How the rogue accountant got away with it, but not by hopping on the ferry to St Malo

Brief Facts

The appellant was a chartered accountant and a member of the respondent institute.  He and his wife were directors and shareholders of a number of trust companies carrying out regulated financial services work in Jersey.  In 2002 the Jersey Financial Services Commission issued a direction to the companies and their directors to cease taking on new trust company business and to commence an orderly winding up of company affairs.  

The Commission also directed that no records or files in respect of those companies or any customers be removed from company offices.  

In ‘flagrant breach’ ([54] (Lord Collins)) of the direction the accountant and his wife attempted, unsuccessfully, to take via the car ferry to St Malo suitcases containing material covered by the direction.  They were intercepted by police, arrested and charged.   Subsequently they were convicted and fined and their applications for leave to appeal to the Jersey Court of Appeal were refused in early 2004.

In late 2004, the institute’s investigation committee preferred a complaint against the accountant.  In April 2005, that complaint was heard and dismissed.  In March 2006 the investigation committee preferred a second complaint against him which came on for hearing before a differently constituted tribunal in December 2006.  

At the second hearing the accountant contended that the second complaint should be summarily dismissed on the basis that the same complaint had been dismissed in the first proceedings.  He alleged that the first and second complaints made the same allegations and that on the basis of autrefois acquit or res judicata the second complaint should be stayed or dismissed.  The tribunal dismissed his application.

The appellant lodged a petition to appeal to the Supreme Court, having been unsuccessful in his applications for judicial review to the High Court and Court of Appeal.  

In between lodging his petition and the hearing of the appeal a disciplinary tribunal convened to hear the substantive complaint found the complaint proved and ordered that the appellant’s institute membership be excluded.

On 19 January 2011 the Supreme Court allowed the accountant’s appeal.

The Appeal

Lord Clarke (with whom the President and Lord Rodger agreed) first considered whether the second complaint was the same as the first complaint.  His Lordship construed the relevant institute by-laws, attributed to both complaints their plain meaning (see [19]-[20]) and concluded that they were the same.

His Lordship shortly dealt with autrefois acquit accepting the institute’s submissions that for the purposes of the underlying principle of both autrefois acquit and res judicata (Nemo Debit Bis Vexari Pro Una Et Eaden Causa — nobody should be vexed twice in respect of one and the same cause), disciplinary proceedings fell on the ‘civil side of the line’ ([24]).  Res judicata principles therefore applied.

His Lordship considered the relationship between cause of action estoppel and issue estoppel as two of the same genus of res judicata, which was the ‘generic term’ in the modern law for the ‘two species’ (Thoday v Thoday [1964] P 181, 197-198).  

Pausing briefly, it is worth noting that French CJ recently referred to the distinction in Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175, 193.  The so described ‘extended’ application in Australia of res judicata emanating from Port of Melbourne v Anshun Pty Ltd (1981) 147 CLR 589, 598 (Gibbs CJ, Mason and Aikin JJ) is now routinely described simply as Anshun estoppel (see, for example, Champerslife Pty Ltd v Manojlovski and anor (2010) 75 NSWLR 245, 252 (Giles JA)) although reservations have been expressed as to the scope of the principle (see, for example, Gibbs v Kinna [1999] 2 VR 19).

In Coke-Wallis, Lord Clarke also stated that res judicata applied to ‘non statutory disciplinary proceedings’.  This was not however the subject of argument before the court and his Lordship did not elaborate ([27]).  

Citing Thrasyvoulou v Secretary of State for the Environment [1990] 2 AC 273, 289 his Lordship referred to institute objects and powers stating that ‘at least for some purposes [the institute is] a public body’.  On this basis his Lordship considered that the provisions of the inaugurating institute charter and supplemental charter and the combined operation of the by-laws were ‘akin’ to statutory provisions and that there ought be no impediment to applying res judicata principles to non statutory disciplinary proceedings even though they could not be described as ‘ordinary civil proceedings’ ([27]) (his Lordship also referred to Meyers v Casey (1913) 17 CLR 90).

‘Public interest override’

The institute raised a ‘novel proposition’ ([48]) that given the ‘disciplinary context’ of the proceedings the court should recognise a ‘public interest exception’ to the strict application of res judicata principles which were absent in ‘conventional or civil litigation’.

In the course of argument the President referred to Arnold v National West Minster Bank PLC [1991] 2 AC 93 (‘Arnold’) which provided for a ‘potential’ exception, but only in issue estoppel cases, to the principle that cause of action estoppel is absolute with no exception for special circumstances.  The President adverted to the potential for an ‘absolute principle’ to put the public at risk.  Lord Clarke raised, as an example, the potential risks in applying an absolute rule in proceedings involving doctors.

Arguably the President’s point would have even more resonance in Australia given the extended understanding of Anshun principles.

Lord Clarke stated that there was ‘force’ behind the introduction of a public interest exception however the circumstances in which such an exception should operate was a matter for Parliament.  His Lordship noted that ‘different considerations no doubt apply to different professions’ ([49]).

It was on this basis that Lord Clarke considered it inappropriate to ‘invent a public interest exception’ but rather leave the question to the legislature. 

In a separate judgment Lord Collins agreed with Lord Clarke that the appeal should be allowed even though such a result lead ‘to the thoroughly undesirable result that for purely technical and wholly unmeritorious reasons’ the tribunal’s second decision could not stand ([55]).

Lord Collins alluded to Lord Clarke’s consideration of the public interest, albeit rather obliquely.  His Lordships position is perhaps best reflected in his concluding remarks:

Curiously, Lord Collins also considered that had the case required application of an ‘abuse of process approach’ rather than the more ‘rigid res judicata principles’ then he would have had ‘no hesitation in concluding that the second set of proceedings was not an abuse of process’ (see [56]).  Lord Clarke was not so bold (see [52]).

Questions raised

In Walton v Gardiner ((1993) 177 CLR 378), Mason CJ, Deane and Dawson JJ described the Australian position on abuse of process thus: ‘proceedings before a court should be stayed as an abuse of process if, notwithstanding that the circumstances do not give rise to an estoppel, their continuance would be unjustifiably vexatious and oppressive for the reason that it is sought to litigate anew a case which has already been disposed of by earlier proceedings (1993) 177 CLR 378, 393 (emphasis added).

Is the public interest a sufficient justification?

Moreover, would a court’s (and even a tribunal’s) inherent power to prevent misuse of its own procedures be overridden by unfairness to a party (ie, the accountant) where ‘right-thinking people’ could be likely to consider that the rogue accountant avoiding the consequences of disciplinary action was an instance of the ‘administration of justice [being brought] into disrepute’ (see Hunter v Chief Constable of West Midland Police [1982] AC 529, 536)?

Conclusion

The case demonstrates that the strict application of Anshun principles can yield undesirable outcomes.  This is perhaps even more likely in Australia where the extended application of res judicata has become commonplace. 

In cases where such outcomes can be avoided, and resort is had, by necessity or otherwise, to abuse of process principles, the limits may be tested and a court or tribunal can be invited to make a ‘broad merits-based’ judgment (Aon, (2009) 239 CLR 175, 194 (French CJ)).  Indeed, Mason CJ stated in Rogers v The Queen that it would be ‘unwise’ to limit circumstances in which abuse of process may arise to ‘fixed categories’ ((1994) 181 CLR 251, 255).  Obviously each case will be fact dependent.

Furthermore, in Johnson v Gore Wood & Co [2002] 2 AC 1 Lord Bingham considered that the ‘public interest’ ought go into the mix:

It is, however, wrong to hold that because if a matter could have been raised in earlier proceedings it should have been, so as to render the raising of it in latter proceedings necessarily abusive.  That is to adopt too dogmatic an approach to what should in my opinion be a broad, merits-based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before (at 31).

The United Kingdom Supreme Court’s clear message ought put Australian legislators on notice. But even in the face of inaction, there is still room for the common law to work.

Postscript

The introduction of statutory exceptions to Anshun type principles in the disciplinary context has occurred in Queensland.  For example, s 243 of the Health Practitioner Regulation National Law Act 2009 (Qld) provides:

243    Conduct may constitute offence and be subject of disciplinary proceedings

(1) If a person’s behaviour constitutes an offence against this Law or another Act and constitutes professional misconduct, unsatisfactory professional performance or unprofessional conduct under this Law—

(a) the fact that proceedings for an offence have been taken in relation to the behaviour does not prevent proceedings being taken before an adjudication body under this Law for the same behaviour; and

(b) the fact that proceedings have been taken before an adjudication body under this Law in relation to the conduct does not prevent proceedings for an offence being taken for the same behaviour.

(2) If a person’s behaviour may be dealt with by a health complaints entity under the law of a participating jurisdiction and constitutes professional misconduct, unsatisfactory professional performance or unprofessional conduct under this Law—

(a) the fact that the behaviour has been dealt with by the health complaints entity does not prevent proceedings being taken before an adjudication body under this Law for the same behaviour; and

(b) the fact that proceedings have been taken before an adjudication body under this Law in relation to the behaviour does not prevent action being taken by the health complaints entity under the law of the participating jurisdiction for the same behaviour.

Chris Tam