Gathani and Tax Practitioners Board (Taxation)

[2019] AATA 6888

Gathani and Tax Practitioners Board (Taxation) [2019] AATA 6888 (16 October 2019)

Division:TAXATION AND COMMERCIAL DIVISION

File Number(s):      2019/4201

Re:Nitin Gathani

APPLICANT

AndTax Practitioners Board

RESPONDENT

DECISION

Tribunal:Deputy President Bernard J McCabe

Date:16 October 2019

Date of written reasons:         14 November 2019

Place:Perth

1.The Tribunal refuses the applicant's request under section 41(2) of the Administrative Appeals Tribunal Act 1975 for an order staying or otherwise affecting the operation or implementation of the reviewable decision while the review proceeds.

2.The operation of the interim stay order of the Tribunal dated 27 September 2019 is extended only until 28 October 2019 subject to an undertaking the applicant:

(a)will not accept any new clients;

(b)will not take on any new work from existing clients;

(c)understands that the extension of the interim stay is to facilitate the finalisation and transfer of its work to other tax agents; and

(d)will write to each of his existing clients to inform them of the operation of the interim stay and how their work is to be disposed.

...................................[sgd].....................................

Deputy President Bernard J McCabe

CATCHWORDS

PRACTICE AND PROCEDURE – stay application – whether a stay is necessary to secure the effectiveness of the final hearing – hardship to the applicant without a stay – prospects of success – interest of the respondent – public interest – stay not necessary – stay application refused

LEGISLATION

Administrative Appeals Tribunal Act 1975 section 41

Tax Agent Services Act 2009 sections 40-5 and 40-25

CASES

Scott and ASIC [2009] AATA 798

REASONS FOR DECISION

Deputy President Bernard J McCabe

14 November 2019

1. These reasons relate to an application for a stay application that was dealt with at an interlocutory hearing on 14 October 2019. At the conclusion of the hearing, I made a decision on the application and gave oral reasons. One of the parties subsequently requested a written statement of reasons. The written statement which follows is distilled from the transcript made of the recording at the hearing.

2. The stay application arises in light of an application for review of a decision in which the respondent made quite serious findings in relation to the conduct of the applicant in a number of different respects. On the strength of those findings, the respondent decided to cancel the applicant’s registration as a tax agent and prevent the applicant from seeking re-registration pursuant to ss 40-5(1)(b) and 40-25 of the Tax Agent Services Act 2009 (Cth). The findings involve allegations of dishonesty, and include what I will call witness tampering. The findings also relate to less serious matters. While the serious allegations of impropriety are hotly contested by the applicant, the likelihood of regulatory action is high if those findings are sustained on the review.

3. Section 41(2) of the Administrative Appeals Tribunal Act 1975 (the AAT Act) gives the Tribunal power to stay the operation or implementation of the decision under review in appropriate circumstances. In the absence of an order under s 41(2), the decision under review would come into effect. The power in s 41(2) is given for a specific purpose, namely:

   for the purpose of securing the effectiveness of the hearing and determination of the application for review.

4. The power to order a stay is not enlivened unless it is thought to be directed to that purpose. Whether it is appropriate to make such an order once I am satisfied the purpose exists requires consideration of a number of different matters alluded to in s 41(2) which says the power may be exercised if:

   It is desirable to do so after taking into account the interests of any persons who may be affected by the review.

5. In Scott and Australian Securities and Investments Commission [2009] AATA 798, Downes J sets out a series of questions that broadly encapsulates the considerations the Tribunal must entertain. While a useful guide, these questions should not be treated as a checklist to be applied inflexibly.

6. The merits of the application for review in circumstances are relevant. Other things being equal, a stronger case on the merits weighs in favour of granting the orders sought. In a case like this, it is difficult to assess the merits. I note the applicant says the findings of fact made by the Board will be hotly contested at the hearing. The applicant foreshadows evidence that will call into question some of the more serious adverse findings in particular. That evidence will be introduced and be the subject of cross-examination but beyond saying that, it is difficult to say this is a strong case. It is simply too early to tell. In circumstances where we do not conduct a mini trial at this point in the process, I cannot give too much weight to this factor.

7. The evidence from the applicant set out in his witness statement is that there will be serious consequences for him if the stay is not granted, specifically that he will not be able to continue his business and that he will be forced to either sell it or close it. If he sells it, he will sell at a loss. If he closes it, then he will lose value. But even if it just remains dormant in some way, he will suffer significant financial loss, which will be something that will cause some difficulty, at least in the short term, even if he is vindicated at the final hearing.

8. There are also potentially consequences for his employees. The applicant’s witness statement says there are a number of employees, including a part-time practice manager, clerical staff and employed accountants. They may lose their jobs. There will also be inconvenience, of course, for clients who may prefer to stick with the applicant provided they are aware of the matters that have been raised. They would need to transition their affairs very quickly to a new tax agent (assuming that no interim arrangements can be made) if a stay is not granted.

9. I accept there is likely to be considerable inconvenience for other parties and obvious adverse consequences for the applicant if no stay is granted and he substantially succeeds at the substantive hearing. The precise consequences in terms of financial loss and impact on creditors and so forth have not been spelled out but I think we can take it as read that the applicant is likely to experience a not insignificant loss.

10. I am required to consider the interests of the respondent. I am not aware of any adverse impact on the respondent if a stay is granted. I must also consider the public interest. While I have just referred earlier to the inconvenience that might accrue to clients of the applicant if they are forced to find an alternative tax agent, the reality is that the whole regulatory regime is designed to protect consumers of those services so they can have confidence the services will be provided with integrity, and that they are going to be provided competently. To that end, the regulatory regime suggests a risk averse approach to stays may be required. It may be especially appropriate for the Tribunal to be risk averse when serious findings in relation to matters of integrity have been made. It is possible the applicant may yet be vindicated: I have not formed a firm view about how likely that is. But even assuming the applicant has good prospects of success, the question is whether the Tribunal should be risk averse in the meantime.

11. I am conscious an interim stay was granted after the reviewable decision had already come into effect. That interim order was made pending the outcome of the stay hearing. I note the applicant had continued to deal with his clients in the absence of the stay order, perhaps on the strength of a misunderstanding that may have been fed by correspondence from the respondent, about what he was permitted to do following the reviewable decision. It appears he did not have access to the tax agents’ portal during the pre-stay period which would have impacted on how much work he could have done on behalf of his clients – which suggests the clients have already been inconvenienced. There is also the matter that of course his clients may well already be aware of these proceedings and any loss that he was going to experience may already have crystallised.

12. All those matters are relevant to the exercise of discretion. But the discretion is only enlivened when I am satisfied the order would have the effect of preserving the efficacy of the hearing and review. The applicant has not specifically identified how that review process will be frustrated or compromised. I accept the applicant will experience hardship and it may well be significant hardship and that is unfortunate if the applicant is ultimately vindicated. However, the power is not just given to prevent hardship. It may be a factor considered once we are satisfied it is necessary to make an order, but it tells us little about whether the power is available.

13. In the circumstances, I am not satisfied the applicant identified how an order would secure the effectiveness of the hearing and determination of the application for review. In those circumstances I am not inclined to make the stay order. I do not think I have the power to make the stay order but even if I did, the public interest concern, given that there are allegations of dishonesty, or findings of dishonesty that have been made, including witness tampering, militates in favour of a more risk-averse approach in a situation like this. Having said that, I note the respondent has agreed to permit the applicant to remain involved in his practice for the specific and limited purpose of facilitating the orderly hand over of his clients’ affairs. The final orders disposing of the application for a stay will reflect that agreement.

14. In those circumstances, the request for a stay of the reviewable decision is otherwise refused. The stay will be dissolved as of close of business on 28 October 2019 subject to certain undertakings.

I certify that the preceding 14 (fourteen) paragraphs are a true copy of the reasons for the decision herein of Deputy President Bernard J McCabe

....................................[sgd]....................................

Associate

Dated: 14 November 2019

Date(s) of hearing:	16 October 2019
Date final submissions received:	11 October 2019
Solicitors for the Applicant:	Mr M McCoy, Ryan & Durey Solicitors
Counsel for the Respondent:	Ms C Thompson
Solicitors for the Respondent:	Ms L Chen, Tax Practitioners Board