Shire of Frankston and Hastings v Cohen

Shire of Frankston and Hastings v Cohen - [1960] HCA 6 - HCA 1960 case summary — Zoe

Part XVI of the Local Government Act 1946 requires the council of a municipality to keep true, regular and up-to-date accounts of all sums of money received and paid on behalf of the municipality and to balance its accounts on 30th September each year. Thereafter, the auditor for the municipality appointed by the Governor in Council from among those holding certificates of competency granted by the Municipal Auditors Board shall, as s. 468 provides, "audit the said accounts", and, for this purpose, it is the duty of the municipal clerk to produce to the auditor "the accounts so balanced as aforesaid with all vouchers in support of the same, and all books papers and writings in its custody or power relating thereto" (s. 469). Then s. 470 provides that: "If the accounts are found correct, the auditor shall sign the same in token of his allowance thereof; but if he thinks there is just cause to disapprove of any part of the said accounts he may disallow any part of the said accounts so disapproved of". In addition to the balanced accounts, an annual statement showing the financial position of the municipality to the end of September must be prepared (s. 472). Any person interested in the accounts may be present at the audit and may make objections. The audited accounts are available for inspection. It is the duty of the council to examine the audited accounts at a meeting where all persons interested in the accounts may be present. The council settles the accounts and "if the same are found just and true they shall be allowed by the council" (s. 478). It is provided by s. 479 that: "After such accounts have been so allowed and signed by such chairman (except as hereinafter provided with regard to a special audit) they shall be final in regard to all persons whomsoever". It is also the duty of the council to have an abstract of its certified accounts prepared which must contain a statement showing whether the auditor has allowed the accounts or not. This must be kept open for inspection and published in a local newspaper (s. 480). Remuneration is provided for by s. 488 (2): "The auditor for any municipality shall be paid out of the municipal fund thereof such remuneration as the Governor in Council may fix and may recover the same from the municipality in any court of competent jurisdiction".

[17]

The Act creates no relationship between the inspector of municipal accounts and the municipalities whose accounts are investigated. An inspector is clearly enough a public official exercising supervision on behalf of the central government over municipal governments. The special auditor seems to me, however, to be in an intermediate position. Section 497 requires such an auditor to report to the Minister and any certificate of misapplication of funds has to be confirmed or disallowed by the Governor in Council. There is no provision for direct communication between a special auditor and the municipality and it may be that the only duty of the special auditor is to the Governor in Council or the Minister. On the other hand, however, there are elaborate provisions to which I have referred which show clearly that in the case of the annual auditor, the municipality has to be made aware of whether the auditor finds its accounts correct or disapproves of them and if so, the grounds of his disapproval, and there is no express requirement that such an auditor should report either to the Governor in Council or to the Minister. As I read Pt. XVI all provisions relating to the annual audit could operate without any such report, but it does appear from s. 480 (2) that it is expected that if such an auditor disallows any part of the accounts, the Minister will be made aware of this and the reasons therefor so that he may, if he wishes, exercise his power to direct that the reasons for disallowance should not be published. If it be that the provisions of the Act relating to special audits indicate that the whole duty of a special auditor is to the Governor in Council or the Minister, a like process of reasoning based upon the obligations which the Act imposes upon an annual auditor would, it seems to me, lead to the conclusion that the duty of such an auditor is to the municipality and not to the Governor in Council or the Minister. The continuous auditor would appear to me to be in the same situation as the annual auditor.

[18]

The third contention against the conclusion I have expressed is that the auditor's function in allowing or disallowing the accounts is quasi-judicial so that no action can be maintained for mere failure to use care and skill in the performance of functions of that character: Partridge v. General Council of Medical Education and Registration of the United Kingdom [1] , Everett v. Griffiths [2] . In support of this, reliance was placed upon four matters. The first is the matter of history already referred to that there was once an appeal from the auditor's decisions to a court of general sessions. The second depends upon the provisions which authorize the attendance of interested persons at the audit, which give them the power to object and then which provide that when the accounts have been allowed, examined and settled, they shall be final in regard to all persons whomsoever except when there is a subsequent special audit (s. 479). The third matter is the wide power of inquisition given by s. 490 to the annual auditor in common with other auditors and inspectors of accounts. The fourth matter is that when a certificate of a special auditor has been confirmed by the Governor in Council, the Act gives that certificate the quality of conclusive evidence in courts of law and it is said the duties of an annual auditor are of the same character as those of a special auditor. These matters taken together are of considerable weight but I am not satisfied that the duty of an annual auditor goes beyond the audit of accounts and their allowance or disallowance. The function of a municipal auditor making an annual audit seems to me to approximate to that of a company auditor making an annual audit. Taking each of the foregoing matters in turn, I would observe that the position which existed prior to 1891 is not now a safe guide because the amendments of 1891 made it clear that the audit is to be the examination of accounts by a person of special skill. The fact that there was originally an appeal to general sessions at a time when the provisions as to special auditors were not as they are now, seems to me to throw little light upon the function of annual auditors at the present time. As to the second and third matters, it is true that the Act does confer upon annual auditors powers and duties beyond those of the ordinary company auditor but this is explicable on the ground that the auditor is appointed to investigate the books and accounts of a governmental authority. So far as s. 479 is concerned, I should say that I have no confidence that I understand what is meant by the provision that the accounts when allowed and signed "shall be final in regard to all persons whomsoever", but the important thing for present purposes is that what gives the accounts that degree of finality is not the certificate of the auditor but their allowance by the council after its examination of their correctness. As to the fourth matter, for reasons which I have already given, I do not think it possible to draw any inference as to the function of an annual auditor from the function of a special auditor. Furthermore, it is the confirmation by the Governor in Council of a special auditor's certificate that gives it the character of conclusive evidence.

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