.
[177] The
difficulty here for the plaintiff is that I have found the Institute to have
acted in good faith in commencing and pursuing its r
18.9 investigation. Moreover, I
have accepted as I am bound to do, the evidence of Ms Grant to the effect that the
inquiry which
necessitated such an investigation, is similar to that which would be
conducted in the course of a r 20 practice review. The plaintiff
may have taken the
view that the scope of a r 18.9 investigation ought to be limited, but there is nothing
in the evidence that suggests
she was misled by the Institute or by Ms Grant as to
that scope. Indeed, it must have been obvious to the plaintiff as the investigation
proceeded, that Ms Grant was casting her net widely. The plaintiff was actively
involved in assisting Ms Grant by identifying and
producing documents and records.
It is not right to say that the plaintiff was misled as to the basis upon which the
documents were
being provided.
[178] There is a further consideration. The rules bind the plaintiff to provide
documents to an Institute investigator,
whether the investigation was being
conducted under r 18 (where r 18.10 applies), or under r 20 (by way of practice
review where
rr 20.4 and 20.5 apply). So the obligation of the plaintiffs to supply
documents was to be found in the rules themselves and did
not arise simply by virtue
of a demand made by the investigator. That being so, what occurred here cannot
have amounted to an unreasonable
search and seizure. The plaintiff, who appears to
be an astute businesswoman, was no doubt aware of her obligation to provide
documents
to the investigator and there is no suggestion that she did so otherwise
than willingly. Indeed, it is common ground between the
parties that the plaintiff
provided the utmost assistance to Ms Grant.
[179] The factual circumstances are simply not consistent
with a claim to
unreasonable search and seizure. This cause of action fails.
Remedies
[180] I have held that the Practice Review
Board lacked jurisdiction to lay a
complaint with the Professional Conduct Committee because r 20 had not previously
been invoked,
and no practice review conducted. Further, the Practice Review
Board had no jurisdiction to lay a complaint under r 18 (because only
the Executive
Board could do so) or under s 21 (because the Practice Review Board does not fall
within the description "any person"
in r 21.1).
[181] The complaint in its current form is therefore invalid. But that is not the end
of the matter. It is common ground
between the parties that judicial review is a
discretionary remedy. Counsel were agreed that the factors listed in McGechan on
Procedure
(JA 4.03) accurately record the factors which are customarily taken into
account in the exercise of the Court's discretion.
[182]
At the outset it is convenient to dispose of a point raised by Mr Reed and
argued by him to be relevant to the exercise of the Court's
discretion against the
plaintiff. As noted earlier, the plaintiff has relinquished her directorship of BCA
consequent on the sale
by a trust associated with her interests of the shares in BCA
to the company's former general manager. The plaintiff's only role
now in BCA is
that of manager.
[183] Under its new owner BCA has declined to co-operate with the Institute's
investigation, and
in particular has declined to provide any further documents to the
Institute. Indeed, it has demanded the return of those already
supplied by the
plaintiff.
[184] Change of ownership in BCA was effected earlier this year, prior to the
commencement of this proceeding,
but some months after Ms Grant's report was
provided to the plaintiff in September 2004. Mr Reed asked me to infer that the sale
is connected to the present investigation, and that its primary aim is that of
preventing the Institute from carrying its investigations
any further. He implied that
the intransigent stance adopted by BCA carries (at least) the tacit approval of the
plaintiff.
[185] The plaintiff
strongly denies the suggestion that the sale of her interest in the
company and her consequent resignation as a director is associated
in any way with
the investigation. She says that the sale had been under discussion for some time
and was certainly mooted before
Ms Grant's report was prepared. I am not prepared
to draw the inference against the plaintiff for which Mr Reed contends. It is strongly
disputed by the plaintiff.
[186] In effect, the Institute argues that the plaintiff is not acting in good faith.
That is a serious
claim which if made out might well affect the exercise of the
Court's discretion, but because it is serious the Court will need cogent
evidence
before acting upon it. At best the evidence is equivocal. Accordingly, I put the
matter to one side.
[187] Mr Muir put
at the forefront of his argument as to discretion, the intertwined
issues of the gravity of the error and the degree of prejudice
to the plaintiff. If a
plaintiff has suffered substantial prejudice, then that will be a factor pointing to the
necessity for substantive
relief: Murdoch v New Zealand Milk Board [1982] 2
NZLR 108, 122. But the over-riding general principle is the need to achieve a fair
result in all the circumstances of the case: Phipps v Royal
Australasian College of
Surgeons [2000] 2 NZLR 513, 521 (PC).
[188] As mounted by the plaintiff, her case if upheld in its entirety would have
revealed a troubling failure on the
part of the Institute to act in accordance with its
own rules, and indeed, to act in good faith. But in the result I have
simply
determined that there has been an error as to jurisdiction in that the complaint to the
Professional Conduct Committee ought
not to have been lodged by the Practice
Review Board, nor could it be founded on r 20.6(c).
[189] I have found also that a complaint
may be lodged by "any person" who may
for example include the Chief Executive of the Institute, or indeed, any individual
member
of the Practice Review Board, under r 21 in respect of any matter properly
arising on an investigation conducted under r 18.9. That
being so, the error is not of
such gravity as to constitute of itself a powerful factor pointing to the grant of a
remedy. Rather
the reverse is the case. The error is somewhat technical in character.
Matters identified by Ms Grant in the course of her r 18 investigation
have properly
been brought before the Professional Conduct Committee by way of complaint. The
error lies simply in the identity of
the complainant and the rule invoked in the
complaint itself.
[190] Neither do I believe the plaintiff to have suffered any significant
prejudice.
The case is wholly different for example, from Doherty v Judicial Committee of the
Veterinary Council of New Zealand
[2001] NZAR 729, relied upon by Mr Muir. In
that case there had been a wholesale failure by the disciplinary body to observe the
rules of natural
justice.
[191] Mr Muir submitted that in the "sanguine belief" that the Institute was
conducting a r 18.9 investigation with no
disciplinary consequences, the plaintiff
offered unrestricted access to all documents and staff. He further submitted that had
she
known that a practice review was being conducted, she would have instructed
her solicitors who were already engaged in the matter.
Questions would have arisen,
Mr Muir argued, as to the mismatch between the advice contained in the letter of 11
February 2004 and
the investigation now being conducted. Advice could have been
taken by the plaintiff from her solicitors as to what documents she
was obliged to
provide and in what context. She might even have elected there and then to resign
her membership of the Institute
which would have foreclosed the review process.
Mr Muir claimed there was then no matter before the Professional Conduct
Committee
or the Disciplinary Tribunal which would have justified a refusal to
accept a resignation in terms of r 2.12(b).
[192] Mr Reed's
response to that submission is to express dismay on the part of the
Institute at the suggestion that the plaintiff might have sought
legal advice with a
view to restricting the availability of documents to the investigator. He pointed out
that whether under a r
18 investigation or a r 20 practice review the plaintiff is
obliged by the rules which bind her, to provide the fullest co-operation
to the
investigator, and to produce such documents and records as may be required. He
also argued that by reason of the provisions
of r 2.12 the plaintiff would have been
unable to resign her membership without the consent of the Institute. I put the
question
of her entitlement to resign to one side for present purposes. It does not
seem to weigh heavily in comparison with other discretionary
factors. Moreover, I
note that in evidence the plaintiff described herself as being a "proud member" of the
Institute for many years.
Whether or not she was entitled to resign, there must be a
question as to whether ultimately she would have done so.
[193] Given
the limited and somewhat technical character of the error which has
been made in this case, I am not satisfied that any significant
prejudice has resulted
to the plaintiff thereby.
[194] Another question, always of some significance, is whether it is necessary
to
grant a remedy in order to send an appropriate deterrent message to professional
bodies, and to the Institute in particular. That
was a factor expressly referred to in
Chiu v Minister of Immigration [1994] 2 NZLR 541, 553. I do not regard that as
weighing heavily against the Institute. It is true that, for reasons largely unexplained,
the r 18
investigation appears to have culminated in a report couched in language
appropriate for a practice review report and the subsequent
complaint perpetuates the
anomaly, but given Ms Grant's evidence that there is a considerable correspondence
between a r 18.9 inquiry
and a practice review, it is perhaps understandable that such
an error may have crept in. That is not to say the error is to be condoned.
It is to be
expected that the Institute will know and apply its own rules properly through its
duly appointed boards and committees.
[195] This is not a case where a sanction is called for. Matters identified in the
complaint arose in the course of a properly
commenced and conducted r 18.9
investigation, and are deserving of consideration on their merits.
[196] Then there is the consideration
that the Court will often exercise caution in
declining a remedy, on the ground that, had the correct procedure been adopted from
the start, the result would nevertheless been the same: see for example the judgment
of Cooke J in Reid v Rowley [1977] 2 NZLR 472, 484, and the observations of the
Court of Appeal in Chiu v Minister of Immigration.
[197] Here however, it is possible with some
confidence to say that the outcome
must necessarily have been the same if the correct procedure had been followed.
The error consists
simply in invoking r 20, and in choosing to have the Practice
Review Board make the complaint in its own right.
[198] There is
the further factor that the matter has not progressed significantly
through the relevant Institute's procedures. The focus in this
case has been upon the
complaint document which is lodged with the Professional Conduct Committee.
That body has the task of considering
whether the complaint can be dealt with in
summary fashion, or whether it should be passed on to the Disciplinary Tribunal for
its
consideration and action if thought fit.
[199] The plaintiff has the right to appear before and be heard by both the
Professional
Conduct Committee and the Disciplinary Tribunal, if the matter should
proceed that far. Many of the authorities on discretion concern
cases in which the
plaintiff has been heard, and (the usually disciplinary) procedures completed. In
those cases it is often easy
to point to prejudice arising from identified breaches.
[200] Here, all of the Institute's formal procedures lie ahead of the plaintiff.
The
preliminary nature of the steps taken by the Institute to date tells against the grant of
a remedy to the plaintiff. In Just
One Life Limited v Queenstown Lakes District
Council [2003] 2 NZLR 411, Panckhurst J observed that the modern approach to the
remedial discretion is to look at substance rather than form. The nature of
the
statutory requirement in issue, the degree of non-compliance and the effect of non-
compliance, are all highly relevant factors
in the assessment.
[201] Adopting that approach and in the light of the other factors to which I have
referred, I have concluded
it is not appropriate to grant relief to the plaintiff.
[202] The effect of this decision is that the procedures prescribed by
the Institute's
rules may be resumed. It is however, not appropriate that the complaint lodged by
the Practice Review Board be relied
upon in its present form. The complaint should
be relaid. It should omit the reference to r 20.6(c) and to the conduct of a practice
review. Further, it should be laid, not by the Practice Review Board but by a natural
person, who might be the Chief Executive of
the Institute or a member of the
Executive Board, or of the Practice Review Board. That is a matter for the Institute.
Decision
[203] For the foregoing reasons, even though I have upheld the plaintiff's claim in
some limited respects, I decline to grant any
of the relief sought in the plaintiff's
amended statement of claim.
Costs
[204] Costs are reserved. Counsel may file memoranda
if the parties cannot agree.
Search of Court file
[205] This proceeding deals with matters currently before the Professional
Conduct
Committee of the Institute. The matter may or may not fall at a later point in time
under the jurisdiction of the Institute's
Disciplinary Tribunal. There is material in
the affidavits filed which is confidential in the sense that it relates to the private
business affairs of the business conducted by the plaintiff at relevant times, and other
material relating to the course of the Institute's
investigations to date, which I am
satisfied ought not for the time being to be available for public search.
[206] At the commencement
of the hearing counsel joined in seeking an order
under r 66 directing the Court file not be searched without leave of the Judge.
I
made that order pending the release of this judgment, and now renew it. The Court
file is not to be searched, save by the persons
referred to in r 66(2) without leave of
the Judge. This order is to apply until further order of the Court.
C J Allan J
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