Vanuatu Teachers Union v Vanuatu Financial Services Commission & Charley [2006] VUSC 81; CC 142 2006 (30 November 2006)

IN THE SUPREME COURT
OF THE REPUBLIC OF VANUATU
(Civil Jurisdiction)

Civil Case No. 142 of 2006

BETWEEN:

VANUATU TEACHERS UNION (VTU)
Appellant

AND:

VANUATU FINANCIAL SERVICES COMMISSION (VFSC)
First Respondent

AND:

LILIAN CHARLEY
Second Respondent

Coram: Justice C. N. Tuohy

Mr. Loughman for Appellant
Ms. Pierre assisted by Mrs. Timakata for Respondents

Dates of Hearing: 30 November 2006
Date of Decision: 30 November 2006

JUDGMENT

1. This is an appeal under s.11 of the Trade Unions Act against the decision of the Registrar of Trade Unions made under s. 13 of the Act to suspend registration of the Vanuatu Teachers Union.
   
2. The decision to suspend was made on 11th August 2006. Under the Act and in particular the proviso to s. 13 (3), the Registrar is required before the expiry of 4 months from the date of suspension to restore the registration or cancel it altogether. Either way the suspension ends and must end as a matter of law one way or the other before the expiry of 4 months from 11 August 2006.
   
   3. Today is the 30th November 2006. The last day for the Registrar to either restore registration or cancel it is the 10th December 2006 so my decision on this appeal will have effect for no more than 11 days. Nevertheless the appellant is entitled to proceed with the appeal and wished to do so.
      
4. Section 13 (3) says
   

"The registration and the certificate of registration of a registered trade union may be cancelled or suspended by the Registrar if he is satisfied that -

(a) the funds of the trade union have been or are being expended in an unlawful manner or on an unlawful object or on an object not authorised by its registered rules;

(b) the accounts of the trade union are not being kept in accordance with the provisions of the Act: ..."

5. There are also further grounds, which are not relevant for the purpose of this appeal, set out in s. 13 (3) (c) and (d). It was under the two grounds which I have read contained in s. 13 (3) (a) and (b) that the Registrar acted in this case. In considering whether and what decision to make under s.13 (3) there is a two step process involved. The Registrar must first be satisfied of one or more of the matters set out in s. 13 (a) (b) (c) and (d). Secondly, if the Registrar is so satisfied, he may then suspend or cancel registration. The use of the word "may" indicates that the Registrar has a discretion as to whether he does suspend or cancel, or does neither of those things, in the event that one of the grounds, the preconditions in s. 13 (3) (a) (b) (c) or (d), have been established.
   
6. The right to appeal against the Registrar’s decision is contained in s. 11 of the Trade Unions Act. In summary it provides as follows:
   

"(1) Any person aggrieved by the refusal of the Registrar to register a trade union or by an order cancelling or suspending registration may within one month of the date of the refusal or order as the case may be appeal against such refusal or order to the Supreme Court.

(2) The Supreme Court in hearing any such appeal shall have all the powers it may exercise in the hearing of a civil suit."

7. So s.11 is rather laconic, it says little and gives little guideline to this Court in the hearing of an appeal.
   
8. This is an appeal against the exercise of a discretion by a statutory officer involved in the administration of an Act of Parliament. In those circumstances, in my view, the task of the Court is also two fold. First it is to decide whether there was information before the Registrar which could have satisfied him, acting reasonably, that one or other of the grounds in s. 13 (3) existed.
   
9. In practice this inquiry is probably little different to a simple inquiry as to whether the information before the Registrar was sufficient to establish one or other of those grounds.
   
10. The second step for the Court is to decide whether, if that was so, the discretion which the Registrar exercised to suspend was exercised on a wrong principle or was a decision which no rational decision maker could make.
    
11. The appellant submitted that the information was simply not there to establish the grounds set out in s. 13 (3) (a), namely that the funds of the Trade Union had been or are being expended in an unlawful manner or on an unlawful or unauthorized object. Mr. Loughman submitted that at most the information might raise a suspicion that the funds of the Trade Union had been or are being used in that way. He pointed out that nowhere in the auditor’s report nor in Ms. Obed’s report was there a direct statement that the funds of the Union were being used unlawfully or on unlawful objects; that those reports only went so far as to say that there was insufficient documentation available from the Union’s books to exclude that possibility. Ms. Pierre pointed to Ms. Obed’s report and in particular she pointed to the information in it that a loan or payment was made from the Union’s medical account to pay for a vehicle and for office land and she submitted that that was the use of Union funds either for an unlawful object or in an unlawful manner.
    
12. On this aspect I agree with the appellant’s submissions. It is clear from the wording of s. 13 (3) that it is not enough to show that the documentation was not there in the books of the Union to establish that all funds were used for lawful objects. The wording of s. 13 (3) makes it clear that it must be positively established that funds had been used for unlawful objects or in an unlawful manner and I agree that there is nowhere in the auditor’s report or in Ms. Obed’s reports or any other information available to the Registrar on 11th August 2006 that establishes that.
    
13. As to diversion of funds from the medical account, it does not seem to me that the purposes for which those funds look like they were used, namely for a vehicle and for land for the Union, were unlawful objects in terms of s. 32 and 33 of the Trade Unions Act. There does not seem to be anything which would prevent the Union executive, if it acted in accordance with its internal management rules, from using funds from one of its accounts for another purpose which is a lawful purpose.
    
14. There might well be consequences to the Union executive if they acted in that way and the Union members did not like it, the consequence being that they could be removed from their positions under the rules of the Union if the Union members decided that that is what they wanted. But unless there could be a legal trust established for the part of the subscriptions which was to go towards medical accounts, then I do not think it would be actually unlawful to use them for another purpose providing the Union’s internal management rules were followed in diverting the money in that way; and really there is not enough before the Court to establish that diverting the money in the way it seems to have been was actually unlawful. So in my view there was no sufficient information to establish the matter set out in s. 13 (3) (a).
    
15. However s. 13 (3) (b) is a different matter. That ground is that the accounts of the Trade Union are not kept in accordance with the provisions of the Act. The provisions of the Act relating to the keeping of accounts are set out in s. 39. That provides that the secretary of every registered trade union shall furnish to the Registrar on or before the 30th April of every year a properly ordered statement of all receipts and expenditure during the period of twelve months ending on the 31st December the preceding year and of the assets and liabilities of the trade union as at such 31st day of December. The statement shall be accompanied by a copy of the auditor’s report and shall be prepared in such form and shall comprise such particulars as may be prescribed.
    
16. Here the audited accounts for the year ending 31st December 2005 had not been furnished to the Registrar at all, as at 11th August 2006, so in that respect there can be no doubt that the ground set out in s. 13 (3) (b) has been established.
    
17. Furthermore the audited accounts for the years 2000 to 2004 inclusive, which were all provided late during 2006 but before 11th of August, were all tagged in paragraphs 2, 3 and 6 in each auditor’s report in the following way:
    

"We were unable to examine adequate supporting documentation in support of individual items of income and expenses totalling (and there were two different figures put into each annual auditor’s reports respectively). We were unable to determine what adjustments if any would have been necessary had we been able to examine adequate supporting documentation.

In our opinion we have not obtained all the information and explanation in respect of the matter referred to in paragraph 2 above".

Because of the significance of the matter set out in paragraph 2 we are unable to form an opinion as to whether the accompanying balance sheet, income and expenditure statement, cash flow statement and notes thereon as set out in Schedule 1 - 10 give the information required by under the Trade Unions Act No. 2 of 1983 in the manner so required so as to give a true and fair view of the state of affairs of the Vanuatu Teachers Union at 31 December 2000 and of its results and cash flows for the year ended on that date."

18. So although the accounts have been audited in the sense that they had been scrutinised by a properly qualified auditor who has made a proper report about them, I do not think that s. 39 has been complied with. What these tagged reports, auditor’s reports, mean is that the accounts are so deficiently kept by the Union that the auditor has been unable to say whether the accounts which the company had recorded are correct accounts and is unable to say whether they correctly represent the true position with regard to the Union’s finances, its balance sheet, its income and expenditures and its cash flow statement.
    
19. In my view it is not enough simply to say: "Here is a set of accounts and here is a report from a properly qualified auditor". In effect there are not proper accounts filed because of the tagging by the auditor. So in that respect also in my view the grounds set out in s. 13 (3) (b) were established at the time the Registrar made the decision to suspend the Union’s registration.
    
20. The second step is this, and that is to consider whether the Registrar exercised the discretion given to him or her under s. 13 (3) on a wrong principle or the decision that he or she reached was one which no rational decision maker could make.
    
21. I have no doubt that this was a decision which was exercised on proper principles and which a rational decision maker could have made. Indeed there is no basis for saying that the Registrar exercised the decision on a wrong principle or that the decision was irrational. It may not be every time that a tagged auditor’s report comes in that suspension or cancellation of registration would be required. The defects might be so small in seriousness, number or monetary value that it would be draconian and excessive to suspend or cancel a Union’s registration. But here there were very real issues about the union’s finances raised in the information before the Registrar from both the auditor’s reports, the lack of any accounts for 2005 and Ms. Obed’s report.
    
22. The matters raised were not small or minor, they were quite serious failures of accounting. They raised a possibility that union funds had been misapplied, not a speculative possibility, a real possibility. As I say the information certainly didn’t establish it at that stage but by the same token, it raised some suspicions involving amounts which were so substantial that it was entirely reasonable for the Registrar to take the intermediate step of suspending registration.
    
23. The Registrar basically under the law had three options:
    
    1. Do nothing
    2. Take the middle course - suspend and look into it
    3. Cancel outright
       
24. The Registrar took the middle way in this case and I cannot say that that was an unreasonable decision or a decision which was made on a wrong principle. Therefore the appeal is refused.
    

Dated AT PORT VILA on 30 November 2006

BY THE COURT

C. N. TUOHY
Judge