Moss, R (on the application of) v KPMG Llp

An objector’s appeal against an auditor’s decision under the Audit Commission Act 1998 is concerned with whether the auditor’s decision was wrong. The court must respect the auditor’s specialist statutory role and should not simply substitute its own discretion. An exercise of discretion is wrong where it is based on an error of principle, falls outside the reasonable range, or omits relevant factors.

Where parking signs or markings materially depart from prescribed requirements, a local authority should not rely on its own statutory contravention to enforce penalties. Trivial non-compliance may be disregarded, but absence of prejudice does not automatically cure a material defect. A declaration may nevertheless be refused where the unlawful element cannot be identified or quantified and the auditor reasonably considers that proceedings would have no practical value.

Barry Moss objected to Bolton Metropolitan Borough Council’s accounts for 2007–2008, alleging that income from on-street and off-street penalty charge notices was unlawful because parking markings and signs failed to comply with statutory requirements.

KPMG, the council’s auditor, declined to apply to the court for a declaration under section 17 of the Audit Commission Act 1998. Mr Moss appealed. The central issues were the nature of the statutory appeal, whether the auditor should have concluded that some income was unlawful, and whether the auditor’s discretion not to seek a declaration had been wrongly exercised.

1. Nature of the appeal. The appeal was dealt with as a review. Under CPR 52.11, it could succeed only if the auditor’s decision was wrong. The court’s approach depended on the issue. A pure error of law was simply wrong; factual evaluations attracted greater restraint. A discretionary decision was wrong if it applied an incorrect principle, fell outside the reasonable range, or failed to consider relevant factors.
2. The statutory scheme gave the auditor a specialist, independent role. An objector could challenge what the auditor had decided not to do, but could not place himself in the position of an auditor applying directly for a declaration. The court therefore had to consider separately whether the auditor’s conclusion on lawfulness was wrong and whether his decision not to seek a declaration was wrong.
3. On the evidence, a significant number of parking penalties should not have been issued. The court accepted the approach in the Parking Appeals Service decision in Burnett v Buckinghamshire County Council. Subject to trivial non-compliance, prescribed markings had to be used. A local authority could not rely on its breach of section 64 of the Road Traffic Regulation Act 1984 as the basis for exacting a penalty.
4. The court distinguished cases where the offence consisted directly of contravening a prescribed sign, including Davis v Healey and Canadine v Director of Public Prosecutions, from cases concerned with whether a restriction had been adequately conveyed. Material defects could invalidate enforcement, but triviality depended on the function and significance of the marking. In off-street car parks, failure to sign the specific requirement that wheels be wholly within a marked bay meant that penalties for merely intruding on the line should not have been issued. Failure to warn of a penalty did not, by itself, invalidate a properly signed pay-and-display requirement.
5. The auditor had been wrong not to reach a positive conclusion that the accounts included significant unlawful payments. However, his discretionary decision not to seek a declaration remained justified. The unlawful receipts could not be identified or quantified with sufficient precision, the defects had been remedied, repayment mechanisms existed, and a declaration would have no practical value.
6. The appeal was dismissed. Costs followed the event and were summarily assessed at £40,000, exclusive of VAT. Time was extended for an application to the Court of Appeal for permission to appeal.

This was a first-instance statutory appeal in the Administrative Court. KPMG’s decision followed its refusal to apply to the court for a declaration under section 17 of the Audit Commission Act 1998.