Cowlishaw v Tax Agents' Board of Queensland

[2000] FCA 827

FEDERAL COURT OF AUSTRALIA

Cowlishaw v Tax Agents’ Board of Queensland   [2000] FCA 827

ADMINISTRATIVE LAW - validity of Administrative Appeals Tribunal decision to affirm suspension imposed by Tax Agents’ Board - evidential limits on test of fitness to practice - significance of partner’s conduct when determining whether agent a “fit and proper person” to conduct business - analysis of Tribunal’s failure to address factors relevant to that inquiry - whether evidence to support findings made

WORDS AND PHRASES - “fit and proper person”

Income Tax Assessment Act 1936 (Cth), s 251K(2)

Briginshaw v Briginshaw (1938) 60 CLR 336 referred to
Tax Agents’ Board of Queensland v Haddad (1994) 48 FCR 223 referred to
Hughes and Vale Pty Ltd v New South Wales (No 2) (1955) 93 CLR 127 referred to
Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 referred to
Minister for Immigration and Ethnic Affairs v Conyngham (1986) 11 FCR 528 referred to
Marrickville Council v Minister for the Environment, Sport and Territories (1996) 45 ALD 39 referred to

GEM ANN COWLISHAW v TAX AGENTS’ BOARD OF QUEENSLAND
Q 203 OF 1999

KIEFEL J
BRISBANE
20 JUNE 2000

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	Q 203 OF 1999

BETWEEN:	GEM ANN COWLISHAW APPLICANT
AND:	TAX AGENTS’ BOARD OF QUEENSLAND RESPONDENT
JUDGE:	KIEFEL J
DATE OF ORDER:	20 JUNE 2000
WHERE MADE:	BRISBANE

THE COURT ORDERS THAT:

1.The decision of the Administrative Appeals Tribunal made on 25 May 1999, so far as it related to the applicant, be set aside.

2.The respondent pay the applicant’s costs of the application.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	Q 203 OF 1999

BETWEEN:	GEM ANN COWLISHAW APPLICANT
AND:	TAX AGENTS’ BOARD OF QUEENSLAND RESPONDENT

JUDGE:	KIEFEL J
DATE:	20 JUNE 2000
PLACE:	BRISBANE

REASONS FOR JUDGMENT

1. Mrs Cowlishaw and her husband were at the relevant time each registered as tax agents, and they were the nominees and partners of Cowlishaw and Company which was also registered as a tax agent. On 13 March 1997, the Tax Agents’ Board of Queensland sent a letter to “The Partners, Cowlishaw & Co”, requiring them to show cause why their registration as a tax agent should not be suspended or cancelled pursuant to s 251K(2) of the Income Tax Assessment Act 1936 (Cth) (“the ITAA”). The conduct identified was:

   “You caused claims for work related expenses to be overclaimed in 1992/93 for …” (and listed twenty taxpayers).

   And further:

   “You caused undue delay in the completion of the following audits with the Australian Taxation Office …” (and listed twenty-two taxpayers).

2. The notice followed the receipt of a complaint by the Australian Taxation Office (“the ATO”) with respect to the tax agent “Cowlishaw & Co”, arising out of audits of the firm’s clients conducted by that office.  It was alleged that the agents did not meet the standards required and that their knowledge of taxation law and their general competence was in question.  The agents’ competence and integrity was questioned, in particular because of alleged delaying tactics employed by the agents. 

3. The Board subsequently resolved that the registration of Cowlishaw & Co as a tax agent be suspended for a period of one year, on the ground that it had neglected the business of a principal;  that that had been caused by the neglect of the partners and that “for those reasons, they were no longer fit and proper persons to prepare income tax returns and transact income tax business on behalf of taxpayers”.  It resolved to suspend both Mr and Mrs Cowlishaw for a period of twelve months from 28 July 1998 on that ground.

4. Application was made to the Administrative Appeals Tribunal to review those decisions.  On 25 May 1999, the Tribunal varied the decisions by suspending Mr Cowlishaw and the partnership until 1 July 2002, and Mrs Cowlishaw until 1 January 2000. 

5. Mrs Cowlishaw appeals from the last mentioned decision and seeks an order that the Tribunal’s decision be set aside, but that the matter not be remitted for rehearing.  The Board cross-appeals with respect to the suspension being specified to a particular day, rather than for a period of time.  The respondent points out that the Board’s decision was stayed on 2 October 1998 by the Tribunal and pending hearing, and was later extended to the date of decision, 25 May 1999.

6. Section 251K(2) of the ITAA provides that the Board may suspend or cancel the registration of any tax agent upon being satisfied, relevantly, that:

   “(b)     the tax agent:

   (i)        has neglected the business of a principal;  or
   …

   (c)a registered nominee of the tax agent is not a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters;

   (d)if the tax agent is a natural person - the tax agent is not a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters;

   …”.

7. The Tribunal accepted the evidence of the ATO officers of a failure on the part of “the applicants” to co-operate in their investigations, and expressed the view that that amounted to a serious breach of the proper conduct of a tax agent’s business and a serious neglect of the business of a tax agent.  It viewed the failure to treat the Board with proper respect, by reason of the applicants’ failure to adequately respond to correspondence, in the same light.  The case against Mr Cowlishaw consisted of evidence from former clients which, the Tribunal considered, “revealed the following deficiencies in the running of the Cowlishaw practice:

   (a)Failing to file tax returns within a reasonable time, or at all in some cases.

   (b)Failing to respond to telephone calls and correspondence.

   (c)Misleading clients by telling them that their returns had been filed with the ATO, when they had not.

   (d)Failing to pass on correspondence from the ATO to clients.”

8. It did not accept Mr Cowlishaw’s attempts to shift the blame to his clients and staff, and found that he had paid two of the clients in an attempt to prevent their making complaints to the appropriate authorities.  It then concluded that all these matters:

   “…constitute misconduct as a tax agent and … indicate that Thomas Cowlishaw is not a fit and proper person to prepare income tax returns or transact income business on behalf of taxpayers.”

9. The Tribunal then turned to consider the position of the applicant here, Mrs Cowlishaw:

   “19.     The applicant, GEM ANN COWLISHAW, is and was a partner of THOMAS COWLISHAW and part of the firm COWLISHAW AND CO.  Gem Cowlishaw was involved in that part of the business which dealt with corporate clients whereas Thomas Cowlishaw dealt with the returns of individuals.

   20.        Evidence was given to the Tribunal that various complainants telephoned Gem Cowlishaw to complain about the matters set out above.  Some of the complainants said that Mrs. Cowlishaw was rude to them.  The Tribunal makes no finding as to whether or not Mrs. Cowlishaw was rude to the clients of the practice but it is clear that she knew that the partnership was not performing properly in relation to those clients to whom she spoke on the telephone.  She does not seem to have done anything to assist in correcting the problems. 

   21.       Gem Cowlishaw also knew or should have known about the numerous requests for information from the officers of the ATO.   She did nothing to assist their enquires.  The Tribunal accepts that Gem Cowlishaw was placed in a difficult position, in that she was, and is, the spouse of the other partner.  Nevertheless, the Tribunal finds that as a partner who knew what the other partner was, or was not, doing she must bear responsibility for the poor state of affairs of the partnership, but not to the same extent as her partner.

   22.        The Tribunal adopts the observations made by Davies J. in Re Su and The Tax Agents’ Board of South Australia, 13 ATR 192, at 195, where he said:

   “The function of a tax agent is to prepare and lodge income tax returns for other persons.  A person is a fit and proper person to handle the affairs of a client if he is a person of good reputation, has a proper knowledge of taxation laws, is able to prepare income tax returns competently and is able to deal competently with any queries which may be raised by officers of the Taxation Department.  He should be a person of such competence and integrity that others may entrust their taxation affairs to his care.  He should be a person of such reputation and ability that officers of the Taxation Department may proceed upon the footing that the taxation returns lodged by the agent have been prepared by him honestly and competently.”

   23.      The Tribunal would be failing in its duty to the public to let the penalty of 12 months stand for Thomas Cowlishaw and Cowlishaw and Company.  The Tribunal will give Gem Cowlishaw the benefit of the doubt about her role in partnership affairs and leave her suspension at about the same level as the Tax Agents’ Board decision.”

10. Whilst expressed in a number of ways, the essential submission for the applicant was that there was no evidence to support a finding that she was not a fit and proper person to be a tax agent.  The applicant also submitted that, in addressing that question, the Tribunal failed to apply the high standard of proof which was appropriate given the seriousness of the allegations and the consequences which followed (see Briginshaw v Briginshaw (1938) 60 CLR 336).

11. The applicant submitted, and I accept, that the finding that a person is not a fit and proper person to carry out the business of a tax agent involves consideration of facts and circumstances relevant to that person.  In Tax Agents’ Board of Queensland v Haddad (1994) 48 FCR 223, 226, a Full Court of this Court held that the same phrase appearing in s 251JC ITAA in connexion with the re-registration of tax agents, anticipates that a decision will be made having regard to the individual circumstances affecting the applicant and the applicant’s practice. In Hughes and Vale Pty Ltd v New South Wales (No 2) (1955) 93 CLR 127, 156, it was observed that the words, used in connexion with the holding of office, were intended to give the widest scope for judgment. Fitness, however, could be said to involve three things: honesty, knowledge and ability. And in Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321, 380, Toohey and Gaudron JJ pointed out that the words derive their meaning from the activity in which the person has been or may be engaged. It is clear from what followed in their Honours’ judgment that questions as to the propriety of the conduct or what the evidence tells of the person’s character and reputation usually arise, and the latter may be sufficient to ground a finding that he or she is not a fit and proper person to conduct the activities in question.

12. A review of the evidence discloses that the complaints related to Mr Cowlishaw’s clients.  Mrs Cowlishaw did not have detailed knowledge of their files, although she became aware of complaints.  Some of them were brought to her attention by the clients involved.  On the few occasions referred to in the evidence, she dealt effectively with one, although in a curt and impolite manner; on another, she gave as reasons for the delays the same reasons ascribed by her husband; and in another she promised to bring the matter to his attention.  The complaints concerning Mrs Cowlishaw did not relate to her own work practices.  To the extent that she dealt with Mr Cowlishaw’s clients, and their complaints of delay in the preparation of their returns, the only reflection upon her was that she was at times abrupt or rude.  That was the principal complaint about her.

13. So far as concerned Mrs Cowlishaw’s knowledge of her husband’s files and the ATO investigations, it appeared that she knew of the audit and assisted in the preparation of the reply to it, but did not have specific knowledge of the individual files in question.  At a particular point in cross-examination she did accept that, as a partner, she would share some responsibility for the wrongdoing of the other partner.  As I will shortly discuss, the Tribunal’s reasoning appears to take this up.

14. The submission that the evidence could not support a direct finding that Mrs Cowlishaw was not a fit and proper person is correct, in my view.  The evidence did not permit findings relating to Mrs Cowlishaw’s ability, her work practices, or her honesty or integrity.  The Tribunal did not, however, make such findings.  It based its decision upon Mrs Cowlishaw’s responsibility as a partner, a matter to which I shall shortly turn.  So far as concerned her direct knowledge of the files not under her control and the audit of some of them, the Tribunal determined that she should be given “the benefit of the doubt about her role in partnership affairs”.  That amounts to a finding, in her favour, that she was not directly involved in the relevant matters and lacked knowledge of them and the resultant enquiries.  The Tribunal had (at par 21) made the finding that she “knew what the other partner was, or was not, doing” but, in context, it is clear that it was imputing that knowledge to her as a partner.  Critically, the Tribunal based its decision about Mrs Cowlishaw’s fitness to act as a tax agent upon the ground that she must, as a partner, bear some responsibility.  In my view that is not a sufficient basis for such a conclusion.

15. It follows from the requirement that a person’s own conduct, character or work practices be addressed in connexion with the enquiry whether they are a fit and proper person to conduct the business of a tax agent, that findings made with respect only to a partner’s conduct or propriety will not suffice. There would need to be evidence connecting the person to that conduct or from which some conclusion could be drawn about his or her own character, integrity and ability. No such findings were made and do not appear, in any event, to have been open. If the Tribunal had considered that it was open to the applicant, because of the extent of her knowledge about problems with her partner’s files, to have done more and that this reflects something about her own work practices or character, no such findings were made. As I have pointed out, the Tribunal appears to have accepted that she did not have that level of understanding. In holding that a suspension was appropriate by reason of a notion of partnership responsibility, in my view, the Tribunal failed to have regard to the meaning of the words in s 251K(2)(c) and (d) and the nature of the assessment necessary to be undertaken. These misdirections constitute errors of law.

16. In view of the decision I have reached, it is not necessary to deal with the contentions on the cross-appeal.  I observe only that they would appear to have had merit.  The effect of nominating a date for expiry of the suspension when a stay had been granted and a further stay was likely, was to substantially reduce the period of suspension which had been intended.

17. The Tribunal’s decision will be set aside.  The applicant also submits that the matter should not be remitted for rehearing; but that if it is, it ought to be heard by a Tribunal differently constituted.  I agree with the latter submission. 

1. If there remains a residual discretion in a second administrative decision maker and there is a prospect that there might be a different outcome, the matter should be remitted for further consideration:  see Minister for Immigration and Ethnic Affairs v Conyngham (1986) 11 FCR 528; Marrickville Council v Minister for the Environment, Sport and Territories (1996) 45 ALD 39, 49. It was not suggested that further evidence would be heard, or was available and I have expressed my views as to the dearth of it concerning Mrs Cowlishaw. I understand this to be the principal basis for the submission. What is not entirely clear to me is whether the Board contends that inferences or findings might be open concerning Mrs Cowlishaw’s conduct as a partner, although I have some doubt that that would be the case. In the circumstances, I propose to hear further submissions on the question of remittal or other appropriate orders.

2. The Board should pay the applicant’s costs.  There should be no orders for costs on the cross-appeal, which engaged little further time.

I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Kiefel.

Associate:

Dated:             20 June 2000

Counsel for the Applicant:	Mr M Robertson
Solicitor for the Applicant:	John Nagel & Co
Counsel for the Respondent:	Mr D O'Brien
Solicitor for the Respondent:	Australian Government Solicitor
Date of Hearing:	16 March 2000
Date of Judgment:	20 June 2000