Etmekdjian and Commissioner of Taxation (Taxation)

[2020] AATA 3821

Etmekdjian and Commissioner of Taxation (Taxation) [2020] AATA 3821 (1 October 2020)

Division:TAXATION AND COMMERCIAL DIVISION

File Number(s):      2020/1089

Re:Artin Etmekdjian

APPLICANT

AndCommissioner of Taxation

RESPONDENT

DECISION

Tribunal:Deputy President Bernard J McCabe

Date:1 October 2020

Place:Sydney

The decision under review is affirmed.

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Deputy President Bernard J McCabe

CATCHWORDS

SUPERANNUATION – application for waiver of disqualified status – where applicant disqualified person –  where delay in lodging application for waiver – whether exceptional circumstances exist – where applicant convicted of dishonestly influencing a Commonwealth public official – where applicant lodged appeal against severity of conviction – where Tribunal satisfied no exceptional circumstances – decision affirmed

LEGISLATION

Superannuation Industry (Supervision) Act 1993 (Cth) ss 120, 126B, 126D, 126K

CASES

Hunter Valley Developments Pty Ltd  v Cohen (1984) 7 ALD 315

Mourched and Commissioner of Taxation [2014] AATA 223

REASONS FOR DECISION

Deputy President Bernard J McCabe

1 October 2020

1. Managing a superannuation fund – even a small, self-managed fund – is a big responsibility. There is a public interest in managing these funds properly given the tax advantages they enjoy. To that end, the Superannuation Industry (Supervision) Act 1993 (Cth) (SISA) establishes rules designed to ensure prudent management. Part 15 of SISA includes rules regarding disqualified persons. A disqualified person may not be a trustee, investment manager or custodian of a superannuation entity, or be a responsible officer (such as a director) of a corporation that performs those roles: s 126K. A person can be disqualified by the Commissioner of Taxation (where the Commissioner is the regulator) or the Federal Court (where the Australian Prudential Regulatory Authority is the regulator) on a variety of grounds, but a person will be automatically disqualified in circumstances set out in s 120. Those circumstances include being “convicted of an offence against or arising out of a law of the Commonwealth, a State, a Territory or a foreign country, being an offence in respect of dishonest conduct”: s 120(1)(a)(i).

2. Section 126B of SISA permits an individual to seek a waiver of his or her status as a disqualified person provided the disqualification was not the product of a conviction for an offence involving serious dishonesty as defined in that section. If satisfied it is appropriate to do so, the Commissioner may issue the waiver under s 126D. Section 126B sets out requirements that must be observed in making the application for a waiver, including a time limit: the application for a waiver “must…be made within…14 days [of] the person’s conviction”: s 126B(3)(b). Section 126B(4) provides the Commissioner may agree to accept and consider an otherwise compliant application which is filed outside of the time limit “only if the Regulator is satisfied that there are exceptional circumstances that prevented the application from being made within that period”.

3. The applicant in these proceedings lodged his application under s 126B more than 14 days after he was convicted of an offence of dishonesty. He asked the Commissioner to exercise the discretion in s 126B(4), but the Commissioner has refused. The matter has now come before the Tribunal for review.

   THE APPLICATION FOR A WAIVER IN THIS CASE

4. The applicant in these proceedings is Mr Artin Etmekdjian. In late 2016, Mr Etmekdjian was charged with dishonestly influencing a Commonwealth public official under s 135.17 of the Commonwealth Criminal Code. The charge arose out of conduct that occurred in 2009. Mr Etmekdjian, an accountant, admitted he backdated three election forms on behalf of a taxpayer in contravention of s 139E of the Income Tax Assessment Act 1936 (Cth). He pleaded guilty at the Local Court hearing on 24 January 2017 and was sentenced on 11 April 2017. He subsequently appealed the magistrate’s sentence to the District Court. The sentence was varied on appeal on 28 June 2017.

5. The applicant also engaged with a number of other regulatory and accreditation bodies during 2017 and early 2018, including:

   ·the Australian Securities and Investments Commission (ASIC) in relation to orders that he be disqualified from managing a corporation;

   ·the Tax Practitioners Board (the TPB) in relation to an allegation that he was not a fit and proper person to remain registered as a tax agent;

   ·the professional conduct committee of Chartered Accountants Australia and New Zealand, which was considering whether he should be subject to disciplinary proceedings;

   ·the New South Wales Department of Justice in connection with his registration as a justice of the peace; and

   ·the City of Ryde Council which was considering whether he was disqualified from holding civic offer pursuant to s 275(1)(e) of the Local Government Act 1993 (NSW).

6. Mr Etmekdjian did not file his application for a waiver pursuant to s 126B of SISA until 23 February 2018. He argues there are exceptional circumstances which justify exercising the discretion in s 126B(4).

   EXCEPTIONAL CIRCUMSTANCES

7. Section 126B(3) of SISA imposes a 14 day time limit for making applications for a waiver, but it also creates other obligations. One of them is the obligation to include with the written application a range of court documents. The relevant court documents are identified in s 126B(5). Section 126B(6) says that if the court documents are not all reasonably available within the 14 day period contemplated in sub-section (3), the disqualified person should still file the application without those documents and provide them as soon as they become available. These provisions underline the importance of making timely applications under s 126B. They also make clear the central importance of the court documents to the exercise of the discretion, as opposed to other materials.

8. The expression ‘exceptional circumstances’ must be interpreted against this background. The expression is not defined – albeit that the section makes clear the circumstances in question must have prevented the application from being made in a timely way when timeliness is very important. The use of the word ‘exceptional’ as a qualifier underlines the legislative intention that the circumstances in question must be genuinely unusual or rare so there is a good reason for treating this case differently from other cases: see, for example, Mourched and Commissioner of Taxation [2014] AATA 223 at [33].

   THE LENGTH OF THE DELAY

9. The legislative clock starts to run on the date of conviction. The Commissioner assumes the date of conviction is 11 April 2017, being the date on which the court imposed the sentence rather than the date on which the guilty plea was entered. Mr Etmekdjian argues the date of conviction was the date on which the District Court handed down its decision on appeal (i.e. 28 June 2017). He says the sentence imposed by the Local Court in February 2017 was stayed pending the outcome of the appeal against sentence. In those circumstances, he argues the conviction was of no effect until the District Court completed its review of the sentence imposed in respect of that conviction.

10. I disagree with the applicant, for reasons I will explain.

11. Section 63 of the Crimes (Appeal and Review) Act 2001 (NSW) provides for a stay of execution of any sentence imposed by a lower court from the point when:

    ·an appeal is successfully filed (i.e. when a notice of appeal is filed and, where leave to appeal is required, that leave is granted); and

    ·(in a case like the present when the applicant was technically sentenced to a term of imprisonment) bail is granted.

12. The judgment of Townsend DCJ on 28 June 2017 refers to the applicant being on bail while the appeal against sentence was determined. It follows the execution of sentence was stayed until that date. But the underlying conviction was not in dispute on appeal. The conviction entered by the Local Court in April 2017 remained undisturbed by the appeal. The date of that conviction is relevant for the purposes of the SISA legislation notwithstanding the appeal against sentence.

13. The Commissioner points out the offence was dealt with summarily by the Local Court, which means the maximum sentence that could be imposed could not exceed 12 months imprisonment. That is important because an applicant cannot ask for a waiver under s 126B of SISA if the conviction resulted from serious dishonest conduct – which is defined (relevantly) to include a conviction resulting in a sentence of at least two years. Mr Etmekdjian did not need to wait for the District Court’s judgment to know whether he was eligible to seek a waiver because he could not be sentenced to more than two years in prison in any event.

14. It follows the applicant should have lodged his application under s 126B within 14 days of 11 April 2017. The appeal was not lodged until 23 February 2018. The delay is substantial. The question, then, is whether there are exceptional circumstances that prevented the applicant from lodging his appeal within the 14 day period.

    WHAT ARE THE EXCEPTIONAL CIRCUMSTANCES IN THIS CASE?

15. The applicant provided a statement dated 27 May 2020 in support of his application, and written submissions prepared by counsel. The written submissions adopted an approach that is commonly taken in generic extension of time applications before the Tribunal. The submissions referred to authorities including Hunter Valley Developments Pty Ltd  v Cohen (1984) 7 ALD 315. Counsel identified five factors that were relevant to the exercise of the discretion in s 126B(4):

    ·The relatively short delay between the conviction and the date of application. It was argued the delay was only seven months although I have already explained the delay was somewhat longer given the appeal period commenced in April 2017, not June. Counsel pointed out the delay was insignificant compared to the lengthy delay in commencing the criminal proceedings in respect of events that occurred in 2009.

    ·The existence of a compelling explanation for the delay. Counsel pointed out s 126B requires that court documents be included as part of the application, and the definition of court documents includes the transcript. Apparently the transcript of the District Court proceedings was not received until 24 January 2018.

    ·Evidence of a strong case. Counsel noted the factors which must be considered when deciding the ultimate question of whether to give a waiver are set out in s 120D. He went on to refer to features of the case which, if accepted, suggest the applicant has good chances of success if he is permitted to progress the application notwithstanding the delay. Those factors include the absence of any personal gain, his voluntary disclosures, the length of time which has elapsed since the offending, his insight and remorse, the professional and personal costs he has already endured, and the fact he is only seeking a waiver with respect to management of his own fund.

    ·No prejudice to the respondent. Counsel suggested there was no serious argument that the Commissioner would experience prejudice if the case were to proceed.

    ·Substantial prejudice to the applicant. Whereas the Commissioner would not experience substantial prejudice if the matter were to proceed to a full hearing, the applicant would be denied the opportunity to press what might otherwise be a compelling case. That would be harsh.

16. While acknowledging some of the evidence referred to above might be relevant, I do not think the approach adopted in generic extension of time cases can be applied here. The question I must address is quite specific: am I satisfied there are ‘exceptional circumstances’ that prevented the application from being made within 14 days of 11 April 2017? The strength of the applicant’s case and the potential for prejudice to either party are not relevant to that question (even if they may have some relevance to the subsequent question of whether to exercise the discretion if I am satisfied it is enlivened).

17. Of all the matters identified by the applicant in his statement (or on his behalf in written submissions), only a few come close to qualifying as ‘exceptional circumstances’ as I have explained the term. One such matter is the lengthy delay in obtaining a transcript from the District Court appeal. I acknowledge the transcript is a court document that should be filed with the application. I assume the applicant had no control over the length of the delay. But I also note s 120B expressly contemplates delay in obtaining court documents. Section 126B(6) says the application should be filed within the time limit and the court documents could be provided when they became available. I do not think the delay in obtaining that document qualifies as an exceptional circumstance which prevented the applicant from making the application within the fortnight that followed the conviction, even if the application could not be finalised at that point.

18. The applicant also referred to the delay involved in dealing with various regulatory authorities. He was no doubt distracted by those interactions, but that was entirely predictable for somebody in his position. He did not need to resolve those interactions before making the application to the Commissioner – he simply prioritised those other interactions in a way that allowed them to become a distraction and a burden. I note the applicant referred to the stress those various interactions created for him and his wife which accumulated over time. He said in his statement that he and his wife were very anxious and, I infer, experienced a sense of debilitation that might have interfered with their ability to progress the application under s 126B. That stress was made worse by the applicant’s health conditions and the fact the interactions took place over a number of months. While I am not without sympathy for the applicant’s position, these matters did not prevent him from making an application within the 14 day period following the conviction in April 2017. He could and should have lodged his application under s 126B before dealing with the other bodies. They are not, in any event, exceptional circumstances.

19. I should add that the applicant’s apparent misunderstanding of the date on which the conviction occurred for present purposes does not amount to exceptional circumstances. Even if I accept the conviction did not occur until June 2017 when the District Court handed down its judgment on the appeal, the applicant did not thereafter make an application under s 126B in a timely way.

    CONCLUSION

20. I am conscious the applicant insists he has a good case to present if he is permitted to proceed. I am also conscious there has been substantial and regrettable delay in commencing the criminal proceedings against the applicant in the first place. Unfortunately for the applicant, the Commissioner has limited power to excuse the non-compliance with the time limits for making an application. The Tribunal is in the same position on review. The law requires that I identify exceptional circumstances that prevented the applicant from complying with the 14 day time limit. It is not enough to establish the applicant had a good excuse, or that non-compliance does not result in any harm, or that the applicant has a good case in relation to the substantive issue. This is not a standard ‘extension of time’ case.

21. The applicant has failed to identify any ‘exceptional circumstances’ that prevented him from making the application within the time frame contemplated in s 126B(3). In those circumstances, the decision under review must be affirmed.

I certify that the preceding 21 (twenty-one) paragraphs are a true copy of the reasons for the decision herein of Deputy President Bernard J McCabe

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Associate

Dated: 1 October 2020

Date(s) of hearing:	31 July 2020 (on the papers)
Solicitors for the Applicant:	Madison Marcus
Solicitors for the Respondent:	Australian Taxation Office