Vergara v Chartered Accountants ANZ
[2021] VSC 34
•23 February 2021
| IN THE SUPREME COURT OF VICTORIA AT MELBOURNE JUDICIAL REVIEW AND APPEALS LIST | Not Restricted |
S ECI 2018 0507
| CLAUDIO VERGARA | Plaintiff |
| v | |
| CHARTERED ACCOUNTANTS AUSTRALIA AND NEW ZEALAND (ARBN 084 642 571) | Defendant |
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JUDGE: | Digby J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 2-4 and 23 September 2019 |
DATE OF JUDGMENT: | 23 February 2021 |
CASE MAY BE CITED AS: | Vergara v Chartered Accountants ANZ |
MEDIUM NEUTRAL CITATION: | [2021] VSC 34 |
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ADMINISTRATIVE LAW – Judicial review – Relief sought in the nature of certiorari and mandamus – Applicability of Datafin principle – Whether decision by the Chartered Accountants Australia and New Zealand susceptible to judicial review.
ADMINISTRATIVE LAW – Judicial review – Whether available to quash a decision made by a domestic body established by Royal Charter and Supplemental Charters to refuse readmission to membership.
ADMINISTRATIVE LAW – Application of a domestic body established by Royal Charter and Supplemental Charters of grounds for review - Construction of By-Laws and Regulations – Whether rule applies to a decision to refuse readmission to membership.
CONTRACT – Extent of rights and entitlement arising from contract relating to application for readmission and/or original membership contract – Claims in relation to breaches of contract – Deprival of natural justice - Unreasonable restraint of trade – Whether Regulations are in the nature of an unreasonable restraint of trade.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Ms A Wilson | Bleyer Lawyers Pty Ltd |
| For the Defendant | Mr I Waller QC with Mr P Noonan | Baker McKenzie |
HIS HONOUR:
Introduction
These Reasons concern an application by Claudio Vergara (the plaintiff) challenging the decision of Chartered Accountants Australia and New Zealand (the defendant) to decline his application for readmission to membership of the defendant on 25 May 2018.
It is common ground that on 25 May 2018 the defendant declined the plaintiff’s application for readmission to membership of the defendant on the basis that the plaintiff did not comply with the defendant’s requirements in relation to an application for readmission, in particular by not producing three references from persons who are members of the defendant.[1] Rather, the plaintiff produced three references from persons who are members of CPA Australia and an additional reference from a person in a senior finance management role.[2]
NOTE: FCB and Tab references are references to the tabs and page numbering of the agreed Filleted Court Book produced by the parties
[1]FCB Tab 12, [23].
[2]Ibid [6].
The plaintiff, by his Statement of Claim dated 8 February 2019, pursues the following causes of action and relief:
(a) Judicial review:
The plaintiff seeks an order in the nature of certiorari quashing the Decision of the defendant and an order in the nature of mandamus compelling the defendant to properly consider the plaintiff's application for readmission according to law.
(b) Relief on the basis that the defendant has not afforded the plaintiff natural justice:
The plaintiff seeks a declaration that the Decision is invalid and/or contrary to law and therefore void and a mandatory injunction that the defendant properly consider the plaintiff's application for readmission according to law.
(c) Breach of contract:
The plaintiff seeks a declaration that the Decision is invalid and/or contrary to law and therefore void and a mandatory injunction that the defendant properly consider the plaintiff's application for readmission according to law. In addition, the plaintiff seeks damages for breach of contract.
(d) Unreasonable restraint of trade:
The plaintiff seeks a declaration that the defendant’s Reg 1.17 is invalid as an unreasonable restraint of trade, a declaration that the Decision is invalid and/or contrary to law and therefore void, and a mandatory injunction that the defendant properly consider the plaintiff’s application for readmission according to law. In addition, the plaintiff seeks damages.
Material facts and background
The defendant is a professional association for accountants in Australia and New Zealand. The defendant was established and is constituted by Royal Charter granted on 19 June 1928[3] (the Original Charter) and subsequent Supplemental Charters.[4] The Original Charter in terms constituted, erected and incorporated one body politic and corporate by the name of the Institute of Chartered Accountants Australia. At all material times the defendant was governed by the Supplemental Charter granted on 26 November 2014[5] (the Supplemental Charter).
[3]FCB Tab 25.
[4]FCB Tabs 16, 25 and 28, preamble, para 2.
[5]FCB Tab 28.
The plaintiff was a member of the defendant from 28 May 2001 until 2 March 2015 (the Membership Contract).[6]
[6]FCB Tab 2, Statement of Claim, [7].
The plaintiff was alleged to have sexually harassed a work colleague in May 2009 (the 2009 Conduct) in contravention of s 28B of the Sex Discrimination Act 1984 (Cth).[7]
[7]Ibid [8].
The Federal Court of Australia (Federal Court) found the allegations to be made out in Ewin v Vergara (No 3)[8] which was unsuccessfully challenged by the plaintiff and successfully affirmed by the Full Court of the Federal Court of Australia (Full Federal Court) in Vergara v Ewin[9] (the Adverse Findings).[10]
[8][2013] FCA 1311 (Ewin v Vergara (No 3)).
[9][2014] FCAFC 100 (Vergara v Ewin).
[10]FCB Tab 2, Statement of Claim, [9].
At first instance, the learned primary Judge in Ewin v Vergara (No 3) awarded judgment against the plaintiff[11] in the amount of $476,163 plus interest[12] for loss and damage suffered by the complainant due to the plaintiff’s breaches of s 28B(6) of the Sex Discrimination Act 1984 (Cth). Relevantly, s 28B of the Act provides:[13]
[11]The respondent in Ewin v Vergara (No 3).
[12]After making allowance for other recoveries by the complainant, the trial Judge entered judgment against the plaintiff for $210,563 inclusive of interest (see Vergara v Ewin [2]).
[13]Sex Discrimination Act 1984 (Cth) s 28B, later amended by the Sex and Age Discrimination Legislation Amendment Act 2011 (Cth) sch 1 item 55.
28B Employment, partnerships etc.
(6)It is unlawful for a workplace participant to sexually harass another workplace participant at a place that is a workplace of both of those persons.
(7)In this section:
place includes a ship, aircraft or vehicle.
workplace means a place at which a workplace participant works or otherwise carries out functions in connection with being a workplace participant.
workplace participant means any of the following:
(a) an employer or employee;
(b) a commission agent or contract worker;(c) a partner in a partnership.
In 2013, in Ewin v Vergara (No 3) the learned primary Judge made Adverse Findings against the plaintiff, and declarations reflecting such findings, including in summary:
(a) that the plaintiff as a workplace participant on four separate occasions in May of 2009 sexually harassed the complainant, another workplace participant, at a place that was a workplace of both those persons, in contravention of s 28B(6) of the Sex Discrimination Act 1984 (Cth);[14]
[14]Ewin v Vergara (No 3) [233], [253], [271] and [465].
(b) that in the first three instances the harassment comprised mainly spoken words;
(c) that in the fourth incident, the harassment comprised sexual intercourse, kissing and touching and stroking of the complainant’s body;
(d) adverse findings regarding the plaintiff’s credit, finding that the plaintiff was ‘an arrogant individual with little or no regard for the truth’[15] and was prepared to say anything he thought would assist his case.[16]
[15]Ibid [53].
[16]Ibid [56].
At the time that the instances of sexual harassment were perpetrated by the plaintiff, the plaintiff was a member of the defendant and was working as an accountant in a Melbourne based business pursuant to a short-term casual employment contract. The female complainant was also working at the relevant time as an accountant in the same business as a permanent employee.[17]
[17]Ibid [97]-[107].
On appeal by the plaintiff the primary Judge’s findings were upheld in 2014 by the Full Court of the Federal Court in dismissing the seven grounds of appeal pressed by the plaintiff.[18]
[18]Vergara v Ewin [2014] FCAFC 100.
On 2 March 2015 the defendant’s Professional Conduct Tribunal found and ordered as follows:[19]
[19]FCB Tab 31.
CHARTERED ACCOUNTANTS AUSTRALIA AND NEW ZEALAND
NOTICE OF PROFESSIONAL CONDUCT TRIBUNAL DECISION
Member subject of adverse findings – Claudio Ernesto Vergara CA
At a hearing of the Professional Conduct Tribunal of Chartered Accountants Australia and New Zealand held on 2 March 2015 in relation to Claudio Ernesto Vergara a chartered accountant of Victoria the Tribunal found a case established in accordance with:
1.By-law 40(e), in that on 5 December 2013 the Federal Court of Australia in Ewin v Vergara (No 3) [2013] FCA 1311 and/or on 19 December 2013 the Federal Court of Australia in Ewin v Vergara (No 4) [2013] FAA 1409 made adverse findings in relation to the member’s professional and/or business conduct and/or competence which were subsequently affirmed on 12 August 2014 by the Full Court of the Federal Court of Australia in Vergara v Ewin [2014] FCAFC 100 (the Judgments), on the member’s own admission; and
2.By-law 40(f), in that the member failed to act in accordance with section 150 of APES 110, Code of Ethics for Professional Accountants in the circumstances recorded in the Judgments; and
3.By-law 40(j), in that the acts, omissions and defaults as set out in paragraph 1 and 2 above bring, or are likely to bring, discredit on the member.
The Professional Conduct Tribunal ordered that:
·Claudio Ernesto Vergara’s membership of Chartered Accountants ANZ be cancelled for a period of 2 years.
·The member receive a severe reprimand.
·The member be required to pay a contribution of $2,900 plus GST towards the costs of the disciplinary action.
A copy of the Professional Conduct Tribunal’s decision can be found on Chartered Accountants ANZ’s website.
-Institute/Member-complaints-and-discipline/tribunal-decisions
Professional Conduct Tribunal
Chartered Accountants Australia and New Zealand
2 March 2015
As a result of the 2009 conduct and the Adverse Findings, the defendant cancelled the plaintiff’s membership of the defendant for a period of two years at a hearing of the defendant’s Professional Conduct Tribunal on 2 March 2015.[20] At this hearing the Professional Conduct Tribunal made further orders that the plaintiff receive a severe reprimand, and be required to pay a contribution of $2,900 plus GST toward the costs of the disciplinary action.[21]
[20]FCB Tab 2, Statement of Claim, [10].
[21]FCB Tab 31.
At the time of the hearing of the plaintiff’s application, the plaintiff held the position of Financial Controller within his current organisation, with an annual salary of $150,000 plus superannuation.[22]
[22]T29.31-T30.3.
Plaintiff’s application for readmission
On 26 June 2017 the plaintiff applied for readmission to membership of the defendant (the application).[23] The application included three references from members of CPA Australia (CPA references) plus an additional reference from a person in a senior finance management role who was the plaintiff’s immediate superior at his employer, from 14 September 2009 to 21 April 2015.[24]
[23]FCB Tab 2, [31]. A copy of the readmission application is at FCB Tab 37.
[24]FCB Tab 16, [6].
The plaintiff’s readmission application was made utilising the defendant’s proforma entitled: ‘Application by a previous Member for Readmission to Membership’. That document set out requirements and terms in relation to an applicant’s readmission application, including those in Section 5 (set out below) in relation to references required to support any readmission application.
Pursuant to Article 21 of the Supplemental Charter the defendant is authorised to make By-Laws, subject to approval of the Governor-General of the Commonwealth of Australia.[25]
[25]FCB Tab 28, art 21.
Pursuant to Article 25 of the Supplemental Charter the defendant was also empowered to make regulations in respect of the Supplemental Charter and/or its By-Laws.
By-Law 20 of the defendant’s By-Laws addresses readmission applications and provides that the Board of the defendant (the Board) is authorised to readmit a person to membership ‘subject to such terms and conditions as it may think fit to impose’.[26]
[26]FCB Tab 29.
By Regulation CR 1, in particular Reg 1.17 operative from 28 July 2016, the defendant made regulations which dealt with admissions and readmissions.[27]
[27]FCB Tab 34.
Regulation 1.17 of the defendant’s Regulations provides as follows:
An applicant for readmission as a Chartered Accountant shall provide references from 3 individual Members of CA ANZ in support of their readmission, provided that:
(a)at least 1 of these individual Members shall have known and had contact with the applicant for the whole of the period since cessation of membership; and
(b)the other individual Members shall have known the applicant for at least 3 years.
These Regulations, including Reg 1.17 of the defendant’s Regulations, are set out in full and addressed later in these Reasons.[28]
[28]Ibid.
At all relevant times until 30 June 2018, the Board delegated the responsibility for its readmission functions under By-Law 20 in respect of former members the subject of disciplinary issues to Mr Simon Grant (Grant), the then Head of Members of the defendant.[29] Grant was assisted in this role by the defendant’s Membership Committee comprised of six members of the defendant including Grant.[30] In turn the Membership Committee was assisted by certain staff of the defendant.
[29]FCB Tab 17, [18].
[30]Ibid [22].
The plaintiff’s application for readmission of 26 June 2017 was responded to on 13 July 2017 by the defendant’s Enrolment and Admissions officer, Mr Tom Proctor (Proctor), who communicated to the plaintiff that the references which the plaintiff had provided were non-compliant references and stated that references needed to be from full members of the defendant or members of the Global Accounting Alliance (GAA) associations, otherwise the plaintiff’s application would be required to be escalated to the Membership Committee. Proctor requested the plaintiff provide the required references, or alternatively provide letters of good standing (LOGS) from CPA Australia for his CPA references in the event he was unable to find GAA referees.[31] The defendant’s letter of 13 July 2017, was in the following terms
[31]FCB Tab 38, page 44.
Hi Claudio,
ID number: 94773
Thank you for your re-admission application.
The requirements for references for the application are that they are from full CA members of Chartered Accountants ANZ or a full GAA member.
The three member references you have submitted are from CPAA members who are not part of GAA. If you are unable to submit references that meet the criteria your application will need to be escalated to the membership committee.
Part of the process for GAA referees is that we confirm their membership via the institute website. CPAA does not have this member search function on their website so please request a letter of Good Standing (LOGS) from each of your referees that confirms they have been a full member in good standing for more than three years.
Please send the updated references, or LOGS if you are unable to find GAA referees, to the “Assessment” email address below using my name in the subject line.
Should have you have any queries, please feel free to contact me.
Kind regards,
Tom Proctor
Enrolment and Admissions
[email protected]Chartered Accountants Australia and New Zealand
The plaintiff provided LOGS for his three CPA references on 20 August 2017.[32]
[32]FCB Tab 42.
On 21 September 2017 Ms Claire Attwood (Attwood) of the defendant notified the plaintiff that the Membership Committee would not consider his application for readmission while the plaintiff remained in debt to the defendant in relation to the costs associated with earlier professional conduct hearings. The defendant required the plaintiff to pay at least 75% of his outstanding debt with the defendant and offered to enter into a payment plan for the remainder of the moneys. The defendant also informed the plaintiff that the CPA Australia references provided by the plaintiff were unacceptable and that the defendant required that the plaintiff provide two written references from full members of the defendant indicating awareness of the reasons for the cancellation of the plaintiff’s membership.[33]
[33]FCB Tab 48. See also FCB Tab 65, page 1225, section headed ‘Background’.
The plaintiff responded on 2 October 2017 advising that he would shortly make payment of 75% of the outstanding debt and proposed a payment schedule for the balance remaining. The plaintiff also advised that he had lost contact with many of his ex-colleagues who were members of the defendant and that he would ‘do the best that I can’ to track them down. The plaintiff requested the defendant provide a list of the information required to be addressed in the references and an Internet link to published Tribunal findings.[34]
[34] FCB Tab 52, page 64.
By email dated 3 October 2017 Attwood responded to the plaintiff advising him that the Membership Committee had confirmed that the two written references from members of the defendant should include the following information:[35]
The referee’s name and their CA ANZ Membership ID number.
Confirmation of what capacity they know you.
How long they have known you.
Indication of their awareness of the reasons your membership of CA ANZ was cancelled by the Tribunal in March 2015.
In their own words, outline the reasons that they recommend you for re-admission to membership as a full CA of CA ANZ.
Letter must be signed and dated by the CA referee.
[35]FCB Tab 55, page 68.
By email dated 22 October 2017 the plaintiff advised the defendant that he had been unable to find suitable references from members of the defendant.
The plaintiff attached a letter dated 23 October 2017 to his email of 22 October 2017 and requested Attwood present the letter to the Membership Committee for their consideration.[36]
[36]FCB Tab 59, pages 76, 80-84.
By this letter dated 23 October 2017 (and the attachments to that letter) the plaintiff, in substance, made submissions to the defendant, amongst other things, as to why the CPA references he had earlier submitted should be considered equivalent to references from members of the defendant and the plaintiff asked that his application be considered on that basis (the references submission).[37]
[37]Ibid pages 80-84.
The Membership Committee considered the plaintiff’s application at a meeting on 6 November 2017. Prior to the Membership Committee meeting the defendant was provided with the plaintiff’s four references and letter of 23 October 2017 and attachments, the 2 March 2015 cancellation decision and the related Adverse Findings judgments.[38] Following that meeting, by email of 13 November 2017, the defendant advised the plaintiff as follows:[39]
[38]FCB Tab 19, [20]-[21], FCB Tabs 60 pages 1213-1220, FCB Tab 63 pages 1982-1989; FCB Tab 64 page 1222; FCB Tab 65 page 1224-1231; FCB Tab 17, [33], FCB Tab 67 pages 1151-1152; FCB Tab 66 pages 1154-1159 including four readmission references); FCB Tab 68 page 1161.
[39]FCB Tab 72.
Hello Claudio,
The membership committee have read your correspondence and explanatory letter of your circumstances in the November 2017 meeting.
I have been advised by the committee that before an application for readmission will be considered, they request the following from you;
•Pay at least 75% of the outstanding disciplinary fine and enter into a payment plan for the balance.
• Official confirmation you have been discharged from bankruptcy.
•As there have been adverse findings against you, we require two written CA references attesting to your fit and proper status, which also acknowledging [sic] the circumstances of the behaviour that led to the adverse findings (as previously requested).
•A statement from yourself addressing whether you meet the fit and proper standard for admission to membership as a CA.
Once you have obtained the information as required, you may email it through to us at [email protected] for consideration.
If you have any further queries, please contact me.
Kind regards,
Claire AttwoodEnrolment & Admissions Analyst
On or about 3 April 2018 the plaintiff emailed the defendant as follows:[40]
[40]FCB Tab 74.
Dear Ms Attwood,
As requested, please find attached supporting documentation for each of the points mentioned in your email below;
Please NOTE:
1.My attached references attesting to my ‘fit and proper status’ including acknowledging the circumstances of the behaviour that led to the adverse findings have been prepared by CPA accountancy professionals. In my letter to your office dated 23 October 2017 (reattached for your convenience) I have explained why my CPA referees must be considered as valid accountancy professional referees for readmission purposes.
2.On the topic of Continuous Professional Development (CPD), in addition to the schedule of CPD hours provided as part of my readmission application dated 26 June 2017, I have now also attached evidence of 4 additional qualifying hours when I attended the ‘VIC Public Sector Forum – October 2017’.
I now believe that I have met and provided all requirements for readmission purposes.
Kindly, I now ask the readmissions Committee to please consider my readmission application in full.
Best Regards
Claudio
The plaintiff’s email dated 3 April 2018 attached further supporting documentation from the plaintiff, including:[41] the plaintiff’s signed Acknowledgment of Debt owed to the defendant and agreed payment schedule; evidence of the plaintiff’s status as a discharged bankrupt; written references from two of the plaintiff’s CPA Australia referees (dated 1 December 2017 and 16 January 2018) attesting to their knowledge of the reasons for the cancellation of the plaintiff’s membership with the defendant; and a statement from the plaintiff dated 3 April 2018 attesting to his status as a fit and proper person. This supporting documentation was provided to Ms Jacqueline MacDiarmid (MacDiarmid), Manager of Member Services of the defendant and Secretary of the defendant’s Membership Committee,[42] on 6 April 2018.[43]
[41]FCB Tab 12, First Vergara Affidavit, [16]; FCB Tab 74, Exhibit ‘CEV-11’.
[42]T251.7.
[43]FCB Tab 19, MacDiarmid Affidavit, [28]; FCB Tab 76 page 1241, Exhibit ‘JLM-13’. Attwood’s email to MacDiarmid dated 6 April 2018; ‘Claudio Vergara (94773) has provided the additional information as requested by the committee in November 2017. He has not, however, provided the additional CA referee letters. He is continuing his application request for readmission with his two CPA Australia referees.’
By email dated 13 April 2018 the defendant advised the plaintiff that Attwood’s earlier advice to the plaintiff that two written references were required in relation to his application was incorrect and that the defendant required three written CA ANZ references pursuant to Reg 1.17, and therefore the CPA references the plaintiff had provided were not suitable to meet the defendant’s readmission requirements.[44] The defendant’s email of 13 April 2018 stated:
[44]FCB Tab 79.
Hello Claudio,
Thank you for your email. I have called the committee liaison on your behalf today and asked for further clarification.
Firstly, I must apologise to you as I realise my initial email regarding references for your readmission application stated we required two CA ANZ referees, this was an oversight on my part of the original correspondence from the Membership Committee. The committee had stated that they require the references for readmission to be from CA members of CA ANZ, and they did not specify two references.
For your application to be considered further, the Membership Committee require the reference requirements as set out under the readmission regulation CR1.17 to be met, therefore the CPA Australia referees you have provided are not suitable to met [sic] our readmission requirement:
1.17 References
An applicant for readmission as a Chartered Accountant shall provide references from 3 individual Members of CA ANZ in support of their readmission, provided that:
(a) at least 1 of these individual Members shall have known and had contact with the applicant for the whole of the period since cessation of membership; and
(b) the other individual Members shall have known the applicant for at least 3 years.
The committee acknowledge that you have entered into a payment plan and have started making payments for the fine, and that you have been discharged from bankruptcy.
Once we have the three CA ANZ references as set out in the readmission regulation, your application will go to the next available committee meeting for review.
If you have any further questions, please do not hesitate to contact us.
Kind regards,
Claire AttwoodEnrolment & Admissions Analyst
On 16 April 2018 the plaintiff wrote to Rick Ellis, Chief Executive Officer of the defendant enquiring as to his application for readmission and otherwise requesting the assistance of the defendant’s Chief Executive Officer in having the Membership Committee consider whether the CPA references provided by the plaintiff are suitable, or to assist the plaintiff in obtaining membership under the defendant’s rules regarding ‘special admissions’.[45]
[45]FCB Tab 12, First Vergara Affidavit, [19]; FCB Tab 80, Exhibit ‘CEV-14’.
On 18 April 2018 the plaintiff was informed that the Membership Committee would consider the plaintiff’s application.[46]
[46]FCB Tab 82; FCB Tab 84, page 1270, prior to the 16 May 2018 meeting, in the defendant’s email dated 18 April 2018 the defendant advised the plaintiff, ‘We have your letter to us dated 23 October 2017 explaining your views on the provision of references’.
On 16 May 2018 a special meeting of the Membership Committee was convened to consider the plaintiff’s application.
By email dated 14 May 2018 MacDiarmid provided a summary to the Membership Committee in preparation for this meeting:[47]
[47]FCB Tab 19, MacDiarmid Affidavit, [34]; FCB Tab 85, Exhibit ‘JLM-19’.
Hi everyone,
The Committee discussed this application for readmission at the November 2017 meeting. At that time you agreed
“Claudio VERGARA – The Committee looked to ensure consistency with earlier cases involving applicants with prior civil or criminal offences or adverse findings. Before the Committee will look at any readmission application again Mr Vergara must pay 75% of the outstanding disciplinary fine and enter into a payment plan for the balance. Mr Vergara advises that his Bankruptcy has been lifted and we need to see evidence of this. As there have been adverse findings against him we will require CA references attesting to his fit and proper status and acknowledging the circumstances of the behaviour that led to the adverse findings. A statement from Mr Vergara addressing whether he meets the fit and proper standard.”
In the interim Mr Vergara has provided us with evidence that his Bankruptcy has been lifted and entered into a payment plan for his fine. He has made the first few payments as per the plan.
He has not however been able to provide us with CA references as required by the Regulation CR 1.17:
‘An applicant for readmission as a Chartered Accountant shall provide references from 3 individual Members of CA ANZ in support of their readmission, provided that;
·at least 1 of these individual Members has have known and had contact with the applicant for the whole of the period since cessation of membership; and
·the other individual Members shall have known the applicant for at least 3 years.’
Applicants must also be a Fit and Proper person CR 1.11
·‘An applicant for readmission (where that applicant is an individual) must satisfy the same fit and proper person requirement that applies to all Members. In determining whether a person seeking readmission is a fit and proper person, the Board or its authorised representative may consider the matters identified in CR 1.5.’
And CR 1.5 includes criminal offences.
Mr Vergara is very anxious to have a final decision on his application (as noted at last meeting he has recently directly approached the CEO about it). He has now fulfilled the basic criteria the Committee set for looking at his application, apart from the provision of correct references, (which he is having great difficult in providing).
I am concerned that the real issue here is not the provision of correct references in itself but whether he meets the fit and proper requirements for membership, the references being only a part of that consideration. If the Committee will not consider him a fit and proper person even with CA references, it would seem to be better to make this clear now.
I am proposing that the Committee have an extra meeting to consider just this application given that the next scheduled meeting is not until mid June and this matter had been running since November 2017. If you could let me know whether you are happy with this proposal I can set up a time and let Mr Vergara know.
Thanks and regards
Jackie MacDiarmid
On 15 May 2018 the Membership Committee were also provided with copies of the following documents in preparation for the meeting:[48]
[48]Ibid [35] and FCB Tab 88, including pages 1278-1282, Exhibit ‘JLM-20; T302.26-31; T318.16-27.
(a) letter of advice to the defendant regarding the fit and proper person requirement dated 8 May 2017;[49]
[49]Privilege was claimed by the defendant in relation to this document.
(b) a copy of the Professional Conduct Tribunal decision of 2 March 2015 with respect to the plaintiff;[50]
[50]FCB Tab 88, page 1277.
(c) the plaintiff’s references submissions letter dated 23 October 2017 (and attachments) as to why CPA references should be considered compliant references;[51]
(d) the plaintiff’s readmission application form dated 26 June 2017 and the references supplied with that form, namely the three CPA Australia references and a reference from a person in a senior finance position;[52] and
(e) a copy of the published reasons for the Adverse Findings against the plaintiff in Ewin v Vergara (No 3) and Vergara v Ewin.[53]
[51]Ibid pages 1278-1282; Grant: at T109.1-3 (ref to plaintiff’s letter dated 23 October 2017); Letter MacDiarmid to plaintiff referencing plaintiff’s letter regarding the provision of references to support the plaintiff’s application FCB Tab 90 page 132; FCB Tab 84, page 1270.
[52]Ibid pages 1283-1293.
[53]Ibid pages 1294-1415.
The plaintiff complains that the members of the Membership Committee were not provided with:
(a) the LOGS for the three CPA references provided by the plaintiff on 20 August 2017;
(b) a copy of updated written references from two of the plaintiff’s CPA Australia referees provided on 3 April 2018 attesting to their awareness of the reasons for the decision of the Professional Conduct Tribunal on 2 March 2015 and the earlier court proceedings; and
(c) the plaintiff’s statement attesting to his fit and proper status provided on 3 April 2018.
On 23 May 2018 the defendant advised the plaintiff by email that the Membership Committee had considered his application for readmission including the plaintiff’s references submission (the plaintiff’s letter of 23 October 2017), and stated that the Membership Committee would insist upon the CA ANZ references referred to in the Readmission Regulations.[54] The defendant advised that:
[54]FCB Tab 90, page 132, the defendant’s email dated 23 May 2018 advises the plaintiff ‘Head of Members considered your application including your letter regarding the provision of references to support your application’ referring to the plaintiff’s references submission dated 23 October 2017.
(a) the defendant’s Readmission Regulations must be followed;
(b) the references provided must be from the CA ANZ members;
(c) a letter would follow from the defendant with details of what is required in supporting references.
By letter dated 25 May 2018, the defendant advised the plaintiff that the defendant’s Membership Committee had decided to decline the plaintiff’s application at that time (the Decision), and further noted certain matters in relation to the reference related requirements of the defendant’s Regulations, as follows:[55]
[55]FCB Tab 37, page 23.
Mr Claudio Vergara
3 Wamba RdBENTLEIGH EAST VIC 3165
Dear Mr Vergara
STRICTLY PRIVATE AND CONFIDENTIAL
Readmission to Membership of Chartered Accountant Australia and New Zealand
The Membership Committee and the Head of Members (as the Board’s representative) have considered your application for readmission and have decided to decline your application at this time.
The requirements for readmission are set out in Regulations CR 1.10 to CR 1.21. In declining the application the Committee was bound by CR 1.17 - References which requires that an applicant for readmission provide references from three individual members of Chartered Accountants ANZ. As a business policy (and as noted on the Readmission application form) we will also accept references from a recognised reciprocal body. Recognised reciprocal bodies include the following organisations:
• The American Institute of Certified Public Accountants
• Chartered Professional Accountants Canada
• Chartered Accountants Ireland
• The South African Institute of Chartered Accountants
• The Institute of Chartered Accountants in England and Wales
• Institute of Chartered Accountants of Scotland
• Hong Kong Institute of Certified Public Accountants
• Institute of Chartered Accountants of ZimbabweReferences from members of other professional associations (who are not also members of Chartered Accountants ANZ or a recognised reciprocal body) do not meet the requirements for referees. Further, CR 1.12 - Additional criteria for all applicants for Readmission provides that the Board may also impose other requirements (CR 1.12 (a)(v)), in this instance full written references addressing specified issues.
To support your application for readmission you must provide three written references from current members of Chartered Accountants ANZ (or a recognised reciprocal body), who are not related to you and who have been full Chartered Accountants ANZ members (or full members of the recognised for reciprocal body) for three years. One of these referees must have known and had contact with you for the whole of the period since cessation of your membership, the other two referees should have known you for at least three years. The referees should, in their references, specifically acknowledge the adverse circumstances resulting in your suspension from membership of Chartered Accountants ANZ, their belief that you are now rehabilitated and that you are a fit and proper person for membership of Chartered Accountants ANZ. The references must be recent, that is dated within three months of the date of application.
The Committee also noted that, depending on the content of the references, they may have further inquiries to make in relation to your application.
Yours sincerely
Simon Grant FCAHead of Members
On 29 May 2018 the plaintiff sent an email to MacDiarmid enquiring as to his options and stating that it did not appear that the Membership Committee had addressed his references submission because the plaintiff claimed, nothing was mentioned about the adequacy of the plaintiff’s CPA references.[56]
[56]FCB Tab 99.
Subsequent to the plaintiff’s email enquiry of 29 May 2018, on 31 May 2018 the plaintiff was notified that there was no internal mechanism for further review.[57]
[57]FCB Tab 100.
Relevant procedural background
The plaintiff commenced the proceedings by Originating Motion for Judicial Review on 25 July 2018.
On 29 January 2019, the defendant’s application for summary judgment was disallowed by Order of Ierodiaconou AsJ, which resulted from a Ruling handed down on 20 December 2018, Vergara v Chartered Accountants Australia and New Zealand [2018] VSC 811. On this date orders were made pursuant to r 4.07 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) that the proceeding continue as if commenced by Writ.[58]
[58]FCB Tab 9.
The plaintiff filed and served a Statement of Claim dated 8 February 2019 pursuant to the Order of Ierodiaconou AsJ made on 29 January 2019,[59] and the defendant filed and served an Amended Defence dated 2 September 2019.
[59]Ibid.
Materials relied upon
In support of the relief sought, the plaintiff relied on the following material:
(a) Affidavits of Mr Claudio Vergara:
(i) dated 25 July 2018 (First Vergara Affidavit);
(ii) dated 18 October 2018 (Second Vergara Affidavit);
(iii) dated 24 May 2019 (Third Vergara Affidavit);
(iv) dated 14 August 2019 (Fourth Vergara Affidavit);
(b) Expert Report of Ms Dianne Azoor-Hughes dated 17 October 2018 (Azoor-Hughes Report);
(c) Submissions dated 28 June 2019, 12 August 2019, 13 September 2019 and 21 September 2019;
(d) At trial the plaintiff gave evidence and adduced evidence from Ms Dianne Azoor-Hughes.
In support of its case, the defendant relied on the following material:
(a) Affidavits of Ms Erin Hourigan:
(v) dated 5 October 2018 (First Hourigan Affidavit);
(vi) dated 9 November 2018 (Second Hourigan Affidavit).
(b) Affidavit of Mr Simon Grant dated 12 June 2019 (Grant Affidavit);
(c) Affidavit of Mr John Brooks dated 14 June 2019 (Brooks Affidavit);
(d) Affidavit of Ms Jacqueline MacDiarmid dated 14 June 2019 (MacDiarmid Affidavit);
(e) Submissions dated 26 July 2019 and 18 September 2019;
(f) At trial the defendant also adduced evidence from Mr Simon Grant, Mr John Brooks and Ms Jacqueline MacDiarmid.
Plaintiff’s pleaded case – Statement of Claim dated 8 February 2019
Judicial Review
The plaintiff’s case as pleaded and submitted, seeks judicial review of the Decision and the relief earlier referred to under the following principal grounds for review in relation to which the plaintiff lists a multitude of matters, particulars and arguments in support of each principal ground. Those matters pressed by the plaintiff in relation to its principal grounds for judicial review are broadly summarised below.
The principal grounds for judicial review and relief in the nature of certiorari and mandamus pursued by the plaintiff are as follows:
(a) constructive failure to exercise jurisdiction;
(b) failure to afford procedural fairness;
(c) apprehended bias;
(d) acting for an improper purpose;
(e) taking an irrelevant consideration into account;
(f) failing to take a relevant consideration into account;
(g) acting illogically, irrationally and unreasonably in relation to the construction and application of Reg 1.17 of the defendant’s Regulations; and
(h) further, or in the alternative to judicial review, failure by the defendant to afford the plaintiff natural justice in relation to the plaintiff’s readmission application and its Decision.
Breach of contract
The plaintiff also pleads, and submits, that for the duration of the plaintiff’s membership of the defendant and following the decision of the Professional Conduct Tribunal on 2 March 2015 to cancel the plaintiff’s membership for two years, a contract existed between the plaintiff and the defendant which included the following implied terms -
That the defendant, in exercising its powers or making a decision or exercising a discretion under the contract, would:
(a) act reasonably;
(b) only take relevant considerations into account;
(c) not take irrelevant considerations into account;
(d) proceed in a manner which is procedurally fair;
(e) proceed in a manner free from actual and apprehended bias;
(f) act for the purposes authorised by the Supplemental Charter;
(g) not act for purposes not authorised by the Supplemental Charter.
The plaintiff pleads in the alternative that if the membership contract was terminated on 2 March 2015 (having regard to the temporary limited cancellation on 2 March 2015), certain terms of that contract survived termination on 2 March 2015 namely, the Supplemental Charter, the written terms with respect to readmission, and the above implied terms.
Further or alternatively, the plaintiff claims that if the membership contract between the plaintiff and the defendant was terminated on 2 March 2015, the plaintiff had certain accrued rights at the date of termination including with respect to the plaintiff’s application for readmission, including the benefit of the above implied terms.
The plaintiff further alleges that the defendant has breached the membership contract and that the plaintiff has suffered loss and damage. The plaintiff details such breaches by repeating the same grounds, supporting matters and particulars which it relies upon in relation to its case for judicial review referred to above.[60]
[60]FCB Tab 2, Statement of Claim, [55]; Plaintiff Submissions, 28 June 2019, [199] and Plaintiff Submissions, 13 September 2019, [27] and [28].
Restraint of Trade
Further, the plaintiff pleads that Reg 1.17 of the defendant’s Regulations and the Decision to decline the plaintiff’s application for readmission operate as an unreasonable restraint of trade.
Relief sought by the plaintiff
On the basis of the above claims the plaintiff seeks the following relief:
(a) an order in the nature of certiorari quashing the Decision;
(b) an order in the nature of mandamus compelling the defendant to properly consider the plaintiff’s application according to law;
(c) a declaration that the Decision is invalid and/or contrary to law and therefore void;
(d) a declaration that the defendant’s Reg 1.17 is invalid as an unreasonable restraint of trade;
(e) a mandatory injunction that the defendant properly consider the plaintiff’s application according to law;
(f) damages;
(g) interest pursuant to the Supreme Court Act 1986, costs, and such other orders as the Court considers appropriate.
Damages and Interest
The plaintiff does not at this time seek orders in relation to subparagraphs (f) and (g) of the preceding paragraph. During oral closing submissions the plaintiff and the defendant both communicated that the plaintiff’s damages claim was not required to be determined until after the determination of the plaintiff’s case in this proceeding against the defendant on liability.[61]
[61]T385.4-25.
Defendant’s pleaded case – Amended Defence dated 2 September 2019
By its Amended Defence dated 2 September 2019, the defendant pleads the following in response to the plaintiff’s claims.
Judicial Review
That the defendant is not amenable to judicial review by the Court. The defendant emphases that the defendant is a private body whose power and decisions derive from private contract and is therefore not amenable to judicial review.
Furthermore, the defendant denies all the matters alleged in the plaintiff’s pleaded grounds of judicial review and says further that the relevant concepts of: ‘jurisdiction’ and/or ‘constructive failure to exercise jurisdiction’; ‘apprehended bias’; ‘improper purpose’; ‘prohibited irrelevant considerations’; and ‘mandatory relevant considerations’ have no meaning and/or application in the context of the defendant’s Decision regarding the plaintiff’s application for readmission.
The defendant also denies that it was required to afford procedural fairness in the context of the Decision. The defendant does however plead that in the circumstances the plaintiff was afforded procedural fairness.
The defendant also pleads that the concept of ‘apprehended bias’ has no meaning and/or application in the context of the defendant’s Decision regarding the plaintiff’s application for readmission, and further denies that a fair minded observer may have apprehended the defendant did not bring an impartial mind to the Decision.
Breach of contract
The defendant admits that a contract existed between the defendant and the plaintiff by virtue of the plaintiff’s membership of the defendant and alleges that the contract was wholly written and constituted by the Supplemental Charter, the By-Laws and the Regulations in force from time to time between 28 May 2001 and 2 March 2015.
The defendant alleges that at the time of the matters complained of by the plaintiff in its grounds for judicial review, the contract between the parties had been terminated, with none of the terms of the contract surviving termination. Further, the defendant refutes that the plaintiff enjoyed any accrued rights as at the date of termination.
The defendant further alleges that upon the plaintiff signing and submitting the application for readmission a new contract arose between the parties regarding the evaluation of that application (Application Evaluation Contract). The defendant asserts that the terms of the Application Evaluation Contract were in writing and comprised the Original Charter, the Supplemental Charter, the By-Laws and the Regulations of the defendant as in force from time to time, between 26 June 2017 and 25 May 2018.
Restraint of Trade
The defendant denies that Reg 1.17 operates as a restraint of trade, and asserts that accountants can operate in Australia without being a member of a professional accounting body, and further that there are a number of professional accounting bodies in Australia to which the plaintiff could apply and be accepted as a member.
The defendant denies that the Decision is invalid as an unreasonable restraint of trade for restraining the plaintiff from exercising his profession as a ‘professional’ or ‘qualified accountant’, or that the conduct of the defendant in denying the plaintiff’s application for readmission was, or is, an unreasonable restraint of trade.
Summary of the defendant’s Supplemental Charter, By-Laws, Regulations and Functions
The defendant is a private body initially established by Royal Charter on 19 June 1928, amended by subsequent Supplemental Charters the current one of which is a Supplemental Charter granted on 26 November 2014. Pursuant to the Supplemental Charter of 26 November 2014 the defendant has made By-Laws and Regulations relevantly as summarised below.
Article 21 of the Supplemental Charter permits the defendant to make By-Laws by resolution approved by a ballot of the membership. By-Laws do not come into operation until approved by the Governor-General of Australia.[62]
[62]FCB Tab 28, page 800, Article 22.
Pursuant to Article 25 of the Supplemental Charter, the Board of the defendant may from time to time also make such regulations as it thinks fit for the better execution of the Supplemental Charter or the By-Laws, or the furtherance of the objects of the defendant and generally regulating the affairs of the defendant, and it may rescind, vary or add to any regulations so made. The regulations which are made by the defendant do not require resolution approved by a ballot nor do they require the approval of the Governor-General.[63]
[63]Ibid Article 25.
Functions of the defendant
Article 3 of the Supplemental Charter sets out the Principal Objects of the defendant, as follows:
(a)to advance the theory and practice of accountancy in all its aspects;
(b)to recruit, educate and train a body of members skilled in such theory and practice;
(ba)to promote the training and education of persons practicing the profession of accountancy;
(c)to preserve at all times the professional independence of accountants in whatever capacities they may be serving;
(ca)to promote quality, expertise and integrity in the profession of accountancy by its members;
(d)to prescribe high standards of practice and professional conduct for, and to maintain the observance of such standards by:
(i) its members;
(ii) (Deleted August 2015)
(iii) non-member practice entities; and
(iv) registered graduates;
(e)to prescribe disciplinary procedures and sanctions, to exercise disciplinary powers and to impose sanctions for the better observance of the standard of practice and professional conduct of [CA ANZ] by members, non-member practice entities and registered graduates;
…
(i)to do all such things as may advance the profession of accountancy, whether in relation to the practices of public accountants (including the provision by such practices, in addition to public accountancy services, of other services by persons from other professions), or in relation to industry, commerce, education, the public service or otherwise.[64]
[64]Ibid page 791, Article 3.
Article 4 of the Supplemental Charter sets out the Ancillary Objects and Powers of the defendant, in furtherance of the above Principal Objects and includes powers relating to the performance of the functions of the defendant and in relation to regulating its affairs.[65]
[65]Ibid pages 792-794, Article 4.
The defendant generates revenue through member subscriptions, payments it receives for the provision of education and training courses and other commercial arrangements.[66]
[66]FCB Tab 13, [10].
It is notable for present purposes that it was uncontested at trial that the defendant has no statutory authority or powers nor any authority delegated from any government department. In distinction, the New Zealand arm of the CA ANZ is statute based.[67]
[67]First Hourigan Affidavit, 5 October 2018, [12].
The plaintiff’s submissions observe that the New Zealand arm of the defendant is, because of its statutory authority, amenable to judicial review and point out that if the Australian arm of the CA ANZ is held not to be amenable to judicial review an unacceptable anomaly would arise.[68]
[68]FCB Tab 13, [11]; First Hourigan Affidavit, 5 October 2018, [12].
It was also uncontested at trial that membership of the defendant is not necessary to practise as an accountant in Australia,[69] and in addition to the defendant, there are several other professional associations for accountants in Australia, including the Institute of Public Accountants (IPA) and CPA Australia.[70]
[69]FCB Tab 21, Azoor-Hughes Report, [5(b)].
[70]Ibid [5(a)].
Supplemental Charter – relating to membership generally
Article 7 provides:
Natural persons may be admitted to membership as Chartered Accountants on terms and conditions prescribed from time to time by the By-laws including, without limitation of the foregoing, terms and conditions in respect of training, examinations, nature and period of service or experience and fitness for membership.
By-Laws relating to membership generally
The defendant’s By-Laws and Regulations deal with, amongst other matters, membership applications.
By-Law 6 provides that:
All admissions of Members shall be made by the Board.
By-Law 7 provides that:
… to be admitted as a Member, every applicant for admission must satisfy the Board, in such manner as the Board requires, that the applicant has fulfilled the prescribed conditions of such admission and must also produce such evidence as the Board deems necessary of the applicant’s fitness for such admission.
By-Law 10(a) provides:
A natural person shall be eligible for admission to Membership as a Chartered Accountant if, at the date of his or her application for such admission he or she:-
(i)(Deleted [insert date]);
(ii)has completed the educational requirements prescribed in the Regulations;
(iii)has completed the prescribed period of service or experience; and
(iv)otherwise complies, or upon admission will be able to and undertakes to comply, with the requirements of the Supplemental Charter, these By-Laws, the Regulations and if applicable, the NZICA Act and Rules.
By-Law 20 provides that:
The Board may, subject to such terms and conditions as it may think fit to impose:
(a)readmit to Membership of CA ANZ any person who has resigned or ceased for any reason to be a Member; …
Regulations relevant to readmission to membership
The Board has also made certain regulations governing readmission to membership, including the following:
(a) Regulation 1.11, which relevantly provides that:
An applicant for readmission (where that applicant is an individual) must satisfy the same fit and proper person requirement that applies to all members. In determining whether a person seeking readmission is a fit and proper person, the Board or its authorised representative may consider the matters identified in CR1.5
(b) Regulation 1.5 provides that:
(a)In considering whether an applicant is a fit and proper person to be admitted to all forms of membership, the Board may have regard to:
(i)whether the applicant is of good fame, integrity and character; and
(ii)without limiting CR1.5(a):
…
B.whether the applicant has ever been subject to disciplinary action by a statutory, regulatory, professional or other body (including entering into enforceable undertakings)
C.whether the applicant is or has ever been a bankrupt, has made an assignment for the benefit of their creditors or has entered into a legal agreement with their creditors, or is subject to a legal procedure for the management or discharge of their debts…
(b)An applicant may be required to attend a personal interview, and to provide references.
(c) Regulation 1.17, which provides that:
An applicant for readmission as a Chartered Accountant shall provide references from 3 individual Members of CA ANZ in support of their readmission, provided that:
(a)at least 1 of these individual Members shall have known and had contact with the applicant for the whole of the period since cessation of membership; and
(b)the other individual Members shall have known the applicant for at least 3 years.
(d) Regulation 1.20(a), which provides that:
Unless a Disciplinary Tribunal, Appeals Tribunal or other predecessor bodies has ordered to the contrary, an applicant who is approved for readmission will be admitted to the form of membership held prior to their resignation or cessation of membership or, in the case of a former Fellow, as determined by the Board, and: …
Authority to exercise the power to grant readmission
The Board has responsibility for the admission and readmission to membership pursuant to By-Laws 6 and 20, and under By-Law 21 for the exclusion of members. In accordance with By-Law 133A, the Board is empowered to delegate any of its powers and responsibilities.
By Board delegations in effect at the relevant time, the Board delegated its responsibility for readmission to membership to the Head of Members, which position was at the relevant time held by Mr Simon Grant.
Considerations - breach of contract
The presentation of the plaintiff’s case
The plaintiff has pleaded and presented its case primarily advancing claims for relief based on an entitlement to judicial review and consequential prerogative remedies.
The plaintiff’s case founded in contract and for breach of contract (excluding its claim based on unreasonable restraint of trade) was pleaded and submitted as the second foundation of its claim.
The breaches relied on by the plaintiff in relation to its contractual claims are sought to be established by cross-referencing and reasserting the same grounds and supporting arguments which the plaintiff relied on in its primary case for judicial review.
I consider that, for the following reasons, the contractual relationship between the plaintiff and the defendant and its terms, in particular the contract entered into by the parties on 26 June 2017 in relation to the plaintiff’s application for readmission to the defendant, are largely determinative of both the plaintiff’s claims based upon breach of contract, which in turn are largely based on the plaintiff’s assertion that its contract with the defendant contained a number of implied terms which were breached, and also the plaintiff’s case put on the basis of its asserted entitlement to judicial review and prerogative relief.
For the reasons referred to in the four preceding paragraphs it is more convenient, and I consider more efficient, to deal first with the plaintiff’s contractual case.
Breach of contract
Plaintiff’s submissions (breach of contract)
The plaintiff submits that the issues in relation to the relevant applicable contractual framework are whether the Membership Contract survived the two year cancellation of the plaintiff’s membership in 2015, or whether certain implied terms survived the cancellation of membership or accrued to the plaintiff’s benefit at the time of cancellation.
In support of its case, the plaintiff submits that:
(a) the decision of the defendant’s Professional Conduct Tribunal did not exclude the plaintiff from membership,[71] as it could have done pursuant to By-Law 45(g) then in force, but rather imposed a two year cancellation;
[71]FCB Tab 31, page 1149.
(b) the only term prescribed by the Professional Conduct Tribunal for reinstatement of the plaintiff’s membership was payment of $2,900 plus GST toward the costs associated with the disciplinary action, which the plaintiff has complied with;
(c) Grant confirmed in his evidence that By-Law 20B does not have application,[72] clarifying that pursuant to [13.13] of By-Law 40,[73] the plaintiff was not required to submit an application to the Professional Conduct Tribunal in order to gain readmission because the plaintiff was not applying for readmission following termination or exclusion from membership, but rather following suspension or suspension on an interim basis;[74]
(d) the fee paid by the plaintiff to the defendant with his application for readmission, which the defendant submits forms consideration in respect of the Application Evaluation Contract, was refunded to the plaintiff on Grant’s instruction.[75]
[72]T87.14-20.
[73]FCB Tab 33, page 318.
[74]Plaintiff Submissions, 13 September 2019, [29].
[75]FCB Tab 99.
The plaintiff submits further that:
(a) the Membership Contract, alternatively the surviving or accrued terms of that contract, included the following implied terms in accordance with which the defendant would act in exercising its power or making a decision, or exercising a discretion:
(vii) to act reasonably;
(viii) only to take a relevant considerations into account;
(ix)not to take any irrelevant consideration into account;
(x) to proceed in a manner which is procedurally fair;
(xi)to proceed in a manner free from actual or apprehended bias;
(xii) to act for the purposes authorised by the Supplemental Charter;
(xiii) not to act for purposes not authorised by the Supplemental Charter, and which implied terms were breached by the defendant;
(b) the Court can infer that the defendant owed an obligation to afford the plaintiff natural justice, whether under the Membership Contract or the Application Evaluation Contract (as the defendant submits), and the Court should find the defendant also breached that obligation.
Defendant’s submissions (breach of contract)
The defendant submits that:
(a) the initial membership contract between the plaintiff and the defendant was terminated by the defendant’s cancellation of the plaintiff’s membership on 2 March 2015 and none of the terms of that contract survived termination;[76]
[76]Amended Defence, 2 September 2019, [55(a)].
(b) there was a separate agreement entered into on about 26 June 2017 (the Application Evaluation Contract) governing the process for the evaluation of the plaintiff’s application for readmission for membership, which comprised the agreed terms and conditions of that evaluation process;
(c) the Application Evaluation Contract included an express agreement to be bound by the Original Charter, Supplemental Charter, the By-Laws and the Regulations,[77] and pursuant to Reg 1.17 to provide written references from three members of CA ANZ;[78]
[77]FCB Tab 37, page 26.
[78]Ibid.
(d) the Application Evaluation Contract included terms which provided:[79]
You are required to provide written references from three (3) individual members of Chartered Accountants Australia and New Zealand in support of your readmission, provided that:
1.At least one (1) of those individual members shall have known and had contact with you for the whole of the period since cessation of membership;
AND
2.The other individual members shall have known the applicant for at least three (3) years.
[79]Defendant Submissions, 18 September 2019; T413.2-T414-29.
Please Note: References must each be completed by a different person. Referees cannot be related to you. The member referee must have been a member of CA ANZ or a recognised reciprocal body for 3 years.
References must be signed within 3 months of application.
(e) in applying Reg 1.17, and/or the terms in sub-paragraph (c) above, the defendant was applying an express term of the Application Evaluation Contract;
(f) having regard to the terms the plaintiff seeks to imply, there is no prospect of an implied term that would assist the plaintiff, because there cannot be an implied term that is contrary to, or prevents the application of Reg 1.17 which is an express term of the contract;[80]
[80]BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266, 283; note also McClelland v Burning Palms Surf Life Saving Club [2002] NSWSC 470, [97]–[100], [126] and [144].
(g) similarly, to the extent that principles of natural justice are to be implied, the content of such duty is variable depending on the facts of the case, and must be in accord with the structure of the organisation’s rules;[81]
[81]McClelland v Burning Palms Surf Life Saving Club [2002] NSWSC 470, [97]–[100], [126] and [144].
(h) as such, principles of natural justice would not apply to compel the defendant to waive its regulations, including Reg 1.17;
(i) to the extent there is an obligation to act fairly, by notifying the plaintiff of the defect in the application and providing him an opportunity to remedy the defect and/or be heard on the issues, the defendant has done so.
Plaintiff’s reply (breach of contract)
The plaintiff submits that the defendant’s position is based on the assumption that Reg 1.17 is binding on it, contrary to the weight of evidence, and the plaintiff submits, in these circumstances there is nothing contradictory about the terms the plaintiff says ought to be implied into the contract.[82]
[82]Plaintiff Submissions, 21 September 2019, [77]-[79].
Considerations (breach of contract)
Cancellation of the plaintiff’s membership
It is common ground that the defendant and the plaintiff were parties to a membership contract in the period of the plaintiff’s membership of the defendant from 28 May 2001 to 2 March 2015.[83]
[83]Ibid [22]; Defendant Submissions, 18 September 2019, [1] and [42].
The central issues in relation to the relevant applicable contractual framework at the time the plaintiff’s application for readmission was made on 26 June 2017, and throughout the readmission application process, are:
(a) whether on the plaintiff’s case the initial membership contract survived the plaintiff’s two year cancellation of membership from 2 March 2015, or alternatively whether certain terms of the initial membership contract survived cancellation of the plaintiff’s membership, or afforded the plaintiff certain accrued rights on and from the time of cancellation of the plaintiff’s membership on 2 March 2015; or
(b) whether on the defendant’s case the plaintiff’s membership came to an end on 2 March 2015 at the time of cancellation of the plaintiff’s membership of the defendant by the defendant’s Professional Conduct Tribunal, resulting in it being only the subsequent readmission application contract of 26 June 2017 (Application Evaluation Contract) which is of application.
I note at the outset of the consideration as to what constituted the applicable contract, that I consider the arguments and the positions of both the plaintiff and the defendant on this issue to be somewhat academic and ultimately of limited significance. This is because, irrespective of the plaintiff’s contention in (a) of the last preceding paragraph, both the plaintiff and the defendant in substance accept that the terms of the applicable contract regulating the plaintiff’s readmission application made on 26 June 2017, include the Supplemental Charter and the defendant’s By-Laws and Regulations.
The plaintiff’s submissions also included that:
(a) in his Statement of Claim at [51] the plaintiff pleads that he was in a contractual relationship with the defendant. Furthermore, the plaintiff particularises that contract as one which, to the extent it is in writing, comprises the Supplemental Charter, the By-laws and the Regulations. Such regulations include Reg 1.17;
(b) in his Submissions dated 21 September 2019 at [54], the plaintiff responds to the defendant’s Submissions of 18 September 2019 at [104], accepting that Reg 1.17 of the defendant’s Regulations formed part of his contract with the defendant and further submitting that ‘the Plaintiff’s position is that Reg 1.17 was not a binding term of the contract, but rather guidance issued by the Board to assist staff of the Defendant in processing applications’;
(c) the plaintiff’s Submissions of 21 September 2019 at [77] also submit that ‘[t]he Defendant’s arguments at [182] to [190] proceed on the assumption that Reg 1.17 is a term that is binding on the Defendant’. The plaintiff submits that is contrary to the weight of evidence;
(d) at [78] of his Submissions of 21 September 2019, the plaintiff invites the Court to find that Reg 1.17 represented a regulation in the nature of guidance from the Board. The plaintiff also submitted that Grant had a discretion as to the implementation of Reg 1.17 in the case of each applicant for readmission.
Furthermore, neither the plaintiff nor the defendant argued that the readmission application requirements, including those in Section 5 of the Application Evaluation Contract, did not form part of the agreement between the parties in relation to the plaintiff’s readmission application. Indeed that Section of the Application Evaluation Contract expressly provided for an alternative provision of references from members of reciprocal bodies recognised by the defendant and it was a central part of the plaintiff’s case at trial that the defendant from time to time waived or varied the requirements of Reg 1.17 and accepted references in support of readmission applications which were not CA ANZ referees, or otherwise acted inconsistently with the requirements of Reg 1.17. This part of the plaintiff’s case was argued notwithstanding that the plaintiff did not expressly accept that the parties entered a 26 June 2017 Application Evaluation Contract.[84]
[84]T405.12-16; Plaintiff’s Submissions, 3 September 2019, [4]-[9].
The issues of significance in relation to this aspect are whether there was an Application Evaluation Contract entered into by the plaintiff and the defendant on 26 June 2017 and whether or not the implied terms argued for by the plaintiff, in the circumstances inform the defendant’s obligations in relation to the plaintiff’s readmission application.
The plaintiff asserts the existence of certain pleaded implied terms in respect of the alternative contract it pleads. The defendant disputes the implication of such terms on the basis of inconsistent express terms which form part of both the initial membership contract and the Application Evaluation Contract, principally relying on Reg 1.17 which expressly requires three specified references in support of any readmission application.[85]
[85]Defendant Submissions, 18 September 2019, [45].
I consider that for reasons which follow that, save for the survival of the expressly conditional eligibility to apply for reinstatement to membership provided for in By-Law 45(g)(i)(2) (which applied at the time of the cancellation of the plaintiff’s membership in 2015), I should reject the plaintiff’s claim that the contract applicable to the plaintiff’s 2017 readmission application was the subsisting initial membership contract entered into between the parties in 2001.
I also reject the plaintiff’s claim that certain terms are to be implied at law into the initial membership contract, or implied as part of any surviving or accrued terms of contract.
The effect of cancellation of the plaintiff’s membership on 2 March 2015
The defendant’s By-Law 45(g) provided in the relevant parts:[86]
[86]FCB Tab 29.
45.Where a complaint or matter is referred to the Professional Conduct Tribunal:-
(g)If the Professional Conduct Tribunal makes a determination that the allegations contained in the Notice of Disciplinary Action, or any part thereof, are established, it may, having given the Member, Practice Entity or Provisional Member a reasonable opportunity of being heard on the question of sanctions, impose any one or more of the following sanctions, namely:-
(i)In the case of an Individual Member:-
(1)exclusion from Membership;
(2)cancellation of Membership for any period not exceeding 5 years with eligibility for re-instatement to Membership on such terms and conditions as the Professional Conduct Tribunal may prescribe and on producing satisfactory evidence that during the period of suspension he or she has maintained his or her professional competence as required from time to time by the Regulations;
(3)cancellation of certificate of public practice;
On 2 March 2015, the defendant’s Professional Conduct Tribunal ordered that:
· Claudio Ernesto Vergara’s membership of Chartered Accountants ANZ be cancelled for a period of 2 years.
· The member receive a severe reprimand.
· The member be required to pay a contribution of $2,900 plus GST towards the costs of the disciplinary action.
The effect of the cancellation of the plaintiff’s membership on 2 March 2015 was to bring the plaintiff’s membership status, rights and entitlements to an end. This is the natural and ordinary intent and effect conveyed by the term ‘cancellation’ in By-Law 45(g)(i)(2) and the term ‘cancelled’ employed in the Professional Conduct Tribunal’s Order of 2 March 2015.
The above construction is also further supported by By-Law 45(g)(i)(2) which expressly provides that subsequent to ‘cancellation’ of membership, and after any associated specified period of ‘cancellation’, the subject past member is permitted to apply for reinstatement of membership by the defendant.
Further, consistent with the meaning of the phrase ‘cancellation of membership’ used in By-Law 45(g)(i)(2), the above meaning and effect of ‘cancellation of membership’ in By-Law 45(g)(i)(2) is not contradicted or qualified by language elsewhere in the defendant’s By-Laws.
The defendant’s Professional Conduct Tribunal’s Orders of 2 March 2015 did not however exclude the plaintiff from the possibility of reinstatement to membership after the period of 2 years of cancellation, on such terms and conditions as the Professional Conduct Tribunal may prescribe, including on production of satisfactory evidence that during the period of his suspension the plaintiff maintained his professional competence as contemplated by By-Law 45(g)(i)(2). The terms of By-Law 45(g)(i)(2) contemplates the possibility of such a reinstatement.
On 2 March 2015 the Professional Conduct Tribunal also ordered that the plaintiff be reprimanded and that the plaintiff pay certain costs. These additional orders were not framed as conditions of the plaintiff being able, after two years, to apply to be readmitted as a member of the defendant.
Further, although not decisive of the legal effect of the defendant’s Decision to cancel the plaintiff’s membership for two years, as the plaintiff noted in his submissions, Grant, the then Head of Members of the defendant, confirmed that he believed that By-Law 20B of the defendant’s By-Laws did not have application to the plaintiff[87] and clarified that pursuant to [13.13] of By-Law 40,[88] the plaintiff was not required to submit an application to the Professional Conduct Tribunal in order to gain readmission.
[87]T87.14-20.
[88]FCB Tab 33, page 318.
For the above reasons I consider that the initial membership contract formed between the plaintiff and the defendant in 2001 was terminated on or about 2 March 2015 by the defendant’s cancellation of the plaintiff’s membership of the defendant pursuant to By-Law 45(g)(i)(2). That cancellation brought the plaintiff’s membership of the defendant to an end, together with the various rights and obligations of both the plaintiff and the defendant attendant on membership of the defendant, save for the plaintiff’s conditional entitlement to apply for reinstatement of membership. The survival of this discrete entitlement was in my view clearly intended by the parties, given the above terms of By-Law 45(g)(i)(2) of the defendant’s By-Laws applicable at the time.[89]
[89]Heyman v Darwins Ltd [1942] AC 356; Del Casale v Artedomus (Aust) Pty Ltd [2007] NSWCA 172, [92].
I accept however that the defendant’s cancellation of the plaintiff’s membership on 2 March 2015 did not exclude the plaintiff from membership beyond the two year period of cancellation which was imposed pursuant to By-Law 45(g), but rather cancelled the plaintiff’s membership and imposed a two year cancellation.[90]
[90]FCB Tab 31, page 1149.
It is, for the above reasons, clear that pursuant to By-Law 45(g)(i)(2) of the then applicable By-Laws of the defendant, the Professional Conduct Tribunal was entitled, amongst other powers, to either impose exclusion from membership, or cancellation of membership for any period not exceeding 5 years (with reinstatement on such terms and conditions as the Professional Conduct Tribunal prescribed and on the provision of satisfactory evidence), and also clear that the defendant’s two year cancellation of the plaintiff’s membership on 2 March 2015 did not also impose an exclusion from membership, thereby rendering it possible for the plaintiff to apply for reinstatement after the expiration of two years from 2 March 2015.
The Application Evaluation Contract – 26 June 2017
For the following reasons I consider that a separate ‘Application Evaluation Contract’ was formed between the plaintiff and the defendant on 26 June 2017, upon the plaintiff submitting his Readmission to Membership application.
The express terms of the Admission Evaluation Contract[91] included:
[91]FCB Tab 37.
(a) Section 5 (References), the Application Evaluation Contract stated that:
You are required to provide written references from three (3) individual members of Chartered Accountants Australia and New Zealand in support of your readmission, provided that:
1.At least one (1) of those individual members shall have known and had contact with you for the whole of the period since cessation of membership;
AND
2.The other individual members shall have known the applicant for at least three (3) years.
Please Note: References must each be completed by a different person. Referees cannot be related to you. The member referee must have been a member of CA ANZ or a recognised reciprocal body for 3 years.
References must be signed within 3 months of application.
(b) The Application Evaluation Contract also included in Section 9 (Bankruptcy, crimes offences and disciplinary action), the following request, namely a ‘yes’ or a ‘no’ answer to questions including the following:
Are you presently or have you ever been adjudged bankrupt or made an assignment for the benefit of your creditors (if applying for NZ membership) or;
Have you executed an authority under Part X of the Bankruptcy Act 1966 (if applying for US membership).
To which the plaintiff answered ‘yes’.
Are you, or have you ever been subject to disciplinary proceedings by statutory, regulatory, professional or other body in respect of your professional capacity?
To which the plaintiff responded ‘no’.
(c) Further, the Application Evaluation Contract also included, following Section 10, the following statement:
In consideration of Chartered Accountants Australia and New Zealand’s evaluation of my suitability for membership, I understand and agree that confirmation of my responses will be sought. These checks may include, but are not limited to, criminal history and verification of my qualifications and professional membership(s).
I have read and agree to be bound by Chartered Accountants Australia and New Zealand’s Royal Charter, By-Laws and Regulations prescribing and ruling on the standards or practice and professional conduct, including the technical standards, as required by Chartered Accountants Australia and New Zealand.
I agree to abide by the lawful decisions of the Chartered Accountants Australia and New Zealand Board or any Regional or Local Council, Standing or other Committees or Officer of Chartered Accountants Australia and New Zealand.
(d) Following Section 11, also provided that:
Once your application has been assessed we will contract you having calculated the total fee payable for your current years subscription and readmission back fee. Once authorised by you we will create an invoice, process your payment and finalise the approval of our application. Your readmission back fee is calculated at 25% of the sum total of subscriptions that would have been paid during the whole of the period on cessation of membership. These back fees are capped at an amount decided by the board and are reviewed annually. We will calculate the total fee payable and contact you regarding further authorisation.
(e) Included the following question which was marked affirmatively by the plaintiff in Section 12 (Documentary requirements/checklist):
RReferences dated within three (3) months of application received date and all referees have been members for at least 3 years.
The plaintiff ticked this subsection to indicate this applied to his references which formed the attachments to his application.
(f) At page 9, it is to be noted that the Application Evaluation Contract also attached a proforma Readmission Reference which in part stated:
The person completing this reference must not be related to the applicant and must have been a member of Chartered Accountants Australia and New Zealand or a recognised professional body for 3 years. A recognised professional body being any GAA body Chartered Accountants Australia and New Zealand has a current Reciprocal Membership agreement with.
The above outlined form and the language of the Application Evaluation Contract in my view reflects the intention of the plaintiff and the defendant to be bound by the terms of the ‘Readmission to Membership’ Form which the plaintiff signed on 26 June 2017.
(j) if a person’s membership with the defendant was cancelled as a result of misconduct and later reinstated following readmission, while reducing a person’s employment prospects, such a scenario would also be indicative of remedial action having been taken and although employment prospects might be reduced in the Expert witness’ view that person would probably be given a second chance of rehabilitation;[300] and
(k) an applicant for readmission must satisfy the same fit and proper person requirement that applies to all members, and the defendant should carefully check that a person has been rehabilitated prior to accepting them for readmission.[301]
[299]T123.4-9.
[300]T123.15-23.
[301]T124.14-31.
I reject the plaintiff’s submission that the defendant is obliged to afford natural justice to the plaintiff in respect of his readmission application, including because the long-standing contractual relationship which had existed for 14 years between the plaintiff and the defendant up until March 2015, and also (as I have held applicable in respect of the existence of the Application Evaluation Contract) by strong implication based upon the Application Evaluation Contract.[302]
[302]Plaintiff Submissions, 13 September 2019, [14]-[17].
I reject the first limb of the plaintiff’s argument referred to in the preceding paragraph because I have earlier held that the plaintiff’s initial membership contract did not survive cancellation of the plaintiff’s membership on 2 March 2015, save in relation to very limited terms. I also reject that the limited readmission related terms of the initial membership contract which survived cancellation and subsisted on 26 June 2017 when the Application Evaluation Contract was entered, or the Application Evaluation Contract itself, gave rise to an obligation to afford natural justice to the plaintiff. The relevant contractual relationship between the plaintiff and the defendant was from 26 June 2017 regulated by the Application Evaluation Contract pursuant to which the plaintiff agreed that the defendant would conduct the process associated with the plaintiff’s application in accordance with the terms of that agreement and I am not persuaded that the defendant has breached that agreement.
It is also critical in relation to this head of the plaintiff’s case that the plaintiff’s readmission application involved whether the defendant acceded to or refused an application by the plaintiff for a privilege or benefit, such as might arise upon the plaintiff being accepted as a member of the defendant.
Here the plaintiff was applying to have his application for readmission processed and, if acceptable to the defendant, being granted membership of the defendant and as a result the privileges, rights, entitlements and status of membership of the defendant.[303] The outcome of the subject readmission application did not involve expulsion or suspension or the removal of benefits enjoyed by the plaintiff.
[303]Australian Football League v Carlton Football Club [1998] 2 VR 546; CECA, (2010) 30 VR 555, [117].
Furthermore, the defendant in my view was entitled to exercise its discretion not to grant readmission to membership of the plaintiff.[304] As earlier noted the Application Evaluation Contract incorporated by express reference to the Supplemental Charter, By-Laws and Regulations of the defendant, which incorporated terms contemplating submission by the plaintiff of a written application to be considered by the defendant, but made no reference, express or implied, to any form of hearing in relation to the plaintiff’s application.
[304]Ibid.
Accordingly, for the above reasons I do not consider that the plaintiff was either entitled to, or could legitimately expect to be afforded, the opportunity to address his application at a hearing before the defendant’s relevant person(s) or delegates.[305]
[305]McCelland v Burning Palms Surf Life Saving Club [2002] NSWSC 470, [113]; CECA, (2010) 30 VR 555, [113], [116].
I am also not satisfied that it has been established, as the plaintiff asserts, that the defendant has a ‘monopoly or near monopoly’ in the relevant area of accounting practice. Nor has it been made out that as long as the plaintiff is unable to gain readmission to membership of the defendant he would also be unable to gain readmission to CPA Australia and the IPA.[306]
[306]T116.26-31; T117.1-4; FCB Tab 21, Azoor-Hughes Report, [(e)].
I consider this submission referred to in the preceding paragraph to be somewhat misconceived. While the evidence is that members of the defendant or the CPA may be eligible for membership of IPA I am not persuaded that it follows that a person must be a member of the defendant or the CPA in order to become a member of the IPA. Indeed the Azoor-Hughes Report which includes that witness’ response in relation to question (e) dealing with requirements for IPA membership, does not include the requirement that the IPA requires membership of the defendant or the CPA.[307]
[307]FCB Tab 21, Azoor-Hughes Report at [(e)] and [(f)], pages 366-367; a person not able to meet certain standards required by the defendant or CPA would have the option to apply for membership of IPA; see also T117.1-10.
Further, I consider that the plaintiff was at all relevant times adequately informed that his application was non-compliant in that it did not include the required references from CA ANZ members or recognised reciprocal bodies. I am satisfied that the plaintiff was not only given a reasonable and fair opportunity to address what had been communicated to him about the reference non-compliance issue which was liable to result in the rejection of his readmission application, but also that the plaintiff in response provided, and the defendant’s Membership Committee and Grant received and considered the plaintiff’s written submissions and materials (although those materials were devoid of any compliant references) and the defendant’s decision-maker received and considered such materials.[308] Accordingly, the plaintiff was afforded fulsome opportunities to make written representations to the defendant so as to address this aspect.
[308]Reasons for Judgment, [31] and [39]; FCB Tab 59, page 76-84; email plaintiff to the defendant, 22 October 2017 [2:47pm]; FCB Tab 88, pages 1275-1293; email 15 May 2018 (9:29am); T109.1-3.
The defendant’s evidence also established which bodies the defendant recognised as ‘recognised reciprocal bodies’ and that the plaintiff had been provided with that information.[309]
[309]FCB Tab 19, MacDiarmid Affidavit, [41]; FCB Tab 98, page 2103, Exhibit ‘JLM-24’; FCB Tab 214; T234.10-24; FCB Tab 101 and T314.5-7.
Ultimately I consider that the plaintiff was given ample opportunity to provide the required compliant references and any other material which he wished to advance in relation to any aspect of his application for readmission, and the plaintiff availed himself of that opportunity, including by making the submission he did in his letter of 23 October 2017 and attachments.[310]
[310]FCB Tab 88, page 1275 and following which was considered by the defendant; T109.1-3.
In permitting and facilitating the submission of the plaintiff’s readmission application and supporting submission and materials, and considering those materials, I am satisfied the defendant met its obligations under the Application Evaluation Contract, and the subsisting reinstatement clause 45(g)(i)(2) of the defendant’s By-Laws applicable under the initial Membership Contract. I am also satisfied for the above reasons that the plaintiff was in all relevant respects treated justly and fairly in relation to the readmission process.
Finally, I also consider for the reasons referred to above dealing with the plaintiff’s allegations that the defendant failed to consider relevant materials submitted by the plaintiff, that in any event because the materials relied on by the plaintiff under that and the present head were I consider immaterial (for the reasons earlier explained) it is most unlikely that the material complained of by the plaintiff as not being received and considered by the defendant would have affected the outcome of the plaintiff’s readmission application.
Unreasonable restraint of trade
Plaintiff’s submissions (unreasonable restraint of trade)
The plaintiff also seeks to overturn the Decision and I infer Reg 1.17 (on which the Decision is based), on the basis that it constitutes an unreasonable restraint of trade.
The plaintiff submits that the Decision constitutes a restraint of trade in this matter in circumstances where:[311]
[311]Plaintiff Submissions, 13 September 2019, [31]-[37].
(a) the impacts of the Decision on the plaintiff’s employment are detailed in the Second Vergara Affidavit,[312] which also exhibits a number of different job advertisements[313] and which support the proposition that in order to obtain a position as a financial controller or manager it is necessary to be a member of the defendant or CPA Australia. The plaintiff concedes that ‘equivalent’ qualifications are at times expressed to be acceptable, however submits that in a competitive employment market an application without membership of either the defendant or CPA Australia is at a disadvantage;[314]
[312]Second Vergara Affidavit, [16]-[23].
[313]FCB Tab 113.
[314]Plaintiff Submissions, 13 September 2019, [32]; see also T40.23-T41.10; T66.22-T68.17.
(b) the plaintiff was employed with Evoqua as Accounting and Reporting Manager earning in excess of $173,000 per annum[315] and was terminated on 21 April 2015 because of the cancellation of his membership of the defendant on 2 March 2015;[316]
(c) the plaintiff, in his evidence in re-examination, explained the difficulties of finding employment as a qualified accountant without the benefit of membership;[317]
(d) the plaintiff concedes he has now obtained employment as a financial controller, however says this has come following a period of 18 months working for the same employer in a junior role before he was given the opportunity through an internal recruitment process,[318] and that although the promotion has come with a significant pay rise it is still well below the average remuneration for members of the defendant with comparable qualifications and experience as the plaintiff.[319]
[315]FCB Tab 104.
[316]FCB Tab 105.
[317]T66.30-T67-20.
[318]T67.23-T68.5.
[319]FCB Tabs 124, 126; and the plaintiff’s completion of the defendant’s ‘remuneration survey’ indicating the average remuneration for members of the plaintiff’s level of experience and types of jobs he is seeking is $2113,469 (FCB Tab 125).
The plaintiff submits that Reg 1.17 is similarly a restraint of trade as it purports to limit the persons who can gain readmission to membership of the defendant to those who have known and had contact with three members of the defendant for the stipulated period of time. The plaintiff submits the restraint is unreasonable having regards to the interests of the parties and the interests of the public as:[320]
[320]Plaintiff Submissions, 13 September 2019, [38]-[43].
(a) the defendant is able to satisfy its interest in ensuring a readmitted person is a fit and proper person without insisting on references from three of its members;
(b) the defendant itself accepts this is the case in accepting references from members of reciprocal overseas accounting bodies;
(c) it is unreasonable not to accept references from members of an Australian professional accounting body when members of that Australian professional accounting body can obtain membership of the defendant by meeting conditions equivalent to those applicable to recognised reciprocal bodies; and
(d) the public interest in ensuring persons entitled to use the post-nominal CA are fit and proper persons can be achieved without the defendant insisting on references from three CA ANZ members.
The plaintiff submits that the unreasonableness of the restraint is underlined here by virtue of the fact that the plaintiff is unable to comply with Reg 1.17 such that insistence upon adherence to Reg 1.17 effectively bars him from membership of the defendant for life, irrespective of whether he is a fit and proper person for membership.
Defendant’s submissions (unreasonable restraint of trade)
The defendant submits that on the evidence the plaintiff knew other members of the defendant, having worked with at least seven members in the past eight years who he is able to identify by name,[321] and therefore any operative restraint arises in the limited context where those members would not attest to the plaintiff being of good character.
[321]Defendant Submissions, 18 September 2019, [192]; T57.14-22.
The defendant denies there is a restraint of trade, because:
(a) readmission to membership is not required to practise as an accountant, and there are other professional accounting bodies;
(b) while membership of the defendant may bolster the plaintiff’s standing as an accountant, and add lustre to his personal ‘brand’ or professional status,[322] it is not necessary to practise as an accountant[323] or to obtain the plaintiff’s desired role;[324]
[322]T118.2-T119.11, Evidence of Azoor-Hughes.
[323]Evidence of Azoor-Hughes, T117.1-10; the defendant also notes that the plaintiff has been practicing as an accountant without membership of any professional accountancy association: T20.2-3; T41.9-10.
[324]The defendant notes the plaintiff has obtained employment in his desired role as financial controller without membership of the defendant, T30.2-3; T41.9-10.
(c) the plaintiff has not established that Reg 1.17 operated as a restraint in the circumstances of the case, in the sense that ‘but for the restraint’, the plaintiff would have been readmitted to membership;
(d) even where the doctrine of restraint of trade does apply, it cannot be said that such restraint is unreasonable;
(e) the need to be satisfied as to the reliability of references is true in every case, but the more so, as in this case, where there is a real reason to have concerns as to the character of the applicant;
(f) the requirement for references from the defendant members ensures the defendant can be reasonably satisfied as to the reliability of the reference and enables a ‘better understanding’ of the referee;
(g) the reference requirement is more easily satisfied by someone with a good reputation, positive employment history and positive workplace relationships, but harder for someone with a bad reputation, poor employment history or who has proved unable to maintain positive relationships with former colleagues.
Plaintiff’s reply (unreasonable restraint of trade)
The plaintiff denies the premise of the defendant’s submission that any restraint arises from the Adverse Findings, as opposed to the Decision or Reg 1.17, and says that:
(a) the termination of the plaintiff’s employment with Evoqua was a direct result of the cancellation of his membership of the defendant;[325]
(b) the plaintiff’s difficulty in securing employment following the cancellation of his membership was because, as an accountant aged in his 50s, employers did not look favourably upon him for junior roles, and he was not eligible to apply for senior roles due to his lack of membership of the defendant or CPA Australia.[326]
[325]FCB Tab 104.
[326]T66.29-T67-20.
Considerations (unreasonable restraint of trade)
The cancellation of the plaintiff’s membership of the defendant was effected by the defendant’s Professional Conduct Tribunal on 2 March 2015 (for a period of two years) on the basis of the Adverse Findings.
The defendant’s Decision[327] to decline the plaintiff’s readmission application was based on the plaintiff’s application for readmission to membership being non-compliant with the defendant’s readmission application requirement in relation to references, in particular in failing to provide three references from members of the defendant as required by Reg 1.17 of the defendant’s Regulations or references from a recognised reciprocal body.[328]
[327]FCB Tab 97, Defendant’s letter to Vergara dated 25 May 2018.
[328]FCB Tab 17, Reg 1.17, CA ANZ Regulations; defendant’s letter to plaintiff dated 13 July 2017 (Reasons for Judgment, [23]); defendant’s letter to plaintiff dated 13 April 2018 (Reasons for Judgment, [34]); defendant’s letter to plaintiff dated 25 May 2018; FCB Tab 37, page 23 (Reasons for Judgment, [42]).
The Decision also stated that the plaintiff’s readmission application could proceed upon the plaintiff providing the required references, however, such consideration would be one in which the Membership Committee may undertake further enquiries in relation to the applicant’s application.[329]
[329]Reasons for Judgment [42]; FCB Tab 21 (Azoor-Hughes Report); FCB Tab 97.
I am satisfied that the plaintiff’s readmission to membership of the CA ANZ is not necessary for the plaintiff to be able to practise as an accountant. This is because there are other professional accounting associations which it has been established in this proceeding provide a foundation for and enable practice as an accountant, namely CPA Australia and IPA.[330]
[330]FCB Tab 17, page 774, [7].
I am also therefore satisfied that the plaintiff’s membership of the defendant is not ‘a practical necessity’ for the plaintiff to carry on his occupation and profession.[331]
[331]Reasons for Judgment [42]; FCB Tab 21 (Azoor-Hughes Report); FCB Tab 97; Re New South Wales Bar Association [2014] NSWSC 1695, [66], [68]. Cf D’Souza v Royal Australian and New Zealand College of Psychiatrists (2005) 12 VR 42, [223]-[226].
I accept that membership of the CA ANZ would likely add to the plaintiff’s professional status,[332] however, I am not satisfied for the reason I have referred to above, that obtaining that status is a practical necessity to practise as an accountant. Nor am I satisfied that CA ANZ membership would be likely to result in the plaintiff being more highly remunerated. In my view the evidence established that subjective considerations in particular including personal attributes of a particular accountant, are more likely to determine that person’s income from practise.[333]
[332]For example, see the Plaintiff Submissions, 13 September 2019, [75]-[87]. FCB Tab 21, Azoor-Hughes Report, [5(k)].
[333]FCB Tab 17, Reg 1.17, CA ANZ Regulations.
I am also not persuaded that even if the doctrine of restraint of trade did apply in this case, it has been established by the plaintiff that the asserted restraint is unreasonable.
The restraint complained of by the plaintiff arose in relation to the defendant’s compliance regime, including, on the plaintiff’s assertion the requirements of Reg 1.17, and the requirement that a person be fit and proper for membership to the CA ANZ.[334]
[334]T117.16-25; T118.1-22.
In my view requirements of the defendant’s Regs 1.11 and 1.17, viewed objectively, are reasonable requirements which were applicable to the defendant and in relation more generally to applicants for readmission.
Similarly, in my view it is reasonable for such purposes that the defendant require applicants for admission or readmission to membership to provide certain specific references and establish that they are fit and proper persons. Regulation 1.17 can readily be understood and seen to be a regulation, at least in part, formulated to achieve this end.
Further, I am also not satisfied that, but for the restraint of trade asserted by the plaintiff, the plaintiff would in any event have been readmitted to membership of the defendant.
This is because it is established that in the plaintiff’s case both the Federal Court and the Full Federal Court have made strongly adverse findings in relation to the plaintiff, including in relation to his sexual misconduct in a professional context, and to the quality and reliability for the plaintiff’s evidence before the Federal Court at trial.
The adverse findings referred to above, which were in substance accepted on appeal, included findings to the effect that the plaintiff was an arrogant individual with little or no regard for the truth; gave an elaborate account of events which was in the nature of untruthful recent invention, and that in respect of his evidence the deliberateness and the scale of the fabrication by the plaintiff resulted in the trial judge in the Federal Court finding the plaintiff to be a witness prepared to say anything he thought would assist his case.[335] Furthermore, I observe the plaintiff appears to have continued to reject those findings.[336]
[335]Ewin v Vergara (No 3) [2013] FCA 1311, [53].
[336]FCB Tab 19, page 1188 at [38]; FCB Tab 32, page 1132 (lines 23-30) and page 1142 (lines 35-36).
For the above reasons, I am not persuaded that the plaintiff would, even if able to comply with the defendant’s regulations and requirements for readmission, also be able to satisfy the defendant that he is a fit and proper person for membership of the CA ANZ.
I am therefore unpersuaded that Reg 1.17 is unreasonable and I am also not satisfied that Reg 1.17 of the defendant’s Regulations, gives rise to a relevant restraint of trade.
Damages
The plaintiff did not seek at trial to put on its foreshadowed case in relation to damages, preferring to leave this part of its case until after it has obtained judgment in relation to the above questions concerning the defendant’s alleged liability.[337]
[337]T385.4-25.
Decision
For the reasons outlined above, the plaintiff’s Originating Motion for Judicial Review filed 25 July 2018 shall be dismissed.
Costs
The defendant submits that, having regard to the above Reasons for Judgment and the outcome in its favour, there are no grounds for departure from the usual order that costs should follow the event in this case. On this basis the defendant seeks an order that the plaintiff pay the defendant’s costs of the proceeding on a standard basis, to be taxed in default of agreement.
The plaintiff in its submission in relation to costs acknowledges that the general presumption in relation to costs is that costs should follow the event.
However the plaintiff also submits that in this matter there are two reasons why the Court should exercise its discretion to limit the costs payable by the plaintiff, namely:
(a) on the plaintiff’s assertion that this case is of wider importance to the defendant than it is to the plaintiff because of the significance of the defendant understanding whether a decision of the type in issue in this proceeding is amenable to judicial review and because of the importance to the defendant of a decision in relation to the nature and terms of its contractual relationship with its members.
On these bases the plaintiff asserts that this matter was in the nature of a test case rendering the outcome of particular precedential value to the defendant; and
(b) given that this matter concerned only whether the plaintiff should be readmitted to membership of the defendant, the plaintiff argues that the defendant applied disproportionate resources to its defence of the plaintiff’s claim in this proceeding and, by implication, the plaintiff asserts that the defendant failed to comply with its overarching obligation under s 24 of the Civil Procedure Act 2010 (Vic) to endeavour to ensure that legal and other associated costs incurred in relation to this civil proceeding were reasonable and proportionate.
On the above bases the plaintiff argues that it should be ordered to pay only half of the defendant’s costs, on a standard basis, to be taxed in the absence of agreement.
In short reply submissions the defendant submits that none of the plaintiff’s above submissions justify a departure from the usual order that costs follow the event and that the plaintiff’s assertion should be rejected.
The defendant also observes that the plaintiff brought its claims in this proceeding in its own interests and raised a raft of allegations against the defendant specific to the facts of this case, and the applicability of the Datafin principles was just one of many issues raised by the plaintiff which required determination.
The defendant also submits that it was entitled to defend the plaintiff’s claims as it saw fit and that the case was one of sufficient complexity to justify the legal resources which the defendant applied to the proceeding.
Decision on Costs
The plaintiff has ultimately been unsuccessful in its claims in this proceeding and the defendant has been overwhelmingly successful in its defence to those claims. In these circumstances costs should ordinarily follow the event.
I am not satisfied that in this matter there is any circumstance which would justify a departure from the ordinary rule in relation to the allocation of costs referred to above.
I do not accept that this proceeding was in the nature of public interest litigation, or a test case, and I accept the defendant’s characterisation of the issue raised by the plaintiff concerning the availability of judicial review in relation to the Decision of 25 May 2018. That issue was but one of the many raised by the plaintiff, including many claims of contractual breach. Further, the plaintiff’s perception as to their importance and utility of an outcome in this proceeding to the defendant is in my view immaterial.
I am also satisfied that it is trite to observe that the defendant was entitled to defend its claim as it saw fit, including to apply such legal resources as it chose in the defence of the claims brought against it.
Further, given the nature, complexity and scope of this proceeding, I am not persuaded that there is any substance to the plaintiff’s assertion that the defendant has failed to meet its obligation to use reasonable endeavours to ensure that legal, and other associated costs incurred in connection with this proceeding were reasonable and proportionate to the complexity of importance of the issues in dispute.
Orders
Accordingly, I shall order that:
(a) The plaintiff’s Originating Motion for Judicial Review filed 25 July 2018 be dismissed.
(b) The plaintiff pay the defendant’s costs of the proceeding on a standard basis, to be taxed in default of agreement.
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