MacDonald v Pricewaterhousecoopers LLP

An appeal under the Audit Commission Act 1998 against an auditor’s refusal to seek a declaration that items of local authority account were unlawful is ordinarily a review of the auditor’s decision. The court asks whether the decision was wrong in law, unlawful, irrational, outside the range of reasonable decisions, or reached without regard to relevant considerations. The objector’s dissatisfaction with the disclosure of supporting documents does not establish that the decision was unlawful. Where the auditor has investigated the underlying figures, considered the relevant evidence and provided a cogent and reasoned decision, the court will not substitute its own view. A finding that a service charge is unreasonable does not necessarily establish that it is unlawful.

Mr George MacDonald, a local government elector, appealed under section 17(4) of the Audit Commission Act 1998 against PwC’s decisions not to apply for declarations that building insurance income and communal television aerial income in the London Borough of Havering’s 2009–2010 accounts were contrary to law.

He argued that apparently identical properties had been charged different insurance premiums and that residents using only terrestrial television had been charged by reference to satellite services. The appeals concerned whether PwC’s decisions were unlawful or wrong, and, in relation to the aerial charges, whether its alternative decision not to exercise its discretion to seek a declaration could stand.

1. The appeals were dismissed. The court applied the principles stated in Fagan v Watkinson (4 December 2010) and Moss v KPMG LLP [2010] EWHC 2923 (Admin).

2. An appeal under section 17(4) is normally a review of the auditor’s decision, although the court may order a rehearing where the interests of justice require it. The first question is whether the auditor’s decision on lawfulness was wrong. If the item was unlawful, the court then considers whether the auditor’s discretion not to seek a declaration was wrongly exercised.

3. The insurance decision was lawful and reasonable. PwC had investigated the charging process, examined the supporting documentation, considered why premiums could differ between properties, and explained its conclusion. The appellant’s inability to obtain documents satisfying him was a separate issue and did not show that the underlying figures or PwC’s decision were unlawful.

4. The aerial-charge decision was also lawful. The Council had power under the lease to charge for television access. A charge could be unlawful only if the Council’s decision was unreasonable in the applicable public-law sense. The first tribunal’s conclusion that the charge was unreasonable did not determine unlawfulness. PwC had considered the tribunal’s findings, obtained appropriate advice, recognised the evidential limitations and applied the correct legal test. There was no basis to overturn either its conclusion on legality or its alternative discretionary decision.

5. PwC’s costs were awarded against Mr MacDonald, summarily assessed at £27,500.

The judgment does not identify a prior court decision in the same proceedings. It records appeals from PwC’s decisions dated 31 August 2011 and 10 January 2012. The court dismissed both appeals and ordered costs of £27,500.