Commissioner of Taxation v Doudle

[2005] SASC 442

Supreme Court of South Australia

(Magistrates Appeals: Criminal)

COMMISSIONER OF TAXATION v DOUDLE

Judgment of The Honourable Justice Debelle (ex tempore)

21 November 2005

CRIMINAL LAW - JURISDICTION, PRACTICE AND PROCEDURE - JUDGMENT AND PUNISHMENT - SENTENCE

Appeal against sentence - failure to lodge tax return - respondent fined but no conviction recorded - whether appeal subject to Everett v The Queen (1994) 181 CLR 295 - whether Crimes Act (Cth) permits imposition of fine without conviction - whether respondent liable to cancellation of registration as tax agent - held, no power to impose fine without conviction - appeal allowed.

Crimes Act 1914 (Cth) s 16A, s 19B; Income Tax Assessment Act 1936 (Cth) s 251BC, s 251JA, s 251JC, s 251K; Taxation Administration Act 1953 (Cth) s 8C; Criminal Law (Sentencing) Act 1988 (SA) s 16; Magistrates Court Act 1991 s 42, referred to.
Federal Commissioner of Taxation v Baffsky (2001) 192 ALR 92; Lanham v Brake (1983) 34 SASR 578, applied.
Police v Cadd (1997) 69 SASR 150, distinguished.
Cobiac v Liddy (1969) 119 CLR 257; Everett v The Queen (1994) 181 CLR 295; Kelton v Uren (1981) 27 SASR 92; McQuestin v Australian Securities Commission (1993) 2 Tas R 30; Morrison v Peers (1995) 87 LGERA 39; Nitschke v Halliday (1982) 30 SASR 119; Olds v Daire (1982) 29 SASR 133; O'Sullivan v Wilkinson [1952] SASR 213; R v Luscombe (1999) 168 ALR 227, considered.

COMMISSIONER OF TAXATION v DOUDLE
[2005] SASC 442

Magistrates Appeal:  Criminal

1. DEBELLE J.        The Commissioner of Taxation appeals against the refusal of a magistrate to convict a person who had pleaded guilty to an offence against the Taxation Administration Act 1953 (Cth) (“the Administration Act”).

2. On 24 March 2005 the respondent was charged on complaint in the Adelaide Magistrates Court with failing to lodge an income tax return for the financial year ending 30 June 2003, contrary to s 8C(1)(a) of the Administration Act.  On 2 September 2005 the respondent pleaded guilty.  Mr Coppola, who then appeared for the respondent, had submitted that the magistrate should not convict the appellant.  The magistrate did not record a conviction and gave brief reasons for his decision.  The magistrate ordered that the respondent pay a fine of $500 and costs totalling $198.

3. The Commissioner appeals on four grounds.  They are:

   1.the sentence imposed by the magistrate was manifestly inadequate;

   2.the magistrate paid insufficient regard to the need for general deterrence;

   3.the magistrate placed too much weight on the finding that a conviction may place the respondent’s livelihood in jeopardy; and

   4.the magistrate had no power to impose a fine without recording a conviction.

   On the hearing of this appeal, Mr Fisher, who appeared for the Commissioner, stated that the Commissioner does not appeal against the amount of the fine.  The only issue of substance in the appeal is whether the magistrate erred in not recording a conviction.

   A Restricted Right Of Appeal?

4. The appeal is brought pursuant to s 42 of the Magistrates Courts Act 1991. The Commissioner also had a right of appeal, pursuant to the terms of s 19B(3)(b) of the Crimes Act1914 (Cth): R v Luscombe (1999) 168 ALR 227.

5. Mr Barnett, who appeared for the respondent, contended that I should apply the reasoning of the majority in Police v Cadd (1997) 69 SASR 150 and hold that this appeal should be subject to the principles expressed in Everett v The Queen (1994) 181 CLR 295. Mr Fisher, for the Commissioner, contended there was no such restraint, relying on the observation of Doyle CJ in Police v Cadd at 159, where the Chief Justice said:

   I add that in my opinion the restrictions expounded in Everett on prosecution appeals do not apply in relation to an appeal against a non‑custodial sentence.

   In Police v Cadd Lander J, with whom Bleby J agreed on this point, expressed the view that an appeal pursuant to s 42 of the Magistrates Courts Act was not subject to the principles expressed in Everett v The Queen.  The conclusion reached by the Chief Justice is the same as that reached by Lander and Bleby JJ, namely, that the principles in Everett do not apply. I refer to the reasons of Lander J at 185 - 196. I agree with the substance of those reasons. Although, as Mr Barnett correctly pointed out, the remarks of the Chief Justice are, strictly speaking, obiter dicta, in my view, the principles in Everett v The Queen do not apply to the particular circumstances of this case where there is no non‑custodial sentence.  Different considerations might, as Mr Barnett pointed out, apply in circumstances where a magistrate refuses to order a conviction but the prosecution appeal seeks a custodial sentence.  That is a matter which can be considered on another occasion.  In reaching this view I have had regard to, as I say, the substance of the reasons of Lander J.  There is, therefore, an unrestricted right of appeal in the circumstances of this matter.

   The Circumstances Of The Offending

6. The respondent was late in filing his income tax return for the year ending 30 June 2003.  By notice dated 29 November 2004, he was required to lodge it on or before 20 December 2004.  He failed to do so.  The complaint was issued on 24 March 2005. The respondent did not lodge his return until 23 May 2005.  The respondent was assessed for income tax in a sum totalling a little over $5000.  He has paid the income tax.  He has filed his return for the year ending 30 June 2004.

   A Submission Not To Convict

7. When inviting the magistrate not to record a conviction Mr Coppola relied on the following facts, facts which Mr Barnett reiterated on this appeal.  The appellant as aged 37 years.  He is a registered tax agent and qualified as such in 1993.  He conducts an accounting business which trades under the name or style “Complete Business Services”.  The business operates in Port Lincoln and in Ceduna, providing accounting and advisory services as well as the preparation of income tax returns.  The respondent is the only registered tax agent in the business.

8. Mr Coppola submitted to the magistrate that the respondent would suffer hardship if convicted in that, if a conviction was recorded, the respondent will be liable to have his registration as a tax agent cancelled or suspended.  He submitted that the respondent had been late in lodging his income tax return because he had been giving priority to the lodgement of returns on behalf of his clients.  He submitted that it was unlikely that the respondent would re-offend.

9. The application that a conviction not be ordered was opposed by the prosecutor appearing on behalf of the Commissioner.

   No Conviction

10. The magistrate made the following remarks when deciding not to record a conviction:

    I take into account all those matters and exercise my discretion in favour of the defendant on this occasion, and refrain from recording a conviction.

    I do so on the basis that the defendant has come before the court with no prior record.  He has no history of failures to lodge or comply with notices.  He has now lodged the returns.

    He was assessed with a tax liability in excess of $5,000 which I understand he has now paid.  He has filed the subsequent succeeding years return and he is about to lodge the 2005 return.  Those are indicators to me that the defendant is unlikely to re‑offend.

    I also take into account the submission and the concession that his licence or permit or authorisation to act as an agent in taxation matters would be affected if a conviction was recorded.

    Without conviction, there will be a fine of $500 together with court costs and prosecution costs.

    It is clear that the magistrate acceded to the submissions made on behalf of the respondent.

11. It is apparent from these remarks that an important factor influencing the magistrate not to record a conviction was the fact that it might adversely affect the registration of the respondent as a tax agent.  In his reasons the magistrate states that the Commissioner conceded that the registration of the respondent might be affected.  In her affidavit filed in support of this appeal, Ms Sarney, who had appeared before the magistrate, states that she informed the magistrate that a conviction does not mean automatic deregistration as a registered tax agent but that the issue would be reviewed by the Tax Agents Board, at which time the defendant would be given opportunity to explain his actions.  This statement is inconsistent with part of the sentencing remarks of the magistrate.  I have decided not to ask the magistrate to report on this issue because, in all the circumstances, it is of no consequence whether the concession was, in fact, made.  The true position is that the conviction of the respondent would not automatically affect the registration of the respondent as a tax agent.  The reasons for that conclusion follow.  Before noting that issue, it is necessary to deal with other issues.

    Section 19B – A Two Stage Process

12. Although not expressly stated, it appears the magistrate was acting pursuant to s 19B of the Crimes Act1914 (Cth) when he discharged the respondent without convicting him. However, his sentencing remarks include an expression which suggest he might have had the provisions of s 16 of the Criminal Law (Sentencing) Act1988 (SA) in mind. I refer to the sentence reading “Those are indicators to me that the defendant is unlikely to re‑offend”. That sentence suggests a reference to a prerequisite in s 16(1) of the Criminal Law (Sentencing) Act1988, which must be satisfied if a conviction is not to be recorded. Nevertheless, I put this to one side and proceed on the footing the magistrate was purporting to act pursuant to s 19B of the Crimes Act.

13. When considering whether to exercise the discretion vested in it by s 19B, the court must engage in a two-stage process. The first is to identify the factor or factors listed in paras. (i), (ii) and (iii) of s 19B(1)(b) which are relevant. The second is, having regard to the factor or factors so identified, to determine whether it is “inexpedient to inflict any punishment” or whether some other conclusions for which the paragraph provides should be reached: Federal Commissioner of Taxation v Baffsky (2001) 192 ALR 92 at [10]. In short, as Cox J said earlier in Lanham v Brake (1983) 34 SASR 578 at 580:

    Before a court may exercise a power conferred by s 19B, it must be satisfied the charge is proved, find that one or more of the par (b) matters has a relevant operation, and then decide that such matter or matters can reasonably support the exercise of the statutory discretion.

    The scope of the considerations relevant to sentence is determined by s 16A of the Crimes Act. That is apparent from the terms of s 16A(1) and (3): see also Baffsky at [15]. As is apparent from the use of the disjunctive “or” in s 19B(1)(b), the grounds listed in paras (i), (ii) and (iii) are in the alternative.

14. The sentencing remarks of the magistrate disclose that he relied on two factors.  The first was the character of the respondent.  In this respect, he relied on the fact that the respondent had no prior record, no history of failing to comply with notices issued by the commissioner, and that he had lodged a return for 2004.  The second was that the respondent’s registration as a tax agent might be affected if a conviction was recorded.

    Compliance With Statutory Obligation

15. While relevant, the fact that the respondent has no prior convictions is, in the particular circumstances of this case, a factor which carries little weight.  It is not uncommon for offences of this kind to be committed by persons who have no previous convictions.  The fact that the offender has no previous convictions is not, standing alone, a sufficient ground not to record a conviction, especially when regard is had to the scope and purpose of the legislation.  As Jacobs J said in Kelton v Uren (1981) 27 SASR 92 at 94:

    It is a fiscal measure which imposes obligations and burdens upon the whole community and it would defeat the purpose of the legislation if the courts were to condone the neglect of those obligations and possible avoidance of the burdens in the case of a first offender simply because he is a first offender.  More particularly is that so when administrative steps have been taken prior to prosecution to remind a defaulter of his obligations.

    The fact that the respondent had lodged his returns for 2004 does not add anything.  That fact demonstrates no more than that the respondent was fulfilling his obligations as a taxpayer.  For these reasons, there was nothing in the character of the respondent which, standing alone, would justify the decision not to convict the respondent.

16. This conclusion is reinforced by the fact that this offence was the usual kind of offending, a run-of-the-mill case of its type.  Notwithstanding a notice dated 29 November 2004 requiring the respondent to lodge the return on or before 20 December 2004, the respondent did not lodge the return until 23 May 2005, almost six months after the notice and five months later than the date specified in the notice.  This was not a case of a delay of one or two days only, but of a number of months.  Furthermore, the return was not lodged until after the complaint and summons had been issued and served.  These facts only serve to emphasise how the intent of the legislation would be defeated if convictions were not recorded in the case of a first offender.  There would be little to deter those minded to lodge late returns.  The recitation of the facts also indicates that it might be a kindness to describe it as a run-of-the-mill case of its type.

    The Relevance Of Professional Standing

17. It was relevant to consider whether the conviction would have had consequences for the continued registration of the respondent as a tax agent. The professional status of an offender is within the broad meaning of “antecedents” in s 19B(1) and in s 16A(2) and is relevant to the issue of adequate punishment in s 16A(2)(k): Baffsky at [35]. Examples of instances where regard has been had to the effect of a conviction on a person’s professional status are Morrison v Peers (1995) 87 LGERA 39 at 42, Thornelow v Filipowski (2001) 52 NSWLR 60 at [57] – [112], and McQuestin v Australian Securities Commission (1993) 2 Tas R 30.

    No Automatic Cancellation

18. The registration of tax agents is regulated by Part VIIA of the Income Tax Assessment Act1936 (Cth) (“the Assessment Act”). If an applicant for registration is a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters, the Tax Agents Board (“the Board”) must register the applicant as a tax agent if the applicant satisfies the other relevant criteria in s 251JA. In s 251JA and elsewhere in Part VIIA of the Assessment Act, the expression “fit and proper person” is used as part of the broader expression “a fit and proper person to prepare income tax returns and transact business on behalf of tax payers in income tax matters”.  For convenience, I will simply use the expression “fit and proper person to prepare income tax returns”.

19. The registration of the respondent demonstrates that the Board considered the respondent to be a fit and proper person to prepare income tax returns. The Board is required to re-register the respondent as a tax agent if he continues to be a fit and proper person to prepare income tax returns and not an undischarged bankrupt: see s 251JC(1) of the Assessment Act.  The Board is invested by s 251K(1) with power to suspend or cancel the registration of a tax agent who has been convicted of the crimes which are listed in that subsection.  The offence committed by the respondent is not listed in s 251K(1).

20. The Board is also invested with power to suspend or cancel the registration of a tax agent if the Board is satisfied that the agent is not a fit and proper person to prepare income tax returns: see s 251K(2)(d).  Section 251BC(1) defines a “fit and proper person” to prepare income tax returns for this purpose.

    251BC(1)   Without limiting the generality of an expression used in this Part, but subject to this section, a person is not a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters, as at a particular time, if:

    (a)     the person is not a natural person;

    (b)     both of the following conditions are satisfied:

    (i)the person was not registered as a tax agent, or as a nominee, for the purpose of this Part immediately before the commencement of section 39 of the Taxation Laws Amendment Act (No 2) 1988;

    (ii)the person does not hold such qualifications (whether academic, by way of experience or otherwise) as are prescribed;

    (c)     the person has not attained the age of 18 years;

    (d)     the person is not of good fame, integrity and character;

    (e)     the person has been convicted of a serious taxation offence during the previous 5 years; or

    (f)    the person is under sentence of imprisonment for a serious taxation offence.

    The only relevant provisions in s 251BC(1) are paras (d) and (e).  However, para (e) does not apply, because the respondent was not convicted of a serious tax offence.

21. [A serious tax offence is defined by s 251A of the Assessment Act to mean, among other things:

    (c)     An offence that is:

    (i)a taxation offence within the meaning of Part III of the Taxation Administration Act 1953; and

    (ii)punishable on conviction by either or both of the following:

    AA fine exceeding $2,000;

    BImprisonment

    As this was the first occasion on which the respondent had offended against s 8C of the Administration Act, the maximum penalty was a fine of $2000. Thus, while s 8C is a taxation offence within the meaning of Part 3 of the Administration Act, the offending in this case was punishable by a fine not exceeding $2000 or imprisonment, and so was not a serious taxation offence.]

22. It is necessary to have regard also to s 251BC(3) of the Assessment Act which provides:

    251BC(3)   Where:

    (a)     a Board is required, in considering an application for:

    (i)re-registration as a tax agent; or

    (ii)re-registration of a nominee of a tax agent;

    to decide whether the Board is satisfied that a particular person is a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters;

    (b)     the person is not under sentence of imprisonment for a serious taxation offence; and

    (c)     the Board is satisfied that, because of special circumstances:

    (i)a conviction of the person;

    (ii)the doing of an act or thing by the person; or

    (iii)an omission of the person

    should be disregarded;

    the Board may, in making the decision referred to in paragraph (a), disregard the conviction, the doing of the act or thing or the omission, as the case requires.

    The Board, therefore, has a discretion to disregard a conviction when considering re-registration.

23. It is necessary to note also that the power vested in the Board by s 251K(2)(d) to suspend or cancel registration of a tax agent on the ground the agent is not a fit and proper person to prepare income tax returns.  That power enables the Board to have regard to all matters affecting the fitness of the agent to prepare income tax returns.  In this respect, it is to be noted that the definition in s 251BC(1) expressly states that it does not limit the generality of the expression “fit and proper person to prepare income tax returns” . Thus, where a tax agent has been found guilty of a taxation offence, but a conviction is not recorded, the Board may, nevertheless, examine the circumstances of the offending and consider whether the tax agent is a fit and proper person to prepare income tax returns.  Thus, the question whether or not a conviction was recorded has little bearing on the issue of cancellation or suspension of the respondent’s registration or upon the issue of re-registration.

1. For these reasons, the recording of a conviction would not have automatically led to the suspension or cancellation of the registration of the respondent as a tax agent nor would it have been an automatic bar to re‑registration.  A conviction would have been a matter to which the Board could have had regard when considering the exercise of its discretion whether to suspend or cancel the respondent’s registration or not to renew it, but, equally, it could have considered the offending even if a conviction were not recorded.

2. In short, the entitlement of the respondent to registration as a tax agent was equally affected by the offending whether or not he was, in fact, convicted. The magistrate, therefore, erred in relying on that factor. In particular, the conviction would not have resulted in automatic suspension or cancellation of his registration as a tax agent.

   An Unlawful Order

3. The magistrate erred in one further respect. The terms of s 19B do not permit the imposition of a fine without recording a conviction which the magistrate purported to order. The nature of the orders which might be made by a magistrate are spelled out in s 19B. The discretion vested in the magistrate permits the magistrate either to convict and impose the appropriate penalty or to dismiss the charge or to discharge the person without proceeding to conviction upon that person entering into what is commonly called a bond to be of good behaviour. In this case, the magistrate purported to dismiss the charge and fine the respondent. This is not permitted by s 19B. In this respect, I adopt the reasons of Gleeson CJ in R v Ingrassia (1997) 41 NSWLR 447. Although the reasons of Gleeson CJ concern s 556A of the Crimes Act 1900 (NSW), the relevant provisions are similar in effect to s 19B.

   Conclusion

4. If there is a reasonable basis for the exercise of the discretion conferred by s 19B, it is not for an appellate court to substitute its own view of the way in which the discretion should have been exercised by the court at first instance. However, I believe that it is appropriate to do so in this case because the magistrate has erred in having regard to one factor which, though relevant, had very little weight, namely, the fact the respondent had no prior convictions, and an irrelevant factor in this case, namely, the effect of the conviction on the registration of the respondent as a tax agent being automatic. In addition, he has misused the power in s 19B. As Cox J noted in Lanham v Brake at 585:

   The exercise of the discretion vested in a court by s 19B requires no more than the mere establishment of one of the conditions in para (b) of s 19B(1).

   In this context, the remarks of Windeyer J in Cobiac v Liddy (1969) 119 CLR, 257 at 276 are apposite:

   The Act speaks of the court exercising the power it confers “having regard to” the matters it states.  I read that as meaning more than merely noticing that one or more of them exists.  Its, or their, existence must, it seems to me, reasonably support the exercise of the discretion the Statute gives.  They are not mere pegs on which to hang leniency dictated by some extraneous and idiosyncratic consideration.  But they are wide words.  None of the matters they connote is necessarily to be regarded in isolation from the others, or apart from the whole of the circumstances of the offender and the offence.  (Emphasis added)

   When deciding whether to exercise the discretion, it is necessary to consider the matters listed in s 19B(1) against the totality of the circumstances relating to the offence and to the offender, as well as to the policy of the relevant legislation, in particular, the intent in relation to the offence charged: Nitschke v Halliday (1982) 30 SASR 119 at 122-123 and Lanham v Brake at 585 and the cases there cited.

5. As I have said, this was a run-of-the-mill offence. It was certainly not a trivial offence but, instead, a typical breach of s 8C. What is a trivial offence will depend upon the policy of the relevant legislation and the circumstances of the offending. In this context, the offending will not be trivial, unless there is something which clearly distinguishes the particular breach of the section under consideration from what might be regarded as a typical breach of the section: Kelton v Uren at 93. There was nothing which took the offending in this case out of the ordinary case. Furthermore, the offending was more towards the serious end of offending of this kind, given that the return was lodged five months after the due date and after the summons had been issued and served.

6. Similarly, there were no extenuating circumstances to justify the exercise of the discretion.  Extenuating circumstances are circumstances which excuse in some appreciable degree the commission of the offence: O’Sullivan v Wilkinson [1952] SASR 213 at 218. It is something which reduces the degree of culpability attaching to the offender: Nitschke v Halliday at 122, that is to say, something special and mitigating in the factual background of the offence: Olds v Daire (1982) 29 SASR 133 at 135 - 136. There was nothing about the offending by the respondent or the circumstances attending it which constituted extenuating circumstances. To the extent that the respondent relied on the fact that he gave priority to lodging returns of his client, that speaks of a lack of organisation of his business. It is not an extenuating circumstance.

7. Mr Barnett submitted that the appropriate order would be to set aside the fine and discharge the respondent upon his entering into a bond to be of good behaviour.  Whilst I understand the reasons for that submission, I do not believe that is an appropriate course to adopt in this case.  The circumstances of the offending were, for reasons I have already set out, of such a kind that there is no basis upon which it is appropriate not to record a conviction.

8. The respondent does not point to any other factor which would justify exercise of discretion of s 19B. For these reasons, I would allow the appeal. The order of the magistrate will be varied by adding to it an order that the respondent be convicted. The orders will therefore be:

   1.Appeal allowed.

   2.Vary the order of the magistrate by adding an order that the respondent be convicted.

   3.The respondent to pay the appellant’s costs fixed in the sum of $150.