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Birdseye and Tax Practitioners Board

Birdseye and Tax Practitioners Board

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Birdseye and Tax Practitioners Board [2020] AATA 1250 (8 May 2020)
Division:TAXATION AND COMMERCIAL DIVISION
File Number(s): 2020/1829
Re:Nicholas Birdseye
APPLICANT

AndTax Practitioners Board
RESPONDENT

File Number(s): 2020/1830
Re:Claim IT (SA) Pty Ltd
APPLICANT

Tax Practitioners BoardAnd
RESPONDENT

DECISION
Tribunal:Senior Member R J Olding
Date:8 May 2020
Place:Adelaide

The applications for stays of the decisions under review are refused.
............................[SGD]............................................
Senior Member R J Olding
CATCHWORDS
PRACTICE AND PROCEDURE – STAY APPLICATION – termination of tax agent registrations – whether Applicants denied procedural fairness by decision-maker – whether conditional stays should be granted pending decisions on applications for review – whether conditional stays should be granted pending determination of procedural fairness issue as a preliminary issue – where Tribunal not satisfied there are prospects of success – stays refused
LEGISLATION
Administrative Appeals Tribunal Act 1975 (Cth), ss 2A, 41, 42D, 43
Superannuation Industry (Supervision) Act 1993 (Cth), s 35D
Tax Agent Services Act 2009 (Cth), ss 2-5, 20-15, subdivisions 30-A, 40-A, ss 60-95, 60-100, 60-115, 60-125, 70-10
CASES
Collector of Customs (NSW) v Brian Lawlor Automotive Pty Ltd (1979) 24 ALR 307

Delis v Tax Practitioners’ Board [2016] FCA 570
Drake v Minister for Immigration and Ethnic Affairs (1979) 24 ALR 577
Le’Sam Accounting Pty Ltd and Tax Practitioners Board [2020] AATA 890
Levi v Auditors and Liquidators Disciplinary Board [2013] FCA 719
Kender and Australian Securities and Investments Commission [2018] AATA 4445
Kioa v West (1985) 159 CLR 550
Poidevin and Australian Securities and Investments Commission [2018] AATA 124
Re Josip Dekanic and Tax Agent’s Board of New South Wales (1982) 62 FLR 154
Scott and Australian Securities and Investments Commission [2009] AATA 798
Secretary, Department of Social Security v Alvaro (1994) 50 FCR 213
Williams and Members of the Companies Auditors and Liquidators Disciplinary Board [2019] AATA 504
SECONDARY MATERIALS
TPB Information Sheet TPB(I) 34/2018 Code of Professional Conduct – complying with taxation laws in the conduct of your personal affairs
REASONS FOR DECISION
Senior Member R J Olding
8 May 2020
WHAT ARE THESE REASONS ABOUT?

The Tax Practitioners Board (“the Board”) terminated the tax agent registrations of Nicholas Birdseye (“Mr Birdseye”) and Claim IT (SA) Pty Ltd (“the Company”) of which Mr Birdseye is the sole director and a 50% shareholder (collectively, “the Applicants”).
Mr Birdseye and the Company applied to the Tribunal for review of those decisions and also for stays of the decisions. The Tribunal granted interim stays, subject to conditions, until the hearing and determination of the stay applications.
These reasons relate to the stay applications.
ORDERS SOUGHT
The Applicants seek orders in these terms:
1That subject to any further order of this Tribunal, the operation of the decisions of the respondent dated 4 February 2020 terminating the applicants’ registration as tax agents is stayed until the decision of the Tribunal on the applications for review comes into operation.
2The stay order is subject to the following conditions:
(a)The applicants are:-
(i) not…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2020] AATA 1250
Decision Date: 8 May 2020

CaseChat Overview and Summary

This matter came before the Administrative Appeals Tribunal (AAT) concerning applications for stays of decisions made by the Tax Practitioners Board to terminate the tax agent registrations of the applicants. The applicants sought conditional stays pending the determination of their applications for review of these termination decisions.

The primary legal issues before the Tribunal were whether the applicants had been denied procedural fairness by the Tax Practitioners Board and, if so, whether this denial warranted granting a stay of the termination decisions. The Tribunal was also required to consider the prospects of success of the applicants' substantive applications for review, the consequences for the applicants of refusing a stay, and the public interest.

The Tribunal accepted that the applicants had an arguable case that they were denied procedural fairness due to the short timeframe provided to respond to a substantial volume of complex allegations. However, the Tribunal found that even if a denial of procedural fairness were established, it did not automatically follow that the termination decisions would be set aside and remitted to the Board. The Tribunal noted the lack of precedent for remitting matters solely on this basis and found that the applicants had not demonstrated reasonable prospects of success in persuading the Tribunal to set aside the decisions. This conclusion was based on the applicants' substantial non-compliance with their own tax obligations, serious allegations regarding invalid deduction claims, unprofessional conduct, and a lack of remorse or indication of future compliance.

Consequently, the Tribunal was not satisfied that the applicants had established an evidentiary foundation for a reasonably arguable case to have the terminations set aside or the prohibition period reduced. Accordingly, the applications for stays were refused.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

Additionally, under s 42D(1) of the AAT Act, at any stage in a proceeding the Tribunal may, subject to exceptions that are not relevant in this case, remit a decision to the decision-maker for reconsideration.APPLICABLE LEGAL PRINCIPLES – STAYS OF DECISIONSStatutory framework The making of an application to the Tribunal to review a decision does not, in itself, affect the operation of a decision.[20] [20] AAT Act, s 41(1). However, a party to a proceeding before the Tribunal, subject to exceptions that do not arise in this case, may apply for a stay of a decision under s 41(2) of the AAT Act, which states:(2) 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.(Emphases added.)Relevant considerations As will be seen from the highlighted portions of s 41(2) extracted above, to make a stay order the Tribunal must be of the opinion that it is “desirable” to do so and consider that the order is appropriate “for the purpose of securing the effectiveness" of the hearing and determination of the relevant application for review. A stay may be subject to conditions (s 41(6)(a)) and instead or in addition to a stay the Tribunal may make orders “otherwise affecting the operation or implementation of the decision”. The considerations which it is appropriate for the Tribunal to consider in determining whether to make a stay are well established:(a)The prospects of success of the application for review.(b)The consequence for the applicant of refusing a stay.(c)The public interest.(d)The consequences for the respondent in carrying out its functions depending on whether a stay is granted or not.(e)Whether the application for review would be rendered nugatory if a stay were not granted.(f)Other relevant matters.[21][21] Scott and Australian Securities and Investments Commission [2009] AATA 798, [4]. The Tribunal’s task in considering the prospects of success of the substantive review has been described in this way:. . . Clearly, it is not the role of the Tribunal in an interlocutory application of this nature to conduct a review of the merits or strength of the arguments, even on a preliminary basis, because such an undertaking would not only be lengthy but it would be unlikely to take into account the possibility of further evidence and submissions that may be more appropriately advanced at the substantive hearing… The Tribunal is, however, at least obliged to determine whether there are facts or circumstances or points of law that may be argued at a substantive hearing which may lead to a different result . . . If the reviewable decision discloses findings and reasoning that an applicant cannot or does not challenge, this would be critical to the issue of prospects and would be a significant factor that would weigh against the granting of a stay. It is incumbent on the applicant for a stay to establish the existence of such facts and circumstances or the possibility of legal error that may lead to a different result, through new evidence or submissions that were not raised before the delegate or by contesting findings of fact or conclusions of law (or a combination of both) that are open to challenge.[22][22] Poidevin and Australian Securities and Investments Commission [2018] AATA 124, [39], [40]

Ratio Decidendi

Legal Principle Established

However, I do not need to discuss these aspects further. The Board does not dispute that it was required to afford the Applicants procedural fairness. The content of that obligation depends on the context in which it arises.[49] In the context of a substantial number of serious and detailed allegations, and around 1,000 pages of unpaginated and uncollated materials being provided for each Applicant, albeit largely duplicated, I accept that the Applicants have a reasonably arguable case that they were denied procedural fairness by being required to respond in 14 days. Arguably, it would have been a practical impossibility to prepare detailed responses in that timeframe.Significance of denial of procedural fairness in consideration of prospects of success of substantive applications[49] Kioa v West (1985) 159 CLR 550, [32]-[33]. However, even if the Applicants establish at the substantive hearing, or as Dr Gray suggested at a preliminary hearing on the topic, that the Board denied them procedural fairness, it does not follow that the Applicants may persuade the Tribunal to set aside the decisions on that basis and remit them to the Board for further consideration. The usual course would be for the Tribunal to consider the matter and make its decision on the basis of all of the relevant evidence and submissions the applicant might put forward. The Applicants were not able to identify a single case where the Tribunal had, on the basis that an applicant had been denied procedural fairness by the decision-maker, remitted the matter for reconsideration by the decision-maker. Prospects of success of the applications for review For the reasons already outlined, I am not satisfied that the Applicants have reasonable prospects of persuading the Tribunal on the basis of denial of procedural fairness to set aside the decisions and remit them to the Board for further consideration, either in a substantive hearing of the applications for review or in a preliminary hearing confined to the procedural fairness issue. In relation to the Applicants’ prospects in a substantive hearing on other bases, the earlier discussion of the Board’s findings demonstrates what I am left with is at least this:(a)substantial and ongoing non-compliance with personal tax obligations, both as to lodgement and payment, and across a number of entities, the details of which are either implicitly accepted or not denied by the Applicants;(b)serious allegations regarding invalid deduction claims for a large number of clients, also of an ongoing nature, which with one exception is not explicitly denied or even confronted in the Applicants’ materials or submissions; (c)highly offensive language directed at tax officials which, whatever the context, is unprofessional by any standard;(d)no expression of remorse or other indication that the Applicants will in the future respect and observe their obligations as tax agents. Against that background, I consider that the Applicants have not established an evidentiary foundation upon which I could be satisfied that they have a reasonably arguable case for having the terminations set aside altogether or the period during which they are prohibited from re-applying for registration reduced to such an extent it would be shorter than the time likely to be taken for the applications for review to be heard and decided. In particular, I am not satisfied that the Applicants have reasonable prospects of persuading the Tribunal that Mr Birdseye is a fit and proper person to be a tax agent, that termination is an excessive sanction in the circumstances or that the period of prohibition from re-applying is excessive or in any case could be reduced to a period that is shorter than that required for the substantive reviews to be completed.[50] This consideration weighs heavily against the grant of the stays.[50] This conclusion makes it unnecessary to separately consider whether the Applicants have reasonable prospects of persuading the Tribunal that termination under s 30-30 for breaching the Code by failing to comply with taxation laws in the conduct of the Applicants’ personal affairs is not the correct and preferable decision. In that regard, I note that it has been held that non-compliance with a tax agent’s own tax obligations and those of companies related to the tax agent is relevant to whether the tax agent is a fit and proper person: Delis v Tax Practitioners’ Board [2016] FCA 570.Consequence for the Applicants of refusing the stays