Robert David Eavestaff Bakewell, Lewis Barrett, Molly Veronica Byrne, Keith Jackson Hancock, Rodney Edward Hartley, Richard Donald Malcolmson, Robert Philip Searcy, David Winston Simmons, Keith Smith, John...
[1992] SASC 3635
•25 September 1992
COURT IN THE FULL COURT OF THE SUPREME COURT OF SOUTH AUSTRALIA KING CJ(1), OLSSON(2) AND MULLIHGAN(3) JJ
CWDS
Administrative law - Judicial Review - Rules of Natural Justice and breach thereof - investigation pursuant to section 25State Bank of South Australia Act - alleged bias and suspicion of bias - right of persons whose reputations may be injured by report to have opportunity to respond to contemplated criticisms - notification of tentative conclusions with opportunity to respond in writing - whether sufficient time allowed - requirements of procedural fairness in circumstances - effect of time for reporting fixed by terms of appointment - whether plaintiffs reasonably apprehended that investigator would report adversely to them without providing proper opportunity to answer contemplated criticisms - declarations as to rights of plaintiffs granted. Judicial Review - ultra vires - proposed terms of report of investigator appointed under section 25State Bank of South Australia Act not authorised by terms of appointment - declaration accordingly.
HRNG ADELAIDE, 7 September 1992 #DATE 25:9:1992
Counsel for plaintiffs except Clark: Mr M L Abbott QC
with Mr N J Iles
Solicitors for plaintiffs except Clark: Piper Alderman
Counsel for plaintiff Clark: Mr T R Anderson QC
with Mr J R Goldberg
Solicitors for plaintiff Clark: Goldberg &; Co
Counsel for defendant: Mr B R M Hayes QC
with Mr J F Costello
Solicitors for defendant: Norman Waterhouse
Counsel for intervener A-G: Mr J J Doyle QC
with Mr B M Selway
Solicitors for intervener A-G: Crown Solicitor
ORDER
Declarations made.
JUDGE1 KING CJ These two actions for judicial review were heard together by the Full Court. The plaintiffs in both actions seek relief by way of judicial review of an investigation being conducted by the defendant of certain matters relating to the operations and financial position of the State Bank of South Australia. They claim that certain proposed findings are beyond the powers of the defendant and that they are being denied natural justice. 2. The defendant to both actions is the Auditor-General of the State. On 11th February 1991 he was appointed by Her Excellency the Governor pursuant to section 25(1) of the State Bank Act to make an investigation and report into the Bank's affairs. Subsequently section 25 was amended by the State Bank of South Australia (Investigations) Act 1991 which came into operation on the 28th March 1991. On the same day the defendant's appointment was revoked and he was re-appointed to conduct the investigation. I set out the first seven subsections of section 25 as amended. The remaining subsections deal with incidental matters which are not material for present purposes.
"25. (1) The Governor may appoint-
(a) the Auditor-General; or
(b) some other suitable person, to make an investigation and
report under this section.
(2) A person so appointed must investigate such matters relating
to the operations and financial position of the Bank or the Bank
Group as are determined by the Governor and must report to the
Governor on the results of the investigation.
(3) A person so appointed must comply with any directions of
the Governor published in the Gazette as to the manner in which
the investigation is to be conducted and the manner in which the
results of the investigation are to be reported, including any
direction requiring reports to be presented to a specified
person or body in addition to the Governor.
(4) Subject to any directions of the Governor, a person so
appointed may, if he or she sees fit to do so in connection with
the investigation, make public statements as to the nature and
conduct of the investigation and may invite and receive
information or submissions as to any matter relevant to the
investigation from such persons as he or she thinks fit.
(5) A person so appointed must, when presenting to the
Governor any report that the person considers need not remain
confidential, also present copies of the report to the President
of the Legislative Council and the Speaker of the House of
Assembly who must in turn, not later than the first sitting day
after receipt of the reports, lay them before their respective
Houses.
(6) Where the investigator forms the belief or suspicion while
undertaking any investigation under this section that there has
been in connection with any transaction entered into in the
course of the operations of the Bank or the Bank Group-
(a) any conflict of interest or breach of fiduciary duty or
other unlawful, corrupt or improper activity on the part of a
director or officer of the Bank or a subsidiary of the Bank;
or
(b) any failure to exercise proper care and diligence on the
part of a director or officer of the Bank or a subsidiary of the
Bank, the investigator may, if practicable, investigate the
matter (whether or not it falls within the matters determined by
the Governor to be the subject of the investigation), and must
in any event report on the matter to the Governor and advise
whether, in his or her opinion, the matter should be the subject
of further or other investigation or action.
(7) For the purposes of an investigation under this section,
the investigator and authorized persons have the same powers as
the Auditor-General and authorized officers have under Division
III of Part III of the Public Finance and Audit Act 1987 for an
audit or examination under that Act, and the provisions of that
Division (including section 34(2) and (3)) apply in relation to
the investigation and the exercise of those powers as if the
investigator or authorized person were the Auditor-General or an
authorized officer exercising those powers under that Division." 3. Division III of Part III of the Public Finance and Audit Act which is invoked by section 25(7) of the State Bank of South Australia Act, confers on the Auditor-General power to require appearance of witnesses, the production of documents and the provision of information. It authorises the administration of the oath. It imposes penalties for failure to appear or failure to produce documents or provide information. It also provides penalties for failing to answer truthfully and for hindering or obstructing the Auditor-General. It excludes immunity against self-incrimination. 4. The appointment of the Auditor-General which was gazetted on 28th March 1991 was in the following terms:
"Appointment of Auditor-General Under Section 25 of the
State Bank of south Australia Act WHEREAS
(1) I am advised that the Bank has a significant
amount of non-performing assets for which there had been
inadequate provision by way of specific or general reserves.
(2) I am advised that by reason of the above, the Bank faced
substantial financial difficulties which have led to an
indemnity being granted to the Bank by the Government.
(3) I am advised that it is in the public interest that the
causes of the financial difficulties at the Bank should be
identified.
(4) By Instrument dated the 9th day of February 1991 I
appointed the Auditor-General to investigate and report on
certain matters relating to the Bank.
(5) I am advised that it is desirable that the matters which
the Auditor-General is to investigate and report on should be
varied.
I, THE HONOURABLE DAME ROMA FLINDERS MITCHELL, Companion of the
Order of Australia, Dame Commander of the Most Excellent Order
of the British Empire, Governor in and over the State of South
Australia acting pursuant to the powers given me by section 25
of the State Bank of South Australia Act, 1983 and all other
enabling powers and with the advice and consent of the Executive
Council do hereby revoke the said appointment and now hereby
appoint the Auditor-General to investigate and report on the
following matters:
A. The Auditor-General is to investigate and inquire
into and report on:
(a) what matters and events caused the financial position of
the Bank and the Bank Group as reported by the Bank and the
Treasurer in public statements on 10th February 1991 and in a
Ministerial Statement by the Treasurer on 12th February 1991;
(b) what were the processes which led the Bank or a member of
the Bank Group to engage in operations which have resulted in
material losses or in the Bank or a member of the Bank Group
holding significant assets which are non-performing;
(c) whether those processes were appropriate;
(d) what were the procedures, policies and
practices adopted by the Bank and the Bank Group in the
management of significant assets which are non-performing;
(e) were those procedures, policies and practices adequate;
(f) whether adequate or proper procedures existed
for the identification of non-performing assets and assets in
respect of which a provision for loss should be made;
(g) whether the internal audits of the accounts of the Bank
were appropriate and adequate.
The Auditor-General is directed to report on the above matters
within six months of the date of this Appointment.
B. The Auditor-General is to investigate and inquire
into and report on whether the external audits of the accounts
of the Bank were appropriate and adequate. The Auditor-General
is directed to report on this matter within twelve months of the
date of this Appointment.
C. The Auditor-General is to investigate and inquire into and
report, with reference to the above matters, whether the
operations, affairs and transactions of the Bank and the Bank
Group were adequately or properly supervised, directed and
controlled by:
(a) the Board of Directors of the Bank;
(b) the Chief Executive Officer of the Bank;
(c) other officers and employees of the Bank;
(d) the Directors, officers and employees of the members of the
Bank Group.
The Auditor-General is directed to report on the above matters
within six months of the date of this Appointment.
D. The Auditor-General is to investigate and inquire
into and report, in relation to the matters set out in
paragraphs A and B above, whether the information and reports
given by the Chief Executive Officer and other Bank officers to
the Board of the Bank:
(a) were under all the circumstances, timely, reliable and
adequate;
(b) sufficient to enable the Board to discharge
adequately its functions under the Act.
The Auditor-General is directed to report on the above matters
at the same time as he reports in relation to paragraphs A and B
above respectively.
E. Having regard to the material onsidered by him in
respect of the matters set out in paragraphs A to
D above, the Auditor-General is in any report on such
matter, to report on any matters which in his opinion may
disclose a conflict of interest or breach of fiduciary duty or
other unlawful, corrupt or improper activity and the
Auditor-General is to report whether in his opinion, such
matters should be further investigated.
F. The Auditor-General is authorised to seek and obtain
such advice or assistance on matters relating to banking,
accounting and auditing practice relevant to this appointment
as he may consider necessary for the purpose of his inquiry.
G. The Auditor-General is directed to provide to the Royal
Commission appointed by me on the 4th day of March 1991:
(a) a copy of any report made by the Auditor-General as
directed in paragraphs A to D above;
(b) any information or interim report it may seek relating to
the matters falling within its Terms of Reference, provided that
he is able to do so having regard to his own inquiries and his
duty to complete his report as soon as practicable.
H. The Auditor-General is directed in conducting his inquiry
and his report so far as practicable to avoid prejudicing
pending or prospective criminal or civil proceedings, and to
report in part by way of confidential report if he considers
it appropriate.
I. The Auditor-General is directed so far as practicable:
(a) in any information provided or report made by him to
protect the confidentiality of information which could properly
be regarded as confidential information of the Bank or of a
member of the Bank Group or of a customer or person dealing with
the Bank or a member of the Bank Group;
(b) in any report prepared by him when it is necessary in his
opinion to disclose or refer to such information, to present the
report in a manner which enables the findings and
recommendations in the report to be considered separately from
the confidential information, the confidential information where
practicable being presented in a separate report or appendix.
J. The Auditor-General is directed to avoid as far as
practicable prejudicing or interfering with the ongoing
operations of the Bank and the Bank Group.
In this Instrument:
"the Act" means the State Bank of South Australia Act, 1983;
"the Bank" means the State Bank of South Australia constituted
by the Act; "the Bank Group" has the same meaning as in section
25 of the Act as amended from time to time; "operations" of the
Bank or Bank Group has the same meaning as in section 25 of the
Act as amended from time to time;
DATED the 28th day of March 1991.
THE HONOURABLE DAME ROMA FLINDERS MITCHELL" 5. The plaintiffs in action number 1893 of 1992 were at material times Directors of the State Bank. A number of them were at material times also Directors of Beneficial Finance Corporation Limited which was a subsidiary of the Bank. The plaintiff in action number 1911 of 1992 was at material times the Chief Executive Officer and Managing Director of the Bank and was also at material times a Director of Beneficial Finance Corporation Limited. 6. The time for reporting mentioned in the terms of appointment has been extended from time to time. The reporting date as at the hearing of these actions was the 30th September 1992 although we were informed that an extension of time was under consideration. The hearing took place on the 7th September 1992. 7. Following his appointment the defendant set about his investigation. He used the services of officers of the Auditor-General's Department and also certain consulting accountants. He had legal advice throughout and was represented by solicitors. In the course of the inquiry the defendant has received approximately 20,000 documents. There have been formal examinations of at least 60 witnesses, some of whom have appeared on numerous occasions. Transcripts have been made of those examinations. Furthermore in the course of the inquiry many other witnesses have been interviewed on an informal basis but transcripts were not taken of those interviews. 8. The plaintiffs in both actions were at all material times represented by solicitors and had the services of counsel including senior counsel. Over the period of the inquiry there has been a considerable exchange of correspondence between solicitors for the plaintiffs and solicitors for the defendant and frequent conferences between the respective legal representatives. Plaintiffs in these actions were among the witnesses interviewed. 9. During the course of the inquiry there has been considerable conflict between the defendant and his legal representatives on the one hand and the plaintiffs and their legal representatives on the other. In general it may be said that the latter have taken the stand that their clients have been denied access to information which is necessary to enable them to present their case. The defendant and his advisers have taken the stand that the plaintiffs, instead of endeavouring to supply the information sought from them, have met requests for information with demands which were excessive and which sought to take control of the investigation out of the hands of the defendant. It is clear moreover that the defendant took the view that the plaintiffs were giving insufficient attention to the time constraints imposed upon the defendant by the terms of his appointment. 10. There are clear indications that the defendant was experiencing difficulty in reconciling the constant demands of the plaintiffs for what they regarded as the requirements of natural justice and the time constraints imposed upon him. In an endeavour to meet the requirements of the plaintiffs without undue delay, the defendant adopted an informal procedure of consultation with the legal advisers of the plaintiffs. As part of that procedure, he furnished a number of reports by persons to whom he had delegated the responsibility of investigating certain facets of the Bank group's activities. He provided those reports on the basis that their conclusions did not represent his views and were not to be regarded even as his tentative views. The idea was to give the plaintiffs an early intimation of the sort of issues which had arisen and an early opportunity to consider what representations they wished to make in connection with them. The procedure broke down in July 1992 because of an impasse between the defendant and the plaintiffs as to the status of these investigators' reports. The defendant required from the plaintiffs, as a condition of receiving them, that they acknowledge that they did not represent the defendant's views and were not even his tentative conclusions. The plaintiffs in action number 1983 of 1992 refused to give this acknowledgement, apparently wishing to keep open an argument based upon these reports that they had been denied natural justice. The defendant thereupon discontinued the furnishing of those reports. 11. The defendant was critical of the plaintiff directors' attitude and expressed the view that they were obstructing the investigation. 12. In August the defendant furnished seven draft chapters of his proposed report to the solicitors for the plaintiffs in action number 1893 of 1992 whom I shall refer to as the "plaintiff directors". They were supplied at different times and with different covering letters. It is unnecessary, however, to set out the text of each of these letters. A fair summary of the effect of this correspondence is that the plaintiffs were reminded of the defendant's obligation to report on 30th September 1992. They were invited to make written submissions and adduce evidence in written form. A date by which such written material must be submitted was fixed in each case. The plaintiffs were informed that the defendant would consider any request for additional time "consistent with his terms of appointment". I set out a schedule indicating the subject matter of each draft chapter, the date and time upon which it was received by the solicitors for the plaintiffs and the date by which the response was required. These draft chapters were referred to as Type B Reports to distinguish them from the Type A Reports which were the delegated investigators' preliminary reports referred to above.
" REPORT DATE DATE RESPONSE
RECEIVED REQUIRED
1. Internal Audit (Bank) 5/8 (3.45 pm) 19/8
2. Paper Meetings - BFC 7/8 (3.45 pm) 21/8
3. Collinsville Stud 7/8 (11.45 am) 21/8
4. Adsteam 14/8 (5.10 pm) 28/8
5. Credit &; Its Management
(Policies Processes etc) 14/8 (5.10 pm) 28/8
6. Interwest/Somerly 14/8 (5.10 pm) 28/8
7. Internal Audit (BFC) 14/8 (5.10 pm) 28/8" 13. The response of the solicitors for the plaintiff directors was to demand by letter dated 18th August 1992, an additional three months within which to make submissions, the opportunity to personally appear and give sworn evidence, the opportunity to call evidence, a copy of the transcript of witnesses touching upon the subject matter of the draft reports, copies of documents relevant to the draft reports and a transcript of their own evidence taken before the defendant. The defendant replied by letter dated the 20th August 1992 in the following terms:
"CONFIDENTIAL Our Ref: ien\118971:vad Messrs Piper Alderman
Your Ref: AFA.F17892B.W Barristers &; Solicitors 167 Flinders
Street ADELAIDE SA 5000 Attention: Ms A. Adair 20 August 1992
Dear Sirs,
Re: Auditor-General's Inquiry into the State Bank
Internal Audit of the Bank We refer to your letter of 18th
August 1992. Our client has instructed us that he will receive
the written submissions that you are instructed to make, and
such evidence in written form that you are instructed to adduce,
by 28th August 1992. If in the written submissions you
identify a request to personally appear, to personally give
sworn evidence or to call other oral evidence in relation to the
draft Internal Audit Report, then our client will consider that
request when it is made. We are instructed by our client that
his draft Internal Audit Report contains sufficient
particularity of all of the facts, material and evidence whether
oral or otherwise, and of the documentation which is relevant to
his draft Internal Audit Report, to enable you to make any
submissions and provide any evidence which you consider
necessary in the interests of ensuring natural justice for your
clients. In relation to your further request that our client
provide you with your clients' transcript of evidence previously
given, our client again invites you to identify any quotations
from your clients' evidence that are contained within his draft
Internal Audit Report, so that you can be provided with the
extract of such evidence sufficient to enable you to set those
quotations in context. Our client looks forward to receipt of
any submissions and evidence in relation to his draft Internal
Audit Report. Yours faithfully NORMAN WATERHOUSE Per: Ingrid
Norman SENIOR ASSOCIATE" 14. That exchange of correspondence related specifically to the draft chapter concerning internal audit. I think that it is reasonable to suppose that both parties would have regarded it as representing their attitudes to all the draft reports. 15. These proceedings were instituted by the plaintiff directors on 24th August. I should mention that on 26th August the defendant forwarded to the solicitors for the plaintiff directors a draft chapter on overseas operations of the State Bank containing criticisms of the plaintiff directors and giving them until the 10th September to respond. The defendant's solicitors again indicated in this letter that the defendant would consider any request for additional time for the making of submissions "consistent with his terms of appointment". We have been informed that there may be other chapters in the report containing criticisms of the plaintiffs which have not yet been supplied. 16. The furnishing of the draft chapters containing criticisms of the plaintiffs, to the plaintiff Clark followed a similar pattern to that relating to the plaintiff directors. There were variations in relation to dates and other matters but they are immaterial for present purposes. The plaintiff Clark did furnish some written submissions within the specified time but demanded further time for fuller submissions. He maintains the same attitude as the plaintiff directors as to what is required to enable him to answer properly the criticisms levelled in the draft chapters. Before turning to the grounds upon which relief is sought, it is necessary to refer to the confidential nature of the evidentiary material in the actions. The purpose of these actions is to protect the business and personal reputations of the plaintiffs against what they claim to be unjust criticisms. If those criticisms became public knowledge before the plaintiffs had had a proper opportunity to answer them, the purpose of the actions would be defeated. For that reason an order was made by the Court prohibiting publication of the evidentiary material on which the actions are based. For the same reason, I consider it to be necessary to avoid reference to the nature of the criticisms in this judgment. It is sufficient to say that the criticisms of the plaintiffs expressed in the draft chapters would if embodied in the final report and published, have the capacity of impairing the plaintiffs' business and personal reputations. The need to avoid reference to the nature of the criticisms creates difficulties for the adequate expression of the reasons for this judgment, and it will be necessary to understand the general references made in these reasons against the background of the evidentiary material to which, in the interests of justice, public reference cannot be made. 17. I shall first consider a claim of the plaintiffs that certain of the tentative conclusions set out in the draft chapters are not within the terms of reference contained in the instrument of appointment and that their inclusion in the final report would therefore be beyond the powers of the defendant. The authority of the defendant to investigate and report is defined by his terms of appointment. The submission made in support of this ground of relief was based upon the terms of the draft chapters. It would be impossible to discuss the argument in detail without disclosing the material complained of and I therefore refrain from doing so. It is sufficient to point out that the answer to a substantial part of the submission is that the defendant is by the terms of section 25(6) of the State Bank of SouthAustralia Act required, if he forms the belief or suspicion that there has been any conflict of interest or breach of fiduciary duty or other unlawful or corrupt or improper activity on the part of a Director or officer of the Bank or a subsidiary of the Bank, to investigate the matter and to report on the matter to the Governor, and in addition to advise whether the matter should be the subject of further or other investigation or action. This obligation placed upon the defendant by the statute is echoed by paragraph E of his terms of appointment. I think, however, that there is some substance in the submission which was made. The defendant is authorised to report on such matters only if he forms a belief or suspicion ("opinion" is the word used in the terms of appointment) that conduct of the kind referred to has occurred. That suspicion or belief must of course be based upon the evidence which has come to the defendant's notice. I think that one passage in the draft chapter on what had been described as Paper Meetings of the Directors of Beneficial Finance Corporation Limited go beyond what is authorised by the section and the terms of appointment. The passage proceeds beyond suspicions based upon evidence and speculates as to the use to which Minutes of Paper Meetings might be put by hypothetical persons in hypothetical situations. That speculation, if published, could be extremely harmful to the plaintiffs. No evidence is referred to which would suggest that the plaintiffs had any such purposes in contemplation and the passage appears to be both speculative and hypothetical. I think that it goes beyond the matters which the defendant is authorised to report upon and I would grant a declaration accordingly. The passage to which I refer is to be found in the draft chapter entitled "Chapter 44 - Conduct of the Affairs of Beneficial Finance - 'Paper' Directors' Meetings" which is exhibit AFA6 to the affidavit of Alison Frances Adair filed herein on the 24th August 1992. 18. It is clear from a consideration of section 25 of the Act and the defendant's terms of appointment, that the defendant is engaged upon an investigation the results of which could reflect upon the conduct of the plaintiffs and affect their business and personal reputations. That view is reinforced by a consideration of certain of the tentative findings and conclusions referred to in the draft chapters of the proposed report. In those circumstances it is beyond question that the plaintiffs are entitled to an appropriate measure of natural justice or procedural fairness. Ainsworth v Criminal Justice Commission (1992) 106 ALR 11. 19. Natural justice in connection with an investigation such as that under consideration requires that there be no taint of bias in the investigation. The investigator must be free of actual bias and there must be nothing in his actions which would create in the mind of a reasonable observer a suspicion of bias. Laws v Australian Broadcasting Tribunal (1990) 170 CLR 70; King v Strickland (1991) 56 SASR 225 at p.229. 20. Counsel for the plaintiff directors has contended that history of the present matter establishes that the defendant is actually biased against the plaintiffs or alternatively that he has so conducted himself that a reasonable person would suspect bias. One point urged in support of this contention can be dismissed at once. There were published in 'The Advertiser' newspaper news items claiming that members of the defendant's staff had leaked information concerning "suspected criminal activity on an incredible scale because they believe the present inquiries may not bring the perpetrators to justice". There are other sensationalist references to apparent fraudulent activity of an outrageous kind and speculation as to "how much corruption is involved". 21. The defendant indicated in the correspondence that he had investigated the reports and that he had satisfied himself that there had been no leak from his office. Certainly there is no evidence at all that the defendant was in any way involved in providing information to the press or in inspiring or condoning what appeared therein. 22. The allegation of bias and conduct giving rise to a suspicion of bias, is largely based upon the manner in which the defendant has conducted his investigation. It must be remembered that the defendant is in charge of the investigation and is entitled to conduct it in the way which seems best to him. It has undoubtedly been a difficult and complex investigation, not made easier by the time constraints under which he has laboured. Whatever criticisms might be made of the course of the investigation, it is apparent that the actions of the defendant have been conditioned and are explained by the complexity of the task and the time available in which to complete it. I can draw no conclusion of bias on the way in which the defendant has conducted his investigation. 23. Counsel for the plaintiffs have drawn attention particularly to the defendant's allegation that they have obstructed timely completion of the investigation. There can be no doubt that the plaintiffs' demands have at times exasperated the defendant. That exasperation is manifest in connection with the frustration of his practice of providing investigators' reports to the plaintiffs in order to expedite progress of the investigation and the plaintiffs' ultimate response to the defendant's tentative conclusions. That procedure floundered upon the unwillingness of the plaintiff directors to accept that the investigators' reports were not the conclusions, even the tentative conclusions, of the defendant. This led to the defendant making the charge in a letter of the 26th June 1992 of "deliberate obstruction to the timely completion of his inquiry". That criticism was repeated during the hearing in this Court. 24. The defendant has a clear responsibility to proceed expeditiously with his investigation. If he forms the opinion that any person who is delaying his investigation for any reason, he is entitled to protest and to reprimand in a way which might produce timely cooperation. I see no need for this Court to pass judgment on the correctness of the defendant's view as to the tactics of the plaintiff directors but, if he genuinely held those views, he was entitled to express them. There is nothing to suggest that he did not hold the view which he expressed in good faith and nothing to suggest that the entertainment or expression of that view would preclude him from bringing a fair and impartial mind to bear upon issues relating to the plaintiffs' conduct in connection with the affairs of the Bank. 25. Finally the complaint of bias was based upon what was said to be the unwarranted tentative findings expressed in the draft chapters. It is understandable that the plaintiff directors are disappointed in some of the tentative findings, but there is no reason to suppose that they have not been arrived at by the defendant on a tentative basis in good faith. They have been communicated to the plaintiffs to enable them to respond to them. It is a perfectly proper procedure and probably the only way in which the defendant could have proceeded having regard to the nature of the investigation. 26. I see no foundation for the allegation that the defendant is biased against the plaintiffs, nor is there anything in his actions which could give rise to a reasonable suspicion of bias. The plaintiffs in both actions claim that they have been denied natural justice in that they have not been accorded and are still not being accorded a reasonable opportunity to refute the tentative conclusions. Counsel for the plaintiff directors submitted that the Court should order:
"(1) the provision of the plaintiff's own transcript and in
the case of no transcript existing, the Auditor-General's notes
of interviews;
(2) the provision of all documents relied upon by the
Auditor-General in his report or chapters of a report that
contain tentative adverse conclusions in relation to the
plaintiffs;
(3) the provision of transcript (or notes of interviews) or
findings of other witnesses that relate to all tentative adverse
views and conclusions;
(4) adequate time, from the provision by the defendant of (1),
(2) and (3), to instruct advisors to prepare a response;
(5) the right to call further viva voce evidence both from the
plaintiffs and any other witness they may be advised to call;
(6) the right to cross-examine witnesses already
heard or who may be later called;
(7) the right to tender further documents;
(8) the right to make submissions orally and in writing;
(9) that the investigator should have, after the receipt of
material mentioned in (5)-(8) inclusive, sufficient time to give
the new material a fair and unprejudiced consideration." 27. The claim of the plaintiff Clark as set out in his summons and supported by his counsel's submissions was to similar effect. 28. In order to rule upon that submission, it is necessary to consider what the rules of procedural fairness or natural justice require in the circumstances of this investigation. In R v Commonwealth Conciliation and Arbitration Commission &; Ors ex parte Angliss Group (1969) 122 CLR 546 at pp.552-553, in a passage which was reaffirmed in the joint judgment of Mason J, Wilson J and Dawson J in National Companies and Securities Commission v News Corporation Limited (1984) 156 CLR 296 at 320, the High Court said in a joint judgment:
"But it must be borne in mind that these principles are
not to be found in a fixed body of rules applicable inflexibly
at all times and in all circumstances. Tucker L.J said in
Russell v Duke of Norfolk (1949) 1 All E.R. 109, at p.118: 'The
requirements of natural justice must depend on the circumstances
of the case, the nature of the inquiry, the rules under which
the tribunal is acting, the subject matter that is being dealt
with, and so forth.' This passage was approved by the Privy
Council in University of Ceylon v Fernando (1960) 1 W.L.R. 223;
(1960) 1 All E.R. 631, and was used by Kitto J in Mobil Oil
Australia Pty. Ltd. v Federal Commissioner of Taxation (1963)
113 CLR 475, at p 504. There his Honour observed: 'What the
law requires in the discharge of a quasi-judicial function is
judicial fairness ... What is fair in a given situation depends
upon the circumstances.' We agree with the foregoing statements
of the relevant law." 29. It is important to consider the nature of the proceeding which is under consideration. It is plain from a consideration of section 25 that what is envisaged is not a judicial or quasi-judicial proceeding. The appointee is to be, not a holder of judicial office or a person whose qualifications suggest he is intended to conduct an inquiry analogous to a judicial inquiry, but the Auditor-General or "some other suitable person". The appointee is "to make an investigation and report". The powers of the investigator are those enjoyed by the Auditor-General when making an investigation under the Public Financeand Audit Act. There is no reference to the holding of a hearing and no conferral of any right to legal representation or to cross-examine witnesses. There is power in the investigator to require the appearance of persons who may be required to give evidence on oath, to inspect accounts records and other documents and to require the furnishing of other information, but the statutory provisions do not confer a right on any person to be heard. The investigation contemplated by section 25 is clearly, to my mind, of a non-judicial and non-curial kind. The non-judicial and non-curial character of that investigation is confirmed by the terms of the defendant's appointment. The appointment of an Auditor-General to investigate and report on the sort of matters referred to in the terms of appointment, does not suggest the conduct of an inquiry of a judicial or curial kind. 30. Factors which are of importance in determining what procedural fairness requires in the circumstances, are the purpose of the inquiry and its urgency. The terms of appointment recite that the Bank "has a significant amount of non-performing assets for which there had been inadequate provision by way of specific or general reserves", that "the Bank faced substantial financial difficulties which have led to an indemnity being granted to the Bank by the Government", and "that it is in the public interest that the causes of the financial difficulties at the Bank should be identified". The defendant is to report within six months. That time has been extended, as indicated above, but it is clear that the executive government regards the investigation as a matter of some urgency. It was thought, no doubt, that the financial problems of the State Bank and their affect on public confidence, required that the causes be investigated expeditiously in the public interest. Public concerns and public confidence were at stake. There was a clear desire for an early report. Factors of that kind were considered to be significant in determining the requirements of natural justice in the particular circumstances of the case, in In re Pergamon Press Limited 1971 1 Chancery 388, and I consider that they are of significance here. 31. Other important factors bearing upon requirements of fairness in this investigation are the prospect of publication of the report, or at least of some sections of it, arising out of the provisions of section 25 and also out of the objects of the investigation both as expressed in the terms of appointment and implicit in them. There is also the factor that the defendant is expressly required to report as to the adequacy of the supervision direction and control exercised by the plaintiffs. The potential for injury to their business reputations, of an adverse report, is therefore obvious. 32. The potential injury to the plaintiffs' reputations requires that they have a fair opportunity to answer matters which might affect their reputations. I do not think, however, that that consideration can be permitted to convert an Auditor-General's investigation into something akin to a judicial inquiry. The report of the defendant may affect reputations but it cannot affect legal rights nor can it result in the imposition of penalties. If there are subsequent proceedings, either civil or criminal, arising out of the report, the plaintiffs will have their opportunity to cross-examine witnesses and to test the evidence against them. I think that the plaintiffs' claims go much too far, having regard to the nature and purpose of the investigation. 33. Despite criticisms of counsel for the plaintiffs, I consider that the defendant's conduct of the investigation up to the time of delivering the draft chapters, has been proper and reasonable and has not involved any infringement of the plaintiffs' rights. It is now necessary to consider what procedural fairness requires at this stage of the investigation. The defendant has formulated tentative conclusions, a number of which would be harmful to the reputations of the plaintiffs. I think that he has taken a proper and reasonable course in making known his tentative conclusions to the plaintiffs in order to give them an opportunity of answering them. In view of his obligation to report expeditiously, he was clearly entitled to insist on a strict timetable. Whether the time allowed for response was adequate requires consideration, but there is a clear obligation on the plaintiffs to respond as speedily as possible. Being concerned that these proceedings might result in unnecessary delay in the conduct of the investigation, the Court at the conclusion of the argument made the following pronouncement:
"Without prejudice to the conclusions which the Court may
reach as to whether the plaintiffs have been accorded
procedural fairness and as to what is necessary to accord
procedural fairness in the future, the Court feels obliged to
comment on one aspect of the matter. We consider that the
defendant's invitation to the plaintiffs to make submissions in
writing in response to the draft reports supplied is, in itself,
a proper procedure in the circumstances. In the course of such
submissions the plaintiffs may of course identify issues upon
which further information is required or upon which it is
desired to adduce oral evidence. The Court will regard the time
which has elapsed since the delivery of the draft reports to the
plaintiffs and the time which will continue to run until the
date on which judgment is delivered, as time available to the
plaintiffs for the preparation and making of the aforesaid
submissions." 34. We were told at the hearing that the defendant has now made available to the plaintiffs transcripts of the evidence which they gave at their interviews with the defendant, and that is no longer an issue in the case. I think that fairness now requires that the plaintiffs have a reasonable time from the delivery of the draft chapters to make their written response to them. In relation to those which have already been delivered, they will certainly have had that opportunity by the time this judgment is delivered. Moreover fairness requires that any other tentative conclusions adverse to the plaintiffs, which have not already been notified to them, should be so notified in the future and that they should be given a fair and reasonable opportunity to comment on them. Where areas of dispute are identified by the plaintiffs in their written submissions, they should be accorded the opportunity to give evidence before the defendant in refutation of the tentative conclusions. They should be allowed to have their counsel present and to be examined or re-examined by their own counsel. They should be permitted to produce any witnesses and to have them examined or re-examined by the plaintiffs' counsel. They should of course be permitted to submit any further documents for the consideration of the defendant. I do not think that the plaintiffs, in this type of investigation, have any right to be provided with transcripts of the evidence of other witnesses or of documents examined by the defendant or to cross-examine witnesses. Fairness demands, however, that the defendant should put to the plaintiffs in giving their evidence the substance of any evidence against them on which the defendant is considering placing reliance and should be confronted with any documents of that kind which may require explanation. I think that the right to give viva voce evidence, as distinct from making written submissions, arises from the manner of the conduct of the investigation which involved the viva voce examination of other witnesses. As other witnesses have given viva voce evidence, the plaintiffs should have the opportunity to do likewise. I think that procedural fairness also requires that the plaintiffs or their legal representatives be given a reasonable opportunity to present arguments, as distinct from evidence, against the tentative conclusions, but whether those arguments are made orally or in writing is a matter for the defendant. 35. No doubt the procedures outlined above will delay the presentation of the report so far as it concerns the plaintiffs, beyond the reporting date, namely 30th September, stipulated in the terms of appointment as extended. I appreciate the considerations which have motivated the government to treat time as of importance, but those considerations cannot override the requirement of the law that the plaintiffs be accorded fair treatment. The statute does not exclude or qualify the rules of natural justice. It must therefore be taken as implicit in section 25 that a fair opportunity to answer criticisms will be accorded to those whose reputations may be affected by a report. The obligation on the investigator to accord such an opportunity cannot be modified by the prescription of a timetable in the terms of appointment. Absent a further extension of the reporting date beyond 30th September, the only course open to the defendant is to omit from his report criticisms of the plaintiffs and to report that the investigation is incomplete by reason of lack of time. 36. Many cases were cited to us as propounding principles of natural justice or illustrating their application in particular situations. Each case must depend upon its own facts and I do not find it necessary to discuss the cases further. I believe that the conclusions which I have reached are firmly based upon the authorities. The principles enunciated, and their application to the facts, in National Companies and Securities Commission v News Corporation and Ors (1984) 156 CLR 296 are particularly apposite to the present case. 37. I have reached the conclusion that, even making full allowance for the plaintiffs' knowledge of the Bank's affairs and the advance information given in the investigators' reports, the time allowed for written submissions on the draft chapters was inadequate in each case. Moreover I consider that the plaintiffs were quite reasonable in gathering from the defendant's letters that he felt bound by the date for the making of his report, namely the 30th September, and that he proposed in that report to deal with the matters contained in the draft chapters. They were also reasonable in supposing that there were other possible findings against them in chapters which had not been communicated to them at all. In those circumstances I think that the plaintiffs had a reasonable fear that procedural fairness would be denied to them due to the time constraints on the defendant. They were therefore justified in instituting these proceedings on the 24th August. I think that they are entitled to appropriate relief. 38. I consider that in action number 1893 of 1992 the Court should make the following declarations:
1. (a) that the plaintiffs are entitled to an extension of
time within which to respond in writing to the tentative
findings and conclusions contained in the draft chapters of the
defendant's proposed report, which have been furnished to them,
to a date not earlier than two months after the dates on which
such chapters were respectively delivered to them;
(b) that the plaintiffs are entitled to be notified of any
other tentative findings or conclusions which might reflect on
their conduct or affect their reputations and are entitled to a
reasonable time within which to respond to them;
(c) that the plaintiffs are entitled to appear before the
defendant, accompanied by their counsel, at a time and place
appointed by the defendant, to give evidence on oath or
affirmation in refutation of such of the tentative findings and
conclusions as are identified in the written responses to be in
dispute, to have put to them the substance of any evidence
information or documents founding such tentative findings, and
to be examined or re-examined by their counsel;
(d) that the plaintiffs are entitled to place before the
defendant, either orally or in writing as directed by the
defendant, any arguments as to the aforementioned disputed
tentative findings and conclusions and any other matters which
might reflect on their conduct or affect their reputations.
2. That a report in terms of the passage in the draft
chapter entitled "Chapter 44 - Conduct of the Affairs of
Beneficial Finance - 'Paper' Directors' Meetings" commencing
with the words "More often than not" and ending with the words
"undertaken by the Fraud Squad", or in substantially similar
terms, would be beyond the powers of the defendant and of no
legal effect. 39. I would make corresponding declarations in action number 1911 of 1992. 40. I have no doubt that the defendant will conduct his investigation in accordance with these declarations and see no reason for any further order.
JUDGE2 OLSSON J I concur in both the conclusions arrived at by the Chief Justice and the forms of declaration which he proposes.
JUDGE3 MULLIGHAN J I agree.
0
6
0