Case: Permanent Trustee Company Limited v Gulf Import and Export Company [2008] VSC 162
Outcome: cited
legal principles emerging from Dobbs [1935] HCA 49 ; (1935) 53 CLR 643 have been largely confined to circumstances where a banker's certificate has been issued as to the amount of indebtedness of a debtor to the bank (for example Dobbs [1935] HCA 49 ; (1935) 53 CLR 643 , Je Maintiendrai Pty Ltd v Australia and New Zealand Banking Group Ltd (1985) 128 SASR 70, Campbell v National Australia Bank Ltd [1994] SASC 4526 , Equus Financial Services Limited v Sabri [1994] FCA 1331 , George Biritz v National Australia Bank Limited [1995] VSC 91 , Shomat v Rubenstein (1995) 124 FLR 284 , Thurwood v First for Finance Pty Ltd [1997] FCA 559 , Australia &amp; New Zealand Banking v Pan Foods Company Importers &amp; Distributors Pty Ltd [1998] VSC 346 , Jenkins v National Australia Bank Ltd [1999] VSCA 33 , State Bank v Lo [2000] NSWSC 1191 , State Bank of NSW v Kit Cheng Chia [2000] NSWSC 552 , Australia and New Zealand Banking Group Ltd v Dzienciol [2001] WASC 305 , Julong Pty Ltd v Fenn [2002] QCA 529 , Apple Computer [2003] NSWSC 126 , Commonwealth Bank of Australia v Bouwman [2003] WASC 205 , Timms v Commonwealth Bank of Australia [2004] NSWSC 76 , Permanent Trustee Company Limited v Gulf Import and Export Company [2008] VSC 162). Since and possible because of Dobbs [1935] HCA 49 ; (1935) 53 CLR 643 , bankers' certificates have become well-known in practice. That is not to say that the principle articulated in Dobbs [1935] HCA 49 ; (1935) 53 CLR 643 has not been extended beyond the banker/customer/surety relationship, however circumstances in which the Dobbs [1935] HCA 49 ; (1935) 53 CLR 643 principle is applicable are primarily confined to those involving the issue of a certificate as to the existence of a fact pursuant to legislation, or certain types of agreement, for example: In this case it is clear that: Any clause which purports to specify how a particular issue will be determined so as to preclude the parties from subsequently ventilating that issue in court must be expressed in the clearest of terms ( Stylis v United Medical Protection Ltd [2007] NSWCA 109). Neither cl 3.3 (nor Annexure 1) clearly express such a limitation. While these provisions do purport to prescribe a method of calculation of profits, they do not purport to have the effect of finality as was the situation in many of the cases to which I have referred. In the absence of such language the Court will be loath to impute such an effect: Permanent Trustee Company Ltd v Gulf Import and Export Company &amp; Emirates Trading Agency LLC [2008] VSC 162 at [38] . The preparation of an audit opinion in accordance with Australian Accounting Standards, while usually undertaken by experts, is clearly not a banker's certificate as contemplated in Dobbs [1935] HCA 49 ; (1935) 53 CLR 643 and the overwhelming majority of cases where the Dobbs [1935] HCA 49 ; (1935) 53 CLR 643 principles have been applied. Nor, in my view, is it akin to a banker's certificate, whereby a person nominated by the relevant bank certifies the existence of a fact appearing in bank records, namely the recorded amount of indebtedness of a customer to the bank. Further, in the sense that an audit report is produced, albeit in an expert fashion, but based upon information provided by the company itself, in my view it is not akin to a certificate given by an engineer, an architect or a builder, who certifies the existence of a state of affairs in relation to construction of a building which he or she has personal knowledge and control. Clause 3.3 can be contrasted with cll 3.4.2, 3.4.3 and 3.4.4 of the share sale agreement which do purport to prescribe certifications by third parties in a manner akin to cases where Dobbs [1935] HCA 49 ; (1935) 53 CLR 643 has been applied. These clauses refer to the retention and subsequent payment of the "Retention Sum" by the vendors' solicitors as follows: ... 3.4.2 secondly, to the Company, such sum of money which represent the difference in the Net Tangible Asset ("NTA") of the Company represented by the Vendors under the Said Accountants (as hereinafter defined ) as at 30.6.97 namely A$1,611,432.00 and the actual NTA of the Company as certified by a firm of accountants appointed by the Purchaser in verifying the NTA of the Company as represented by the Vendors to the Purchaser; 3.4.3 thirdly, to the Company such sum of money which represent the loss and damages suffered by the Company as a result of FFT's breach of FFT's warranties, representations and covenant under the FEH/FFT Agreement upon the Vendors' Solicitor's receipt of FEH's auditor's certification of such amount of loss and damages suffered by the Company; 3.4.4 fourthly, to the Company, such sum of money which represent the loss and damages suffered by FI as a result of FBT's breach of FBT's warranties, representations and covenants under the FIA/FIPL Agreement, upon the Vendors' Solicitor's receipt of FEH's auditor's certification of such amount of loss and damages suffered by the Company. Clauses 3.4.2, 3.4.3 and 3.4.4 provide for conclusive certification by nominated persons of certain facts. Such language does not appear in cl 3.3. Significantly, cl 17 of the share sale agreement provides that " any dispute in connection with the agreement should be finally settled by arbitration by an independent person appointed by the President for the time being of the Australian Society of Certified Practising Accountants (Queensland) at the request of either party". This clause did not exclude disputes in respect of cl 3.3. The existence of cl 17 and the fact that it applies to all disputes militates against an interpretation that audited financial statements were to be a final and conclusive determination of the profits of Forbes Australia within the meaning of cl 3.3. Possible failure of Deloitte Touche Tohmatsu report to comply with Annexure 1 Even assuming that the effect of cl 3.3 and Annexure 1 is that an audit opinion is akin to a "Dobbs" certificate as submitted by the applicants, I do not accept that the position as to the audited profits before tax is so finally and conclusively determined by the tender of the Deloitte Touche Tohmatsu audit report that the respondents are not permitted to challenge the findings of the report on the basis that it does not comply with Annexure 1, which provided the machinery of calculation adverted to in cl 3.3. The High Court in Dobbs [1935] HCA 49 ; (1935) 53 CLR 643 accepted that a clause of this nature should not be interpreted as covering all grounds which go to the validity of the amount certified, for example illegality (at 651). Similarly, the Courts have found that a certificate can be challenged on such grounds as fraud and obvious error ( Permanent Trustee Company Limited v Gulf Import and Export Company [2008] VSC 162) , although if the certificate is properly tendered the onus falls upon the defendant to demonstrate by acceptable evidence that the certificate is incorrect ( Commonwealth Bank of Australia v Oberdan [2000] SASC 428 at [14] , Concrete Constructions Group Pty Ltd v Coddlestone Pty Ltd [1995] ACTSC 332).