ACN 147 341 991 Pty Ltd T/As DNV Accountants & Business Advisers and Tax Practitioners Board

[2016] AATA 86

ACN 147 341 991 Pty Ltd T/As DNV Accountants & Business Advisers and Tax Practitioners Board [2016] AATA 86 (9 February 2016)

Division	TAXATION & COMMERCIAL DIVISION
File Number(s)	2016/0466
Re	ACN 147 341 991 Pty Ltd T/As DNV Accountants & Business Advisers
APPLICANT
And	Tax Practitioners Board
RESPONDENT

DECISION

Tribunal	Egon Fice, Senior Member
Date	9 February 2016
Place	Melbourne

The application for a stay in this proceeding before the Tribunal has been granted

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Egon Fice, Senior Member

Catchwords

Tax agents –– professional Code of Conduct –– allegation of malpractice –– termination of registration –– harm or damage to applicant if stay not granted  –– consideration of public interest ––  stay order granted

Legislation

Tax Agent Services Act 2009 ss. 30-10 (1), 30-10 (3) and Part 3 Division 30

Administrative Appeals Tribunal Act 1975 s. 41(2)

Cases

Scott and Australian Securities and Investments Commission (2009) 51 AAR 114
Bryant v Commonwealth Bank of Australia (1996) 134 ALR 460
Alexander and Migration Agents Registration Board (1995) 40 ALD 99

REASONS FOR DECISION

Egon Fice, Senior Member

18 February 2016

1. ACN 147 341 991 Pty Ltd t/as DNV Accountants & Business Advisers (DNV Accountants) was a registered tax agent having been registered under the Tax Agent Services Act 2009 (the TAS Act).

2. In a letter dated 4 January 2016 the Tax Practitioners Board (TPB) notified DNV Accountants that it was satisfied it had failed to comply with ss. 30-10 (1) and 30-10 (3) of the Code of Professional Conduct which is set out in Part 3 Division 30 of the TAS Act. For that reason, the TPB terminated DNV Accountants’ registration as a tax agent with affect 8 February 2016.

3. On 29 January 2016 DNV Accountants lodged an application with the Tribunal seeking review of that decision.  In addition, DNV Accountants lodged a request for a Stay Order.  The reasons for that request was stated to be:

   … as the operation of the Order to terminate the Company’s registration as a Tax Agent, under section 30-30 of the TASA, will cause irreparable damage to the Applicant’s business which could not be reversed or rectified in the event that the Applicant is successful on the Review of this decision.

4. I heard DNV Accountants’ Stay Order application by telephone on 9 February 2016 and ordered that the operation or implementation of the decision to cancel DNV Accountants’ registration as a tax agent be stayed until the hearing of this matter is concluded or the stay revoked by the Tribunal.  These are the reasons for my decision which was given orally.

   POWER TO GRANT A STAY ORDER

5. The Tribunal’s power to grant a stay order is found in s. 41(2) of the Administrative Appeals Tribunal Act 1975 (the AAT Act).  Relevantly, it provides (emphasis in original):

   The Tribunal may, on request being made by a party to a proceeding before the Tribunal (in this section referred to as the relevant proceeding), if the Tribunal is of the opinion that it is desirable to do so after taking into account the interests of any persons who may be affected by the review, make such order or orders staying or otherwise affecting the operation or implementation of the decision to which the relevant proceeding relates or a part of that decision as the Tribunal considers appropriate for the purpose of securing the effectiveness of the hearing and determination of the application for review.

6. Downes J, in his capacity as President of the Tribunal, in the case Re Scott and Australian Securities and Investments Commission (2009) 51 AAR 114 (Scott), dealt with a stay application in the context of a banning order having been made against the applicant prohibiting him from managing a corporation for a period of 18 months.  His Honour said, at 115:

   In considering the application, it is appropriate for me to consider a range of matters, including:

   1.  The prospects of success.

   2.  The consequence for the applicant of the refusal of a stay.

   3.  The public interest.

   4. The consequences for the respondent in carrying out its functions depending upon whether a stay is granted or not.

   5. Whether the application for review would be rendered nugatory if a stay were not granted.

   6. Other matters that are relevant, amongst which I would include the length of time that the ban has already been in place and the gap between today and the hearing of the application.

7. I should probably point out, merely as an observation, that the range of matters which should be considered in most administrative decisions may be greater than those where a court is required to consider a stay in matters between private parties.  In private litigation, it would be rare for the public interest to be a relevant consideration, although it might in some cases.  This was alluded to by Kirby J in Bryant v Commonwealth Bank of Australia (1996) 134 ALR 460 where his Honour said, at 464:

   In the exercise of the jurisdiction to provide a stay, it has often been emphasised that cases involving a stay of the operation of the criminal law or of laws designed to protect the public (e.g. deregistration of a professional lawyer or medical practitioner) are in a class different from cases involving no more than the suspension of the operation of orders affecting two private litigants only.

8. I make the above observation because there was some focus on court decisions regarding the basis for granting a stay. A more accurate guide to the operation of s. 41(2) of the AAT Act will be found in cases dealt with by this Tribunal.

9. As Deputy President BJ McMahon said in Re Alexander and Migration Agents Registration Board (1995) 40 ALD 99 (at 102 – 103), the purpose of the power contained in s. 41(2) is intended to preserve the situation prior to the reviewable decision. It is not intended to put an applicant in a different position from that which existed prior to the reviewable decision. It is designed to serve the purpose of securing the effectiveness of the hearing and the determination of the application for review.

10. There is, implicit in the words of s. 41(2), acceptance that a refusal to grant a stay will cause harm or damage to an applicant. However, that by itself is insufficient to found a sound basis for making such an order. I need to take into account the interests of any persons who may be affected by the review and that assessment requires me to weigh up those matters described by President Downes J in Scott.

    PROSPECTS OF SUCCESS

11. While it is plainly not the role of the Tribunal to determine the matter by making findings of fact, it is required to examine what evidence is available at the time of hearing the stay application and to determine, without making any findings, whether the applicant for the stay order has prospects of success.  The threshold level is low; it simply requires me to be satisfied that the evidence discloses an arguable case.

12. The breaches of the Code of Professional Conduct claimed by the TPB appear to have arisen from a complaint made by the director of two companies who were clients of the accounting practice.  A dispute appears to have arisen between Mr Daniel Cobb, the sole director of both of the companies concerned, regarding fees for work said to have been done by DNV Accountants.  The essence of the complaint is that DNV Accountants accessed the Tax Agent Portal of both companies amending their respective Australian Taxation Office (ATO) records including account information and transactions; activity statements and details; income tax lodgment details; registration information; and financial institution details.

13. DNV Accountants contends that it was engaged by Mr Cobb as a tax agent for the two companies and was authorised to and did maintain the Tax Portal as tax agent for the taxpayers.  In support of that claim, I had in evidence a document titled Engagement Letter dated 3 August 2012 from DNV Accountants addressed to Mr Daniel Cobb.  It purports to set out the terms of engagement of the tax agent including the preparation and lodgement of annual tax returns and Business Activity Statements for Mr Cobb and his companies.  One of the terms set out in the Engagement Letter is that DNV Accountants would be entitled to retain all documents they had prepared until full payment was made for outstanding fees in the event that its services were terminated.  Furthermore, the Engagement Letter states that DNV Accountants reserves the right to deduct its fees from any refunds and/or monies held in trust if and when payments became overdue.  Although that engagement letter is not dated, there is an acknowledgment which states:

    I, Daniel Cobb, confirmed that I understand and agree to terms of engagement.

14. Mr Daniel Cobb’s signature appears on that Engagement Letter agreeing to the terms of engagement.

15. I also had in evidence timesheets dating from 3 July 2012 through to May 2014 indicating the work done by DNV Accountants, which was previously known as A & S Services Australia.  I also had in evidence an email dated 4 April 2014 which was sent from [email protected] to DNV Accountants which appears to have been sent by Mr Cobb and it states that it authorised Mr Paul Kleores of DNV Accountants to prepare and lodge the companies’ Business Activity Statements for December 2013.  There is in evidence other correspondence from Mr Cobb to DNV Accountants dated 29 July 2013 requesting Profit & Loss and Balance Sheet for the companies in question.

16. Despite the above evidence, in a record of interview provided by TPB dated 18 February 2015, the person conducting the interview asked Mr Cobb if he recalled signing the Engagement Letter.  The record shows that he said he had never seen it before.  He said he never signed any such letter and his purported signature on it was not his.  In other words, he claimed there was a fraud.  This was despite the fact that there is a subsequent correspondence from Mr Cobb which appears to contradict his claim of fraud.

17. It ought to be immediately apparent that there is a substantial dispute between the parties regarding the nature of the authority granted to DNV Accountants to do accounting work for the companies in question.  It is not for me to determine the outcome of that dispute for the purposes of this interlocutory application.  It is sufficient to say that the evidence so far presented needs to be tested and it is only when that is completed that one will be able to determine the outcome.  For the present purposes, it clearly establishes that DNV Accountants has an arguable case.  It cannot be said that there are no prospects of success.

    CONSEQUENCES ON APPLICANT IF STAY REFUSED

18. I had in evidence an affidavit made by Mr Christopher John Somogyi, a director of DNV Accountants.  Mr Somogyi testified that a refusal to grant a stay would result in irreparable damage to the business of DNV Accountants which had some 285 clients currently on its books.  The practice employs four full-time staff members who would need to be laid off if the accountancy practice could not continue.  In addition, the practice engages between 4 to 6 contractors who rely on payments received from the accountancy practice for their livelihood.  I take it from Mr Somogyi’s evidence that if a stay were not granted, this application by DNV Accountants would be rendered nugatory.  I had no evidence to the contrary.  Logically, that outcome is a real possibility.  The grant of a stay would secure the effectiveness of the hearing and determination of the application for review.

    PUBLIC INTEREST

19. Ms W Collins, a lawyer engaged by the TPB, submitted that there were public interest considerations which favoured a refusal to grant the stay requested by DNV Accountants.  She submitted that the TPB was properly concerned that other members of the public dealing with the accountancy practice may be dealt with in a manner which the TPB considered to be in breach of the Code of Professional Conduct.  When I asked Ms Collins whether there was any evidence of past improper conduct by DNV Accountants, she said she was not aware of any such improper conduct.  In fact she agreed that her submissions regarding public interest were based solely on what the TPB claimed was the misconduct of DNV Accountants in relation to the two companies in question and that gave rise to the possibility of future conduct of a similar nature taking place.

20. With respect to Ms Collins, that does not follow.  It is simply speculation.  Furthermore, in the context of this matter where it is clearly about a fee dispute between DNV Accountants and two of its clients, there are no obvious reasons why such a dispute would extend to any other clients of the accounting practice.  I find there is no evidence to support the concerns expressed by Ms Collins regarding the public interest issue.

    CONSEQUENCES FOR THE RESPONDENT IF STAY GRANTED

21. In the course of the hearing, Mr J Sinisgalli, a solicitor acting for DNV Accountants, said he was authorised to give an undertaking that the accountancy practice would not accept any new clients while the stay remained in place and it would only complete existing work for existing clients.  There being no dispute apparent between DNV Accountants and any other clients, there was no evidence of any detriment to be suffered by the TPB if a stay were granted.

    OTHER MATTERS

22. I should also consider the position of the clients of DNV Accountants and the current tax work being conducted on their behalf.  There was no evidence of any malpractice in relation to those clients.  If a stay were not granted, the files would need to be moved to another accounting practice to enable work to be completed.  I have no doubt that would involve substantial inconvenience and probably expense to those clients.  In my opinion, that inconvenience and expense ought not be visited on those persons in circumstances where they have no dispute whatsoever with the accountancy practice.

    CONCLUSION

23. For the reasons I have stated above, the operation and implementation of the TPB decision dated 4 January 2016 terminating DNV Accountants registration as tax agent should be stayed pending the final outcome of this dispute or revocation of the stay.  That stay is conditional on DNV Accountants not accepting any new clients nor extending the scope of the work with its current clients while the stay remains in operation.

24.     I certify that the preceding 23 (twenty-three) paragraphs are a true copy of the reasons for the decision herein of Egon Fice, Senior Member

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Associate

Dated 18 February 2016

Date of stay hearing

Date of oral stay decision

Date of written reasons

9 February 2016

9 February 2016

18 February 2016

Solicitor for the Applicant

Joshua Watts

Solicitors for the Applicant

AHW Solicitors