Clifford v Tax Practitioners Board (No 2)

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FEDERAL COURT OF AUSTRALIA

Clifford v Tax Practitioners Board (No 2) [2024] FCA 557

File number(s): QUD 341 of 2023
Judgment of: HORAN J
Date of judgment: 24 May 2024
Catchwords: ADMINISTRATIVE LAW – registered tax agents – appeal from decision of the Administrative Appeals Tribunal affirming decision of Tax Practitioners Board to terminate the applicant’s registration as registered tax agent – termination of registration under s 40-5(1) of the Tax Agent Services Act 2009 (Cth) for ceasing to meet tax practitioner registration requirements – where Board and Tribunal found that the applicant had breached the Code of Professional Conduct and was not a “fit and proper person” – where applicant prohibited from reapplying for registration as a tax agent for 18 months – whether Tribunal was legally required to consider alternative lesser sanctions under Subdiv 30-B when exercising discretion to terminate registration under s 40-5(1) – whether Tribunal failed to consider circumstances that the applicant was winding down her practice and prejudice to her existing clients caused by termination of registration – no error established in Tribunal’s reasons – appeal dismissed
Legislation:

Administrative Appeals Tribunal Act 1975 (Cth) ss 37, 41, 42A, 43(5C), 44

Income Tax Assessment Act 1936 (Cth) Pt VIIA

Tax Agent Services Act 2009 (Cth) ss 2-5, 20-5, 20-15, 30-10, 30-15, 30-20, 30-30, 40-5, 40-20, 40-25 44, 60-95, 60-12, 90-15
Cases cited:

Applicant WAEE v Minister for Immigration and Multicultural and Indigenous Affairs (2003) 236 FCR 593

Clifford v Tax Practitioners Board [2023] FCA 1256 Clifford and Tax Practitioners Board [2023] AATA 2068

Collector of Customs v Pozzolanic Enterprises Pty Ltd (1993) 43 FCR 280

Kuswardana v Minister for Immigration and Ethnic Affairs (1981) 35 ALR 186

LogicAccountants & Tax Professionals Pty Ltd v Tax Practitioners Board [2022] FCA 830

Minister for Immigration and Ethnic Affairs v Wu Shan Liang (1996) 185 CLR 259

Schmuel and Tax Practitioners Board [2019] AATA 2168

Stasos v Tax Agents’ Board [1990] FCA 379; 21 ALD 437

Su v Tax Agents’ Board of South Australia (1982) 61 FLR 1

Transport Accident Commission v Bausch [1998] 4 VR 249
Division: General Division
Registry: Queensland
National Practice Area: Administrative and Constitutional Law and Human Rights
Number of paragraphs: 120
Date of hearing: 24 October 2023
Counsel for the Applicant: D Morgan
Solicitor for the Applicant: Mills Oakley
Counsel for the Respondent: L Molesworth
Solicitor for the Respondent: Sparke Helmore Lawyers

ORDERS

QUD 341 of 2023
BETWEEN:

JENNIFER LILIAN CLIFFORD

Applicant
AND:

TAX PRACTITIONERS BOARD

Respondent

ORDER MADE BY:

HORAN J

DATE OF ORDER:

24 MAY 2024

THE COURT ORDERS THAT:

1.The applicant is granted leave to rely on the proposed amended notice of appeal dated 23 September 2023.

2.The appeal be dismissed.

3.The applicant pay the respondent’s costs as taxed or agreed.

Note:   Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.


REASONS FOR JUDGMENT

HORAN J:

INTRODUCTION

  1. On 14 July 2023, the Administrative Appeals Tribunal affirmed a decision of the Tax Practitioners

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Details
Case
[2024] FCA 557
Decision Date

CaseChat Overview and Summary

The appeal was brought by the applicant, a registered tax agent, against the decision of the Administrative Appeals Tribunal (the "Tribunal") which affirmed the decision of the Tax Practitioners Board (the "Board") to terminate the applicant's registration as a tax agent. The decision was made under section 40-5(1) of the Tax Agent Services Act 2009 (Cth) for ceasing to meet the tax practitioner registration requirements. The Board and the Tribunal found that the applicant had breached the Code of Professional Conduct and was not a "fit and proper person" to hold registration. The applicant was also prohibited from reapplying for registration as a tax agent for 18 months. The applicant appealed to the court, arguing that the Tribunal was legally required to consider alternative lesser sanctions under Subdivision 30-B when exercising its discretion to terminate registration under section 40-5(1) and that the Tribunal failed to consider circumstances that the applicant was winding down her practice and the prejudice to her existing clients caused by the termination of registration.

The court had to determine whether the Tribunal erred in not considering the alternative sanctions available under Subdivision 30-B of the Tax Agent Services Act 2009 (Cth) and whether the Tribunal failed to take into account that the applicant was in the process of winding down her practice and that the termination of her registration would cause prejudice to her existing clients. The court found that the Tribunal had not erred in its decision. The Tribunal had considered the applicant's submissions and the evidence provided, and had determined that the termination of registration was the appropriate decision in the circumstances. The Tribunal had also considered the impact of the termination on the applicant's existing clients, and had granted a stay of the decision to allow the applicant to complete her current work and minimise the impact on her clients. The court held that the Tribunal's decision was not unreasonable or unjust, and that the applicant had not established any error in the Tribunal's reasons.

The court dismissed the appeal and ordered that the applicant pay the respondent's costs as taxed or agreed. The court found that the Tribunal had properly exercised its discretion in affirming the Board's decision to terminate the applicant's registration, and that the Tribunal had not failed to consider the alternative sanctions or the relevant considerations. The court held that the Tribunal's decision was supported by the evidence and was not affected by any error of law. The court also held that the applicant's appeal was not well-founded and that the costs order was appropriate.

Orders

Orders of the court

1. The applicant is granted leave to rely on the proposed amended notice of appeal dated 23 September 2023.

2. The appeal be dismissed.

3. The applicant pay the respondent’s costs as taxed or agreed.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

Accordingly, while I grant leave to the applicant to rely on the amended notice of appeal dated 26 September 2023, the appeal is dismissed.BACKGROUND The applicant has been a registered tax agent since 31 July 1987 and has operated her own practice as a sole practitioner since around 1988. On 1 February 2021, after having received information from the Australian Taxation Office (ATO), the Board wrote to the applicant raising concerns that she may not have been complying with her obligations as a registered tax practitioner. In particular, the applicant was informed that information available to the Board indicated that annual returns in relation to self-managed superannuation funds (SMSFs) lodged under the applicant’s registration number may have contained incorrect information, and that the applicant may have failed to comply with the ATO’s requests for information relating to those SMSF annual returns, including requests for the provision of a copy of the approved SMSF auditor’s report. The Board requested that the applicant review the annual returns of two identified SMSF clients lodged for the 2018 financial year and advise whether the SMSF auditor number listed on those returns was correct, including by providing evidence to demonstrate that the SMSF annual return was audited or explaining why the annual return was not audited prior to lodgement. The Board’s letter also noted that the applicant may have outstanding personal taxation obligations. The ATO records available to the Board indicated that she had an outstanding income tax debt of $193,522.07. The Board requested that the applicant immediately address any outstanding personal tax obligations. On 23 February 2021, the applicant provided a response to the Board’s requests. The applicant’s response set out some background to her circumstances, including that she was a sole practitioner, that she had experienced serious illnesses since 2004 that had prevented her from working for some periods of time, and that she had faced a range of challenges in her personal life in connection with the management of rental properties and their associated debt and “various serious family issues”. As a consequence, the applicant stated that: After 2007 I had to start letting most of my large clients go to get back to a number of clients that I could manage with only working 40 to 50 hours a week and my lodgement numbers started to decline steeply. The applicant stated that she was now lodging less than 400 tax returns a year, whereas at the highest level of her practice (in around 2006) she was lodging over 1,000 tax returns annually and “working up to 100 hours a week”. The applicant continued:I have been struggling every year since 2004 to complete all my Tax Return Lodgements within the Lodgement requirement time but I am hopeful to get caught up by the end of this financial year. In respect of her personal tax liability, the applicant stated that she “should have this debt cleared by the end of the financial year” upon the sale of two of her rental properties.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

By letter dated 9 August 2022, the Board advised the applicant of its decision to terminate her registration as a tax agent, taking effect from 6 September 2022, and that she may not apply for registration for a period of two years.THE TRIBUNAL’S DECISIONApplication for review On 5 September 2022, the applicant applied to the Tribunal for review of the Board’s decision. In her application, the applicant contended that the Board’s decision was wrong because it was made at a time when she was going through an ongoing illness, was trying to work in her accounting practice as a sole trader at her busiest time of year, and was “being singled out by [the] ATO for several other matters that all required long, detailed answers that I didn’t have the time or state of health to comply with on time”. The applicant also sought a stay of the Board’s decision pending the hearing and determination by the Tribunal of the review application. An interim stay was granted on 15 September 2022 pursuant to s 41(2) of the AAT Act on the condition that the applicant did not “undertake any new clients”. The interlocutory stay application was listed for hearing by the Tribunal on 27 October 2022, but was dismissed under s 42A(2) of the AAT Act when the applicant failed to appear at the interlocutory hearing. The Tribunal subsequently reinstated the stay application under s 42A(9) of the AAT Act, based on its acceptance of medical evidence explaining the applicant’s failure to attend the interlocutory hearing. On 29 March 2023, the Tribunal ordered that the Board’s decision be stayed until the hearing and determination of the review or further order, upon the condition “that the applicant will not accept instructions from any new clients”. In giving brief reasons for granting the stay, the Tribunal noted that its decision was “[m]ainly in the interests of the various clients [of the applicant] whose documents are late and cannot be lodged by the applicant unless a stay is ordered”.Tribunal hearing In its statement of issues, facts and contentions (SOFIC) dated 21 April 2023, the Board identified the issues arising for determination as: (a)whether the applicant breached ss 30-10(1), 30‑10(2), 30-10(7) and 30-10(14) of the Code; (b)whether the applicant ceased to meet the tax practitioner registration requirement that she is a fit and proper person as required by s 20‑5(1)(a) of the TAS Act; and (c)if so, the correctness of the Board’s decisions to terminate the applicant’s tax agent registration pursuant to s 40-5(1)(b) of the TAS Act and determine that she may not apply for registration for a period of two years pursuant to s 40-25(1) of the TAS Act. In lieu of a statement of issues, facts and contentions, the applicant indicated in an email to the Tribunal dated 12 May 2023 that she would be relying on all previous correspondence submitted to the Board and to the Tribunal, and would subsequently provide written submissions for the hearing in accordance with the Tribunal’s directions.

Ratio Decidendi

Legal Principle Established

Part 6 of the TAS Act establishes the Board and sets out its function and powers, including a framework for the conduct of investigations by the Board. Subdivision 60-E deals with investigations by the Board. Among other things, the Board may investigate any conduct that may breach the TAS Act (which includes the Code): s 60-95(1)(b). An investigation is commenced by the Board giving the person a notice in writing. Section 60-125 deals with the outcomes of investigations. Relevantly, s 60-125(2) provides:Investigation relating to whether conduct breaches this Act(2) If the Board investigates conduct under section 60-95 and finds that the conduct breaches this Act, the Board must either:(a) make a decision that no further action will be taken; or (b) do one or more of the following (i)impose one or more sanctions under Subdivision 30-B;(ii)terminate an entity’s registration under Subdivision 40-A;(iii)apply to the *Federal Court for an order for payment of a pecuniary penalty under Subdivision 50-C;(iv)apply to the Federal Court for an injunction under section 70‑5. Note: The Board may terminate an entity’s registration under Subdivision 40-A without investigating conduct under section 60-95.CONSIDERATION The applicant relies on two grounds of appeal: (a)first, in deciding to affirm the decision to terminate the applicant’s registration, the Tribunal erred in failing to consider alternative sanctions available under subdivision 30-B of the TAS Act (the “alternative sanctions ground”); and(b)secondly, the Tribunal erred in failing to take into account two mandatory relevant considerations, namely that the applicant was in the process of winding down her practice and was no longer accepting new clients, and that the termination of her registration would cause prejudice to her existing clients (the “relevant considerations ground”). The applicant requires leave to amend her notice of appeal to include the relevant considerations ground (and the associated question of law). At the hearing, the Board opposed the grant of leave. As noted earlier in these reasons, the Board did not submit that the proposed amendment gave rise to any prejudice, but rather opposed the grant of leave on the basis that the additional ground did not have any substantive merit. The parties provided written and oral submissions addressing the relevant considerations ground. On balance, I consider that the relevant considerations ground is sufficiently arguable to warrant the grant of leave to amend. I will proceed to address the substance of this ground of appeal below.The alternative sanctions ground The applicant submits that the Tribunal was required to reach the correct or preferable decision, exercising all of the powers and discretions of the original decision-maker. In the circumstances of the present case, the applicant submits that this required the Tribunal to consider whether the decision to terminate the applicant’s registration was preferable to other decisions that it had the power to make.