New South Wales Supreme Court CITATION : McILRAITH v INSTITUTE of CHARTERED ACCOUNTANTS [2003] NSWSC 208 HEARING DATE(S) : 18/03/2002 JUDGMENT DATE : 26 March 2003 JUDGMENT OF : Dowd J DECISION : Declaration that decisions of the Disciplinary Committee and the Appeal Committee are void. Declaration that plaintiff was denied procedural fairness. Defendant restrained from publishing those decisions that were declared void. Costs reserved. CATCHWORDS : Disciplinary body - judicial review - procedural fairness - obligations of domestic tribunal. Allesch v Maunz (2000) 203 CLR 172 CASES CITED : Bond v Australian Broadcasting Tribunal (No 2) (1988) 19 FCR 494 Lee v Showmen's Guild of Great Britain [1952] 2 QB 329 Public Service Board of New South Wales v Osmond (1986) 159 CLR 656 PARTIES : John Howard McIlraith (Plaintiff) Institute of Chartered Accountants in Australia (Defendant) FILE NUMBER(S) : SC 30007/02 COUNSEL : J W Stevenson (Plaintiff) G Flick SC with G K Burton (Defendant) SOLICITORS : Holman Webb Lawyers (Plaintiff) Abbott Tout Solicitors (Defendant) IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION ADMINISTRATIVE LAW LIST DOWD J Wednesday 26 March 2003 30007/02 JOHN HOWARD McILRAITH v INSTITUTE of CHARTERED ACCOUNTANTS JUDGMENT 1 HIS HONOUR: The plaintiff, by way of summons, sought judicial review of the proceedings of a Disciplinary Committee and an Appeal Committee of the defendant, the Institute of Chartered Accountants (the "Institute"), and claimed against the Institute the following orders: 1. A declaration that the decision made by the Disciplinary Committee of the defendant of 5 April 2001 that the plaintiff be suspended from membership of the defendant for two years and pay $6,100.00 plus GST for costs is void. 2. A declaration that the decision of the Appeal Committee of the defendant of 27 June 2001 set out below is void: "To affirm the determination of the Disciplinary Committee that the allegation contained in the Notice of Disciplinary Action has been established. To vary the decision that you be suspended from membership of the Institute for a period of two (2) years to a severe reprimand. To affirm the decision that you be required to pay the amount of six thousand one hundred dollars ($6,100.00) plus GST towards the costs of the Institute in dealing with the Notice of Disciplinary Action. To affirm that your name is to be included in the report of the findings and sanctions to be published in the Institute's journal. To order that you be required to pay the amount of two thousand four hundred and fifty dollars ($2,450.00) plus GST towards the costs of the Institute in dealing with the Notice of Appeal." 3. A declaration that the plaintiff was denied procedural fairness and natural justice before both the Disciplinary Committee and the Appeal Committee of the defendant. 4. A declaration that the defendant has not committed any act, omission or default which was or is likely to bring discredit upon himself or the defendant or the profession of accountancy within the meaning of By-Law 40(j) of the By-Laws of the defendant. 5. A declaration that neither the Disciplinary Committee nor the Appeals Committee of the defendant had jurisdiction to hear or determine the complaint which gave rise to their decisions of 5 April 2001 and 27 June 2001 respectively. 6. An injunction restraining the defendant from publishing or otherwise giving effect to the decision of the Appeal Committee of 27 June 2001. 7. Costs. 2 Number 4 was not pressed at the hearing and number 5 was only pressed as to natural justice. 3 The plaintiff is a member of the Institute, the defendant in the proceedings. On 8 March 2001 the plaintiff received a "Notice of Disciplinary Action" which alleged liability for disciplinary action in accordance with By-Law 40(j) in that he had brought discredit on himself, the Institute and the profession of accountancy because of his actions towards three named persons: Mr Brian R Taylor from 31 May 1999 to 27 August 2000, Mrs Noeline Haile from 9 February 1998 to 28 June 2000 and Mr Alex Ilkin in a letter dated 1 September 2000. 4 The original dispute had arisen in 1998 as to whether there was a discrepancy of the accounts of a body corporate. The plaintiff, having been the former secretary, had sought an explanation as to an alleged "discrepancy" of some $6,837.00. The three persons named in paragraph 2 above were respectively the auditor of the owners' corporation, one of the managing agents of the owners' corporation and the solicitor acting for the company under which Mrs Haile operated. 5 The dispute led to an application for mediation by the Strata Schemes Office which was refused and an appeal against that refusal was rejected. The dispute contended that Mr Taylor had failed to observe Australian accounting standards and alleged dishonest and criminal conduct against the company Suechris Holdings Pty Ltd, under which Mrs Haile operated. 6 A complaint was then lodged by Mr Taylor against the plaintiff with the Institute and the matter was investigated by an officer of the Institute. 7 On 25 March 2001 the plaintiff requested particulars of the allegations against him and, in particular, the information provided to the Institute by the three named persons. The plaintiff also sought the names of any witnesses proposed to be called and asked the Institute to provide further and better particulars of the disputed factual matters relied on by the Institute in order to maintain its complaints against him with respect to one of the three persons, Noeline Haile. The plaintiff also sought deferral of the proceedings to allow preparation by him. 8 He received a letter on 29 March 2001 advising that the matter would proceed on 5 April 2001 before the Disciplinary Committee in the expectation that it would be dealt with on that day unless the committee agreed to a postponement. The letter on behalf of the Institute advised that the material relied on would be in the case file and that material in another file, in another complaint number 86.99, which is a complaint made by the plaintiff against the Mr Brian Taylor, one of the three named above, would not be before the committee. The letter advised that it was not proposed to call witnesses without further notice. 9 On 5 April 2001 the proceedings before the Disciplinary Committee were heard, the decision of the committee, without reasons being given, being: i. The allegation contained in the Notice of Disciplinary Action has been established. ii. That the plaintiff be suspended from membership of the defendant for two years. iii. That the plaintiff pay the amount of six thousand one hundred dollars ($6,100.00) plus GST towards the costs of the Defendant in dealing with the Notice of Disciplinary Action. iv. On any application for reinstatement to membership the plaintiff satisfy the defendant that he is a fit and proper person. 10 The plaintiff lodged a Notice of Appeal, the primary issue being that actions taken by him in relation to the three named persons were in the plaintiff's capacity as Chairman and Treasurer of the owners' corporation of "The Owners-Strata Plan 17839" and that he was perfectly entitled to take such action and that certain of the plaintiff's actions were taken respectively as Treasurer of the owners' corporation and as immediate past Treasurer of the owners' corporation. 11 The plaintiff contended that he was unfairly prejudiced and denied natural justice in the proceedings before the Disciplinary Committee by reason of the following factors: "16.1 The failure of the Institute to define particulars of the allegations against the plaintiff, including the actions and conduct which were referred to in the Notice of Disciplinary Action. 16.2 The failure of the Disciplinary Committee to allow the plaintiff sufficient time to prepare an adequate and proper defence, and produce copies of relevant documents. 16.3 The failure of the Disciplinary Committee to allow the plaintiff to inspect certain documents in the possession of the Institute, filed by Mr Taylor in answer to the plaintiff's complaint against him (the Institute's file reference: N107.00). 16.4 No evidence was adduced by the Institute to demonstrate or which demonstrated that any actions and conduct were motivated by malice, or the absence of good faith. 16.5 A Disciplinary Committee is not competent to determine issues of fact and law raised by the plaintiff's complaint against Suechris filed with the Department of Fair Trading on 28 June 2000. 16.6 A Disciplinary Committee is not competent to determine the issues of fact and law raised by the plaintiff's complaint against Mr Brian Taylor, filed with the Department of Fair Trading on 28 June 2000. 16.7 A Disciplinary Committee is not competent to determine the issues of fact and law raised by the publication of defamatory material by Mrs Haile, Mr Taylor, Mr Ilkin, Mr and Mrs Bunyan and the owners corporation, with respect to the plaintiff." 12 The appeal asserted that the conduct complained of in relation to the plaintiff: (a) Involved no failure to observe a proper standard of professional care, skill or competence in the course of carrying out the plaintiff's professional duties; (b) did not arise from the conduct of the plaintiff's professional duties; (c) in no way reflected on or arose out of the plaintiff's professional or business conduct or competence; (d) did not involve the commission of a criminal statutory or any other offence; (e) did not involve any act of dishonesty; (f) did not involve any matter concerning professional standards of practise; and (g) accordingly, did not bring and was incapable of bringing discredit on the plaintiff, or the Institute, or the profession of accountancy such as would warrant the intervention of the Institute. 13 The plaintiff further alleged that the penalty was imposed having regard to the nature of the conduct complained of and the fact is that he did not engage in the conduct complained of in any professional capacity and that the membership records of the Institute showed that the plaintiff was in good standing and not previously disciplined, and was thus excessive. 14 Shortly prior to the hearing of the Appeal Committee, Messrs Holman Webb, solicitors for the plaintiff, wrote to the Institute seeking precisely what "conduct" and "actions" the Institute relied upon in support of its contention that the plaintiff had brought "discredit" upon himself, the Institute or the profession of accountancy. The letter pointed out that the case file that the Institute sought to rely upon comprised some three hundred and fifty pages of documents. That letter sought a reply by the close of business on 20 June 2001. 15 By letter dated 25 June 2001 which was faxed to the plaintiff's solicitors on that day, the solicitors for the defendant inter alia set out the following: "We note that the main ground of your client's appeal is that your client claims that he was not afforded procedural fairness and was denied natural justice for the reason that he was not given adequate particulars of the complaint made against him. We are instructed that in addition to the Notice of Disciplinary Action date 8 March 2001, your client was provided with the following material in relation to the complaint: a) A copy of the original letter of complaint from Mr B Taylor date 20 October 2000 which was forwarded to your client under cover letter dated 23 October 2000; b) A copy of the Disciplinary Case File which was forwarded to your client under cover letter dated 9 March 2001; and c) A copy of the Appeal Case File which was forwarded to your client under cover letter dated 14 May 2001. We are instructed that the Appeal Case File includes, inter alia, a copy of the transcript of the proceedings before the Disciplinary Committee. That being the case, both your firm and your client are aware of the nature of the allegations against your client that are the subject of this appeal. They are sufficiently detailed in the original letters of complaint, the correspondence in the original case file, and the extra documents tabled at the hearing before the Disciplinary Committee and the transcript of those proceedings which are contained in the Appeal Case File." 16 At the hearing before the Appeals Committee, which took place on 27 June 2001, the plaintiff was represented by Mr James Stevenson of counsel, instructed by Mr Richard Allsop of the plaintiff's solicitors. At this hearing it was submitted on behalf of the plaintiff that the Notice of Disciplinary Action is the only document in which any statement is made by the Institute as to the conduct which, it contends, warranted disciplinary action in the terms of By-Law 40(j) if the plaintiff had brought discredit upon himself, the Institute or the profession. 17 By-Law 40(j) is in the following terms: "A member … shall be liable to disciplinary action in any of the following events …: (j) If he or it has committed any act, omission or default which, in the opinion of any of the committees referred to in By-Law (41) brings, or is likely to bring discredit upon himself or itself, the Institute or itself, the Institute or the profession of accountancy", It was pointed out that the plaintiff had sought particulars of allegations and was told that the three hundred and fifty page document, being the case file, meant, in effect, the plaintiff had to work it out for himself. 18 It was pointed out in the appeal that Mr Breen for the Institute said there were three complaints about the plaintiff, first that, in effect, the plaintiff engaged in intimidatory and harassing correspondence and that he had written letters that were intemperate and inappropriate. It was secondly put that Mr Breen's argument was that the plaintiff had brought the complaints not so much as a private individual but a private individual "wearing the hat of a chartered accountant" but that there was no particularising of the way in which the plaintiff's references in some of his letters to the fact that he was accountant was such as to bring discredit in terms of rule 40(j) of the By-Laws. 19 It was pointed out to the Appeals Committee that the third category was that the plaintiff had made statements that were prepared in an intimidatory fashion "without any real evidence to substantiate the allegations", but the particular allegations were not particularised. The Institute was then called upon to particularise the specific allegations as the statement that he made which had no evidence to support it as he may wish to refute whatever evidence is put forward to support the allegation. 20 It was pointed out that the Tribunal did not give reasons and, therefore, neither the plaintiff nor indeed other members of the Institute, if the result was published, would be any the wiser. In reply, it was submitted on behalf of the Institute that the file contained a number of letters that the plaintiff had written and that he had had sufficient time to examine these. It was put to the Appeal Committee that it was not proposed to go into evidence but that much of the evidence that the plaintiff had complained about and had disputes about were really, in Mr Breen's terms "making a mountain out of a molehill". 21 At the appeal hearing the Institute's allegation that there are statements made without evidence to substantiate those statements was not pressed. 22 The decisions of the Appeal Committee announced on 5 July 2001 were in the following terms: To Affirm the determination of the Disciplinary Committee that the allegation contained in the Notice of Disciplinary Action had been established. To Vary the decision that the plaintiff be suspended from membership of the Institute for a period two (2) years to a severe reprimand. To Affirm the decision that the plaintiff be required to pay the amount of six thousand one hundred dollars ($6,100.00) plus GST towards the costs of the Institute in dealing with the Notice of Disciplinary Action. To Affirm that the plaintiff's name is to be included in the report of the findings and sanctions to be published in the Institute's journal. To Order that the plaintiff be required to pay the amount of two thousand four hundred and fifty dollars ($2,450.00) plus GST towards the costs of the Institute in dealing with the Notice of Appeal." 23 It was contended by the counsel for the Institute, Dr Flick SC, that a Notice of Proceedings need not set out "chapter and verse" and the notice identified the "provision" in issue, the time periods and the people against whom the conduct was said to have occurred. It was further put that there is no contention now advanced that the plaintiff was unaware of the factual issue, the subject of the inquiry, and there has not been a denial of procedural fairness as there is no entitlement to particulars in administrative proceedings, Bond v Australian Broadcasting Tribunal (No. 2) (1988) 19 FCR 494. 24 It was also contended by the counsel for the Institute that the facts were within a narrow compass and that the submissions advanced by the plaintiff when he appeared in person demonstrated a knowledge of the issues to be addressed and that any denial of procedural fairness had been remedied by the subsequent proceedings before the Appeal Committee. 25 The ground of review contended by the plaintiff is denial of procedural fairness in that both committees failed to afford a fair hearing and even if the appeal hearing had complied with procedural fairness its decision was not capable of curing procedural defects in the decision of the Disciplinary Committee. 26 By-Law 46(g) states: "On each appeal the Appeal Committee shall have regard only to the material presented to the Disciplinary Committee. At its discretion the Committee may hear any witness who appeared before the Disciplinary Committee and receive additional material relevant to the complaint." 27 The Committee is given power to affirm, vary or set aside any Disciplinary Committee determination. The By-Law does not of itself specify the criteria to be applied nor does the Appeal Committee appear to operate in the present case since no additional evidence was adduced, other than as a complete re-hearing of the Disciplinary Committee's earlier determination. 28 There is no issue that this court may review the decision of a tribunal of a trade or professional association or, indeed, any other domestic tribunal on the ground of denial of procedural fairness, Lee v Showmen's Guild of Great Britain [1952] 2 QB 329. 29 The consequences of the determination of a tribunal such as set up by the Institute are the exercise of a very substantial power to preclude or restrict a member from operating at his occupation and must operate under the principles of procedural fairness which are implied from the terms of the contract between the members of the body concerned. 30 Notwithstanding the knowledge by the plaintiff that he had some idea of Mr Taylor's complaint, a busy professional at a busy time of the year should, with the experience of the members of the Disciplinary Committee be afforded a reasonable time for the preparation of a case, particularly one where there are many hours of reading in a very large file. The time provided in the By-Laws for notice of a hearing may for relatively simple issues be sufficient. It is a question of fact in each case what is a reasonable time and the request of the plaintiff for an adjournment in the circumstances appear to me to be reasonable and should have been granted. 31 There was a failure on the part of the Institute to give the plaintiff adequate notice of the conduct and actions which, were alleged, brought discredit to the professional body. No such notice was given by the Institute as to the alleged misuse of the plaintiff's professional position and even though this notice was provided at the Disciplinary Committee hearing the contention that it was, "as a private individual wearing the hat of the chartered accountant", is hardly a sufficient specification to bring the matter within the requirement of procedural fairness. 32 For the plaintiff to be advised at the hearing on 5 April 2001 that he had failed to "have a friendly chat" with key people on the body corporate and of taking an aggressive stance in the dispute. Additionally, no notice was given as to the allegation that the plaintiff's conduct was not ethical until the actual hearing. 33 A procedure such as in the present case, whereby a large amount of material is presented to a person against whom a complaint is made, does not ultimately assist the person concerned in knowing what is alleged against him. It clearly also creates a problem where a body makes a determination without giving reasons for that determination for the person concerned to know what he has had determined as being wrong conduct. If a party is inevitably in doubt by simply receiving a Notice of Determination that he has been guilty of professional misconduct and the precise misconduct is not specified it underlines the need for a clear statement of the charge that is to be determined. 34 There were many actions by the plaintiff of an intemperate and aggressive nature which were contained in the file which might have been a cause for complaint. It is clearly not appropriate for a person against whom a claim is made not to know at least the general subjects of complaint if not fairly specific complaints themselves. 35 Although there was some degree of precision about the material concerned in the complaint concerning Mr Taylor I accept the submission put on behalf of the plaintiff that the material against the basis for the charge in relation to Mrs Haile and Mr Ilkin was not specified. 36 Further to the matters that I have canvassed as to adjournment and specification of the alleged conduct it is necessary for procedural fairness for the complaint to specify how the conduct comes within the wording of the By-Laws in the specification of the charge. This is not a proceeding which creates a requirement for formal pleading as in a criminal or other legal civil proceeding but is a requirement that the substantial nature of the conduct alleged as well as generally the particulars of conduct and a description of, in this case, the conduct alleged bringing discredit on the plaintiff, the Institute or the profession within the By-Law 40(j) needs to be specified. 37 There was a contention by the plaintiff that the conduct of the committee was such that a fair minded person would apprehend that members did not bring a fair and unprejudiced mind to the matter before them. It is clear that some of the terminology used by the members of the committee appear to have pre-judged aspects of the issues before the committee, however, I do not think that the general contention of bias has been made out. 38 It was submitted on behalf of the plaintiff that the failure to give reasons constituted a breach of the requirements of procedural fairness. This issue was considered in Public Service Board of New South Wales v Osmond (1986) 159 CLR 656 at 676 where Dean J held that in the circumstances of a particular case giving reasons may be part of a requirement for a fair hearing. 39 I think that, where the conduct of the Disciplinary Committee in not giving reasons on a non-specific charge, particularly where the complainant conduct was not as an accountant but the alleged conduct was "wearing the hat of an accountant" that there was a requirement for the Disciplinary Committee to give reasons. 40 This was particularly so in terms of a matter coming before the Appeal Committee. It is not possible to have a re-hearing on the same material as the body from which the appeal was brought and achieve procedural fairness. As a new hearing, the defects as to procedural fairness of the Disciplinary Committee were not cured even by the slight particularisation which occurred at the Disciplinary Committee giving more information as to the complaint. 41 The failure of the Disciplinary Committee to give reasons is a relevant matter in terms of the preparation for the appeal. This is a case where in terms of procedural fairness, in a complex factual dispute with a very wide ambit of evidence, fairness would require the giving of reasons both at the Disciplinary Committee and at the Appeal Committee. 42 It was submitted by the plaintiff that By-Law 46(g) is the type of hearing which is considered by Allesch v Maunz (2000) 203 CLR 172 where the powers of the appellate body can only be exercised where there is some legal, factual or discretionary error. 43 I accept the plaintiff's submission that a fair hearing is required at both the Disciplinary Committee and at the appellate stage because of the serious consequences of the very wide quasi-criminal penalties in which the Disciplinary Committee and the Appellate Committee are vested. 44 The very fact that, in the middle of the hearing before the Appeal Committee, the Institute declined to press the allegation of making knowingly false statements but inviting the committee to take it into account as part of the background facts underlined the lack of procedural fairness to the plaintiff. 45 I consider that for the reasons I have given, set out above, that the proceedings before the Disciplinary Committee were not conducted with procedural fairness taking into account the events leading up to the hearing, the hearing itself and the failure to give reasons. 46 I consider that the limited nature of the appellate hearing and the way in which that appellate hearing was conducted, particularly in the light of withdrawal of serious allegations during the course of the hearing and the way in which the appellate power is set out in the By-Laws, that this hearing did not cure the defect in the proceedings before the Disciplinary Committee and in itself was not conducted with procedural fairness. The additional time afforded the plaintiff in the delay before the appeal was of little use without reasons for the earlier determination and without specificity as to the nature of the complaint. 47 I therefore make the following orders: i. I declare that the decision of the Disciplinary Committee of the defendant of 5 April 2001, that the plaintiff be suspended from membership of the defendant for two years and pay $6,100.00 plus GST for costs, is void. ii. I declare that the decision of the Appeal Committee of the defendant in relation to the plaintiff of 27 June 2001 and the orders made, are void. iii. I declare that the plaintiff was denied procedural fairness and natural justice before both the Disciplinary Committee and the Appeal Committee of the defendant. iv. I order that in any publication by the defendant of the result of these proceedings that the defendant is restrained from publishing terms and effect of the decision of the Disciplinary Committee and the decision of the Appeal Committee. v. I reserve the question of costs. ********** Last Modified: 07/21/2003 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.