Safe and Sound Building Society v SRJ Audit Pty Ltd
[2015] QCATA 109
To print this judgment please return to the case and click on the PDF icon
next to the
case name. For court use, a full PDF copy is required or preferred.
Exit Distraction Free Reading Mode
Please Note: You are about to print a copy of the onscreen
version of
this judgment. For court use, a full PDF copy of the judgment is required or preferred. Please
return to
the case for PDF printing options.
- Unreported Judgment
- Safe and Sound Building Society v SRJ Audit Pty Ltd[2015] QCATA 109
- Add to List
Safe and Sound Building Society v SRJ Audit Pty Ltd[2015] QCATA 109
Safe and Sound Building Society v SRJ Audit Pty Ltd[2015] QCATA 109
CITATION: | Safe and Sound Building Society v SRJ Audit Pty Ltd [2015] QCATA 109 |
PARTIES: | Safe and Sound Building Society (Applicant/Appellant) v SRJ Audit Pty Ltd (Respondent) |
APPLICATION NUMBER: | APL107-15 |
MATTER TYPE: | Appeals |
HEARING DATE: | On the papers |
HEARD AT: | Brisbane |
DECISION OF: | Senior Member Stilgoe OAM |
DELIVERED ON: | 20 July 2015 |
DELIVERED AT: | Brisbane |
ORDERS MADE: |
|
CATCHWORDS: | APPEAL – LEAVE TO APPEAL – MINOR CIVIL DISPUTE – MINOR DEBT – where accountants engaged to conduct audit – where audit conducted and fee rendered – where fee not paid – where respondent alleged negligent audit – where allegation not contained within counterclaim – whether counterclaim possible in minor debt claim – whether tribunal has jurisdiction to deal with counterclaim – where applicant called for production of “accounts” – whether accounts prepared – whether applicant entitled to working papers of auditor – whether grounds for leave to appeal Chantrey v Martin [1953] 2 QB 286 Dearman v Dearman (1908) 7 CLR 549 Fox v Percy (2003) 214 CLR 118 Pickering v McArthur [2005] QCA 294 Chambers v Jobling (1986) 7 NSWLR 1 Early Property Group Pty Ltd v Cavallaro [2010] QCATA 65 |
APPEARANCES and REPRESENTATION (if any): | |
This matter was heard and determined on the papers pursuant to s 32 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld) (QCAT Act). | |
REASONS FOR DECISION
- [1]By letter dated 19 March 2014, Daniel Murphy, on behalf of Safe and Sound Building Society, engaged SRJ Audit Pty Ltd to conduct an audit of financial report of the Society. SRJ quoted a fee of $7,800 plus GST.
- [2]SRJ rendered three invoices: on 31 March 2014 for $2,200; on 30 April 2014 for $4,400; and on 31 May 2014 for $1,980. The Society did not pay the invoices. SRJ filed an application for minor debt. The tribunal ordered the Society pay SRJ the debt plus costs.
- [3]The Society wants to appeal that decision. Because this is an appeal from a decision of the tribunal in its minor civil disputes jurisdiction, leave is necessary.[1] Leave to appeal will usually be granted where there is a reasonable argument that the decision is attended by error, and an appeal is necessary to correct a substantial injustice to the applicant caused by that error.[2]
- [4]The Society submits that the tribunal erred in failing to consider its counterclaim. The Society submits that “the papers in question” are the property of the Society. The Society submits there are errors of fact.
Did the tribunal err in not considering the counterclaim?
- [5]The Society’s counterclaim was contained in a letter to the tribunal dated 19 December 2014. There are three good reasons why the tribunal did not consider it. The first is that the Society did not file a Form 36 Response and/or Counterclaim. The second reason is that, in an application for minor debt, the tribunal cannot consider a counterclaim[3]. The third reason is that the tribunal had no jurisdiction to consider the counterclaim even if it was properly brought to the tribunal’s attention.
- [6]The Society’s “counterclaim” alleged that SRJ’s work was negligent or not fit for the purpose, which caused the Society loss.
- [7]The tribunal has jurisdiction for consumer/trader claims and trader/trader claims. A “trader” is a person who, in trade or commerce, carries on business of supplying services. A person is not a “trader” if, in supplying services, the person acts in the exercise of a discipline that is not ordinarily regarded as within the field of trade or commerce[4].
- [8]SRJ is not a trader because it is providing services in the exercise of a discipline – auditing and accounting – that is a professional service and not ordinarily regarded as within the field of trade or commerce[5]. That does not mean that the Society does not have a claim; it simply means that the tribunal could not consider it.
- [9]The tribunal did not err in failing to consider the Society’s counterclaim.
Did the tribunal err in its treatment of “the papers in question”?
- [10]The Society referred the appeals tribunal to a decision of Chantrey v Martin[6] in support of a submission that documents created by SRJ in the course of its audit were, in fact, owned by the Society and, therefore, should have been produced.
- [11]A proper reading of Chantrey v Martin does not support the Society’s submission. The Court of Appeal held that the company’s private ledgers are clearly the property of the company but that the working papers created by the accountant in the course of its work belonged to the accountant.
- [12]If SRJ created a ledger, which it did not, the Society would be entitled to a copy. The Society is not entitled to copies of SRJ’s working documents.
Are there errors of fact?
- [13]
The production of management accounts
- [14]The Society submits that SRJ was required to draft accounts for review and it did not do so.
- [15]The letter of engagement has no reference to SRJ drafting accounts for review. The Society’s argument appears to be that SRJ could not have conducted an audit unless it first completed the management accounts.
- [16]The tribunal found that SRJ had no obligation to create management accounts. If, as the engagement letter noted, the Society had no management accounts, then it was the Society’s responsibility to address that issue. It cannot expect SRJ, on a limited retainer, to do that work without compensation. The tribunal did not err in its finding that the Society, and not SRJ, was responsible for the production of the management accounts.
Auditing is not “accounting services”
- [17]SRJ’s claim was for “accounting services provided” to the Society at the Society’s request. The Society submits that “accounting services” includes compiling ledgers, books, balance sheets and profit and loss statements, which SRJ has not done. It submits that auditing, in plain language, is checking that proper accounting has occurred. It submits that, because SRJ has produced no evidence of accounting services, its claim must fail.
- [18]An audit is “an official examination and verification of accounts and records, especially of financial accounts”[9]. An accountant is “a person whose profession is analysing and communicating financial information and maintaining financial records for an organisation[10]”. Clearly, the work of an accountant includes auditing. SRJ’s work as an auditor could properly be described as accounting services.
Could SRJ audit the accounts if the accounts did not exist?
- [19]The Society argues that SRJ could not have done its auditing work unless it first undertook accounting work to prepare the books and records. Because there were no proper books and records, the Society argues that SRJ is wrongly charging for work it did not do.
- [20]The engagement letter made it clear that the preparation of books and records was not part of SRJ’s task. SRJ acknowledged that there were no proper books and records and that it conducted its audit from source documents[11]. Its audit was, perhaps, unorthodox, but that does not mean that the work was not done, the invoices properly rendered and the claim payable. The tribunal was not in error in finding that the claim was properly brought.
Draft accounts for review
- [21]The Society submits that page 4 of the engagement letter includes a commitment from SRJ that it will prepare draft accounts for review. It submits that, because SRJ did not perform this function, it is not entitled to payment.
- [22]The reference to “draft accounts for review” appears in the section of the engagement letter labelled “Timing” but, in determining the extent of SRJ’s retainer, it is necessary to read the engagement letter as a whole.
- [23]In page 1, SRJ undertakes to audit the financial report. In page 2, SRJ specifically notes that the Society management has responsibility for the preparation of the financial report. It notes that the Society will provide access to all information required to conduct the audit. It notes that the Society is responsible for lodging the necessary returns. Page 4 of the engagement letter sets out the fee estimate assumptions. Even though the assumption that management accounts have been completed has been deleted, the balance of the assumptions do not support a finding that SRJ has assumed the responsibility for preparing the management accounts. On page 5 of the engagement letter, SRJ notes that it will require access to the Society’s source documents. On all pages of the letter, a reference to SRJ’s work is a reference to an audit. I am satisfied that SRJ’s retainer was limited to an audit of the existing material.
Failure to protect the Society’s interests
- [24]A number of the Society’s submissions are directed to the inadequacy of SRJ’s audit, an alleged breach of fiduciary duty and the difficult position in which the Society finds itself, particularly in relation to a missing $52,000.
- [25]As I have already identified, while these may form the basis of legitimate complaints, they are not complaints within the tribunal’s jurisdiction. Therefore, they cannot form the basis of a successful ground of appeal. If the Society has concerns about the quality of the audit, it may bring a claim against SRJ, but not in the minor civil disputes jurisdiction of the tribunal.
Conclusion
- [26]There is no reasonably arguable case that the tribunal was in error. Leave to appeal should be refused.
Footnotes
[1] QCAT Act s 142(3)(a)(i).
[2] Pickering v McArthur [2005] QCA 294 at [3].
[3] QCAT Rules r 48(3).
[4] QCAT Act Schedule 3.
[5] QCAT Act Schedule 3, Early Property Group Pty Ltd v Cavallaro [2010] QCATA 65 at [17].
[6] [1953] 2 QB 286.
[7] Dearman v Dearman (1908) 7 CLR 549 at 561; Fox v Percy (2003) 214 CLR 118 at 125-126.
[8] Chambers v Jobling (1986) 7 NSWLR 1 at 10.
[9] Macquarie Dictionary Online
https://0www.macquariedictionary.com.au.catalogue.sclqld.org.au/features/word/search/?word=auditing&search_word_type=Dictionary.
[10] Macquarie Dictionary Online
https://0www.macquariedictionary.com.au.catalogue.sclqld.org.au/features/word/search/?word=accountant&search_word_type=Dictionary.
[11] Transcript page 1-12, lines 35 – 41.