Frugtniet and Tax Practitioners Board (Taxation)
[2017] AATA 1393
•30 August 2017
Frugtniet and Tax Practitioners Board (Taxation) [2017] AATA 1393 (30 August 2017)
Division:TAXATION & COMMERCIAL DIVISION
File Number: 2013/0717
Re:Rudy Frugtniet
APPLICANT
AndTax Practitioners Board
RESPONDENT
DECISION
Tribunal:Dr Gordon Hughes, Member
Date:30 August 2017
Place:Melbourne
The Tribunal affirms the decision under review.
..........................[sgd]..............................................
Dr Gordon Hughes, Member
TAX AGENTS – Termination of registration as a tax agent – applicant prevented from applying for registration for a period of five years – tax practitioner registration requirements – whether a fit and proper person to be registered as a tax agent – decision affirmed
TAX AGENTS – Jurisdiction – whether Board conducted an investigation under Subdivision 60-E of the Tax Agent Services Act 2009 (Cth) – no investigation conducted – investigation unnecessary where Board concerned about whether practitioner was a fit and proper person – Tribunal has jurisdiction
PRACTICE AND PROCEDURE – Evidence – power of Tribunal to have regard to transcript of Tribunal proceedings that were the subject of a successful Federal Court appeal – having regard to transcript not inconsistent with any directions of the Court remitting the matter to the Tribunal to be re-heard
Legislation
Administrative Appeals Tribunal Act 1975 (Cth); ss 10A, 19A, 19D, 37, 44
Income Tax Assessment Act 1936 (Cth); ss 251A, 251J(3)
Legal Practice Act 1996 (Vic)
Legal Profession Act 2004 (Vic)
Migration Act 1958 (Cth); s 309(2)Tax Agent Services Act 2009 (Cth); ss 20-5, 20-15, 20-45, 40-5, 40-25, 60-95, 60-125, 90-1
Tax Agent Services Regulations 2009 (Cth)
Tax Agent Services (Transitional Provisions and Consequential Amendments) Act 2009 (Cth); Item 24 of Sch 2
Cases
Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321
Frugtniet v Board of Examiners [2002] VSC 140
Frugtniet v Board of Examiners [2005] VSC 332
Re Frugtniet and Tax Practitioners Board (2014) 148 ALD 401
Frugtniet v Law Institute of Victoria Limited [2012] VSCA 178
Frugtniet v Tax Practitioners Board (2015) 67 AAR 336
Hughes & Vale Pty Ltd v New South Wales (No 2) (1955) 93 CLR 127
Industrial Equity v Deputy Commissioner of Taxation (1990) 170 CLR 649
Law Institute of Victoria Limited v Frugtniet [2011] VCAT 596
Stasos v Tax Agents’ Board of New South Wales (1990) 21 ATR 974
Su v Tax Agents’ Board, South Australia (1982) 61 FLR 1
Toohey v Tax Agents Board of Victoria (No 2) (2008) 106 ALD 506Secondary Materials
Administrative Appeals Tribunal, Delegations and authorisations pursuant to subsections 10A(2) and 59A(1) Administrative Appeals Tribunal Act 1975, dated 1 July 2015
REASONS FOR DECISION
Dr Gordon Hughes, Member
30 August 2017
BACKGROUND
Mr Frugtniet applied to the Tax Agents’ Board of Victoria (TABV) on 30 May 2008 for registration as a tax agent. He completed a period of work experience and his application was approved for a period of three years effective from 1 January 2010.
The Tax Practitioners Board (the Board) was established by the Tax Agent Services Act 2009 (Cth) (the TAS Act) and assumed responsibility for the registration of tax agents in Australia.
On 28 November 2012 Mr Frugtniet sought renewal of his registration, which was to expire on 31 December 2012. In accordance with s 20-50(2) of the TAS Act, his registration continued from 1 January 2013 until the Board made its decision.
On 16 January 2013 the Board decided to terminate Mr Frugtniet’s registration as a tax agent effective from 22 March 2013, and to preclude him from re-applying for registration for a period of five years, because in the Board’s opinion he ceased to meet the requirement that he was a fit and proper person. Mr Frugtniet was notified of the decision on 15 February 2013.
On 18 February 2013 Mr Frugtniet lodged an application with the Tribunal for review of the decision. On 23 October 2014 the Tribunal affirmed the decision of the Board (Re Frugtniet and Tax Practitioners Board (2014) 148 ALD 401) (the first Tribunal).
Mr Frugtniet lodged an appeal with the Federal Court of Australia and on 1 October 2015 Jessup J set aside the first Tribunal’s decision and ordered that the application for review be remitted for hearing and determination by the Tribunal differently constituted (Frugtniet v Tax Practitioners Board (2015) 67 AAR 336).
The application was heard by the differently constituted Tribunal on 15 June 2016 and 15-16 November 2016 (the remittal hearing). This was followed by further submissions, the last of which were received on 23 January 2017. At that time, the Tribunal’s decision in this matter was reserved.
As of 1 July 2017 the appointment of the member who presided over the remittal hearing had expired. On 3 July 2017 Deputy President S A Forgie made a direction under s 19D(2)(a)(i) of the Administrative Appeals Tribunal Act 1975 (AAT Act), that the matter be reconstituted to myself. Section 19D(2)(a)(i) provides that:
(2)At any time after the hearing of a proceeding commences and before the Tribunal determines the proceeding, the President may revoke a direction under subsection 19A(1) in relation to the proceeding and give another such direction, if:
(a)the member, or one of the members, who constitutes the Tribunal for the purposes of the proceeding:
(i)stops being a member…
…
Under s 10A(2) of the AAT Act, the President may, by signed instrument, delegate to a member any or all of the President’s powers or functions under the AAT Act or another enactment. By instrument signed 1 July 2015 the then President of the Tribunal delegated authority to exercise the power under s 19D(2)(a), other than subsection (2)(a)(iii), to Deputy Presidents and Senior Members of the Tribunal.
In revoking the direction under s 19A(1) of the AAT Act and reconstituting the matter to myself, the Deputy President was satisfied that it was in the interests of justice to reconstitute the hearing, as required by s 19D(6)(a) of the AAT Act. Furthermore, as required by s 19D(7) of the AAT Act, the Deputy President had regard to the Tribunal’s objective in s 2A of the AAT Act. The member who heard the matter on remittal was not consulted (s 19D(6)(b) of the AAT Act) about the reconstitution as they were no longer a member at the time the reconstitution decision was made.
Section 19D(4) of the AAT Act provides that the reconstituted Tribunal must continue the proceeding and may have regard to any record of the proceeding before the Tribunal as previously constituted (including a record of any evidence taken in the proceeding). In writing these reasons for decision, I have had regard to all documents admitted into evidence during the course of the remittal hearing and a Transcript of Proceedings from the hearing on 15 June 2016 and 15-16 November 2016.
LEGISLATION
Subdivision 40-A of the TAS Act deals with the grounds that may give rise to termination of registration as a tax agent. Section 40-5 provides:
40‑5Termination of registration—individuals
(1)If you are a *registered tax agent or BAS agent and an individual, the Board may terminate your registration if:
(a)an event affecting your continued registration, as described in section 20-45, occurs; or
(b)you cease to meet one of the *tax practitioner registration requirements; or
(c)you breach a condition of your registration.
Note:The Board may also terminate your registration for breach of the Code of Professional Conduct: see Subdivision 30-B.
Section 20-45 deals with events which may affect the continued registration of a tax agent and provides:
20‑45Certain events may affect your continued registration
The following events may affect your continued registration as a *registered tax agent, BAS agent:
(a)you are convicted of a *serious taxation offence;
(b)you are convicted of an offence involving fraud or dishonesty;
(c)you are penalised for being a *promoter of a *tax exploitation scheme;
(d)you are penalised for implementing a *scheme that has been promoted on the basis of conformity with a *product ruling in a way that is materially different from that described in the product ruling;
(e)you become an undischarged bankrupt or go into external administration;
(f)you are sentenced to a term of imprisonment.
The expression tax practitioner registration requirements is defined in s 90-1 as:
tax practitioner registration requirements means the matters about which the Board must, under Subdivision 20-A, be satisfied before the Board is obliged to grant an application for registration under this Act.
Subdivision 20-A sets out the eligibility requirements for registration. Section 20-5(1) provides:
20‑5Eligibility for registration as registered tax agent, BAS agent or tax (financial) adviser
Individuals
(1) An individual, aged 18 years or more, is eligible for registration as a *registered tax agent or BAS agent if the Board is satisfied that:
(a)the individual is a fit and proper person; and
(b)the individual meets the requirements prescribed by the regulations (including, but not limited to, requirements relating to qualifications and experience) in respect of registration as a registered tax agent or BAS agent; and
(c)the individual maintains, or will be able to maintain, professional indemnity insurance that meets the Board’s requirements; and
(d)in the case of a renewal of registration – the individual has completed continuing professional education that meets the Board’s requirements.
Section 20-15 lists out the criteria for determining whether an individual is a fit and proper person, and provides:
20‑15Criteria for determining whether an individual is a fit and proper person
In deciding whether it is satisfied that an individual is fit and proper person, the Board must have regard to:
(a)whether the individual is of good fame, integrity and character; and
(b)without limiting paragraph (a):
(i)whether an event described in section 20-45 has occurred during the previous 5 years; and
(ii)whether the individual had the status of an undischarged bankrupt at any time during the previous 5 years; and
(iii)whether the individual served a term of imprisonment, in whole or in part, at any time during the previous 5 years.
Section 40-25 sets out the period during which a person may not apply for registration, and provides:
40‑25Period during which you may not apply for registration
(1)If the Board terminates your registration, the Board may also determine a period, of not more than 5 years, during which you may not apply for registration.
…
Finally, as outlined later in these reasons for decision, Mr Frugtniet raises a jurisdictional issue as a result of an alleged subdivision 60-E investigation by the Board. Subdivision 60-E sets out the provisions for investigations by the Board and relevantly provides:
…
60‑95Investigations
(1)The Board may investigate:
(a)your application for registration; or
(b)any conduct that may breach this Act; or
(c)other matters prescribed by the regulations.
(2)The Board must notify you in writing if the Board decides to investigate you. The notice must be given within 2 weeks after the decision is made.
(3)An investigation is taken to commence on the date of the notice.
…
60‑125Outcomes of investigations
…
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
Period within which a decision must be made
(3)The Board must make a decision under subsection (2):
(a)within 6 months after the day on which the investigation is taken to have commenced under subsection 60‑95(3); or
(b)if a longer period is determined by the Board under subsection (4)—within that period
(4)If the Board is satisfied that, for reasons beyond the control of the Board, a decision under subsection (2) cannot be made within the period mentioned in paragraph (3)(a), the Board may determine a longer period within which the Board must make a decision under subsection (2).
(5)If the Board determines a longer period, the Board must do so not later than 2 weeks before the expiry of the period mentioned in paragraph (3)(a).
(6)The reasons mentioned in subsection (4), include, but are not limited to, the following:
(a)undue delay that has been caused by an entity other than the Board and that has affected the conduct of the investigation to which the decision relates;
(b)the complexity of the investigation.
Decision not made
(7)If:
(a)a decision is not made within the period mentioned in paragraph (3)(a) and the Board does not determine a longer period; or
(b)the Board determines a longer period but does not make a decision within that period;
the Board is taken to have decided to take no further action in relation to the matter that was the subject of investigation.
…
ISSUES
The issues before the Tribunal are:
·Did Mr Frugtniet cease to meet the requirement for registration as a tax agent that he is a fit and proper person?; If so:
·Should the discretion to terminate his registration be exercised?; If so:
·Should a period, during which Mr Frugtniet cannot apply for registration, be imposed?
DID MR FRUGTNIET CEASE TO MEET THE REQUIREMENT FOR REGISTRATION AS A TAX AGENT THAT HE IS A FIT AND PROPER PERSON?
The 2008 TABV application
When Mr Frugtniet applied for registration as a tax agent in May 2008 he did not bring to the attention of the TABV that in 2001 and in 2005 the Board of Examiners declined to find that he was a fit and proper person for admission to legal practice in Victoria. On his application form and schedule of personal details completed on 30 May 2008 Mr Frugtniet answered No to the following questions:
Application for registration as a tax agent - individual
14.Have you had membership or registration with a professional body or registration board, (including a Tax Agents’ Board), refused, cancelled or suspended in the last 10 years?
15.Have you been disbarred, expelled or struck off from the practice of your profession, or have you been disciplined by a professional body or registration board (including a Tax Agents’ Board) in the last 10 years?
…
17.Is there any other matter which may affect your eligibility for registration?
…
Schedule of personal details
18.Is there any other matter of which you are aware, which may have an effect on whether the Board would regard you as a fit and proper person or of good fame integrity and character?
Mr Frugtniet told the Tribunal that in completing the application form he was not obliged to disclose prior criminal charges and the outcome of criminal proceedings, other than whether a serious taxation offence had occurred in the preceding five years. He stated further that his answers to questions 14 and 15 were not incorrect because the Board of Examiners was neither a professional body nor a registration board, although he conceded, in hindsight, that he should have answered questions 17 and 18 differently. He also accepted that the Migration Agents Registration Authority (MARA) had taken into account the dismissal of his appeals in 2002 and 2005 when finding that he was not a fit and proper person to provide immigration assistance.
In 2011 the Board became aware that the Board of Examiners had twice refused Mr Frugtniet’s application for admission to practise as a legal practitioner in Victoria. On both occasions the Board of Examiners found that Mr Frugtniet was not a fit and proper person.
Mr Frugtniet applied to the Board of Examiners in August 2001. His application was refused on 22 October 2001, and on 1 May 2002 the Supreme Court of Victoria dismissed his appeal against the decision, finding that Mr Frugtniet had failed to satisfy the Court that he was a fit and proper person for admission to legal practice (Frugtniet v Board of Examiners [2002] VSC 140). Justice Pagone stated:
…
[5] The Board of Examiners seems never to have been told by Mr Frugtniet of three charges which had been laid against Mr Frugtniet in the early 1990s for perjury (“the perjury charges”), that in 1978 he had been convicted in the United Kingdom when a young man (“the UK Convictions”), or that he had been charged in 1998 with six counts of theft and three counts of attempted theft as an employee of the ANZ bank (“ANZ charges”)…
…
[11] The evidence before me does not establish to my satisfaction that Mr Frugtniet is now a fit and proper person for admission. The way in which details of the perjury charges, the ANZ charges and, more particularly, the UK convictions have come to light in this proceeding have not left me with sufficient confidence in the applicant. His obligation was to disclose matters that could inform a judgement about whether he was a fit and proper person for admission to practice. It was not an obligation merely to list convictions or charges, but was an obligation to inform the decision maker of everything that could bear upon the judgment that needed to be made about him and his character. His task was not to select or edit from his life’s experiences only some events that might be relevant to the question, but to disclose every matter that might fairly assist in deciding whether the applicant was a fit and proper person at the time of admission…
[12] The applicant accepted during his submissions to me that the perjury charges, the ANZ charges and the UK convictions were matters that ought to have been disclosed and considered in deciding whether he was a fit and proper person for admission to practice. The Board of Examiners might itself have found in his favour if he had candidly laid out these matters, and if he had done so, there would have been more prospect of the present appeal succeeding. However, these were matters that only came to light upon investigations undertaken by the Board itself after its adverse decision, after the applicant’s institution of this appeal and after the applicant had filed his first affidavit in this court in support of the appeal. In those circumstances I have no present confidence that the applicant would have disclosed these matters if they had not come to the Board's knowledge and had the Board not tendered the evidence in the proceeding before me.
Justice Pagone found that an applicant had an obligation to make full disclosure of every matter which may have been relevant to the consideration of the person’s fitness for admission, and was not limited to criminal charges or convictions but included disclosure of any matter which may bear upon a judgment about the person, including character.
On 24 November 1997 in the Broadmeadows Magistrates’ Court Mr Frugtniet had been found guilty of obtaining property by deception and was fined $1000 without conviction in relation to the sale of airline tickets acquired unlawfully involving a travel agency of which his former wife was a director. The Board of Examiners determined that Mr Frugtniet had failed to establish that he was a fit and proper person as it was of the view that he had not made full and frank disclosure of all the circumstances relevant to the offence for which he had been fined without conviction.
Justice Pagone noted that, in the County Court of Victoria in 1998, Mr Frugtniet was acquitted of perjury charges as he had held an honest and reasonable belief at the time that he gave evidence to the Travel Agents Licensing Authority that he did not have to disclose the UK convictions because of his understanding of the operation of the laws of the United Kingdom relating to spent convictions. Mr Frugtniet was also acquitted of six charges of theft and three charges of attempted theft, relating to allegations that he had given personal details of accounts to an accomplice while working at the ANZ Bank. However, the Court noted that the pro-forma affidavit contained in a schedule to the Legal Practice Act 1996(Vic) specifically mentioned the need for disclosure of formal charges of criminal offences and not simply convictions, although Mr Frugtniet said that he had not seen a copy of the schedule when he lodged his application.
On 27 July 2004 Mr Frugtniet applied again to the Board of Examiners for admission to legal practice. His application was refused on 11 February 2005 on the basis that he was not a fit and proper person and on 24 August 2005 the Supreme Court of Victoria dismissed his appeal against the decision (Frugtniet v Board of Examiners [2005] VSC 332). Justice Gillard stated:
[67] The appellant carries with him a massive bag of dishonest conduct. It is a pattern of conduct committed over an extensive period…
[68] His pattern of conduct raises a substantial question mark concerning his honesty and his character and reputation. He is a person who does not appear to have learned from his experiences during 1989 to 2000. He carries a very heavy burden of persuading this Court that he is a person of good character and reputation and a fit and proper person to practise law. He has not discharged that burden. The way he has presented himself to this Court shows a man who is loose with the truth and is prepared to distort the truth if he thinks it will help him. Often he was asked questions which he failed to answer and went off on some tangent seeking to minimise his criminality in the past. The evidence does not persuade me that the appellant has learned from his past experience, or that he is a person motivated to tell the truth.
…
[70] The appellant has to frankly and candidly state the level of his dishonesty in the past, and not seek to hide it. He must show that it will not reoccur. Unfortunately he has not demonstrated any of these matters to the Court. Indeed, he is one of those witnesses who, when asked a question, thinks how he should answer the question rather than answering it truthfully and accurately. It will take, in my view, many years of blameless conduct before one could have any confidence that the appellant has shed his past, turned over a new leaf and intends to pursue a blameless and honest career.
In respect of the application to the TABV in 2008, the Tribunal finds that questions 17 and 18 should have been answered differently, in that Mr Frugtniet was obliged to disclose that the Board of Examiners, whose function was similar to a registration authority, had not been satisfied that Mr Frugtniet had established that he was a fit and proper person for admission to legal practice in Victoria in both 2001 and 2005. Similarly, Mr Frugtniet had an obligation to disclose that in each case the Supreme Court of Victoria had dismissed his appeal against the decision. He must have understood that these matters would be relevant to any consideration of his fame, integrity and character, yet he neglected to disclose them. For these reasons, the Tribunal finds that Mr Frugtniet knowingly gave false answers to two of the questions asked of him in his application.
The 2011 VCAT decision
On 8 April 2011 the Victorian Civil and Administrative Tribunal (VCAT) granted an application by the Law Institute of Victoria and decided that Mr Frugtniet was, for three years, a disqualified person under the Legal Profession Act 2004 (Vic) (Law Institute of Victoria Limited v Frugtniet [2011] VCAT 596). Judge Jenkins, Vice President, stated that Mr Frugtniet had failed to demonstrate any insight into his behaviour and failed to express any responsibility or remorse. Indeed he has denied any transgressions whatsoever, notwithstanding clear and objective evidence. The basis for the decision was that on 25 May 2010, at the Werribee Magistrates’ Court, Mr Frugtniet had deliberately and falsely represented to a Magistrate and a barrister that he was a sole practitioner and solicitor. On 13 August 2012 the Victorian Court of Appeal dismissed Mr Frugtniet’s appeal against the decision other than the finding by VCAT of contempt and VCAT’s decision regarding costs (Frugtniet v Law Institute of Victoria Limited [2012] VSCA 178).
Mr Frugtniet offered to the Tribunal partial explanations and stated that he was not acting in a professional capacity at the Magistrates’ Court when he misled the Magistrate and the barrister. He added that the proceedings were preliminary rather than substantive, and he was helping a group of families, but he accepted that he had made an error of judgment. Mr Frugtniet described the episode as a “brain snap” born out of misguided loyalty to a friend in need of legal assistance and emphasised that the period of three years’ disqualification from being a lay associate had expired.
Application to the Migration Agents Registration Authority
On 27 October 1999 Mr Frugtniet applied to MARA for repeat registration as a migration agent and answered No to a question asking whether he was the subject of criminal charges still pending before a court, or whether he had been convicted of an offence which was not spent. However, at the time, he was the subject of the pending criminal charges concerning his employment with the ANZ Bank. In March 2000, he was acquitted of the charges.
In his 2005 judgment, Gillard J stated at [47]:
The date of the declaration is 26 October 1999. On no view could that answer be correct. He admits as much now. At that time he was facing nine charges concerning his employment at the ANZ Bank. The answer to the question: "Are you the subject of any criminal charges still pending before a court?" should have been "Yes". When asked by the Court as to his explanation, the appellant prevaricated, did not initially answer the question but referred to the fact that the matter was raised years later by MARA, he gave them an explanation and no further action was taken by the authority. Eventually he admitted to the Court that his answer was wrong and he should have answered "Yes". Another matter of concern is that he did not appreciate the importance of making a false declaration. He informed the Court that he had in fact in a separate document told MARA of the charges. He was unable to produce a copy and MARA did not have any copy. I have grave doubts about his evidence. But as was put to him, if he was revealing this information to MARA in another way, then his answer should have been "Yes", and reference back to an earlier communication. The way he gave evidence in relation to this raises considerable concerns about his honesty and more importantly whether he is prepared to be frank about his past indiscretions. His seemingly ignorant attitude to the importance of a statutory declaration is also a matter of concern. As the Court asked him "Would you advise a client to do what you did in the circumstances?" He said "No".
It was the respondent’s submission that Mr Frugtniet knowingly made a false declaration to MARA in his 1999 application for repeat registration as he did not disclose charges that were still pending. Conversely, Mr Frugtniet submitted that he had not made a false declaration as he had previously disclosed his pending charges to MARA and was not required to disclose them again. Furthermore, Mr Frugtniet argued that the Tribunal can not find that he made a false declaration in his 1999 application for repeat registration as MARA itself did not make such a finding.
The Tribunal does not have a copy of Mr Frugtniet’s 1999 application for repeat registration before it, nor does it have a blank copy of the form at that time. However, Justice Gillard did have the form before him and outlined the question concerning pending charges and spent convictions at paragraph [45] of his judgment. That question, incorporating Mr Frugtniet’s answer, reads:
11.Are you the subject of any criminal charges still pending before a court, or have you ever been convicted of an offence which is not spent? Refer to Part VIIC Crimes Act 1914 (Cth) for a definition of a spent conviction.
NoÄ Yes ¡
If yes, please attach details including dates.
Mr Frugtniet argued at the remittal hearing, as he did in the 2005 matter before Justice Gillard, that he had advised MARA of the pending charges prior to completing the repeat registration application and that, as a result, he did not need to disclose them again in the application form. He told the Tribunal at the remittal hearing that it was his understanding that with the Migration Agents Registration Authority, when you disclose something, you’re not meant to be repeating it and that the form said something to the effect that if you had previously disclosed it [pending criminal charges], that you didn’t have to disclose it again. He contended that only the top part of the question had been extracted and that there was a further part of the question stating that repeat disclosure was not necessary. He further stated that there is a similar explanation in each of the MARA registration forms to the current day outlining that repeat disclosure is not necessary. Following the conclusion of the remittal hearing, Mr Frugtniet provided a copy of his 2004 application for repeat registration with MARA in order to support his assertions concerning repeat disclosure. Question 23(ii) requires Mr Frugtniet to state that he is not currently the subject of any criminal proceedings. The form does not contain a question or explanatory note to the effect that criminal charges which have been previously disclosed do not need to be disclosed again.
It is clear that the 1999 application form for repeat registration required Mr Frugtniet to disclose any pending charges, regardless of whether he had previously disclosed them to MARA. Mr Frugtniet has produced no evidence which indicates that there is an additional question or explanatory note in the 1999 form that states that pending charges disclosed previously do not need to be disclosed again. Furthermore, although not necessary to consider as a result of my conclusion concerning prior disclosure and the 1999 form, there is no evidence before the Tribunal that substantiates Mr Frugtniet’s claim that he disclosed his pending charges to MARA prior to completing the 1999 form. Justice Gillard had grave doubts about Mr Frugtniet’s evidence in this regard. The Tribunal similarly has grave doubts on this matter and finds that Mr Frugtniet did not make the prior disclosure.
As noted above, Mr Frugtniet also submitted that he cannot be found to have made a false declaration in the 1999 application for repeat registration as MARA itself did not make such a finding. That submission must be rejected. On 19 December 2005 MARA sent Mr Frugtniet a notice under s 309(2) of the Migration Act 1958 (Cth) stating that it was considering sanctioning him and invited him to make submissions in respect of matters raised in the notice. One of the matters raised in the notice was Mr Frugtniet’s answer to question 11 in the 1999 application for repeat registration as a migration agent. The notice stated that [i]t is therefore open for the authority to find you deliberately misled the Authority in your application for repeat registration by not declaring you were subject to criminal charges still pending before a court. Mr Frugtniet subsequently responded to MARA on 31 January 2006, 2 June 2006 and 19 July 2006. On 25 July 2006 MARA decided to take no further action on the matter. In its letter dated 26 July 2006 notifying Mr Frugtniet of its decision, MARA made no mention of the 1999 application for repeat registration as one of the reasons for the s 309(2) notice. In fact, no mention is made of the 1999 application for repeat registration at all in the letter. It is perhaps encompassed by the final reason for the notice listed by MARA in its decision letter of 26 July 2006 that Mr Frugtniet was not a person of integrity or otherwise a fit and proper person to give immigration assistance. Indeed, the s 309(2) notice notes under the heading INTEGRITY OR FITNESS AND PROPRIETY that Mr Frugtniet failed to declare his pending charges in his applications for repeat registration. It matters not whether there is an implicit conclusion or no conclusion on the matter; it is clear that, as Mr Frugtniet correctly submitted, MARA declined to find that he had made a false declaration in the 1999 application for repeat registration. However, that does not preclude the Tribunal from making a different finding.
Question 11 of Mr Frugtniet’s application for repeat registration clearly asked him if he was the subject of any pending criminal charges. He answered no to that question, despite his pending charges in relation to his employment at the ANZ Bank. There was no qualifying statement in the 1999 application that previously disclosed charges did not need to be disclosed again. In any event, there was no evidence that Mr Frugtniet had previously disclosed his pending charges to MARA. With this in mind, the Tribunal finds that Mr Frugtniet knowingly made a false declaration to MARA in his 1999 application for repeat registration as he did not disclose the charges that were still pending.
Complaints lodged with the Board by clients
Three complaints about Mr Frugtniet’s conduct in providing services as a tax agent for 2010/11 were received by the Board on 27 September 2011. Mr C. Pineda, Mr J. Galvez-Londono and Ms M. Galvez-Londono all lodged similar complaints. They alleged that Mr Frugtniet had notified them of their expected tax refunds, which were subsequently paid into their bank accounts by the Australian Taxation Office (ATO), but they later discovered that their actual refunds were in excess of the amount which had been credited to their bank accounts, with the balance apparently retained by Mr Frugtniet. On the first day of the remittal hearing, the respondent conceded that the complaints of Mr Pineda and Mr Galvez-Londono were irrelevant to this proceeding and accordingly those complaints were not taken into evidence.
The evidence of Ms Galvez-Londono remains relevant to this proceeding. The Applicant asserted, however, that the evidence should be disregarded because Ms Galvez-Londono was not called as a witness and he did not have an opportunity to cross-examine her. The Tribunal rejects this submission, given that the Applicant did not, in the course of the hearing, raise that he wanted to cross-examine this witness. Whilst the Tribunal is willing to take account of Ms Galvez-Londono's witness statement, it makes the observation that its ultimate conclusions can be reached independently of this evidence by reference to a series of emails between the Applicant and Ms Galvez-Londono. Ms Galvez-Londono gave evidence to the First Tribunal, and claimed in her witness statement dated 1 February 2012, that Mr Frugtniet had falsified amounts claimed as deductions in her income tax return without her knowledge (consistent with her email to Mr Frugtniet on 20 September 2011); had advised her of a tax refund that was lower than the amount deposited into Mr Frugtniet’s cash management account by the ATO (consistent with a series of emails from Ms Galvez-Londono on 7 September 2011); and had lodged a request for an amended assessment with the ATO without her authority (consistent with Ms Galvez-Londono's email of 16 September 2011). She said that no charges or fees in addition to the $75 fee for preparing her tax return had been mentioned or agreed upon (consistent with her email of 7 September 2011 at 1.32pm), and he had persuaded her to sign an authorisation for her refund to be paid into his bank account (referenced in the same email). She said that when she asked for her refund amount to be paid to her, Mr Frugtniet replied that he would be deducting an additional amount of $500 because he had maximised the full available deductions (as set out in Mr Frugtniet's email of 7 September 2011 at 12.10pm). Ms Galvez-Londono became distrustful of the manner in which Mr Frugtniet had conducted her tax affairs (in her email of 7 September 2011, she said I am not going to authorise you to do anything because I don't trust you), and in reply at 1.57pm on the same day Mr Frugtniet appears to have suggested that her Australian citizenship might be at risk for making false and misleading statements in her income tax return, as a means of persuading her not to lodge a complaint with the authorities. He also suggested, in an email dated 19 September 2011, that she might be complicit in seeking to defraud the Commonwealth Government. Finally, Ms Galvez-Londono requested a copy of all deductions claimed in her 2011 tax return (consistent with her email of 12 September 2011) and a copy of the amended tax return he lodged with the ATO without her authorisation (consistent with her email of 16 September 2011). At the remittal hearing, Mr Frugtniet confirmed that he did not provide these requested documents to Ms Galvez-Londono.
In addition to the matters explicitly raised in Ms Galvez-Londono’s statement, the respondent has also highlighted that Mr Frugtniet created a false impression to some of his clients that he was operating a trust account. During the remittal hearing, the respondent drew Mr Frugtniet’s attention to a trust account authority letter signed by Ms Galvez-Londono on 5 August 2011. Mr Frugtniet did not operate a trust account as part of his business as a tax agent, rather, he operated a cash management account. The respondent also noted that, in an email from Mr Frugtniet to Ms Galvez-Londono dated 10 September 2011, Mr Frugtniet informed Ms Galvez-Londono that her funds were held in trust.
Mr Frugtniet responded to the complaints by contending that the suggestion that the complainants had signed authorisations without reading the documentation was a complete fabrication; after reviewing incorrect information provided by the complainants the request was made to amend the assessment and any funds returned to the tax office; he had full and proper authority to retain the complainants’ funds in trust, and on discovering that false information had been provided, he was not prepared to return the funds to the complainants despite being requested to do so. He also submitted that Ms Galvez-Londono’s statement may be unreliable and the Tribunal should give little weight to its contents, particularly in the absence of details of text messages and telephone calls between them. He noted that the other two complainants had not been called to give evidence. Mr Frugtniet further stated that he told clients about his trust account when it was not, in fact, a trust account, only because that was how his software package described the cash management account.
As mentioned above, Ms Galvez-Londono’s version of events is supported by emails between her and Mr Frugtniet during the relevant period. The Tribunal refers in particular to a series of emails between 7 September 2011 and 20 September 2011. In the emails Mr Frugtniet discussed measures to maximise her tax return, with a clear inference that he was inflating the claims contained in the return. Further, Mr Frugtniet obtained authority from Ms Galvez-Londono, consistent with the same email of 7 September 2011, to receive tax refunds into his trust account when there was no justification for doing so, particularly when the basis was that he could maximise her tax refund. The Tribunal finds his explanation about his trust account to be implausible, particularly given Mr Frugtniet’s previous practice as a conveyancer and his studies of the law. Furthermore, Mr Frugtniet knew, or ought to have known, that his clients would accept his written assurance that funds would be held in a trust account when there was no such account (rather, it was a cash management account).
As evidenced by an exchange of emails on 7 September 2011, the agreement between Mr Frugtniet and Ms Galvez-Londono was that his fee for the preparation of her tax return would be $75. However, he later that day deducted an amount of $500 for an outstanding liability related to migration services provided to her brother, which had nothing to do with her tax return. He then agreed that same day to waive the $500 fee if she preferred him to prepare an amended return. The emails sent by Ms Galvez-Londono to Mr Frugtniet during this period complained that he had not provided her with a copy of her tax return or her amended return. His comments about risks to her citizenship status suggest intimidation or threats if she complained publicly about his behaviour. On the balance of probabilities, the Tribunal finds Mr Frugtniet administered Ms Galvez-Londono’s tax affairs without obtaining her consent on a number of occasions; he refused to provide a full list of deductions claimed on her behalf; he provided a false impression that he was operating a trust account and falsely claimed that funds would be held in a trust account; he lodged an amended return without proper authority and indeed against Ms Galvez-Londono's wishes; he deducted fees owing from Ms Galvez-Londono's brother in an unrelated matter; and he refused to provide his client with a copy of her tax return or amended return despite being asked. Some of his comments in correspondence suggest that he sought to mislead and threaten her. This behaviour constitutes conduct as a tax agent that reflects poorly on his insight, ability and honesty, particularly as Ms Galvez-Londono is a person with little knowledge of, or familiarity with, the taxation laws of Australia.
The Tribunal finds that this conduct demonstrates that the public would not have confidence that he would carry out the functions of a tax agent with integrity and competence.
Preparedness to mislead the First Tribunal
In his 2002 judgment, Pagone J stated that:
[12] The applicant accepted during his submissions to me that the perjury charges, the ANZ charges and the UK convictions were matters that ought to have been disclosed and considered in deciding whether he was a fit and proper person for admission to practice. The Board of Examiners might itself have found in his favour if he had candidly laid out these matters, and if he had done so, there would have been more prospect of the present appeal succeeding. However, these were matters that only came to light upon investigations undertaken by the Board itself after its adverse decision, after the applicant’s institution of this appeal and after the applicant had filed his first affidavit in this court in support of the appeal. In those circumstances I have no present confidence that the applicant would have disclosed these matters if they had no come to the Board’s knowledge and had the Board not tendered the evidence in the proceeding before me.
Before the First Tribunal, Mr Brown cross-examined Mr Frugtniet on this passage. Mr Frugtniet contended that his UK convictions and charges concerning perjury and his time at the ANZ bank were brought to Justice Pagone’s attention as a result of an affidavit he had lodged with the court. The relevant portion of that exchange is as follows (pages 110-111 of transcript):
All right, okay. My penultimate point relates to paragraph 12 on page 227. Now, this is Pagone J’s judgment, and at paragraph 12, to paraphrase, Pagone J notes that even in the course of the proceeding before him it was only investigations undertaken by the Board of Examiners which then resulted in material being put before the court that revealed the extent of your past record?---That’s not so. I don’t think you can read that into that paragraph at all. As you probably would appreciate, the - the short answer to all of that is that you go on appeal de novo and, having realised that the board had refused me, it was incumbent upon me - I think Pagone J is saying, look, I’m actually disclosing at this late stage now, I’m being fully frank and candid but it’s come too late. Obviously the other side may have made enquiries or otherwise, but it’s a de novo hearing. I wasn’t trying to conceal anything because the board ---
Okay. Well, let me take you to the third sentence in that paragraph 12 then. “However, these were matters that only came to light upon investigations undertaken by the board itself after its adverse decision, after the applicant’s institution of the appeal and after the applicant had filed his first affidavit in this court in support of the appeal.”?---Well, might I say that my first affidavit had full disclosure, so the fact that they were seeking - when I say an investigation, seeking details of these different matters from England I can’t really reconcile. I think Pagone J was being very fair and equitable in saying that the first time that I came to disclose all of this - I know you try to draw a chronology as if to say it was after they had conducted an investigation. These are - it was actually done in my - with my first affidavit.
But read the sentence. His Honour is actually saying you didn’t disclose these matters until after the appeal had been instituted and after you’d filed your first affidavit, so there wasn’t full disclosure?---Well, I - I’m not going to play with - with actual words. If - if you want to play ---
No, no, no, the words are very clear?---with that I’m happy to produce the first affidavit. I’ll go back because, I mean, what we’re having here is I think just something - and Pagone J I think leading up to that in that paragraph. This was rather favourable. He makes the point had I made full disclosure of course it would have been considered more favourably and I would have had an opportunity, et cetera.
But surely the point there is you didn’t?---To the Board of Examiners. The first time I made disclosure. You see the point, sir, you’re trying to make, it’s that someone else has discerned or discovered something and then, because of this sentence, the way you’re construing it, after my first affidavit. That’s the premise of your question, that I then come to disclose it. Not so. The Board of Examiners had refused me based on these matters. How can you say then that I’m not aware and that I’m coming - just because a judge obiter is saying something, and saying something favourably in paragraph 12, that you would pick on that sentence and say well, after your first affidavit. You know you have to file an application - or first a number of affidavits that go with it. I didn’t come to disclose just because somebody else disclosed it. The Board of Examiners have already refused me based upon this non‑disclosure, so how can you justify that?
Well, if you read the final sentence of that paragraph?---Yes.
His Honour goes on to say, “In those circumstances I have no present confidence that the applicant would have disclosed these matters if they had not come to the board’s knowledge and had the board not tendered the evidence in the proceeding before me”?---Yes, because the board was aware, so I - I mean, I accept what is there. That’s Pagone J’s judgment. The board already had that. So and that’s ---
Mr Frugtniet was granted leave by the First Tribunal to lodge a copy of the affidavit post-hearing and he did so on 11 July 2014. That affidavit was dated 7 March 2002 and was filed with the Victorian Supreme Court on the same date. The respondent then notified the Tribunal on 25 July 2014 that the affidavit Mr Frugtniet had lodged with the Tribunal was in fact his second affidavit lodged in the 2002 proceedings, rather than the first affidavit mentioned by Pagone J in his judgment. On 30 July 2014 the respondent lodged a copy of Mr Frugtniet’s first affidavit from the 2002 proceedings which was sworn and filed with the Victorian Supreme Court on 8 November 2001. On that date, the respondent also lodged with the Tribunal copies of the Board of Examiners’ affidavits in those proceedings, being the affidavits of Mr R. Blythman (sworn and filed 13 February 2002, with a further affidavit sworn 27 February 2002 and filed 28 February 2002) and Mr E. Page (sworn 27 February 2002 and filed 28 February 2002). Mr Frugtniet’s first affidavit contains no mention of the relevant convictions and charges. The first mention of those convictions and charges is found in those affidavits lodged by the Board of Examiners. Mr Frugtniet’s second affidavit, which he stated to the First Tribunal was the first affidavit in the 2002 proceedings, mentions the convictions and charges in response to the Board of Examiners’ affidavits.
It is the respondent’s contention that in lodging with the First Tribunal a copy of his second affidavit and failing to bring to the Tribunal’s attention that it was not the first affidavit from the 2002 proceedings, Mr Frugtniet revealed a preparedness to mislead the previous Tribunal. Furthermore, the respondent contended that Mr Frugtniet was prepared to mislead the Tribunal through stating that it was he, and not the Board of Examiners, who brought the relevant convictions and charges to the Supreme Court’s attention. In reply, Mr Frugtniet said that he had made a mistake in claiming that it was his affidavit that was the source of the relevant convictions and charges and that he was similarly incorrect about his second affidavit being presented to the Tribunal as his first affidavit. However, Mr Frugtniet submitted that the Tribunal should not allow the Respondent to re-agitate evidence given in the previous proceedings and that the respondent could not re-agitate facts and issues previously determined by the First Tribunal in circumstances where the matter was remitted by the Federal Court on the ground of apprehended bias.
In considering this issue, it is important to have regard to section 44 of the AAT Act and the Federal Court’s decision of 1 October 2015 remitting this application for review to be reheard by a Tribunal differently constituted. Section 44 of the AAT Act relevantly provides:
Powers of Federal Court
(4)The Federal Court of Australia shall hear and determine the appeal and make such order as it thinks appropriate by reason of its decision.
(5)Without limiting by implication the generality of subsection (4), the orders that may be made by the Federal Court of Australia on an appeal include an order affirming or setting aside the decision of the Tribunal and an order remitting the case to be heard and decided again, either with or without the hearing of further evidence, by the Tribunal in accordance with the directions of the Court.
Constitution of Tribunal if Federal Court remits case etc.
(6)If the Federal Court of Australia makes an order remitting a case to be heard and decided again by the Tribunal:
…
(b)whether or not the Tribunal is reconstituted for the hearing---the Tribunal may, for the purposes of the proceeding, have regard to any record of the proceeding before the Tribunal prior to the appeal (including a record of any evidence taken in the proceeding), so long as doing so is not inconsistent with the directions of the Court
In setting aside the First Tribunal’s decision, Jessup J ordered that this matter be remitted for hearing and determination by the… Tribunal differently constituted. No further directions were made for how the matter should be conducted on remittal. With that in mind, the Tribunal concludes that having regard to the transcript of the First Tribunal hearing and in particular Mr Frugtniet’s assertions regarding the disclosure of his convictions and charges in the 2002 proceeding, is not inconsistent with any direction made by Justice Jessup.
The Tribunal finds that through his conduct during the First Tribunal hearing, Mr Frugtniet displayed a preparedness to mislead the First Tribunal. Mr Frugtniet informed the First Tribunal that it was he, and not the Board of Examiners, who brought the relevant convictions and charges to the Supreme Court’s attention. Justice Pagone took a different view, stating that the relevant convictions and charges were first brought to his attention by the Board of Examiners. Having read the affidavits that led Justice Pagone to that view and having seen the dates on which those affidavits were filed, the Tribunal reaches a similar conclusion. It is plain to see that the Board of Examiners was the source of that information in the 2002 proceedings and not Mr Frugtniet. The Tribunal is not convinced that Mr Frugtniet was merely mistaken before the First Tribunal in claiming that he was the source of the information. Whilst it would be unreasonable to expect Mr Frugtniet to remember every part of the 2002 proceeding, it defies belief that Mr Frugtniet would forget such an important series of events in the context of that proceeding. Indeed, Pagone J noted that Mr Frugtniet’s failure to disclose the relevant convictions and charges to the Board of Examiners and to the Court were matters preventing him from finding that Mr Frugtniet was a fit and proper person for admission. The Tribunal finds that Mr Frugtniet knew that he was not the source of the relevant information to the Supreme Court in the 2002 proceedings, yet sought to portray to the First Tribunal that he was. As such, the Tribunal finds that Mr Frugtniet was prepared to mislead the First Tribunal.
Mr Frugtniet’s preparedness to mislead the First Tribunal during the hearing of the application is further compounded by his preparedness to mislead the First Tribunal following the hearing. In lodging his second affidavit from the 2002 proceedings with the Tribunal post-hearing, Mr Frugtniet provided an explanation that it was a further affidavit in response to orders of Master Wheeler of the Victorian Supreme Court. Mr Frugtniet described the contents of this affidavit as self explanatory. Although he opted for the term further instead of first in his explanation of the affidavit, the Tribunal finds that Mr Frugtniet sought to cloud the First Tribunal’s judgement by failing to explicitly note that this was not his first affidavit. Indeed, as he had received leave from the First Tribunal to lodge the first affidavit, it was important for Mr Frugtniet to note that this was not his first affidavit and provide an explanation beyond it being self explanatory. Of more concern is the fact that, in lodging his second affidavit and merely stating that its contents were self explanatory, he further perpetuated the misleading assertion that it was he, and not the Board of Examiners, who disclosed the relevant convictions and charges to the Supreme Court. This is further indicative of Mr Frugtniet’s preparedness to mislead the First Tribunal.
Other matters
Validity of the registration application form
With regard to Mr Frugtniet’s 2008 TABV application, Mr Frugtniet stated that the application for registration form used by the TABV in 2008 was not an approved form. As a result, Mr Frugtniet argued that this form was ultra vires and therefore, the answers in the application which have found to be false earlier in these reasons for decision cannot be taken into account when considering whether Mr Frugtniet is a fit and proper person.
The powers of the Tax Agents Boards, prior to the commencement of the TAS Act and the creation of the Board, were outlined in the Income Tax Assessment Act 1936 (Cth) (ITAA36). In his submission that the registration form he completed was ultra vires, Mr Frugtniet cited s 251J(3) of the ITAA36, which at the time of his 2008 TABV application provided that [a]n application shall be in the approved form and shall be accompanied by such information as is required by the form to be provided. Section 251A then provided that the expression approved form means a form approved in writing by the Board. Mr Frugtniet also relied upon item 24 of Schedule 2 of the Tax Agent Services (Transitional Provisions and Consequential Amendments) Act 2009 (Cth) (the Transitional Act), which states that:
(1)This item applies to any records or documents that:
(a)are in the custody of a Tax Agents’ Board immediately before commencement; or
(b)relate to the activities of a Tax Agents’ Board but are in the custody of the Commissioner of Taxation before commencement.
(2)The records and documents must be transferred into the custody of the Board as soon as practicable after commencement.
Mr Frugtniet places emphasis on an email sent to him by a merit review and investigations officer with the Office of the Australian Information Commissioner (OAIC) dated 24 February 2014. The email concerns a freedom of information request (FOI request) made of the Board by Mr Frugtniet and notes that Mr Frugtniet sought, amongst other things:
7.Any written authority and or approval by the TPB that existed prior to or in 2008 in respect of application forms and schedules thereto attaching for the use by applicants for registration as a tax agent;
The OAIC officer stated that the Board had informed the OAIC that their searches did not locate any documents which fell within the scope of item 7. The OAIC officer stated that the Board had undertaken a reasonable search for the item and conducted the following searches:
·“Searches of the boards (sic) national share drive, electronic case management system (iMIS) and Regulatory Assurance (RA) Case Manager for any relevant documents stored electronically
·Liaising with relevant board officers to ascertain whether there were further documents which may not have been located on the relevant systems”
On the basis of the above information and legislative provisions, it is Mr Frugtniet’s submission that the application for registration form that he completed in 2008 was not approved in writing by the Tax Agents’ Board. Conversely, the Board contends that the form completed by Mr Frugtniet was the regular registration form completed by persons applying to the TABV for registration and that Mr Frugtniet has failed to establish that the form was not approved in writing. The Board submitted that the Tribunal should apply the presumption that, in relation to official acts, all necessary conditions and formalities have been satisfied until the contrary is proved (Industrial Equity Ltd v Deputy Commissioner of Taxation (1990) 170 CLR 649 at 671, per Gaudron J). The approval of the registration form is an official act covered by the presumption and, for the reasons outlined below, the Tribunal finds that Mr Frugtniet has not been able to prove that the form was not approved in writing by the Board.
First, given the importance of such a form to the operations of the Tax Agents’ Board, it is difficult to envisage that this form did not have the requisite written approval as outlined in the ITAA36. Indeed, the Tax Agents’ Board could not legally register tax agents without such approval existing. The Tribunal finds that this further strengthens the presumption that the necessary formality of written approval for that form exists. Second, the OAIC reported the Board did not locate any documents which fell within the scope of Mr Frugtniet’s request. That should be distinguished from a conclusion that such documents do not exist. Again, it is difficult to conclude that all the necessary approvals for the forms needed for the day to day operations of the Tax Agents’ Board did not exist. It may be that those documents were destroyed at some point after they were transferred to the Board, though it is more likely that they are simply no longer readily accessible by the Board’s staff through the usual means used in a standard FOI request. It may also be that Mr Frugtniet’s request was not worded correctly in order to assist the Board in finding the document or documents that he sought. In particular, the Tribunal notes his use of the phrase [a]ny written authority and or approval by the TPB that existed prior to or in 2008. That phrase would be somewhat confusing for an FOI officer given the Board did not exist "prior to or in" 2008, though it is hoped that some flexibility and common sense was used when addressing his request. Finally, it is relevant that Mr Frugtniet could have lodged a request for a summons with the Tribunal seeking the production of the relevant document. A summons may have yielded a similar result to the FOI request or it may have brought the relevant written approval before the Tribunal. Regardless, a summons request seems to be a reasonable step Mr Frugtniet should have taken in advancing his argument about the validity of the application form. Taking all these matters into account, although the Board could not locate the written approval in Mr Frugtniet’s FOI request, the Tribunal finds that Mr Frugtniet has not proven that the application for registration form was not approved as required under the ITAA36.
Even if the 2008 TABV application for registration form was not approved in writing by the Tax Agents’ Board, I would nonetheless find that Mr Frugtniet’s answers in that document are relevant to an assessment of whether he is a fit and proper person. Justice Jessup’s remarks on appeal from the First Tribunal decision are relevant in this regard. On appeal, Mr Frugtniet argued that the First Tribunal failed to consider his argument about the application for registration form not being approved in writing by the Tax Agents’ Board. Rejecting that argument, his Honour stated at 341-342 that:
…The applicant’s application in 2008 was in fact made on a Commonwealth government form, headed: “Application for registration as a tax agent – individual”. The applicant willingly used that form, and provided all the information, answered all the questions and marked all the boxes required by or set out on it. Whether approved or not, this form, when completed, was in fact a written application by the applicant for registration as a tax agent. The accuracy of the responses which the applicant provided on it, and the relevance of them to the question that was before the Tribunal, were centrally in play in the proceeding in which the applicant fully participated…
Regardless of whether or not the application form was appropriately approved by the Tax Agents’ Board, the form Mr Frugtniet completed was the form all applicants for registration completed and would have been considered appropriately approved at the time. The Tribunal has no doubt Mr Frugtniet would have held that view when completing the form. It was a Commonwealth Government form and it required Mr Frugtniet to make a declaration that the information in the form was true and correct. His answers in that document, irrespective of whether it was approved in accordance with the ITAA36, are relevant to an assessment of whether he is a fit and proper person.
Failure to conduct an investigation
Mr Frugtniet submitted that the Board had not complied with the TAS Act when conducting its investigation into his conduct. He said that, notwithstanding that the respondent contends that no investigation took place, it is beyond doubt from the documentation (including what he called a show cause letter given to him on 26 June 2012) that an investigation was conducted and the delay involved in not making a decision within six months after its commencement was a breach of natural justice. As a result, he argued that the Board’s decision to terminate his registration was invalid because s 60-125(7) of the TAS Act dictates that the Board should be taken to have decided to take no further action at the conclusion of the six month time period.
In the letter dated 26 June 2016 a delegate of the Board outlined the Board’s concern about whether Mr Frugtniet was a fit and proper person to continue to be registered as a tax agent. The notice stated that the Board’s concern had arisen as a result of the 2008 TABV application, the 2011 VCAT decision and the three complaints lodged against Mr Frugtniet all coming to the Board’s attention. The letter, described in the respondent’s submissions as a natural justice letter, invited Mr Frugtniet to make submissions on the issue of whether he was a fit and proper person and to explain why his registration should not be terminated under s 40-5(1) of the TAS Act. Mr Frugtniet made the appropriate responses to that invitation. The allegation that Mr Frugtniet was not a fit and proper person was made more formally in a letter dated 20 November 2005. Both parties accept that the letter was mistakenly dated 2005 and should read 2012. The 20 November 2012 letter enclosed a submission provided to the Board Conduct Committee and invited Mr Frugtniet to make further submissions on the issue of whether he was a fit and proper person. Mr Frugtniet made those submissions on 8 January 2013 and 15 January 2013. As mentioned earlier in this decision, Mr Frugtniet’s registration as a tax agent was subsequently terminated on 15 February 2013.
Under s 60-95(1) of the TAS Act, the Board may investigate the following: 1) an application for registration; 2) any conduct that may breach the TAS Act; and 3) other matters prescribed by the regulations. The letter to Mr Frugtniet dated 26 June 2016 does not concern an application for registration or any conduct that may breach the TAS Act, rather, it concerns his eligibility to continue to be registered as a tax agent in light of concerns about his fitness and propriety to be registered as a tax agent and provides him with an opportunity to respond to complaints about him received by the Board. Ceasing to meet the eligibility requirements for continued registration as a tax agent was not a matter requiring investigation as prescribed by the Tax Agent Services Regulations 2009 (Cth) at the time (nor is it a requirement now). It follows that there is no obligation on the Board to conduct a subdivision 60-E investigation in relation to concerns about whether a tax agent has ceased to meet one of the eligibility requirements for registration. Similarly, it follows that there is no statutory time limit on the Board’s consideration of whether Mr Frugtniet had ceased to meet one of the eligibility requirements for registration. The Board’s decision of 15 February 2013 was validly made under ss 40-5(1) and 40-25(1) of the TAS Act and the Tribunal has jurisdiction to review that decision.
Consideration of whether Mr Frugtniet is a fit and proper person
The meaning of the term fit and proper person was considered by the High Court of Australia in Hughes & Vale Pty Ltd v New South Wales (No 2) (1955) 93 CLR 127 where Dixon CJ, McTiernan and Webb JJ found the word fit, in relation to an office, involves honesty, knowledge and ability (at 156). The meaning of fit and proper person was also considered by the High Court in Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321. Justices Toohey and Gaudron stated at 380:
The expression ‘fit and proper person’, standing alone, carries no precise meaning. It takes its meaning from its context, from the activities in which the person is or will be engaged and the ends to be served by those activities. The concept of ‘fit and proper’ cannot be entirely divorced from the conduct of the person who is or will be engaging in those activities. However, depending on the nature of the activities, the question may be whether improper conduct has occurred, whether it is likely to occur, whether it can be assumed that it will not occur, or whether the general community will have confidence that it will not occur.
In Su v Tax Agents’ Board, South Australia (1982) 61 FLR 1, Davies J stated in relation to tax agents at 4-5:
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.
In Stasos v Tax Agents’ Board of New South Wales (1990) 21 ATR 974, Hill J agreed with Davies J’s statement in Su, though with a qualification that the functions of a tax agent were broader than preparing and lodging tax returns. He stated at 985:
However, a person who has been shown to be other than a fit and proper person to be registered must satisfy the Tribunal considering his re-registration or cancellation of his registration as the case may be, that he appreciates the significance of his wrongdoing, that he regrets it and that he has rehabilitated himself such that it is truly unlikely that there will be any lapse in the future of the standards which are required of him. The more serious his dereliction from duty the longer may be the time necessary to show this. It will not be sufficient for him to merely express his contrition. The Tribunal must be satisfied on the balance of probabilities that not only is that contrition actually felt, but that he will not again deviate from the high standards required of him as a registered tax agent.
In Toohey v Tax Agents Board of Victoria (No 2) (2008) 106 ALD 506 Middleton J stated at 510:
…In determining whether a person is a fit and proper person the enquiry is directed not only to whether improper conduct has occurred, but whether it is likely to occur again, and whether the community will have confidence that it will not occur. This will involve an evaluation of character and reputation…
Mr Frugtniet has established a clear and consistent pattern of conduct over a considerable period that shows him to be a person of dishonest behaviour and lacking in integrity, and the public will have no confidence that future dishonesty would not occur if he remains registered as a tax agent. There have been a number of adverse comments made about Mr Frugtniet and his character, and the totality of his conduct indicates that he clearly has not learnt from his past mistakes. Mr Frugtniet’s character has long been in question, dating back at least to his false declaration to MARA in his 1999 application for repeat registration in which he failed to disclose the charges that were still pending. In answering questions 17 and 18 in the negative on his 2008 application for registration as a tax agent Mr Frugtniet has not demonstrated that he has changed his behaviour, despite any claims to the contrary. His actions in misleading the Werribee Magistrates’ Court in 2010 by deliberately and falsely representing that he was a sole practitioner and solicitor evidenced a continuing willingness to mislead and deceive. His conduct as a tax agent in dealing with Ms Galvez-Londono’s tax affairs in 2011 raises grave concerns about his character, honesty, transparency and accountability, for example by misrepresenting to Ms Galvez-Londono that he was operating a trust account and attempting to impose a $500 fee on her relating to her brother’s migration matters. Finally and most recently, Mr Frugtniet displayed a preparedness to mislead the First Tribunal at and after the hearing. The Tribunal finds that Mr Frugtniet has not shown that he is a person of good fame, integrity and character, and he does not satisfy the Tribunal that he is a fit and proper person for the purposes of the mandatory requirements for registration as a tax agent.
SHOULD THE DISCRETION TO TERMINATE MR FRUGTNIET’S REGISTRATION BE EXERCISED?
In view of its findings about Mr Frugtniet’s failure to satisfy one of the mandatory requirements for registration as a tax agent, it follows that the Tribunal decides that Mr Frugtniet’s registration as a tax agent should be terminated under s 40-5(1)(b) of the TAS Act.
SHOULD A PERIOD, DURING WHICH MR FRUGTNIET CANNOT APPLY FOR REGISTRATION, BE IMPOSED?
Mr Frugtniet submitted that he has expressed regret over past failures and should be judged as at the present date. He said that he has shown absolute remorse and, as far as words can do it, his statements disclose recognition of his past conduct, regret and contrition and an intention to observe proper standards of conduct in the future. He told the Tribunal that it is of some relevance that he is aged 62 years, has three young children to support and is a sole practitioner who has been engaged in multiple disciplines and has feelings of shame regarding the events at Werribee Magistrates’ Court that led to the VCAT decision.
Mr Frugtniet submitted further that the Board may impose conditions when granting or renewing his registration as a tax agent. He said that since the date of the Board’s decision he has incurred a substantial penalty in not being able to provide tax agent services for his clients, which has compounded his penalty in relation to the VCAT decision. Mr Frugtniet also noted that he has now served his three year ban arising out of the VCAT proceeding.
The Tribunal takes into account the submissions made by Mr Frugtniet about his personal circumstances and the impact of the Board’s decision on his livelihood. However, in view of its findings about Mr Frugtniet’s pattern of dishonest conduct over a considerable period, the Tribunal considers that his expressions of remorse are not matched by action on his part, particularly his attempts to find fault with the Board and its decision-making processes and his actions in dealing with Ms Galvez-Londono’s tax affairs and seeking to discredit her evidence. He admitted that his conduct at Werribee Court that led to the VCAT decision was wrong, yet he sought to minimise the findings by VCAT against him. He has shown that his conduct has been inconsistent with the standard of conduct expected of a registered tax agent. The ATO, the public and Mr Frugtniet’s clients would have no confidence that he would perform the functions of a registered tax agent with integrity, and he represents an unacceptable risk to the public in that role. For these reasons the Tribunal finds that under s 40-25 of the TAS Act Mr Frugtniet may not apply for registration as a tax agent for a period of 5 years after the effective date of termination of his registration.
DECISION
The Tribunal affirms the decision under review.
I certify that the preceding 72 (seventy-two) paragraphs are a true copy of the reasons for the decision of Dr Gordon Hughes, Member
..............................[sgd]..........................................
Associate
Dated: 30 August 2017
Dates of hearing: 15 June, 15 & 16 November 2016 Date final submissions received: 23 January 2017 Applicant: Self-represented Advocate for the Respondent: Mr David Brown Solicitors for the Respondent: Australian Government Solicitor
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