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7 Aug 2015 11:04am

No defamation in NZ accountancy bodies' legal action

The New Zealand High Court has ended a row between two accountancy bodies which ended up with one suing the other for defamation

In a judgment released yesterday Justice Robert Dobson rejected CPA Australia’s suit for defamation and NZ$50,000 (£21,145) damages against the New Zealand Institute of Chartered Accountants (NZICA). He concluded that although CPA Australia’s complaints were understandable, the body as a corporate plaintiff had not proved pecuniary loss.

NZICA – which earlier this year merged with the Australian Institute of Chartered Accountants to form Chartered Accountants Australia and New Zealand (CAANZ) – held a virtual audit monopoly in New Zealand until 2012. But this was broken when a new regulatory regime was introduced and the new regulator, the Financial Markets Authority, also recognised CPA Australia for the purposes of audit.

In the legal action, CPA Australia alleged that NZICA had embarked on “a deliberate and aggressive campaign” to undermine its professional qualification. It said the institute had “overstepped the appropriate boundaries of rivalry between the designations” in statements in flyers, advertisements, news articles and at industry events between 2011 and 2013.

In one advertisement which was published in the national media in 2012, NZICA suggested that in accounting there was first class  practice and second class practice which was why top management only hired NZICA members.

A 2011 flyer sought to compare the earnings of CPA members with those of chartered accountants.

NZICA argued that the case was “much ado about nothing”. A speech by its then acting chief executive Kristen Patterson in May 2013, which had offended CPA Australia, was more to do with how NZICA was adapting to the new more competitive regime. She was seeking to explain to her industry audience the rationale for the merger between NZICA and the Australian institute.

Justice Dobson was not convinced. He said in his judgment that “some aspects of the May 2011 flyer were misleading” because NZICA had misrepresented information in the comparison of earnings and published “a pattern of adverse comparisons that portrayed CPAA in a misleadingly inferior light”.

He also found that CPA Australia has “made out elements of actionable defamation” in relation to comments made at the industry events. “Ms Patterson was inappropriately aggressive in criticising CPAA, where elements of those criticisms were false”, took “substantially less care in ascertaining the state of the facts than should have occurred” and “was cavalier in confidently asserting matters on which she was wrong”.

Some of her remarks would have been defamatory had CPA Australia established pecuniary loss, he added, but since it had failed to do so, its complaint was dismissed.

Welcoming the High Court decision, CAANZ chief executive Lee White said, “We are pleased that our defence was successful. We are keen to continue our focus on the work of the new organisation and will continue to support our team and our members as we move into exciting times for the chartered accounting profession.”

Despite the fact it lost the case, CPA Australia said that the judge had vindicated its actions. “We commenced these proceedings as a last resort, and only after all attempts to resolve the matter outside these proceedings had been exhausted,” said chief executive Alex Malley.

“First and foremost we were acting as a matter of principle to defend the integrity of the CPA designation, and of the profession more generally. CPA Australia has an ethos of integrity built into its charter, and there are similar standards of professional and ethical behaviour expected of the accounting profession.

“We believe Justice Dobson’s findings that NZICA defamed CPA Australia and breached provisions of the Fair Trading Act are a vindication of the action we have taken on behalf of our members.”

Julia Irvine


 

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