Westerman v Attorney General (WA)

[2017] WASC 369

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   WESTERMAN -v- ATTORNEY GENERAL (WA) [2017] WASC 369

CORAM:   MASTER SANDERSON

HEARD:   6 DECEMBER 2017

DELIVERED          :   6 DECEMBER 2017

PUBLISHED           :  14 DECEMBER 2017

FILE NO/S:   CIV 2479 of 2017

BETWEEN:   SHARON WESTERMAN

Plaintiff

AND

ATTORNEY GENERAL (WA)
First Defendant

INDIGENOUS SERVICES PTY LTD as Trustee of THE NJAMAL PEOPLE'S TRUST
Second Defendant

Catchwords:

Charitable Trusts Act 1962 (WA) - Application by plaintiff for forensic audit - Turns on own fact

Legislation:

Charitable Trusts Act 1962 (WA)

Result:

Application dismissed

Category:    B

Representation:

Counsel:

Plaintiff:     Mr J Graham

First Defendant              :     Mr C S Bydder

Second Defendant         :     Mr K L Christensen

Solicitors:

Plaintiff:     GA Legal

First Defendant              :     State Solicitor for Western Australia

Second Defendant         :     Christensen Partners

Case(s) referred to in judgment(s):

Nil

1. MASTER SANDERSON:  By originating summons filed 5 September 2017 the plaintiff sought relevantly the following orders:

   1.Orders directing the Second Defendant in its capacity as trustee for the Njamal People's Trust:

   (a)to appoint a suitably qualified independent accounting professional to conduct a forensic accounting audit of, and prepare a report on, the accounts and financial records of and relating to the Njamal People's Trust for the period 1 May 2014 to the date of order;

   (b)to provide such cooperation, information and documents, as reasonably required by the person appointed to conduct the forensic accounting audit for the purpose of conducting the forensic accounting audit.

   2.Orders that the Second Defendant pay the costs of this application.

2. The Njamal People's Trust (the Trust) was established by a Deed of Trust dated 29 October 2003.  The current trustee of the trust is the second defendant.  On 3 May 2017 the first defendant appointed Mr Alan Sefton to examine and enquire into the Trust.  Mr Sefton initially expected to report before the end of 2017.  It now appears that his report will not be available until 18 February 2018.

3. This application was brought under s 21 of the Charitable Trusts Act 1962 (WA). That section reads as follows:

   Proceedings to enforce or vary charitable trusts or to require a new scheme

   (1)The Attorney General, or an officer of the Public Service, or any other person, may apply to the Court in respect of any property, money or income subject to a trust for a charitable purpose, whether or not a scheme in respect of that property, money or income has been approved by the Court or the Attorney General under Part III or otherwise, for an order -

   (a)requiring the trustees to carry out the trusts on which the property, money or income is held, and to comply with the provisions of the scheme (if any); or

   (b)requiring any trustee to meet his liability for any breach of trust affecting the property, money or income, as the Court may direct; or

   (c)excluding any purpose from the purposes for which the property, money or income may be used, applied or disposed of; or

   (d)giving directions in respect of the administration of the trust, or in respect of any examination or inquiry under section 20, or in respect of any question to be answered or assistance to be given by any person in connection with that examination or inquiry; or

   (e)directing that on and after the date of the order or any subsequent date specified in the order, the property, money or income subject to the trust shall not be used or applied or disposed of otherwise than in accordance with a scheme that, after the date of the order, is approved by the Court or the Attorney General under Part III;

   and the Court may make such order on that application as it thinks fit.

   (2)Copies of an application under this section shall be served on the trustees of the property, money or income to which the application relates, and on the Attorney General.

   (3)On an application under this section, the Court may decide what persons shall be heard before it in support of, or in opposition to, the application.

4. The written and oral submissions of the defendants accepted the plaintiff has standing to bring the application. They also accepted an application could be made under s 21(1)(d). For the purposes of this application I was prepared to accept the power to order a forensic audit was available under the subsection. However, the point was not argued and it is, in my view, an open question as to whether or not any order could be made. But as I have said for the purpose of this application I was prepared to accept and act upon the concessions made by the defendants.

5. The plaintiff is a member of the Njamal People and has been involved in the operation of the Trust since 2010.  Between May 2014 and May 2016 the Australian Executor Trustees (AET) was a trustee of the Trust.  In that period some members of the Njamal People raised concerns about AET's management of the Trust's assets and funds.  These concerns included a lack of disclosure about trustee and consultant fees, failures to consult with the Trust Advisory Committee (appointed pursuant to cl 9 of the Trust Deed) on trust fund expenditure and investments, and potential conflicts of interest arising from the trustee's relationships with certain members of the Njamal community.

6. Due to these concerns a community meeting was held on 29 February 2016 between the Njamal People and representatives of the then trustee.  At that meeting a motion was put that a forensic audit be undertaken.  The motion was duly carried.  Since the date the motion was passed the trustee has changed but no steps have been taken to undertake the forensic audit.  It is essentially to give effect to the motion passed by the meeting that this application is brought.  The evidence filed by the plaintiff goes into more detail as to alleged irregularities in the conduct of the affairs of the Trust.  But reduced to its essence, the plaintiff is seeking the forensic audit in line with the motion passed by the community meeting.

7. The defendants raised a number of objections to the plaintiff's application.  The second defendant first and foremost submitted it was not clear what a 'forensic audit' actually involved.  The plaintiff led no evidence on this question, no potential appointee as auditor was nominated and there was no evidence as to how any appointed auditor would go about his or her task.  Although it is a phrase which is quite often used in relation to corporations law there appears to be no case which has actually defined what a 'forensic audit' involves.  An internet search throws up the following definition:

   The primary difference between financial and forensic audits lies in the purpose of the audit.  A financial audit confirms the validity of a company's financial records, providing investors and creditors with confidence in the financial information.  Forensic audits relate directly to an issue defined by the audit client.  This issue may involve employee fraud or a dispute with a vendor or customer.  The auditor's report must meet the standards for presentation in court.

   (This definition is taken from an internet site 'bizfluent' and was provided by a Mr Jeffrey Thomas who has, according to the site, 20 years' experience in accounting and financial management).

8. While none of the parties attempted to define what a forensic audit might be, the definition set out above seems reasonable.  Acting upon that definition it is clear there was no warrant for making the orders sought.  As I have said the first defendant has already appointed Mr Sefton to enquire into the affairs of the Trust.  If Mr Sefton requires some assistance either from an auditor or some other accounting professional it would be open to him to approach the court.  To make an order now would cut across Mr Sefton's enquiry and in all likelihood duplicate the work he is undertaking.  That is a state of affairs to be avoided.

9. It should also be noted that financial reports have been prepared for each financial year of the Trust's existence.  These accounts include an auditor's report.  While that may not be the equivalent of a forensic audit it does ensure the accounts have been subjected to independent scrutiny.  The auditor is a tier one accounting firm and it is reasonable to have confidence in the auditor's report.  At the very least it can be said there is nothing in the material which suggests a forensic audit is appropriate.

10. For these reasons at the conclusion of the hearing I dismissed the plaintiff's application.  On publication of these reasons I will hear the parties as to costs.