Stephen Warne on professional negligence, regulation and discipline around the world

The Australian Professional Liability Blog random header image

Disciplinary decisions result in res judicatae

February 8th, 2011 · No Comments

So said England’s highest court in R (on the application of Coke-Wallis) v Institute of Chartered Accountants in England and Wales [2011] UKSC 2. An accountant and his wife were directors and shareholders of trust companies carrying out regulated financial services in Jersey.  Jersey is an island off the coast of Normandy which is not part of the United Kingdom but which has a large financial services sector closely associated with England, and 20% flat taxation. A Jersey regulator ordered the accountant to stop what he was doing and directed that no records of the companies be removed from their offices.  Four days later they were arrested at a car ferry with suitcases full of company records, ‘in flagrant breach’, as Lord Collins put it, of the direction, which they were trying to ‘spirit off the island’ as Lord Clarke put it.

Disregard of a direction of the regulator was a crime. They were convicted and fined.  Their appeal was unsuccessful. About a year later, the Investigation Committee of the Institute of Chartered Accountants in England and Wales ‘preferred a complaint’ against the accountant.  It was heard in April 2005 and dismissed on the spot. About a year later again, the Committee preferred a second complaint.  The accountant took a preliminary point: the defence of res judicata.  The Institute’s disciplinary committee found that the second complaint was not barred by res judicata.  On review, the trial judge and the Court of Appeal agreed.  The Supreme Court unanimously did not, and kyboshed the second complaint, rewarding the accountant for his stamina. See also the case note by Mayer Brown. (In Victoria, compare Kabourakis v Medical Practitioners Board of Victoria [2005] VSC 493, which I noted here.  It suggests that often, these questions will be determined by statutory interpretation, especially where the disciplinary procedures are set up by statute.)

The Institute’s bye-laws said that accountants were liable to disciplinary action if he commits any act or default likely to bring discredit on himself, the Institute or the profession of accountancy.  A second part of the bye-laws provided that the fact that an accountant had been found guilty of an indictable offence outside England and Wales corresponding to an indictable English offence was conclusive proof that the convicted person had committed an act likely to bring discredit on himself, the Institute or accountants.  A third part said that a finding of fact in criminal proceedings was prima facie evidence in the disciplinary hearing of the facts found.

The Supreme Court’s plurality held at [14] that being convicted of itself was not an act or default likely to bring discredit on the accountant, the Institute, or accountants generally.  It only attained that status by being deemed to be so by the second part of the bye-laws.  At [16], the plurality said ‘In short, there is nothing in the bye-laws which provides that a qualifying conviction itself amounts to the discreditable conduct. It is simply conclusive proof of discreditable conduct.’

The first complaint was that the accountant had committed ‘any act or default likely to bring discredit on himself, the Institute or the profession of accountancy in that he was convicted’ of failing to comply with the regulator’s direction.  But the complaint set out the facts on which the conviction was based in some detail. The reason it failed was that there was no equivalent indictable English offence.

The second complaint was that the accountant had committed ‘any act or default likely to bring discredit on himself, the Institute or the profession of accountancy in that he’ attempted to remove from Jersey the company records in contravention of the regulator’s direction.

The Supreme Court held that the two complaints were the same.  In substance, the first complaint was an ill-expressed version of the second.  The conviction was not capable of itself being the act complained of within the first part of the bye-laws, which was the operative part.  The implicit inference was that since the conviction could not itself be the discreditable conduct, the regulator must be taken not to have intended to say that it was.  Since regulators do not always get things right, one wonders about that.  But at the first hearing, the regulator did not suggest that the conviction itself was within the first, operative, part of the bye-law.  The regulator did, however, seek to tender only the evidence of the conviction.  As the plurality said:

‘Although it could have done, it did not put its case in any other way.  It could have relied upon the findings of fact as prima facie evidence of the facts [under the third part of the bye-laws] or it could have relied upon the underlying facts themselves.  All the relevant evidence was available to it.  It did not, however do so.’

It was what you call a monumental cock-up.

The result was that, disciplinary proceedings being civil rather than criminal proceedings for the purposes of the taxonomy of res judicata and autrefois acquit, that species of res judicata known as cause of action estoppel (as opposed to issue estoppel) was a full defence to the second complaint.  Res judicata being absolute, there was no call for ascertaining whether special circumstances told against recognition of the defence (as would have occurred had it been an issue estoppel case).

Though there is something to be said for the desirability of an exception to the rigour of res judicata when it comes to disciplinary decisions, said the judges, any such exception was a matter for parliament, not the common law.

Lord Collins helpfully set out other authorities for the proposition that disciplinary hearings give rise to res judicata:

’57.    It has been held or assumed in a number of decisions in other common law jurisdictions that res judicata principles apply to successive complaints before professional disciplinary bodies. Many professional disciplinary bodies are established or regulated by legislation, but the principles apply equally irrespective of the status of the disciplinary body. The reason is that from the earliest times it has been recognised that the principle of finality or res judicata applies to tribunals established by the parties, such as an arbitral tribunal: Dunn v Murray (1829) 9 B & C 780; Fidelitas Shipping Co Ltd v V/O Exportchleb [1966] 1 QB 630, 643, per Diplock LJ.

58.    For example, in Canada it was accepted by the Manitoba Court of Appeal that principles of res judicata applied to a complaint by the College of Physicians against a doctor. On the facts it was held that the College could take proceedings against the doctor for sexual misconduct notwithstanding that four years previously the College had rejected the complaint, but that was because the earlier decision was not regarded as a final decision: Holder v College of Physicians and Surgeons of Manitoba [2003] 1 WWR 19. In Solicitor v Law Society of New Brunswick [2004] NBQB 95 the Law Society was held to be barred from bringing a complaint based on alleged fraudulent billing, when the solicitor had already been reprimanded for billing irregularities arising out of the same matters; and in Visser v Association of Professional Engineers & Geoscientists [2005] BCSC 1402 it was held that the Association was not entitled to bring successive disciplinary proceedings for different offences based on the same conduct. In Australia it was held that a doctor who had been censured by a Medical Board could not subsequently be the object of a second inquiry into alleged infamous conduct: Basser v Medical Board of Victoria [1981] VR 953. See also in New Zealand Dental Council of New Zealand v Gibson [2010] NZHC 912 (dentist bound by findings of disciplinary tribunal). In some cases the same result has been achieved by finding that the disciplinary tribunal is functus officio after the first decision: Chandler v Alberta Association of Architects [1989] 2 SCR 848 (Canadian Supreme Court). In the United States, in Florida Bar v St Louis, 967 So 2d 108 (Fla 2007) and Florida Bar v Rodriguez, 967 So 2d 150 (Fla 2007) the Supreme Court of Florida accepted that res judicata principles applied to successive complaints brought by the Bar, but held that on the facts the causes of action were different. But it has also been said that res judicata or double jeopardy principles may not apply to disciplinary bodies because their “disciplinary requirements serve purposes essential to the protection of the public, which are deemed remedial, rather than punitive”: Spencer v Maryland State Board of Pharmacy, 846 A 2d 341, 352 (Maryland Court of Appeals, 2003); cf Re Fisher, 202 P 3d 1186, 1199 (Sup Ct, Colorado, 2009).’

See also:

Tags: autrefois acquit · Discipline · procedure · prosecutorial failures