In brief

The Supreme Court of Victoria’s recent decision in Vergara v Chartered Accountants ANZ [2021] VSC 34 has important implications on the availability of judicial review in respect of the decisions of private bodies in Australia. 

The full decision can be found here.

Mr Vergara’s claim

Claudio Vergara was a member of Chartered Accountants Australia & New Zealand (CA ANZ) from May 2001 until his membership was cancelled in March 2015.  His membership was cancelled for a period of two years as a result of adverse findings made by the Federal Court of Australia, which determined that Mr Vergara sexually harassed a work colleague.  In June 2017, following the expiry of his membership cancellation, Mr Vergara applied for readmission to CA ANZ. 

CA ANZ requires that applicants for readmission provide references from three individual members of CA ANZ in support of their readmission.  Mr Vergara failed to meet this requirement.  Mr Vergara and CA ANZ subsequently exchanged correspondence for a number of months, throughout which Mr Vergara was unable to provide any, let alone three, references from members of CA ANZ in support of his readmission. 

On 25 May 2018, CA ANZ informed Mr Vergara that it had decided to decline his application for readmission and again outlined its reference requirements for readmission applications.

Mr Vergara commenced proceedings in the Supreme Court of Victoria in late 2018 seeking to challenge the decision of CA ANZ to decline his application for readmission.  The causes of action identified by Mr Vergara were numerous and included:

  • An application for judicial review.
  • An allegation that CA ANZ had failed to afford him natural justice.
  • An allegation that CA ANZ’s decision to decline his application for readmission constituted a breach of contract.
  • An allegation that CA ANZ’s decision to decline his application for readmission constituted an unreasonable restraint of trade.

The Court’s decision

On 23 February 2021, Justice Digby of the Supreme Court of Victoria handed down a 122 page judgment, ultimately concluding that CA ANZ was entirely successful in defending each and every one of Mr Vergara’s causes of action.  In particular, his Honour:

  • Found that CA ANZ is not amenable to judicial review on the basis that it does not perform a public duty nor exercise public power, and instead draws its decision-making powers from private contract with its members.
  • Found that CA ANZ’s decision to decline Mr Vergara’s application for readmission was a lawful exercise of its powers.
  • Found that the essential character of the relationship between CA ANZ and its members is contractual and, in Mr Vergara’s case, the relevant contract was formed at the time of his application for readmission, and not based on his initial membership contract.
  • Rejected Mr Vergara’s claim that certain terms, such as a requirement to “act reasonably”, should be implied into the contract between CA ANZ and its members.
  • Rejected Mr Vergara’s claim that CA ANZ had breached the terms of its contract with him and found that none of Mr Vergara’s claimed grounds for judicial review would have been established, even if CA ANZ’s decision to decline his application for readmission was found to be one that was amenable to judicial review.
  • Rejected Mr Vergara’s claim that the requirement to produce references from three individual members of CA ANZ constituted an unreasonable restraint of trade.

Implications

In addition to the above mentioned implications for CA ANZ and its members, the decision provides clarity on the availability of judicial review in respect of the decisions of private bodies in Australia. 

Mr Vergara referred to a line of authority which he argued opened the door to the applicability in Victoria of the principles established by the English Court of Appeal decision in R v Panel on Take-overs and Mergers, ex parte Datafin plc [1987] QB 815 (Datafin), which extended the scope of judicial review in English law to private bodies which exercise public functions.  The Court in Datafin held that a decision of a private body may be amenable to judicial review if the decision was made, in a practical sense, in the performance of a public duty or in the exercise of a power which has a public element. 

CA ANZ successfully argued, however, that although Datafin has been discussed in several Australian decisions (outlined below), the principles established in Datafin do not reflect the law of judicial review in Australia and any determination as to the applicability of Datafin in Australia ought be avoided unless and until it is necessary.  His Honour further concluded that CA ANZ’s decision to decline Mr Vergara’s readmission application would not have attracted the application of the Datafin principles even if they were applicable in this jurisdiction.

In rejecting Mr Vergara’s claim for judicial review, his Honour provided a summary of the current Victorian position regarding the applicability of Datafin, with reference to a number of decisions.

In Master Builders,the Full Court of the Supreme Court of Victoria was asked to consider whether judicial review was available with respect to the powers exercisable by the “Building Industry Task Force”, a non-statutory task force established by the Victorian Government to deal with collusive tendering and other corrupt practices in the building industry.  The Court found that it was unnecessary to apply the Datafin principles because although the Task Force was not established pursuant to statute, it was “an emanation of government, exercising governmental power.”

In CECA,2 the Court considered whether a decision by the Australian Council for Private Education and Training (ACPET) to refuse an applicant institute’s application for membership of the ACPET and the related ACPET scheme was amenable to judicial review.  Despite finding that the scheme had statutory force and that membership of the scheme resulted in obligations of a public nature, Kyrou J ultimately concluded that the ACPET’s decision did not have “public consequences” because the applicant institute was not yet a member of the scheme, was not bound by it, and was not seeking to impugn an adverse determination purportedly made under the scheme.  It was therefore not necessary for the Court to decide on the applicability of Datafin.  Notwithstanding, his Honour noted a number of Australian decisions in which Datafin had been referred to with apparent approval and stated in obiter that “in the absence of High Court authority to the contrary, Master Builders is sufficient authority for the applicability of the Datafin principle in Victoria.”

In his reasons in this case, Justice Digby referred to the High Court’s decision in NEAT Domestic Trading3 in which their Honours elected not to determine, on the facts of that case, the question of whether public law remedies (such as judicial review) may be granted against private bodies (as can be the case pursuant to the Datafin principle).  His Honour also referred to the Victorian Court of Appeal’s more recent decision in Mickovski,4 which concluded that the clear implication of the High Court’s decision in Neat Domestic Trading is that the judiciary ought to avoid making a decision about the application of Datafin unless and until it is necessary to do so.

Ultimately, Justice Digby concluded that:

“I also consider that to apply the Datafin principles in this case would constitute an extension of the law of judicial review, in circumstances where both the High Court in NEAT and the Victorian Court of Appeal in Mickovski have declined to take that step…

the present position in this jurisdiction is that the application of the Datafin principles has not been authoritatively decided in this jurisdiction and further there are a number of persuasive judicial statements, in substance, counselling caution in relation to deciding upon the application of Datafin at this time and on the current state of the law in this area…

I am, in any event, persuaded that this case would, in any event, not attract the application of the Datafin principles.”

Author

Paul Forbes is a partner in the Dispute Resolution group at Baker McKenzie, Sydney. Paul acts in complex commercial disputes before state, federal and appeal courts in relation to claims for negligence, misleading conduct and other contraventions of trade practices legislation, breach of contract, judicial review, equitable relief, fraud, white-collar crime, data and cyber-security. Paul also has significant experience in class actions, financial services, disputes related to business sale and purchase contracts, supply and distribution contracts, franchising agreements and the use and misuse of confidential information.

Author

Charlotte Hendriks is an Associate in the Baker McKenzie Dispute Resolution team based in Sydney.

Author

Jake Spain is is an Associate in the Baker McKenzie Dispute Resolution team based in Melbourne.