Goh & Partners v Solomon Islands Broadcasting Corporation [1998] SBHC 146; HCSI-CC 37 of 1996 (17 August 1998)

CC 37.96 HC

IN THE HIGH COURT OF SOLOMON ISLANDS

Civil Case No. 37 of 1996

GOH & PARTNERS

-V-

SOLOMON ISLANDS BROADCASTING CORPORATION

High Court of Solomon Islands
(Muria, CJ.)

Civil Case No. 37 of 1996

Hearing: 22 April 1998
Judgment: 17 August 1998

J. Sullivan for the Plaintiff
C. Ashley for Defendant

MURIA CJ: This is a claim by the Plaintiff in the sum of $4,078.60 for professional services rendered to the defendant plus interest and costs. The professional services in respect of which this claim is brought was the auditing of the accounts of the defendant.

It is common ground that the defendant is a statutory corporation to which the provisions of the Public Finance and Audit Act, 1978 applies. It is also a common fact that the plaintiff had been appointed by the Auditor General to audit the defendant’s accounts for the year 1992. The plaintiff had carried out the auditing of the defendant’s accounts for the said year. The defendant agreed that it had paid the plaintiff for the work done but denied that it owes the plaintiff any further payments, particularly, in respect of the increased fees approved by the Auditor General. The amount of $4,078.60 claimed by the plaintiff came about as a result of the Auditor General’s approval to increase the audit fees for the extra work necessary for the finalization of the audited accounts of the defendant. The onus is on the plaintiff to satisfy the Court that they are entitled to the amount claimed.

By virtue of section 39(1) of the Public Finance and Audit Act, 1978, the accounts of a Statutory Corporation such as the defendant, must be audited by the Auditor General. If for any reason the Auditor General is unable to carry out the auditing himself, he is empowered by subsection (2) of section 39 to authorise any person publicly carrying on the profession of accountant to audit the books and accounts of a Statutory Corporation. A person appointed by the Auditor General to carry out the auditing on his behalf must report to the Auditor General on the work undertaken. In the present case the plaintiff had been appointed by Auditor General to audit the accounts of the defendant.

The evidence adduced by the parties in this case is less troublesome, in my view, as far as the claim on the increased fees is concerned. The reason for not paying the $4,078.60 was that, the defendant did not agree to the Auditor General’s decision on the increase of the fees. Principally, the disagreement arose out of the suggestion that the plaintiff did not do any extra work to justify the increase of fees. According to Mr. Marau, the defendant had provided the plaintiff with statements of accounts, profit and loss and balance sheets which were the documents needed for the auditing of its books and accounts. According to Mr. Marau, there was nothing else left for the plaintiff to do to justify the extra charge of $4,078.60. However, Mr. Marau agreed that there were matters which the defendant had not done to enable the plaintiff to carry out its auditing work effectively and consequently the plaintiff had to do them. These includes preparation of cash flow statements, summary trial balance, making proper adjustments to the balance sheet, identifying and recording of items of fixed assets (real properties disposed of during the year and not recorded) and adjusting discrepancies found in the debtors and creditors ledger which did not match the general ledger. Mr. Marau’s evidence obviously shows that the cash flow statements had not been done and the three documents, namely, balance sheet, profit and loss and trial balance which he said had been prepared by the defendant, were only drafts with the various discrepancies and adjustments still needed to be done on them.

Mr. Diau who once worked for the plaintiff, was involved in the auditing of the 1992 books and accounts of the defendant. He gave evidence for the defendant at this trial. He stated that the defendant only prepared a draft trial balance and that it was the plaintiff had to prepare the other documents. He further confirmed that the used of cash flow statements were new in Solomon Islands and so the plaintiff had to properly audit the defendant’s accounts using the new method. The evidence of both Mr. Marau and Mr. Diau demonstrates that there were other work necessarily to be done before the plaintiff could carry out the auditing of the books and accounts of the defendant.

Mr. Ian Barty who gave evidence for the plaintiff also confirmed that the defendant did not prepare the cash flow statement as this was a new accounting technique required by International standard, and the defendant did not know how to do that. The plaintiff had to do it. He further stated that the plaintiff had to prepare the cash flow statement, statements of accounts, profit and loss account and balance sheet. He further stated that debtors ledgers did not reconcile with the general ledger and that generally there were a lot of queries about figures not reconciling which made the auditing of the defendant’s accounts not easy. There are other matters raised in Mr. Barty’s evidence which on the whole clearly demonstrates that the plaintiff had to carry out extra work to enable them to properly audit the defendant’s accounts.

I note that in the course of the hearing, Counsel for the plaintiff took objection to Mr. Marau giving evidence to the effect that the profit and loss account and balance sheet were prepared by the defendant. The intention of such evidence is clearly to advance the defendant’s case that the plaintiff did not have to prepare the profit and loss account and balance sheet since those documents had been prepared by the defendant. As such the plaintiff could not have justified their claim for any extra work. The objection to such evidence is in my view properly taken. At no time was it ever suggested to any of the plaintiff’s witnesses that it was the defendant who prepared the said documents and not the plaintiff. The defendant first put in this suggestion when its witness Mr. Marau gave evidence for the defendant. Such a practice clearly conflicts with the rule in Browne-Dunn [1894] 6 R 67 which states that a cross-examiner must put to on opponent’s witness in cross-examination the nature of the case upon which it proposed to rely in contradiction of his evidence, unless notice had already been given of the intention to rely on such matters. The basis for such a rule of practice is that it would be unfair to a witness to deny him of the opportunity of offering any explanation on matters subsequently raised and which are opposed to what he said in his evidence. The importance of the rule in Browne -v- Dunn had been stressed in a number of cases. I need only repeat what Hunt J., said in Allied Pastoral Holdings Ply Ltd -v- Commissioner of Taxation [1983] 1 NSW LR 1 at 16:

“It has in my experience always been a rule of professional practice that, unless notice has already clearly been given of the cross-examiner’s intention to rely upon such matters, it is necessary to put to an opponent’s witness in cross-examination the nature of the case upon which it is proposed to rely in contradiction of his evidence, particularly where that case relies upon inferences to be drawn from other evidence in the proceedings. Such a rule of practice is necessary both to give the witness the opportunity to deal with that other evidence, or the inferences to be drawn from it. And to allow the other party the opportunity to call evidence either to corroborate that explanation or to contradict the inference sought to be drawn”.

This rule is apt to our circumstances in this country and ought to be observed.

Although in this case Mr. Marau was allowed to give his evidence, it very much remained a matter for the Court to put whatever weight it considers appropriate on his evidence. In view of the rule in Browne -v- Dunn, I feel that very little weight should be given to the particular part of Mr. Marau’s evidence referrred to earlier. In any case I am satisfied, as I have already pointed out that additional work had to be done by the plaintiff in order to properly audit the defendant’s accounts.

The Auditor General had been notified of the matters and he considered it justified to increase the fees to compensate the plaintiff for the extra work performed in order to properly audit the defendant’s accounts. The defendant was advised of the matter, but was adamant that it would not pay the plaintiff. From the evidence before the Court, I am satisfied that the plaintiff performed extra work in order for it to properly audit the accounts of the defendant. The fees to be paid for such audit is determined by the Auditor General by virtue of section 40 of the Public Finance and Audit Act which provides:

“40. Anybody corporate the accounts of which are audited by the Auditor General under the provisions of this Part shall in respect of such audit pay such fees as may be determined by the Auditor General.”

In the present case the Auditor General was satisfied that the work done merited the increased fees and he so determined it. Of course the plaintiff had to justify it to him before he could grant the increase of fees. The plaintiff justified the claim for increased fees before the Auditor General and certainly so before this court as well. That being the case, the defendant’s obligation is to pay the amount so determined by the Auditor General, for that is what the words “....... shall in respect of such audit pay such fees as may be determined by the Auditor General” in section 40 entail.

There will be judgment for the plaintiff in the sum of $4,078.60 plus interest at 5% to the date of trial, that is, $776.61, making it a total of $4,855.21. I also order that a further 5% interest is charged and added to this judgment sum until it is paid in full.

The costs of these proceedings to be paid by the defendant.

Order accordingly.

(G J B Muria)
CHIEF JUSTICE