Reported Decision : (2003) 46 ACSR 113 New South Wales Court of Appeal CITATION : Bell v St Michael's Golf Club [2003] NSWCA 159 HEARING DATE(S) : 20 May 2003 JUDGMENT DATE : 25 June 2003 JUDGMENT OF : Sheller JA at 1; Ipp JA at 2; Tobias JA at 3 DECISION : 1.Declaration 3 made by Gzell J on 19 February 2002 be set aside and the following declaration substituted:; "DECLARES that int he circumstances which have occurred, the opinion expressed by the defendant in his Independent Audit Report dated 25 October 2001 with respect to the Financial Statements of the plaintiff for the year ended 30 June 2001 to the effect that the remuneration reported in Note 17 to those Statements (for fees of $4,860.00 paid to Stafford and $600.00 paid to Stockford) was received by an honorary member of the Committee of the plaintiff in contravention of Article 74 of the Articles of Association of the plaintiff, was in error."; 2. Appeal Dismissed; 3. Appellant to pay the respondent's costs of the appeal CATCHWORDS : Declaratory relief sought - Construction of company constitution - Accounting services provided by honorary member of committee - Challenge to correctness of annual financial report by independent auditor - D Corporations Act 2001 ss 308(1), 295(3) , 314(1) 319(1), 285(1), 292(1), 322(1) LEGISLATION CITED : Accounting Standard AASD 1017 [3.1.1] Supreme Court Act s 75 Administrative Decisions (Judicial Review) Act 1977 (Cth) Ainsworth v Criminal Justice Commission (1992) 174 CLR 564 Russian Commercial & Industrial Bank v British Bank For Foreign Trade Ltd (1921) 2 AC 438 Telstra Corporation Ltd v Australian CASES CITED : Telecommunications Authority (1995) 133 ALR 417 Gardner v Dairy Industry Authority (1977) 18 ALR 55 Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 Australian Securities Commission v Ampolex Ltd (1995) 38 NSWLR 504 PARTIES : Donald Bell St Michael's Golf Club FILE NUMBER(S) : CA 40186/02 COUNSEL : A: Mr B Coles R: Mr R D Wilson SOLICITORS : A: Herbert Geer & Rundle R: Tress Cocks & Maddox LOWER COURT Supreme Court - Equity Division JURISDICTION : LOWER COURT SC 5485/01 FILE NUMBER(S) : LOWER COURT Gzell J JUDICIAL OFFICER : IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40186/02 SHELLER JA IPP JA TOBIAS JA 25 June 2003 DONALD BELL v ST MICHAEL'S GOLF CLUB Judgment 1 SHELLER JA: I agree with Tobias JA. 2 IPP JA: I agree with Tobias JA. 3 TOBIAS JA: At all material times the respondent was a golf club and the appellant was its duly appointed auditor. Pursuant to s 308(1) of the Corporations Act 2001 (the Act) the appellant prepared a report to the members of the respondent with respect to the annual financial report of the respondent prepared pursuant to s 295 of the Act with respect to the year ending 30 June 2001. In his report the appellant qualified the financial report in a manner unacceptable to the respondent. 4 On 14 November 2001 the respondent instituted proceedings in the Equity Division of the Supreme Court seeking (apart from costs) only declaratory relief. The proceedings were heard by Gzell J and on 18 February 2002 his Honour delivered judgment in favour of the respondent. On 19 February 2002 his Honour made certain declarations and ordered the appellant to pay the respondent's costs of and incidental to the proceedings. It is against the making of those declarations and order that the appellant appeals to this Court. The relevant facts 5 The respondent is a company limited by guarantee and as at 30 June 2001 it had 1,190 members. As I have indicated, the appellant was its auditor and was also one its members. The respondent's Honorary Treasurer was Mr D A Cutrupi. He was a chartered accountant and was a director and shareholder of Stafford & Partners Services Pty Ltd (Stafford). He also had an interest in Stockford Accounting Services Pty Ltd (Stockford) which was said to be the new name for Stafford. 6 During the year ended 30 June 2001 the respondent paid Stafford $4,860 and Stockford $600 for accounting services which included the preparation of the annual financial report of the respondent for the year ended 30 June 2000. Stockford has accrued, but not charged the respondent, the sum of $5,000 with respect to the preparation of the annual financial report of the respondent for the year ended 30 June 2001. 7 Pursuant to a combination of s 295(3) of the Act and paragraph 3.1.1 of Accounting Standard AASD 1017, the financial statements of the respondent for the year ended 30 June 2001 contained the following note: "17 Related Parties During the year Stafford & Partners, a firm of which Mr Domenic Cutrupi is a principal, provided accounting services under normal commercial terms and conditions. The total fees rendered amounted to $5,460.00 and an additional $5,000.00 has been accrued in respect of the preparation of the 2001 year accounts." 8 The financial report of the respondent was the subject of an independent audit report by the appellant dated 25 October 2001 (the report). Under the heading 'Qualification' reference was made to Accounting Standard AASD 1017 and Statement of Accounting Concepts SAC2. The report then contained the following statement: "Following from the above we draw the members' attention to Note 17 of the financial statements detailing director related transactions and advise that it is our opinion that the remuneration reported in this note was received by an honorary member of the Committee in contravention of Article 74 of the respondent's constitution as detailed below and that this breach was not detailed in the note." 9 After setting out the terms of Article 74 of the Articles of Association of the respondent (the Articles) the report continued: "The subject of the above non disclosure relates to a fee paid in relation to the preparation of the annual accounts for the year ended 30 June 2000, the cost of which was known at the time the accounts were prepared. The effect of this is that the profit for the year ended 30 June 2000 was overstated by $5,460. Upon instruction from this Firm, the cost of preparing the current year's accounts was accrued in an amended version of the financial statements." 10 Under the heading 'Qualified Audit Opinion' the report concluded as follows: "In our opinion, except for the effects of the financial report of the matter referred to in the qualification paragraph, the financial report of St Michael's Golf Club Ltd is in accordance with: (a) the Corporations Act, including: (i) giving a true and fair view of the company's financial position as at 30 June 2001 and the performance of the year ended on that date; and (ii) complying with Accounting Standards; (b) other mandatory professional reporting requirements." 11 It would appear that when the respondent's Committee or Board of Directors received the report it disagreed with the qualification therein contained. Accordingly, it caused it solicitors, Tress Cocks & Maddox, to write to the appellant by letter dated 1 November 2001 in which those solicitors opined that the appellant's conclusion that the payment to Stafford was in breach of Article 74 involved a misconstruction of that article. That opinion was supported by detailed reasoning and the appellant was advised that the solicitors had independently briefed a named senior counsel who had confirmed their view that the relevant payment was not in breach of Article 74. The letter then asserted that the representation in the report that 'remuneration was received by an honorary member of the Committee in contravention of Article 74 of the respondent's constitution' was clearly incorrect and misleading and raised a serious issue in relation to Mr Cutrupi's reputation and the actions of the respondent's Committee. As the Annual General Meeting (the AGM) of the respondent at which the report would be tabled was then imminent, the appellant was urgently requested to provide the solicitors with his reasoning as to why the payment to Stafford was in breach of Article 74. 12 By letter dated 6 November 2001 the appellant responded to the solicitors in the following terms: " As you would be aware the duty of the auditor of St Michael's Golf Club Ltd is to report on the financial statements to the members of the respondent, which we have done via the issuance of our audit certificate. Accordingly, the contents of that report is solely for the purpose of discharging our duties to the members of the respondent and we are therefore at a loss as to the authority by which your letter requests we justify our position as detailed in that audit certificate. Given the above and with all due respect to yourself and Mr John Sackar QC we will not be responding to your letter further than this correspondence as we believe your request to be both inappropriate and without due authority. As a matter for your record we advise that prior to issuing our audit certificate we sought opinions from two different counsel both of whom are considered experts in the field of registered respondent legal affairs and each have supported our conclusions in this matter." 13 As a consequence of the impasse that had occurred, the respondent instituted the proceedings referred to in paragraph 4 above seeking declarations firstly, that upon the true construction of the Articles, the respondent had the power to pay to Stafford an amount of $5,460 during the 2001 year for accounting services rendered to it in circumstances where Mr Cutrupi, a principal of Stafford, was also a member of the Committee of the respondent and, secondly, that the respondent had the power to pay Stockford an amount of $5,000 in respect of accounting services rendered to it during the 2002 year in the same circumstances concerning Mr Cutrupi. More directly with respect to the appellant, the respondent sought a declaration in the following terms: "4. A declaration that in the circumstances which have occurred, the defendant erroneously qualified the Financial Report of the plaintiff for the year ended 30 June 2001 when he stated in the Independent Audit Report of Bell Partners, chartered accountants, dated 25 October 2001 that the remuneration reported in note 17 (being for fees of $5,460 paid to Stafford) 'was received by an honorary member of the Committee in contravention of Article 74 of the respondent's Constitution'." The course of the proceedings before Gzell J 14 At the hearing before Gzell J a number of affidavits were filed on both sides of the record. Relevantly for present purposes, the appellant filed an affidavit sworn on 1 February 2002 in paragraph 10 of which he set forth five reasons for the formation by him of the view that he had to qualify his audit report in the manner already referred to. One of the reasons so recorded was rejected by his Honour but that matters not for present purposes. 15 After the affidavits had been read and objections taken by both parties to parts thereof and ruled upon, counsel for the appellant cross-examined the President of the respondent who had also sworn an affidavit. Counsel then called the deponents of the affidavits which had been sworn and filed on behalf of the respective parties and they were cross-examined. In the course of the cross-examination of Mr Anthony Bell, the son of the appellant and a chartered accountant in the appellant's firm, Bell Partners, was asked whether the report had been sent to ASIC to which he replied in the negative. He was further asked whether he and his partners had considered sending the report to ASIC. His response was that the firm had proceeded to get advice from a reputable firm of commercial lawyers as to the construction of Article 74. He indicated that, as auditors, the firm had a duty to the members of the respondent and that, given their qualification of the financial statements, he intended proposing to the President that a special resolution be passed at the forthcoming AGM to have the members ratify the transaction in respect of which the report had alleged that the Honorary Treasurer had received remuneration in contravention of Article 74. 16 Counsel for the appellant addressed his Honour at length and resisted the making of any of the declarations sought. He submitted that, on the evidence, it was reasonably open to the appellant to form the opinion that there had been a breach of Article 74 and it mattered not that he might have been wrong in so doing. His submissions went into some detail in support of the proposition that it was reasonably open to the appellant to form that opinion. If that were so, it was submitted that for the reasons advanced before his Honour and repeated before this Court, it was not open to his Honour to make the declarations which the respondent had sought. 17 However, on my reading of the transcript of the appellant's argument, his counsel went perilously close to arguing the merits of the opinion which the appellant had expressed to the effect that Article 74 had been contravened. However, he did submit that the true construction of Article 74 was not a matter which concerned the appellant and that his case was that the correctness of the appellant's opinion could not be the subject of declaratory relief where that opinion was held honestly and on reasonable grounds. He therefore submitted that although the respondent was seeking to argue the proper construction of Article 74, the appellant was not a proper party to the resolution of that issue. 18 Notwithstanding the manner in which counsel for the appellant sought to argue the matter before the trial judge, it is clear that at no time has the appellant withdrawn his opinion that the relevant payments were made in contravention of Article 74; nor did he ever concede that that opinion was erroneous and that the true construction of Article 74 and its application to the relevant facts was as advanced by the respondent. In other words, at no time did he concede error but sought to sidestep any issue as to the correct construction of Article 74 by asserting that the respondent was not entitled to declaratory relief once it was established that the appellant's opinion was held honestly and on reasonable grounds. 19 His Honour rejected the appellant's submissions and made the following declarations: "1. DECLARES that in the circumstances which occurred and upon a true construction of the Articles of Association ("the Articles") of St Michaels Golf Club Ltd ("St Michaels"), the payment of $5000.00 to Stockford Accounting Services Pty Ltd ("Stockford") in the year to end 30 June 2002 for accounting services rendered to St Michaels during the year to end 30 June 2001 will not be in breach of Article 74 of the Articles. 2. DECLARES that in the circumstances which have occurred and upon a true construction of the Articles, the payment of an amount of $4860.00 to Stafford and Partners Pty Ltd ("Stafford") and an amount of $600.00 to Stockford during the year to end 30 June 2001 was not in breach of Article 74 of the Articles. 3. DECLARES that in the circumstances which have occurred, the defendant erroneously qualified the Financial Report of St Michaels for the year to end 30 June 2001 so far as he stated in the Independent Audit Report of Bell Partners , chartered accountants, dated 25 October 2001 that the remuneration reported in note 17 (being for fees of $4860.00 payed to Stafford and $600.00 paid to Stockford) 'was received by an honorary member of the Committee in contravention of Article 74 of the Articles'." 20 Declarations 1 and 2 were the result of Gzell J's construction of Article 74. It provided, so far as relevant, as follows: "No member of the Committee will receive any remuneration for his services but each member will be entitled to repayment out of the funds of the Club for out-of-pocket expenses and disbursements reasonably and properly incurred, including (in the case of the Honorary Treasurer) salary or wages paid for clerical or other assistance." 21 His Honour held that on the true construction of Article 74, the services performed by Stafford and Stockford the subject of Note 17 to the financial statements (see [7] above) were not services required of the Honorary Treasurer as a consequence of which their payment and projected payment did not and would not infringe the Article. This conclusion was clearly correct and, consistent with the appellant's approach to the issues referred to in [17] above, he did not seek to argue the contrary. The submissions before this Court 22 The appellant's submissions were divided between those with respect to the making of Declarations 1 and 2 on the one hand and those with respect to Declaration 3 on the other. As to the former, the essence of those submissions was that (a) The appellant was joined in the proceedings in his capacity as auditor and not in his capacity as a member of the respondent; (b) Even if the appellant was also joined in his capacity as a member, he was an inappropriate contradictor in the absence of an order that he represent the membership generally for otherwise no-one would be bound by the declarations other than himself. Alternatively, the appellant was not an appropriate contradictor as he did not, before his Honour, seek to oppose the submissions of the respondent that the subject payments were not made in contravention of Article 74; (c) There was no legal controversy between the parties with respect to the matters the subject of Declarations 1 and 2 as the appellant was only expressing an opinion which he was obliged to express pursuant to s 308(1) of the Act; (d) It followed that the conditions upon which purely declaratory relief may be given as set forth by the High Court of Australia in Ainsworth v Criminal Justice Commission (1992) 174 CLR 564 at 581-582, 595-597 were not satisfied in the present case. 23 With respect to the making of Declaration 3, the appellant submitted that: a. The opinion expressed by the appellant in his report was one which was mandated by s 308(1) of the Act; b. That opinion was required to be the subject of a report to the members of the respondent; c. If there was disagreement with the opinion so reported, then it was a matter to be dealt with by the members in general meeting; d. Once the opinion was expressed in the report and communicated to the members, it passed into history which could not be rewritten by the making of the declaration in question; e. The question of whether or not the appellant's opinion was correct was therefore a theoretical one and not one which constituted a justiciable issue or involved a real controversy between the parties; f. It would be inappropriate to force an auditor such as the appellant to have to defend the correctness of his opinion in proceedings to which he was involuntarily joined as a party given the mandatory requirement of the Act that the opinion, if honestly and reasonably held, must be reported to the members; g. There was no utility in the making of the declaration as what was done could not, in effect, be undone and would not, in any event, be binding on any member who held a contrary view to that the subject of the court's decision; h. In any event, the declaration was made in inappropriate terms insofar as it declared that the appellant had 'erroneously qualified' the respondent's annual financial report. The relevant law 24 The annual financial report in respect of which the report was issued by the appellant was prepared in accordance with provisions of s 295 of the Act. The notes to the financial statements contained in that report and, in particular, Note 17, was required by s 295(3)(b) or (c). The appellant's statutory responsibilities are to be found in s 308 which, so far as is relevant, provides as follows: " 308 (1) [ Report to members ] An auditor who audits the financial report for a financial year must report to members on whether the auditor is of the opinion that the financial report is in accordance with this Act, including: a. Section 296 (compliance with accounting standards); and b. Section 297 (true and fair view). If not of that opinion, the auditor's report must say why. 308 (2) [ Where non compliance with an accounting standard ] If the auditor is of the opinion that the financial report does not comply with an accounting standard, the auditor's report must, to the extent it is practicable to do so, quantify the effect that non-compliance has on the financial report. If it is not practicable to quantify the effect fully, the report must say why." 25 Pursuant to s 314(1) of the Act, the respondent was obliged to report to its members by sending them copies of, inter alia, the financial report for the relevant year and the auditor's report on the financial report. By s 319(1) the respondent, having prepared or obtained a report for the year as required by s 292(1) of the Act, was obliged to lodge the report with ASIC. Given the terms of s 319(1), I am of the opinion that the report to be lodged was required to include the auditor's report notwithstanding that that report was prepared pursuant to Division 3 rather than Division 1 of Part 2M.3 of the Act: see also Step 5 in the table to s 285(1). Accordingly, the appellant's report containing his qualifying opinion was not only available to members but also, when lodged with ASIC in compliance with s 319(1), became part of the public record. 26 The general principles with respect to the granting of declaratory relief are not in issue. It is common ground that they are set forth in the judgments of the High Court in Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 at 581-582, 595-597. Those principles have been applied in cases too numerous to mention. They consistently cite the following passage from the speech of Lord Dunedin in Russian Commercial & Industrial Bank v British Bank for Foreign Trade Ltd (1921) 2 AC 438 at 488 as setting out the requirements which must be satisfied before a court will exercise its discretion to make a declaration without other consequential relief: "The question must be a real and not a theoretical question; the person raising it must have a real interest to raise it; he must be able to secure a proper contradictor; that is to say, someone presently existing who has a true interest to oppose the declaration sought" 27 The foregoing considerations referred to by Lord Dunedin have been restated by other judges in various ways. Thus, in Telstra Corporation Ltd v Australian Telecommunications Authority (1995) 133 ALR 417 at 418, Lockhart J stated that the central question was: "…whether there is a justiciable issue between the parties or only an hypothetical question in the resolution of which….the applicant has no real interest, hence leaving no matter for the court's adjudication, and meaning the court is being asked to provide an advisory opinion" 28 Again, Kirby P in Australian Securities Commission v Ampolex Ltd (1995) 38 NSWLR 504 at 508D-E said that the exercise of the declaratory power under s 75 of the Supreme Court Act was: "…a beneficial development, at least where there is a real, practical question in controversy, in being or in potential, which the intervention of the court may help to resolve" 29 In essence, therefore, the respondent was required to establish that: a. The issues in respect of which it sought declaratory relief raised real and not theoretical questions; b. It had a real interest in litigating those issues and obtaining the declaratory relief sought; c. The obtaining of the declaratory relief sought had utility in that, if granted, the declarations will relate to existing rights or transactions and thus will have real consequences for the parties; d. The appellant, having been joined by the respondent as the defendant to the proceedings, was a proper contradictor in the sense that he had a true interest to oppose the declaratory relief sought. Resolution of the issues with respect to Declarations 1 and 2 30 The appellant submitted that, with respect to these declarations, the respondent had not established any of the pre-conditions to their making. It was submitted that there was no issue or controversy between the appellant and the respondent with respect to the payments the subject of the declarations and, in particular, as to whether the payments were in contravention of Article 74 and that any such controversy, if it existed, could only be between the respondent, Mr Cutrupi, Stafford and Stockford. It was further submitted that the parties referred to were not in conflict with respect to the lawfulness of the payments and it was only between them that there could be a controversy as to whether there was a contravention of Article 74. Accordingly, in the absence of those parties, the declarations in question could have no utility and it was only they, or some other member or members of the respondent who opposed the payments, who would constitute a proper contradictor. 31 In my opinion, those submissions should be rejected for the following reasons. Firstly, the issue as to whether the payments contravened Article 74 constituted the basis upon which the appellant formed his opinion that led to his qualification of the financial statements. As Gzell J observed in paragraph 45 of his judgment: "…the appellant must have had the constitution of the plaintiff in mind when he performed the statutory auditor functions." Further, upon the assumption that the appellant remained the auditor of the respondent, Declaration 1 related to the payment of $5,000 to Stockford for the year ending 30 June 2002 for accounting services rendered to the respondent during the year ending 30 June 2001 and would, therefore, appear as a related transaction in the financial statements for the year ending 30 June 2002 which the appellant (if then the appointed auditor of the respondent) would be required to audit. If the appellant maintained his opinion that such a payment contravened Article 74, then he would be required to qualify the accounts in respect of that financial year. The issue at least potentially, thus remained a live one as between the appellant and the respondent. 32 Secondly, as I have already noted in paragraph 18 above, at no time, including during submissions made in the appeal, has the appellant accepted the proposition that his opinion was incorrect. It seems to me that he has, at least implicitly, maintained his position that, in his opinion, the payments already made contravened Article 74 and that similar payments in the future would also be in contravention thereof. It is insufficient, in my view, for the appellant to sidestep this issue and merely assert that he had reasonable grounds for forming the opinion, a position he sought to maintain before Gzell J. 33 Thirdly, in the absence of the subject declarations and upon the basis of the appellant's qualification of the financial statements, a real question arises as to the duty of the Committee with respect to the subject payments and, in particular, as to whether it was bound to pursue, if necessary by action, their recovery irrespective of what its own views with respect to the lawfulness of the payments may have been. 34 Fourthly, although it may well be, as the appellant contended, that the members in general meeting could have ratified the payments, at the AGM held on 24 November 2001 the annual accounts for the year ending 30 June 2001 were adopted by resolution but with the qualification that the appellant's assertion that there had been a breach of the respondent's constitution was being contested by the Committee and would be resolved in due course by the court. On the basis of this qualified resolution, it seems to me that the members in general meeting were concerned as to the correctness of the appellant's qualification of the financial statements and, rather than dealing with the issue themselves, considered that the authoritative determination of the court as to whether the payments were made in contravention of Article 74 would be a better solution especially as it gave the appellant an independent forum in which to defend the correctness of his opinion. In these circumstances, there can be no doubt that the making of the declarations has considerable utility both in respect to the lawfulness of the payments already made to Stafford and Stockford and in respect of payments of a similar nature to be paid to Stockford in the future for the preparation of the respondent's annual financial report. 35 In the foregoing circumstances, I am of the opinion that each of the pre-conditions referred to in paragraph 29 above have been satisfied. There was a real and practical issue or question in controversy between the appellant and the respondent; the court was not being asked to answer an abstract or hypothetical question; the respondent had a real interest in the determination of the question; the appellant was not only an appropriate contradictor but in fact sought to maintain his opinion and oppose the declarations sought on the basis that his opinion should stand and not be undermined by their grant; and the making of the declarations clearly had utility and would produce consequences for the parties, both past and future, with respect to whether the relevant transactions were in contravention of Article 74. Accordingly, his Honour was correct to make Declarations 1 and 2. Resolution of the issues with respect to Declaration 3 36 With respect to the making of this declaration, the appellant, in essence, repeated the submissions referred to in paragraph 30 above. Additionally, it was firstly submitted that, having expressed his opinion in his report in accordance with his clear statutory obligation under s 308(1) of the Act, the appellant's task was spent and his report, together with the qualifying opinion contained therein, had 'passed into history'. Accordingly, consistent with the approach of the High Court in Gardner v Dairy Industry Authority (1977) 18 ALR 55 at 69, the making of Declaration 3 would be inappropriate as it would not affect existing rights or transactions. 37 Secondly, it was submitted that the respondent had no continuing interest in the auditor's report and the opinion expressed therein especially as the members at the AGM of 24 November 2001 had the option of either adopting or rejecting it. This submission overlooks the fact that the financial statements were adopted but with a qualification with respect to the correctness of the appellant's report. 38 Thirdly, it was submitted that as there was no suggestion that the appellant's opinion as expressed in his report was other than held honestly and upon reasonable grounds and was, therefore, one which he was required to express pursuant to s 308 of the Act, there would be no utility in seeking to determine the underlying correctness of the opinion especially as the court's declaration could not correct the public record. It was therefore submitted that the making of the declaration sought would only be an attempt to rewrite history. 39 Fourthly, it was submitted that there were good policy reasons why Declaration 3 should not be made against an auditor who was properly carrying out his statutory duties. It was thus submitted that it would be contrary to the statutory scheme and the requirement that an auditor should independently and fearlessly express his or her opinion with respect to the matters set forth in s 308(1) of the Act if that opinion could be challenged in proceedings to which the auditor would, against his or her will, be joined as a party with attendant risks as to costs. Further the risk of such proceedings would undermine the considerations referred to and would inhibit an auditor from expressing opinions otherwise formed honestly and on reasonable grounds. 40 Finally, it was submitted that, consistent with the decision of the High Court in Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321, only the 'decision' of the appellant constituted by his expressed opinion could be subject to review and not the conclusions reached by him as steps along the way in the course of his reasoning leading to the formation of that opinion. 41 In my opinion these further submissions of the appellant with respect to Declaration 3 should also be rejected. Firstly, there can be no doubt that the appellant's qualification of the respondent's financial statements was a matter of great seriousness both to the respondent, its members (in particular, Mr Cutrupi) and to the appellant. Clearly, it was not a matter that he undertook lightly. The seriousness of the matter and the clear difference of opinion between the respondent and the appellant as to whether the subject payments were made in contravention of Article 74 simply points up the fact that the correctness of the appellant's opinion raised a matter of real controversy between them. 42 Secondly, the appellant's report forms part of the public record on two fronts. In the first place, it comprises part of the material which the respondent was required to send to its members pursuant to s 314(1)(a) of the Act. It thereby came into the public domain and would, for instance, be available to those seeking membership of the respondent and who wished, before becoming members, to satisfy themselves that the Committee was conducting itself in accordance with the respondent's constitution. 43 In the second place, as already noted in paragraph 25 above, the respondent was bound, pursuant to s 319(1) of the Act, to lodge its financial statements including the auditor's report, with ASIC so that it became part of the statutory public record. It was entitled to amend its financial report for the year ending 30 June 2001 and, if it did so, it was bound to lodge the amended report with ASIC pursuant to s 322(1) of the Act. In my opinion it would be open to the respondent to amend Note 17 to reflect Declaration 3 by referring to the fact that the court had declared the payments referred to therein as not being in contravention of Article 74, thus correcting the statutory public record. 44 Accordingly, it follows that the respondent and its members, as reflected in the resolution passed at the AGM of 24 November 2001, has had a continuing interest in the appellant's report and in the correctness of the opinion therein expressed. The decision in Gardner relied on by the appellant has no more application to the making of Declaration 3 than it has to Declaration 1 and 2. The appellant's opinion had not relevantly 'passed into history': in the circumstances the making of Declaration 3 clearly had utility. 45 Thirdly, subject to a variation to the terms of Declaration 3 to which I shall refer hereafter, a declaration to the effect that the auditor's opinion that the subject payments contravened Article 74 was in error is not inconsistent with the provisions of s 308(1) of the Act or of the appellant's fulfilment of the duty imposed upon him thereunder. The making of such a declaration does not render the appellant's report and the qualification of the financial statements contained therein invalid in the sense that the appellant could be accused of failing to comply with his duty under s 308(1) of the Act to report to members the opinion that he had formed with respect to the matters referred to in that provision. He was bound to do so in the circumstances and what he did was clearly a proper exercise of his statutory duty. 46 However, in my opinion the foregoing considerations do not mean that the expression of the appellant's opinion in his report is inviolate where, as here, it contained a legal error with respect to the proper construction of Article 74. Notwithstanding a submission to the contrary by the respondent, there can be no doubt that, at the time he formed his opinion, the appellant had reasonable grounds for so doing given the legal advice that he had apparently received with respect to the construction of Article 74. In this regard, he acted both lawfully and appropriately. No one is criticising the appellant for the expression of what has turned out to be an erroneous opinion. But being erroneous, there is no reason in principle why it should not be corrected. 47 Fourthly, I reject the submission (which was put more as a discretionary consideration than as a pre-condition to the exercise of the power to grant declaratory relief) that as a matter of policy declaratory relief should be refused where it relates to the correctness of an opinion otherwise properly formed and communicated by an auditor carrying out his statutory duty pursuant to s 308 of the Act. No doubt, there may well be circumstances where, as a matter of discretion, such a declaration with respect to matters arising out of an opinion formed and communicated pursuant to s 308 should not be the subject of declaratory relief. But where, as here, the issue concerns the proper construction of the constitution of an entity such as the respondent, it can only be for the benefit of all parties, including its current and future auditor, that the correct construction of the relevant provision be authoritatively determined. 48 Fifthly, depending on the issue in dispute, it would always be open to an auditor joined in proceedings in which only declaratory relief was sought to merely file a submitting appearance except as to costs. This is especially so where, as in the present case, there is no suggestion that the auditor was negligent in the formation of his opinion. In those circumstances, if the auditor is the only party to the proceedings and submits, there would be no contradictor and, consistent with the principles which govern the grant of purely declaratory relief, no such relief would be forthcoming. The position in those circumstances would be no different to an ex parte application for purely declaratory relief which, in accordance with the principles referred to, would be refused. In the present case, the appellant did not file a submitting appearance and chose to strenuously contest the proceedings. His stance at the hearing before Gzell J was anything but passive. His counsel was asked during the course of argument in the present appeal as to why this was so but was unable to enlighten the Court on the issue. Having taken the course that he did, the appellant must bear the consequences of his submissions being rejected. 49 Sixthly, in my opinion the appellant's argument based upon the decision of the High Court in Bond has no substance. The Court's decision in that case related to the statutory right of judicial review provided by the Administrative Decisions (Judicial Review) Act 1977, (Cth). The present case is not one of judicial review of an administrative action but is simply a determination of whether a particular opinion expressed by the appellant was erroneous in point of law. But for that error the opinion would not have been formed. In any event it was akin to the erroneous finding of the ultimate fact in issue which underlay the administrative decision in Bond and which the High Court held was amenable to review. The decision in Bond is therefore no bar to the correction of the legal error which underlay the appellant's opinion in this case. Conclusion 50 For the foregoing reasons I am of the opinion that, subject to one matter, the appellant fails in his attack upon the granting by Gzell J of declaratory relief to the respondent. However, I am of the view that Declaration 3 is inappropriately framed. It declares that the appellant 'erroneously qualified' the respondent's financial report for the year ending 30 June 2001. This is incorrect. There was nothing erroneous about the qualification contained in the appellant's report insofar as the appellant, holding the opinion he did honestly and upon reasonable grounds, was bound by s 308(1) of the Act to report to the members upon the financial statements as he did. In my opinion, the following declaration should be substituted for Declaration 3 as made by Gzell J: " DECLARES that in the circumstances which have occurred, the opinion expressed by the defendant in his Independent Audit Report dated 25 October 2001 with respect to the Financial Statements of the plaintiff for the year ended 30 June 2001 to the effect that the remuneration reported in Note 17 to those Statements (for fees of $4,860.00 paid to Stafford and $600.00 paid to Stockford) was received by an honorary member of the Committee of the plaintiff in contravention of Article 74 of the Articles of Association of the plaintiff, was in error. 51 Accordingly, I propose the following orders: Declaration 3 made by Gzell J on 19 February 2002 be set aside and the following declaration be substituted therefore: " DECLARES that in the circumstances which have occurred, the opinion expressed by the defendant in his Independent Audit Report dated 25 October 2001 with respect to the Financial Statements of the plaintiff for the year ended 30 June 2001 to the effect that the remuneration reported in Note 17 to those Statements (for fees of $4,860.00 paid to Stafford and $600.00 paid to Stockford) was received by an honorary member of the Committee of the plaintiff in contravention of Article 74 of the Articles of Association of the plaintiff, was in error. Otherwise appeal dismissed. Appellant to pay the respondent's costs of the appeal. ********** Last Modified: 07/01/2003 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.