The former principal of a government school in Western Australia has faced trial for allegedly acting corruptly as a public officer based on his sale of school property to a friend. Mr R was fired by the Western Australian Education Department following an internal investigation into his sale of a demountable building for $100, which the Prosecutor argues was dishonest and deceptive.

The sale

Mr R had consulted with the Education Department regarding its policy towards asset disposal, which requires any asset to be put out to tender. Despite this, the item was advertised for a fixed price of $100 in the Quokka Newspaper, which the Prosecutor alleges acted as a cover for the improper transaction. The building was then sold for $100 to a friend of Mr R. ABC News reports that Mr R is also accused of charging the school with the removal costs for the building.

Earlier reports suggested that this transaction deprived the Education Department of $4000 based a valuation of the building. The maximum penalty for the offence under the Western Australian Criminal Code Compilation Act 1913 is seven years’ imprisonment.

Corruption or ‘bureaucracy gone crazy’?

The case against Mr R is based on the allegation that he had informed himself of the correct procedure to follow for the sale and then deliberately went against the Education Department’s policy, making efforts to conceal the wrongdoing. It is alleged that this was both dishonest and deceptive and related to the discharge of his obligations as principal to organise the disposal of unwanted assets.

Mr R’s lawyer rejects this version of events, and argued that Mr R’s consultation with Education Department officials and the completion of necessary paperwork indicated that he was attempting to follow procedure, and merely made an error in failing to comply with procedure. Mr R’s lawyer submitted that this error did not amount to corrupt conduct, but instead it was an honest mistake made by a principal who was extremely busy and wished to get rid of an unused building which had become a problem for the school. The lawyer also argued that the case was merely an instance of ‘bureaucracy gone crazy’, where Mr R was being accused of being deceptive despite his openness when organising the transaction.

The trial is ongoing.

Duties of principals

As this case relates to a government school, Mr R has been charged with an offence based on the corrupt behaviour of public officers under the Criminal Code Compilation Act 1913. This offence would not apply to the principals of non-government schools, but any corrupt behaviour would breach their legal obligations to the school and relevant criminal codes.

As principals are often categorised as ‘officers’ of a school under corporate law, they also have an obligation to act in the best interests of the school. If they act to prioritise their own interests or the interests of a related party above those of the school, they may be open to legal action from the school and liable for financial penalties. Increased governance obligations in registration standards have been introduced in states such as WA and NSW, and require processes to be implemented to minimise the risk of such conduct occurring.

Schools should have a robust conflicts of interest policy and a related party transactions policy, as well as procedures that ensure that all directors act appropriately. See our earlier articles: Just what are related party transactions? And how should your school manage them? and Conflicts of interest: clearing up the confusion. Mr R claims that his conduct was based on a mistaken understanding of the correct procedure. If schools create clear and unambiguous procedures, the likelihood of such an error is reduced.

In addition to this, dishonest and deceptive actions which cause financial disadvantage to a school will likely be caught by a State or Territory’s criminal code as fraudulent behaviour. In our earlier article, Commercial manager of New Zealand school pleads guilty to stealing $795,000, a school employee who had already repaid money she stole in the course of her work was then subsequently charged with fraud. These provisions should act as an additional disincentive for any dishonest behaviour.

Although the sources for the obligation to act in an honest manner in relation to financial matters differs between government and non-government schools, all employees who have control over a school’s assets have a legal obligation to act in the best interests of the school. Corrupt or fraudulent behaviour will be subject to legal sanctions, although schools should prioritise prevention through establishing effective policies and procedures.