April 2019

Liability and your professional reports

  • By David M Abbott Jr FAusIMM(CP), AusIMM Ethics Committee Member and AIPG

An examination of your professional obligations when preparing written reports and other documents

AusIMM members are encouraged to use post-nominals as part of their professional title and position. Members will author or co-author many professional documents over the course of their careers. Some of these documents will be specifically written to comply with the Competent Person requirements of the JORC Code, the Practitioner requirements of the VALMIN Code, or similar regulation with the expectation that the document will be filed with or be explicitly subject to scrutiny by the Australian Stock Exchange or another securities regulator. But probably most of a member’s professional documents are not written with this intention. Distinguishing between a JORC Code-compliant report, for example, and other professional documents is important. This helps to distinguish between the potential liability if a professional document is found to be unprofessional, incompetent or unethical. 

A word of caution regarding the term ‘CP’

The Chartered Professional page on the AusIMM website points out ‘The terms “Chartered Professional” and “CP” should not be confused with the term “Competent Person”. An AusIMM Chartered Professional undergoes an accreditation process through the AusIMM Chartered Professional Program while a Competent Person must meet a separate set of specific criteria in relation to the JORC code. The AusIMM Chartered Professional Program does not assess this.’ 

In addition to having the appropriate membership credential (ie either an AusIMM Member or Fellow) a Competent Person also ‘must have minimum of five years relevant experience in the style of mineralisation or type of deposit under consideration and in the activity which that person is undertaking’ (JORC Code, 2012). Despite the distinction, many people may incorrectly regard a Chartered Professional as a Competent Person, which may or may not be the case depending on the particular assignment and documentary product. 

Liability for JORC Code-compliant reports 

ASX listing rule 5.6 addresses the need to file a ‘JORC Code-compliant report prepared by (a) named Competent Person(s) if a public report by an entity contains a statement relating to exploration targets, exploration results, mineral resources, ore reserves, production targets’ (2014). The note to rule 5.6 states, ‘This rule is not confined to reports under this chapter. It also applies to all public reports, including prospectuses, product disclosure statements, information memoranda, bidder’s and target’s statements, annual reports, financial statements, technical papers, presentations, website content and information given to the ASX for release to the market under other chapters of these rules.’

Being named as a Competent Person for purposes of a JORC Code-compliant report brings with it the legal liabilities of the applicable securities laws that allow a securities regulator, a private individual or professional organisation such as AusIMM to bring an action against the Competent Person(s) named if the report is alleged to be non-compliant, incompetent, false, misleading or otherwise deficient. Such actions can be very expensive, time-consuming for the Competent Person and may well be detrimental to their professional reputation if made public. AusIMM’s Professional Conduct Committee can investigate allegations that a report is non-compliant or otherwise deficient, and AusIMM’s Ethics Committee can determine if the AusIMM Code of Ethics has been violated in the preparation of the non-compliant or otherwise deficient report (AusIMM Code of Ethics, 2018); such a determination is likely when non-compliancy places the public at risk and or results from misrepresentation or gross negligence. The ability and willingness of these AusIMM committees to investigate and, when warranted, sanction AusIMM members is an important part of AusIMM’s international standing as a CRIRSCO-recognised professional organisation.

It is worth noting that similar liability applies to VALMIN Code-compliant reports.

Prior written consent

ASX listing rule 5.22 specifically requires the named Competent Person’s ‘prior written consent’ ‘as to the form and context’ of the reported results. ASX listing rule 5.24 requires the filing of annual reports ‘with the prior written consent of the named Competent Person or Persons’ who are named in the annual report. Rule 5.24 notes that the named Competent Person(s) in an annual report may differ from those named in a market announcement. The ‘prior written consent’ provision of the listing rules is a very important protection for a Competent Person. If a named Competent Person provides ‘prior written consent’ to be named, then the named Competent Person is liable for any statements attributed to them. If a named Competent Person does not provide ‘prior written consent’, then the market announcement or annual report is deficient, and the Competent Person is not liable for any statements attributed to them. 

‘The named Competent Person should only provide prior written consent to language for which they are willing to accept professional liability.’ 

A named Competent Person should therefore carefully review the language of any market announcement or annual report and demand appropriate changes (if necessary) to the language prior to providing prior written consent. The named Competent Person’s written consent should explicitly refer to date and other version identifying wording of the document for which consent is given. Various people (company officials, legal counsel and perhaps others) are typically involved in preparing market announcements, annual reports and other publicly disseminated documents and thus various versions of the document may be prepared. The named Competent Person should only provide prior written consent to language for which they are willing to accept professional liability. 

Retaining copies for reference

The named Competent Person should also retain a copy of the report containing the information, conclusions and mineralisation estimates contained in the market announcement or annual report. Having a documentary evidence of the specific language will be very important should a question arise about a statement attributed to the named Competent Person.

Retaining copies of one’s professional reports is important. If a report is ever challenged, for whatever reason, a vital question is ‘What does the report say?’ and this best answered by having a copy. While data provided by or paid for by a client is the client’s property, the author(s’) interpretations, opinions and conclusions are the author(s’) and the author(s) has/have legal liability for incompetent or unprofessional work. 

Professional reports are ‘instruments of service’ and traditionally have remained owned by the author(s) (Abbott, 2011). The ASFE Contract Reference Guide, 3rd edition (Bachner, 1997) contains a model clause dealing with ownership of instruments of service, which reads: ‘Plans, specifications, reports, boring logs, calculations, field data, field notes, laboratory test data, estimates, and similar documents and materials (other than samples) prepared by or for CONSULTANT as instruments of service are CONSULTANT’S property. CONSULTANT shall retain these instruments for (xx) years following submission of final project deliverables, during which period CONSULTANT’S instruments of service will be made available for CLIENT’S review at any reasonable time.’

What this looks like in practice

A war story helps make the point. Once during my years as a geologist for the US Securities and Exchange Commission (SEC), I received a call from a Houston, Texas-based geologist. This geologist had prepared a report on a prospect for a client in Dallas and was delighted when the client called back wanting a report on a second prospect. About a week following the submission of the second prospect report, the geologist called the client’s office to obtain a copy of the offering document for the second prospect. The client was out of the office, but the client’s secretary recognised the consultant’s name and mailed him a copy of the offering document. The geologist was appalled to see that a reserve estimate had been added to his report in the offering document, which led to his call to me. I referred the geologist to the SEC’s Houston office explaining that he could now be the expert for the SEC and help prove that the client was making a fraudulent offering.

Liability for other professional documents

As noted above, AusIMM members are encouraged to use post-nominals as part of their professional title and position indicating the professional nature of the document and providing at least abbreviated evidence of your professional qualifications. Most of these documents will not be available to the public and hence need not meet the JORC, VALMIN or other requirements of a public report; examples may include letters, memoranda, emails, in-house presentations, etc. This fact does not mean that these professional documents are free from incurring professional liability. This can include documents prepared by a member purporting to be but are not compliant with the JORC or VALMIN or similar codes, or documents that violate AusIMM’s Code of Ethics. Codes of Ethics provide the public with assurance of competent professional practice, particularly those, that like AusIMM’s Code, are backed by disciplinary proceedings (Abbott, 2018). Examples of violations of the AusIMM Code of Ethics include dishonesty, negligence and unfair treatment.

Conclusion

In general, the purpose of a professional document should be made clear. This purpose can be indicated by, for example, a ‘purpose’ or ‘scope of work’ section in a letter, memo, or report or on the title slide of a presentation made for a professional meeting, in the author’s identification in a paper for publication, or in another manner. The written consents to be named as a Competent Person required by the ASX’s listing rules is a special example of a statement of purpose. In addition, retain copies of your professional documents so that should a question about the document ever arise, you have a ‘true and correct’ copy that can serve as a reference point. 

References

Abbott Jr D M, 2018. A brief reflection on geoscience ethics codes: AusIMM Bulletin, Feb 2018, p 28-31.

Abbott Jr D M, 2011. Report ownership – data and opinion in Professional Ethics & Practices, The Professional Geologist, Nov/Dec 2011, p 26-29.

ASX, 2012. Competent person’s consent form [online]. Available from: www.asx.com.au/documents/regulation/2012-jorc-competent-person-consent-form.pdf.

ASX, 2014. Chapter 5: Additional reporting on mining and oil and gas production and exploration activities [online]. Available from: www.asx.com.au/documents/rules/Chapter05.pdf.

AusIMM, 2015. VALMIN Code [online]. Available from: ausimm.com/wp-content/uploads/2018/10/VALMIN_Code_2015_final.pdf 

AusIMM, 2018. Code of Ethics [online]. Available from: ausimm.com/about/governance/code-of-ethics/.

AusIMM, 2019. AusIMM Charted Professional program [online]. Available from: ausimm.com/about/accreditation/chartered-professionals/chartered-professional-program/.

Bachner J P, 1997. ASFE Contract Reference Guide, 3rd ed.: Associated Soil & Foundation Engineers, ASFE Inc [online]. Available from: https://openlibrary.org/books/OL3382896M/ASFE_contract_reference_guide.

CRIRSCO, 2013. International reporting template for the public reporting of exploration results, mineral resources, and mineral reserves [online]. Available from: crirsco.com/template.asp.

JORC Code, 2012 [online]. Available from: www.jorc.org/docs/JORC_code_2012.pdf. 

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