Rankine and Rankine v Harris

[1997] QCA 194

IN THE COURT OF APPEAL	[1997] QCA 194
SUPREME COURT OF QUEENSLAND

Appeal No. 6944 of 1996

Brisbane

[Rankine & Anor v. Harris]

BETWEEN:

ROY McNAY RANKINE and MURIEL HELEN RANKINE

(Plaintiffs) Appellants

AND:

ERNEST GEORGE HARRIS

(Defendant)	Respondent
Fitzgerald P McPherson JA de Jersey J

Judgment delivered 9 July 1997

Separate reasons for judgment of each member of the Court each concurring as to the orders made.

APPEAL DISMISSED. APPELLANTS PAY RESPONDENT'S COSTS TO BE TAXED ON A SOLICITOR AND OWN CLIENT BASIS. PARTIES HAVE LEAVE TO DELIVER FURTHER SUBMISSIONS IN WRITING ON COSTS WITHIN 7 DAYS.

CATCHWORDS: ACCOUNTANT APPOINTED BY CONSENT ORDER TO
CONDUCT AUDIT OF AFFAIRS OF PARTNERSHIP - extent of

entitlement to enlist assistance of others - construction of order.

Counsel:	Mr H. B. Fraser Q.C. with him Mr McQuade for the appellants Mr P. D. McMurdo Q.C. with him Mr T. North for the respondent
Solicitors:	Flower & Hart for the appellants Minter Ellison for the respondent
Hearing Date:	19 May 1997

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Appeal No. 6944 of 1996

Brisbane

Before Fitzgerald P.
McPherson J.A.
de Jersey J.

[Rankine & anor. v. Harris]

BETWEEN:

ROY McNAY RANKINE and MURIEL HELEN RANKINE

(Plaintiffs) Appellants

AND:

ERNEST GEORGE HARRIS

(Defendant) Respondent

REASONS FOR JUDGMENT - FITZGERALD P.

Judgment delivered 9 July 1997

The circumstances giving rise to this appeal are set out in the reasons for judgment of de Jersey J.

The disputes which have arisen between the appellants and the respondent involve matters to which the

appellants, their partners and the respondent apparently gave no consideration at the time when the

respondent was appointed by consent orders as an “agent” of the partnership of which the appellants

were members and an “officer” of the Supreme Court to carry out functions described in those orders

and referred to in the reasons for judgment of de Jersey J. While it is by no means clear to me that the

evidence from experienced accountants which the parties called before the Trial Division Judge who made the orders the subject of this appeal was admissible, it does not seem to me to be in doubt, or

indeed the subject of serious dispute, that the respondent was entitled, and intended by the appellants

and their former partners, to utilise the services of his firm of chartered accountants, Messrs Coopers

& Lybrand, in carrying out the work required by the consent orders. It was also intended and expected

that the respondent’s firm would be paid for the work, and that the respondent would accordingly

benefit.

In such circumstances, many of the points raised by the appellants are plainly without merit. For

example, complaint was made that the respondent also accepted other work for which his firm was

paid, thereby increasing his income as a member of the firm. There was plainly nothing to prevent the

respondent from continuing his practice, and there was nothing to indicate that the appellants had any

expectation that he would not do so.

The appellants’ real objection was related to what they described as the respondent’s “delegation” of

the functions to which he was appointed to perform by the consent orders, or the excessive and

impermissible extent of that delegation.[1] One matter raised was that the appellants did not receive the

[1]        cf. Ah Toy v. Registrar of Companies (1986) 10 F.C.R. 356,

full benefit of the respondent’s expertise, for which he had been appointed. However, that matter was

concluded against the appellants by findings made by the Trial Division Judge who made the orders the

subject of the present appeal. His Honour’s conclusions were, in effect, that the respondent had not

delegated his functions under the consent orders but only various tasks involved in the performance of those functions whilst retaining for himself appropriate powers of supervision and decision-making which

he personally exercised. There was adequate basis for his Honour’s findings.

Although Mr H. Fraser Q.C., who did not represent the appellants below and seems to have been

belatedly briefed to appear in this Court, valiantly sought to demonstrate otherwise, the appellants’ real

complaint in this Court was a matter which had not previously been properly raised. Shortly stated, the

proposition was that the method by which the work necessary for the performance of the respondent’s

functions was performed involved excessive use of other members and/or staff of the respondent’s firm,

leading to an increase in the amount which the appellants and their former partners were charged for the

performance of the respondent’s functions, to the disadvantage of the appellants and the advantage of

the respondent because of the increased income which he consequently received. In particular, it was

contended that one of the two other members of the respondent’s firm involved in the work, Mr Roach,

was unnecessarily involved and charged for discussions with the respondent and with the other member

of the firm involved, Mr Moni. The essence of the complaint, although somewhat over-simplified, was

that direct communications between the respondent and Moni would have eliminated charges for

Roach’s services, significantly reducing the amount which the appellants and their former partners were

required to pay. Possibly, there were additional allegations of duplication or other unnecessary work,

but it is unnecessary to consider that further. For the reasons given by de Jersey J., I am of opinion that

the appellants should not be permitted to raise the new point for the first time in this Court, involving,

as it necessarily does, factual issues which were not litigated and resolved below.
Four matters nonetheless deserve comment. Firstly, persons such as the respondent, who was not a

registered auditor, should not accept tasks for which they are not qualified. Secondly, members of firms

who accept personal appointments are not entitled to treat those appointments as appointments of their

firms. Thirdly, any permissible use of an appointee’s firm will be limited by his or her personal

responsibilities under the appointment. Fourthly, scrupulous care to avoid duplication or other

unnecessary work or charging must be taken.

Nonetheless, for the reasons given the appeal fails. I agree with the orders proposed by de Jersey J.

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Appeal No. 6944 of 1996

Brisbane

Before Fitzgerald P.
McPherson J.A.
de Jersey J.

[Rankine v. Harris]

BETWEEN:

ROY McNAY RANKINE and MURIEL HELEN RANKINE

(Plaintiffs) Appellants

AND:

ERNEST GEORGE HARRIS

(Defendant) Respondent

REASONS FOR JUDGMENT - McPHERSON J.A.

Judgment delivered 9 July 1997

In this matter, the difficulty, so far as there is one, appears to me to stem from the description

given to the respondent in the order of 21 June 1995 by which he was appointed. The application

which led to the order asked for the appointment of a receiver to sell assets of a dissolved partnership

known as Rankine Bros., of which the parties to the action were members. The order, which was made

by consent, appointed the respondent not as receiver but as “agent” of the partnership (para.1 of the

order) and authorised him (para.2) to sell certain specified assets and shares. Paragraph 3 of the order

provided that the agent be further appointed “as an officer of this Court” to conduct an “audit” of the assets, liabilities and books of account of the partnership, and to prepare such other accounts as were

necessary for that purpose. The agent was then to pay the liabilities from the proceeds of sale (para.4)

and distribute the balance proceeds to the parties in accordance with their liabilities.

The Court has, so far as I am aware, no general jurisdiction to appoint an “agent” to anyone,

or to the assets or property of anyone; that being so, parties have no power to invest such a jurisdiction

by consent. However, a receiver appointed by the court in a partnership action is the agent of the

parties interested in the assets: see Bertrand v. Davies (1862) 31 Beav. 430; 54 E.R. 1204; and such

a receiver is also an officer of the Court. The same is equally true, for example, of a liquidator, who is

an officer of the Court under the rules, and is also an agent of the company in liquidation. See Knowles

v. Scott [1891] 1 Ch. 717. It seems to me, therefore, that, even though the parties went to some

trouble to avoid saying so, the effect of the order to which they consented was to appoint the

respondent as receiver for the purposes and with the duties and functions specified. The explanation

for their carefully avoiding use of the word “receiver” may perhaps be found in para.6(a) of the order,

which expressly provides that the respondent was not to take physical possession of or operate any

asset of what was in fact a large-scale business of saw millers and timber merchants; but the fact that

the respondent was not appointed to take possession or to manage the business, but to audit, sell and

distribute, the assets or their proceeds, would not prevent his being any the less a receiver for the

purposes specified.

Having characterised the office to which the respondent was appointed as that of a receiver,

the questions raised on the appeal became simpler to solve. As so often happens, they concern the

receiver’s remuneration, or its quantum, after the event. Receivers, particularly if they are accountants,

seldom come cheap. However, the consent order, as later varied, provided for the respondent to be remunerated in accordance with the rates adopted as guidelines by the Insolvency Practitioners

Association of Australia, and those rates consequently apply unless for some reason the Court or its

taxing officer considers them excessive or inappropriate for the work in fact done.

What is said by the appellant in that behalf is that the respondent did not perform his duties in

accordance with the terms of the order, and that, in doing as he did, he increased the work involved,

which to that extent ought not to be chargeable against the assets or (what is for this purpose much the

same) the parties. The primary complaint is that he impermissibly delegated his auditing functions to

others, who were members or employees of the firm of accountants of which he is a partner; and that,

by doing so, extra and unnecessary time and expense was taken up in conferring with, and supervising,

the activities of those who did the work.

As a general proposition, it may well be correct to say that a receiver appointed by the court

may not delegate the performance of his duties and functions to others: cf: Ah Toy v. Registrar of

Companies (1986) 10 F.C.R. 356. It appears to be the practice for receivers, who wish to employ

agents, to obtain the authority to do so of the Court, either by including an express and general power

to that effect in the order of appointment, or by obtaining from the Court a subsequent direction or order

authorising the engagement of an agent to perform a particular function. However, the absence of such

authority does not necessarily deprive a receiver of the right to indemnity or reimbursement in respect

of remuneration payable or paid to an agent so employed by the receiver. In Re National Flying

Services Ltd. [1936] Ch.271, a receiver appointed by the court to company assets, which included an

airfield, employed an agent to find a purchaser for the airfield without first obtaining leave of the court

to engage him. The agent introduced a purchaser, but the court refused to sanction a private contract

of sale and required that tenders be called, whereupon the same purchaser successfully tendered to buy the property at a slightly higher price. When the agent’s claim for compensation came before the court,

Farwell J. said ([1936] Ch. 271, 273) that, because leave to employ the agent had not been obtained,

the result was that:

“the court is now perfectly free to refuse the payment of any commission at all ... The parties are entirely at the mercy of the court ... The court will consider each case on its merits. In a proper case it is open to the court to say that it is not equitable to allow advantage to be taken of the agents efforts without some compensation to him, although prima facie he is entitled to nothing.”

His Lordship added that there could be “no question of a scale fee”; but that, as the agent was by

reason of his knowledge and experience in a good position to find a purchaser and had expended

considerable time and money in doing so, it would not be equitable to allow those interested in the

property to take advantage of his efforts without compensation. From what can be gathered from the

report of the case, the allowance in fact granted there was considerably more than that originally claimed

by the agent.

The approach adopted in that instance is capable of being traced back at least as far as the

decision in Forrest v. Ewes (1816) 2 Mer. 68; 35 E.R. 867. In that instance a manager appointed by

the Court of Chancery in England to an estate in Jamaica included in his accounts an amount by way

of commission paid by him to agents on produce sold from the estate and shipped to England during

the manager’s absence. The amount was disallowed by the Master on the ground that the manager had

not been personally resident in the island at the time when the produce was sold and shipped, but had

deputed the management to those agents during his absence.

In allowing an exception to the disallowance of that item in the Master’s report, Lord Eldon

said:

“Although persons entitled to commission must be resident in the island, and personally acting in the absence of the owner, yet, it would be too much, and in fact would be laying down a very injurious principle, to say that, in no case where the manager himself is absent, commission ought to be allowed. In Chambers v. Goldwin (9 Ves. 270, 273), I held that the mortgagee was entitled to be allowed all the sums which he had actually paid to others whom he had instructed with the management during his absence; and, though in that case the actual payments, and consequently the allowances, fell short of the amount of the commission charged, and a manager has no right to be paid his commission, as commission, during his absence, yet I think he is entitled to what he has really paid to others for the management of the estate, provided the payments be in themselves reasonable, as to which, if it is disputed, there must be an enquiry.”

The upshot of that decision, which has been applied in other cases particularly where the property to

be managed or received was located abroad or required specialist attention, was that disbursements

on account of work done by others at the behest of the receiver or manager, but without the authority

of the court, would, to the extent that they were required to be done and reasonable, be allowed out

of the assets. The decision in Re National Flying Services Ltd. [1936] Ch.271 shows that the

principle is not confined to payments already made by a receiver but extends to those yet to be made

for work done but not yet paid for.

In the present case, therefore, I do not consider that the fact that the respondent did not himself

perform the auditing work is fatal to his claim to be paid or to retain a reasonable sum paid to others

by way of remuneration for doing that work. The primary judge plainly regarded his conduct to be

reasonable. de Jersey J. has given reasons with which I agree, for concluding that there was no

improper or excessive delegation of responsibility in this instance. The respondent himself exercised an

adequate degree of personal supervision and control over those activities. I also agree that if, in the

result, extra time or work was in fact unnecessarily added to the hours for which the respondent would

otherwise have been entitled to charge, the appellant ought to have raised that issue below and secured

detailed findings on it. Not having done so, it is not possible now for them to raise the matter for the first time on appeal, where the facts cannot be properly investigated, and they ought not now be

permitted to do so.

Like Fitzgerald P., I confess to a sense of unease at the idea that court-appointed receivers may

be tending to treat their appointments as in effect appointments of the firm of which they are members.

By doing so, they place themselves in a position in which their duty may well conflict with their interest

as members of the firm, which profits from their employment in that work: cf. Re Timberland (1979)

4 A.C.L.R. 259, 319. The only safe course is for the receiver to obtain the authority of the court before

engaging in what was done here. Once again, however, that aspect of the matter was not raised below

in a form that would enable us to consider, or give effect to its implications, if any in this case.

Acquiescence, on which the primary judge also relied in his reasons, may amount to another

basis on which the decision below can be sustained: see Fraser v. Burgess (1860) 13 Moo. P.C. 314;

15 E.R. 118; but it is not necessary to consider that question in view of the conclusion reached on the

primary point.

I agree with the orders proposed by de Jersey J., including the order as to the costs of the

appeal.

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Appeal No. 6944 of 1996

Brisbane

[Rankine & Anor v. Harris]

Before Fitzgerald P

McPherson JA

de Jersey J

BETWEEN:

ROY McNAY RANKINE and MURIEL HELEN RANKINE

(Plaintiffs) Appellants

AND:

ERNEST GEORGE HARRIS

(Defendant) Respondent

REASONS FOR JUDGMENT - de JERSEY J.

Judgment delivered 9 July 1997

In 1990 the appellants gave notice dissolving a family partnership, known as

Rankine Bros, which carried on, among other things, businesses of farming and timber

milling. The business of the partnership was nevertheless continued. However, on 21

June 1993, all interested parties consented to the court's making various orders directed

towards the winding up of the affairs of the partnership. (Those orders were

subsequently varied in certain respects, again by consent, on 21 October 1993 and 17

November 1994.)

By those orders, the court appointed the respondent, "as agent of the

partnership", to carry out certain tasks. By para. 2 of the order, he was appointed "as

agent for sale as an officer of this court", to sell certain property. He was given a wide

discretion as to the manner of sale, and specifically authorized to engage marketing agents and other consultants. Paragraph 3 of the order is in these terms, particularly

relevant upon this appeal:

"3.

The agent be further appointed, as an officer of this Court, to:

(a)	Conduct an audit of all the choses in action credits property and effects debts and liabilities of the partnership (such audit to include an audit of the books of account of the partnership previously prepared by one ROSS BOTTOMER);
(b)	Make and prepare all such further accounts as in the agent's opinion are necessary to reflect truly, accurately and fairly the assets, liabilities, and affairs generally of the partnership; and
(c)	Make and prepare a balance sheet of the partnership as at 19 November 1990."

Paragraph 8 of the order as varied provided that the respondent be entitled to

remuneration in accordance with the guideline rates of the Insolvency Practitioners

Association of Australia.

The respondent claimed to have carried out the work as required of him by the

terms of the order, and to be entitled to remuneration accordingly. The appellants

challenged this by application brought before the learned primary Judge. They sought

an order that the respondent not be released or discharged from his appointment as

agent, a declaration that his audit report dated 24 November 1994 did not satisfy the

requirements of the order, and an order that his remuneration be reviewed.

As relevant to this appeal, the appellants' central contention before the learned

Judge was that the respondent delegated the performance of his functions under the

order to an impermissible extent: it was contended that he should not be regarded as

having himself conducted the audit, but as having retained others to perform it
substantially for him.

After a lengthy hearing which included a substantial amount of oral evidence,

the Judge rejected that contention and, except in a presently irrelevant and minor

respect, refused the appellants' claim for relief. On this appeal, the appellants dispute

his Honour's conclusions, insofar as they particularly extend to the respondent's

reliance on work done by a co-partner and auditor, Mr Roach, and renew their claim for

the relief which the Judge denied them.

The respondent was not a registered auditor. It was therefore hardly surprising

that he sought the assistance of other experienced registered auditors who were

partners of his firm, Coopers & Lybrand. They were Mr Roach in Brisbane and Mr

Moni at the Cairns office - the partnership carried on business in far northern

Queensland and its assets were located there.

At the hearing before the learned Judge, there was analysis of the comparative

amounts of time spent on the audit by the respondent himself, his two co-partners, and

other staff of his accounting firm. The appellants used that information before his

Honour as part of the foundation for their contention that the respondent should not be

regarded as having himself conducted the audit.

It is convenient to set out his Honour's factual findings on this aspect:

"From June 1993 to December 1993, the three partners spent 287.7 hours upon the administration. Of this time, 51.7 hours was attributed to the respondent. Roughly half the time spent doing the work was attributed to employees of Coopers & Lybrand.

During the year 1994 the total partner time spent on the administration was 606.2 hours of which 49.3 hours was attributed to the respondent. All told the time attributed to the three partners of Coopers & Lybrand was nearly 60% of the time spent by that firm on the administration. The other 40% was attributed to staff employed by the firm.

From January 1995 to June 1995 the partners spent 68.1 hours upon administration. Of this time 19.9 hours was attributed to the respondent. All told about 50% of the time recorded as having been spent by Coopers & Lybrand generally upon the administration was attributed to the three partners.

In summary, ... of the time spent upon performance of the obligations imposed upon the respondent by the order, 55% of the total time spent in complying with the order was spent by the respondent and his two partners and 12.56% was time spent by the respondent personally."

For completeness, I should also record his Honour's finding that the "respondent

probably spent more hours performing work he was appointed to perform than has

been charged for, for the reasons that he gave ... (and) ... that similarly his two partners

sometimes performed work not recorded."

His Honour considered that while that sort of analysis had some relevance to the

issue, he did not derive great assistance from it, "having regard to the obligations that

the order placed upon (the respondent)". As to those obligations, his Honour

proceeded from the basis that the respondent was, by consent of the parties, appointed

as their agent to conduct the audit. He then observed that "an agent may employ

another to do things for him in the performance of his duty as agent if it is a common

usage in the type of business or profession of which the agent's business is an example

to have others perform certain parts of the agent's obligation provided that usage is not

inconsistent with the express terms of the agent's authority."

The learned Judge heard evidence, without objection, from experienced accountants not within the respondent's firm, Mr Maloney called by the appellants and Mr Hennessey called by the respondent, as to their experience of the practice of

accountants conducting audits in similar situations. He drew these conclusions from

their evidence:

"(i)	A person holding the appointment of the respondent here in issue will normally rely upon trained staff under his direct or indirect control to do much of the investigative and other work necessary for completion of work for which he is responsible.
(ii)	He will supervise, direct and control the manner in which the work is performed, particularly having regard to making decisions involving application of principle in questionable circumstances, adopting any change in strategy etc. as required.
(iii)	He will rely upon work performed upon his supervision and control by other persons because of the training and skill of those persons and the fact that he has carefully checked the progress of the work as they perform it and has supervised the way it was performed.
(iv)	The appointee is responsible for any error on the part of staff or fellow partners in performing the work for which he is responsible and for that reason takes care to supervise and control the manner in which those persons perform the work for which he is responsible."

Against that background, the learned Judge then expressed these findings as to

the way in which the respondent in fact went about the discharge of his obligation

under the order:

"(a)	He established the strategy and methods to be used to conduct the audit and perform the other accounting work after a thorough discussion with Mr Roach in Brisbane and Mr Moni in Cairns, each of whom were registered auditors with a greater experience in the conduct and performance of audit work than was possessed by the respondent.
(b)	He relied upon the skill and experience of those partners to have audit work performed on the accounts and the stocktake already prepared and held by Ross Bottomer the accountant in Cairns upon the partnership books to 30 June 1993.
This skill involved the performance of work by them which included also supervision of work done by the staff of Coopers & Lybrand in both Brisbane and Cairns.
(c)	The respondent supervised the work done by his partners in carrying out audit procedures to ensure that the strategy and methods he had adopted at the outset were adhered to. He adopted many but not all of the conclusions arrived at provisionally by his partners. The conclusions upon which the audit was finally based were his conclusions based upon the exercise of his own personal judgment, albeit that he had regard to the superior audit experience of his two partners and presumably upon the advice they gave him. I would infer that in some if not most instances he was motivated to act upon the conclusions reached by his partners and the advice they gave him in connection with the performance of the necessary audit work. In doing so however he made their conclusions which he adopted his own conclusions and to the extent that the audit of the partnership accounts reflected input from his partners, the respondent led, directed and supervised the activities of those partners and it was his judgment which was determinative in all matters of substance and importance concerning the manner in which the audit was to be carried out and its outcome published in his report of 24 November 1994.
He did not delegate the performance of his obligations to conduct an audit of the partnership accounts or to perform any other accounting work required by the order of June 1993 to his partners.
Each partner acted as his amanuensis and was subject to his management supervision and control and the audit was in all respects conducted by the respondent alone - in the sense that only he managed, directed, controlled and was responsible for the performance of the accounting work necessary to audit (i.e. check) the books of the partnership with the contemporaneous records reflecting business activities and stock movements to ensure that the books of account prepared by Ross Bottomer the accountant for the partnership in Cairns accurately recorded and reflected the assets and liabilities and affairs generally of the partnership as at 30 June 1990. These were ‘updated’ to 19 November 1990 and a balance sheet of the partnership as at that date was prepared."

The Judge concluded, as may be seen, that the respondent did not delegate the

performance of his obligation to any impermissible extent, or indeed at all. Insofar as

he sought the assistance of others, that was consistent with common practice or usage

in such situations, and not inconsistent with the terms of what the judge considered to

be his agency.

The Judge added the observation that because the appellants made no complaint

as to the technical proficiency, reliability or accuracy of the audit process, their

objection should be seen as "very technical ... with little merit", directed towards

denying the respondent remuneration for the work he "improperly ‘delegated’ to his

partners which resulted in an audit and report about which no complaint is made" - his

partners themselves having no avenue for recompense.

It is convenient to mention immediately one point taken by the appellants on

appeal. The appellants referred, as part of the relevant ‘narrative’, to the analysis of the

comparative times spent by the respondent and his co-partners and employees. It was

suggested that this provided some support for a contention of excessive delegation.

Once, however, it is conceded, and it must be conceded, that the respondent was

entitled to enlist the assistance of others, provided he retained control and

acknowledged his own subsisting responsibility, then plainly - as his Honour observed

- the analysis of comparative times could not be determinative, or even necessarily a

strong indicator, of how the ultimate question should be resolved. It is conceivable that

carrying out the detailed checking involved in an audit, which could responsibly be

carried out by experienced audit staff, would consume much more time than the more periodic exercise of control and supervision by the respondent. In my view, as the

above extract confirms, his Honour was right to focus, rather, on the question whether

the respondent "led directed and supervised" the audit, and whether, in fact, "it was his

judgment which was determinative in all matters of substance and importance

concerning the matter in which the audit was to be carried out and its outcome". The

Judge answered those questions affirmatively, and his conclusions were supported by

the evidence he accepted. Those conclusions were in my view ample to warrant his

ultimate position, that there had been no impermissible delegation of responsibility.

The appellants contended, in broad terms, that the learned Judge allowed the

respondent too much latitude in the enlisting of the assistance of others. They referred

on appeal, as in the court below, to cases concerning the limits of the permissible

delegation by court appointed receivers and liquidators. Cases like Commissioner for

Corporate Affairs v. Harvey [1980] VR 669, 695 and Ah Toy v. Registrar of Companies (1986)

10 FCR 356, 361 indicate that such officers must retain control, with any delegation

being carefully regulated. The Judge preferred to determine the way the respondent

should proceed by reference to the court order, distinguishing those cases on the basis

that they concerned officers of the court who were not appointed to act as agents of the

parties, and because there were, in those situations, relevant specific statutory or

regulatory constraints not present here. I agree that the content of the respondent's

obligation fell to be determined in this case by reference to the order. Even allowing

for the general thrust of those other cases, his Honour has here found, with sufficient

support in the evidence, that the respondent did retain control of the exercise. The particular challenge on which the appellants concentrated, in the

presentation of their appeal, focused on the respondent's utilization of the services of

Mr Roach. The appellants submitted that the court order "did not authorise the

respondent to engage Mr Roach to do that management and supervision which was

appropriate to be done by a partner in Brisbane; the respondent should have done that

work himself". The appellants referred to a concession by the respondent's senior

counsel before the learned Judge that the respondent could himself have done the work

done by Mr Roach, at least as well; that there was no cost advantage in using Mr Roach,

whose work was billed at the same rate as the respondent charged; and yet, it was said,

the partnership suffered financially, having to bear the cost of an unnecessary "extra

layer of partner supervision" - while on the other hand, this approach left the

respondent himself free to accept other financially rewarding work, which, it was

submitted, was inconsistent with a fiduciary position arising under the order.

The Court considered early in the hearing of the appeal whether it should allow

the appellants to pursue the claim that the involvement of Mr Roach would necessarily

have increased the costs of the administration, through the interposition, as it was put,

of an unnecessary "extra layer of partner supervision". That point was not raised or

explored at the hearing below; the learned Judge made no finding with respect to it; the

notice of appeal dated 22 August 1996 did not advert to it; it was not mentioned in the

appellants' first outline of argument delivered on 25 September 1996; and the point was

raised for the first time only in the appellants' amended outline delivered on 19 May

1997, the morning of the hearing of the appeal. The respondent objected to its being raised. These were powerful considerations against allowing the matter to be argued

on appeal. Further, I was not prepared to infer that the real costs to the partnership

would necessarily have been higher. That conclusion, if drawn superficially, would

ignore an assessment of possible benefit to the partnership through the extra partner

involvement. Exploration of the relevant factual issue, in short, required rather more

detailed consideration. There was simply none at all below. This Court nevertheless

allowed Mr Fraser Q.C., who appeared for the appellants, to address argument upon

the point, but without committing itself to determining the point. The further

submissions did not dissuade me from my disinclination to allow the point to be

argued. I consider that the appeal should be determined therefore without reference

to this consideration.

The key to the reason why the learned Judge accepted, as reasonable and

legitimate, the respondent's utilization of the services of Mr Roach, rests in his view,

supported by the evidence, that Mr Roach was, as the Judge put it, a "registered auditor

with greater experience in the conduct and performance of audit work than was

possessed by the respondent". Most of the exercise required of him bore the character

of an audit. As I said earlier, it was therefore hardly surprising - the respondent not

himself being a registered auditor - that he sought the assistance of registered auditors.

Further, as his Honour found, a person in the position of the respondent here would

ordinarily "rely upon work performed under his supervision and control by other

persons because of the training and skill of those persons ...". With relation to the

particular facts of the case, his Honour then found that the respondent, having established a strategy and method for the audit with his two co-partners who were

experienced registered auditors, "relied upon the skill and experience of those partners

to have audit work performed ...". I should add that it was not in dispute that the

respondent (rather than other potential nominees) was appointed because of particular

skills and experience he could bring to the work he was engaged to do. But in the end,

he lacked wide experience and qualification in auditing, so there was an obvious need

to supplement the respondent's own involvement through the utilization of registered

auditors. Mr Fraser submitted that the involvement of Mr Moni, the registered auditor

in Cairns, would have satisfied that need - a matter to which I return.

There are two matters of terminology which I should first address. I have

referred to the respondent's utilization of the services of Mr Roach. Reference to

"delegation", which ordinarily involves some assumption or shifting of responsibility,

is probably inapt. The Judge found that in fact there was no delegation in that sense,

in that the respondent always retained ultimate authority and responsibility.

I should also say that I am not persuaded that in carrying out the audit, the

respondent was properly styled an "agent". He was the person agreed upon by the

parties, and designated by the order, to do that task. Reference to his being an agent

in para. 3 of the order is more a matter of identification of the person to do the task than

an acknowledgment of the character in which the person does the task. But in the end,

whether he was an agent properly so called, or not, is of little moment.

It was accepted that in carrying out the audit, and doing the other tasks required of him by the order, the respondent could enlist the assistance of others. The notion of "conducting" an audit carries with it the possibility that the leader, or director, or

manager of the process will involve assistants. The question ventilated on appeal was

whether the Judge was right to dismiss the contention, made on behalf of the

appellants, that the respondent went too far in that process of enlistment.

Mr Fraser's submission came down to this: first, the respondent's use of others

was so extensive as to deprive the partners of the benefit of the respondent's own

personal skill and expertise; and second, there was necessarily "doubling up" for which

the partners had to pay - in that involving Mr Roach necessitated consultation between

the respondent and him which would have been unnecessary had the respondent done

the work done by Mr Roach: so far as the respondent was not a registered auditor, he

could in that case have relied as necessary on Mr Moni in Cairns.

As to the former point, the Judge's findings dispose of it. The Judge's findings

necessarily involve the conclusion that the respondent did apply his skill and expertise

and retain control of and responsibility for the whole exercise. One might cast the

appellants' contention in this way: the respondent treated his personal appointment as

if it were the appointment of his firm, and ignored - to the detriment of the partners of

Rankine Bros - the essentiality of their intention that he be appointed with a view to the

application of his particular expertise and experience. The contention plainly cannot

survive the Judge's findings set out earlier. I add that those findings are in my view

wide enough to cover the reasonableness of the use of the services in Brisbane of Mr

Roach, even though another registered auditor, Mr Moni, was available and also used

in Cairns. So far as that led to extra cost, if it did, such as through additional consultations between the respondent, Mr Roach and Mr Moni, it relates to the latter

point. That latter point is the very lately raised contention which in my view we should

not determine on this appeal, for the reasons earlier expressed.

My judgment comes down to this. It is beyond question that under the order of

the court, the respondent could invoke assistance in carrying out the duties required

of him. So far as the respondent utilized the services of Mr Roach, the learned Judge

was entitled to conclude, as he did, that that course was open to the respondent,

provided he did not surrender his own responsibility for carrying out the duties

referred to in the order.

I expressly put to one side a case where following this approach is seen to

increase costs unnecessarily or unreasonably - that is, without corresponding benefit:

that is the contention which was not open as this case was run.

It remains for me to refer to the appellants' challenge to findings made by the

Judge based on a notion of acquiescence. The Judge found that at the respondent's first

meeting with the appellants and other members of the partnership on 29 June 1993, the

respondent "outlined in considerable detail exactly how he proposed to conduct the

administration": "he told them that he would have the overall responsibility of control

but that Mr Roach his partner would be the person with whom they would be mostly

dealing; he was to be the man who would have the 'hands on activity' and that the

respondent would be available at any time if they wanted to make contact with him

directly or if they wanted to refer things to him. He told them that he would be in the

background and would be supervising and making sure that the administration was
conducted correctly." The appellants did not demur.

This led into the following finding, which the appellants now challenge. His

Honour said:

"Even if it were arguable that the respondent had no sufficient personal involvement in selling the property or preparing the marketing strategy for sale, or in conducting the audit and performing the other accounting work required by the order (which in my view it is clearly not) the applicants clearly acquiesced in the manner in which the respondent purported to perform his obligations under that order until that performance had been all but completed."

The appellants submit that "acquiescence" was not pleaded or argued at the

hearing, that it would in any case be inapt to the limited sort of "agency" in question

here, and further, could not have been established by the facts. I need not explore

those matters. That is because this observation by his Honour was peripheral to the

substantial (and unimpeachable) basis upon which he found against the appellants. As

emerges from the above passage, beginning with the words, "Even if it were

arguable...", and including his Honour's emphatic rejection of what follows by the

bracketed words, "which ... it is clearly not", the observation was subsidiary. Because

I consider the challenge to the principal basis upon which his Honour found against the

appellant to be untenable, it is not necessary for me to go into the question raised with

relation to this alternative and subsidiary issue.

I would dismiss the appeal and order the appellants to pay the respondent's

costs to be taxed. The question arises whether those costs should be taxed on a solicitor

and own client basis. This was raised but not explored at the hearing of the appeal. The

learned Judge deferred making a costs order, but foreshadowed the real prospect of
their being ordered to be taxed on a solicitor and own client basis. As he put it:

"Prima facie and subject to hearing submissions from the defendants, I should think that an order for costs in favour of the respondent should be made and unless I am persuaded by argument to the contrary he ought recover against the applicants/plaintiffs his costs of and incidental to this application to be taxed on a solicitor and own client basis. If the costs were taxed on a party and party basis only, then the other parties to the action would ultimately have to bear the greater share of the difference between those party and party costs and solicitor and own client costs which to my mind would be unjust."

If the costs of this appeal are recovered following taxation on a party and party

basis, the respondent would nevertheless be entitled presumably to recover the

margin between those and his actual reasonably incurred costs by recourse to the

partnership assets. See para. 8 of the order as varied, which entitled the respondent

"to be reimbursed expenses on a monthly basis from the proceeds of sale of the assets

or from the funds (held in the partnership bank account)". In consequence, all partners

would have to bear that burden, even though only the appellants chose to take these

proceedings.

I would therefore order, in dismissing the appeal, that the appellants pay the

respondent's costs to be taxed on a solicitor and own client basis. Since the point,

though raised, was not argued at the hearing of the appeal, I would add that the

parties have leave to deliver written submissions with relation to the issue of costs

within seven days, serving a copy of any such submissions on the other parties. In the

event that no submissions are received, the above order should stand. In the event

that submissions are received, the Court would of course consider the matter further.

360ff.