Ham v Tax Practitioners Board
[2018] FCA 1652
•2 November 2018
FEDERAL COURT OF AUSTRALIA
Ham v Tax Practitioners Board [2018] FCA 1652
File number: QUD 606 of 2017 Judge: LOGAN J Date of judgment: 2 November 2018 Catchwords: TAXATION – tax agents – cancellation of registration – fit and proper person – tax agent knowingly concerned over lengthy period in equitable fraud when acting otherwise than as tax agent as account for client – extent to which this is a factor to be taken into account in determining whether person is a fit and proper person – observations upon role of and conduct befitting a tax agent and content of expressions “fit and proper person” and “good fame, integrity and character” – Tax Agent Services Act 2009 (Cth), ss 20-5, 20-15, 20-25, 20-50. Held – appeal dismissed. Legislation: Administrative Appeals Tribunal Act 1975 (Cth) ss 43,44
Income Tax Assessment Act 1936 (Cth) ss 251BC, 251BC(1)
Income Tax Assessment Act 1943 (Cth) s 26
Migration Act 1958 (Cth) s 65
Tax Agent Services Act 2009 (Cth) ss 2-5, 20-1, 20-5(1), 20-5(1)(a), 20-15, 20-15(a), 20-15(b), 20-25, 20-25(1), 20-45, 20-50, 30-10, 60-5, 60-15, 70-10(a)(i), 80-5
Income Tax Assessment Act 1936 (Qld) s 65
Cases cited: Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321
Bankstown Municipal Council v Fripp (1919) 26 CLR 385
Buck v Bavone (1976) 135 CLR 110
Canehire Pty Ltd & Anor v Themis Holdings Pty Ltd [2014] QCA 296
Jacobellis v. Ohio 378 U.S. 184 (1964)
Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24
Minister for Immigration and Border Protection v Eden (2016) 240 FCR 158
Minister for Immigration and Border Protection v Stretton (2016) 237 FCR 1
Minister for Immigration and Border Protection v SZVFW (2018) 92 ALJR 713
Minister for Immigration and Multicultural Affairs v Eshetu (1999) 197 CLR 611
Minister for Immigration and Multicultural and Indigenous Affairs v SGLB (2004) 78 ALJR 992
ProjectBlue Sky Inc v Australian Broadcasting Authority
(1998) 194 CLR 355
Roth v. United States 354 U.S. 476 (1957)
Re: Su v. Tax Agents Board of South Australia (1982) 13 ATR 192
Shell Company of Australia Ltd v Federal Commissioner of Taxation (1930) 44 CLR 530
Stasos v Tax Agents’ Board of New South Wales (1990) 21 ATR 974
Themis Holdings Pty Ltd v Canehire Pty Ltd & Anor [2014] QSC 38
Toohey v Tax Agents’ Board of Victoria (No 3) (2010) 78 ATR 905
Ziems v Prothonotary of Supreme Court of New South Wales (1957) 97 CLR 279
Date of hearing: 23 April 2018 Date of last submissions: 23 April 2018 Registry: Queensland Division: General Division National Practice Area: Taxation Category: Catchwords Number of paragraphs: 60 Counsel for the Applicant: Mr D A Savage QC with Mr C D Coulsen Solicitor for the Applicant: QBM Lawyers Counsel for the Respondent: Mr M McKechnie Solicitor for the Respondent: Australian Government Solicitor
Table of Corrections 6 November 2018 In paragraph 15, the word “to” is added before “detail”.
6 November 2018 In paragraph 52, the word “none” is changed to “nine”.
6 November 2018 In paragraph 56, the quote is changed to “within a range of possible acceptable outcomes”.
6 November 2018 In paragraph 59, the word “penitent” is changed to “pertinent”. 12 August 2020 In paragraph 55, in the quoted paragraph the word “maybe” has a space in between “may” and “be”. At the end of the quote [footnote references omitted] has been inserted. 12 August 2020 In paragraph 55, the quote paragraph 82 has been replaced in its entirety with the correct quoted paragraph. At the end of the quote [footnote references omitted] has been inserted. ORDERS
QUD 606 of 2017 BETWEEN: PHILIP HAM
Applicant
AND: TAX PRACTITIONERS BOARD
Respondent
JUDGE:
LOGAN J
DATE OF ORDER:
2 NOVEMBER 2018
THE COURT ORDERS THAT:
1.The appeal be dismissed.
2.The applicant pay the respondent’s costs of and incidental to the appeal, to be taxed if not agreed.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
LOGAN J:
Mr Philip Ham is an accountant. He was once a chartered accountant but was excluded from membership of Chartered Accountants Australia and New Zealand (CAANZ) following a hearing by that body’s Professional Conduct Tribunal (PCT) on 6 October 2015. He was also once a tax agent registered under the Tax Agent Services Act 2009 (Cth) (TAS Act). The present respondent, the Tax Practitioners Board (Board), decided to refuse renewal of his registration The Board’s decision was affirmed by the Administrative Appeals Tribunal (Tribunal) (Senior Member Cotter).
The PCT found professional disciplinary charges laid against Mr Ham, grounded in several alleged breaches of CAANZ’s by-laws, proved. Those charges had their origin in the facts as found, observations concerning Mr Ham made and orders made by the Queensland Supreme Court (Philippides J) in Themis Holdings Pty Ltd v Canehire Pty Ltd & Anor [2014] QSC 38 (Themis Holdings v Canehire). An appeal against the judgement given in that case was later dismissed by the Queensland Court of Appeal: Canehire Pty Ltd & Anor v Themis Holdings Pty Ltd [2014] QCA 296. Greater detail in relation to this litigation is given later in these reasons for judgement.
In January 2016, CAANZ sent a copy of its Professional Conduct Tribunal’s findings to the Board.
The Board was established by s 60-5 of the TAS Act. It administers the system set out in that Act for the registration of registered tax agents, Business Activity Statement (BAS) agents and tax (financial) advisers as well as undertaking other functions as specified in s 60-15. That system notably includes a Code of Professional Conduct as set out in s 30-10 of the TAS Act.
The Board and the system it administers replaced an earlier regime for the registration and regulation of the conduct of tax agents, once found in Pt VIIA of the Income Tax Assessment Act 1936 (Cth) (ITAA 1936). The Federal origins of that regime may be traced to an amendment made to the ITAA 1936 in 1943 by s 26 of the Income Tax Assessment Act 1943 (Cth). In turn, that regime initially operated in parallel with, but eventually replaced, earlier State regimes for the registration of tax agents: for example, see, in Queensland, s 65 of the Income Tax Assessment Act 1936 (Qld) (repealed). Thus, legislative provision for the registration and regulation of the conduct of tax agents is no new subject.
Mr Ham was first registered as an individual tax agent in June 1989. That was under the regime then found in Pt VIIA of the ITAA 1936. He is the sole director and supervising agent of a company, H & P Services Pty Ltd, which is also a registered tax agent.
In May 2016, the Board sought from Mr Ham a written explanation in respect of the PCT’s findings. The procedure thus initiated was overtaken by a need for Mr Ham to renew his registration. He made such an application the following month, on 16 June 2016. That application was accompanied by a letter of explanation dated 15 June 2015.
Mr Ham’s application for renewal of registration as a tax agent was considered by a committee of the Board at a meeting on 13 October 2016. The committee was acting on the delegated authority of the Board. The committee decided to reject Mr Ham’s application. That was on the basis of an absence of satisfaction that he was a “fit and proper person” for registration as a tax agent, as s 20-5(1)(a) of the TAS Act required.
It was in these circumstances that Mr Ham sought the review of the Board’s decision by the Tribunal. On 9 October 2017, the Tribunal decided to affirm the Board’s decision.
Mr Ham has now appealed to this Court on questions of law under s 44 of the Administrative Appeals Tribunal Act 1975 (Cth).
As pleaded, the questions of law are:
(1)whether or not Senior Member Cotter erred in law in determining the application adverse to the Applicant in failing to avert to relevant considerations;
(2)is the true meaning of the words “fit and proper person” as those words are used in s 20-5 of the Tax Agents Services Act 2009 (“the Act”) where the conduct of the Applicant which is the subject of the Decision below does not arise out of the conduct of the Applicant as a tax agent; and
(3)whether Senior Member Cotter determined the application in a manner which ls so unreasonable that no reasonable tribunal could so decide?
These questions of law entailed no challenge to the findings of fact which the Tribunal made on the basis of the reasons for judgement given and order made in Themis Holdings v Canehire and such other material as was before it. Accordingly, it is convenient to adopt the following account of background facts given by Senior Member Cotter in his reasons (paras 2 to 17, footnote references omitted):
Mr Ham, Canehire Pty Ltd and Mr Trevor Holzapfel and the Fison Avenue land
2.For many years, Mr Ham acted as the accountant for Mr Trevor Holzapfel and his various entities; he was a family friend.
3.In July 1991, on Mr Ham’s advice, the Holzapfel Property Trust (“HPT”) was established. The HPT was a discretionary trust of which Mr Holzapfel, members of his family and companies controlled by them, were beneficiaries. Canehire Pty Ltd (“Canehire”), a shelf company of Mr Ham (who was its sole director and shareholder), was appointed as the trustee.
4.In September 1993, Canehire, as trustee of the HPT, acquired the lessee’s interest in a Crown lease over land at Fison Avenue, Eagle Farm. A company controlled by Mr Holzapfel carried on business on the land. Between 1993 and 2000, various Holzapfel-related entities made improvements to the land.
5.Mr Holzapfel was interested in acquiring the freehold title to the land. Between 1996 and 1998, Canehire, through Mr Holzapfel, conducted negotiations in that regard with the Department of Natural Resources (“DNR”). However, Canehill was not financially able to pay the purchase price sought by the DNR and instead obtained a renewal of the lease to December 2002.
6.In 2000, one of the Holzapfel-related entities which carried on business on the land experienced financial difficulties. Its bank made demand on Canehire as guarantor of the borrower’s obligations. Mr Holzapfel and his entities lacked the capacity to satisfy the bank’s demand. Mr Ham, who was able to obtain funds at a cheaper rate than the bank was charging, proposed to Mr Holzapfel that Canehire, in its own right, pay out the bank and that the Holzapfel-related entities assume an obligation to repay Canehire. Mr Holzapfel accepted the proposal, which was documented. Subsequently, in April 2001, the bank assigned its securities in respect of the debts owing to it, to Canehire.
7.Until 2002, Mr Holzapfel exercised control over the land and negotiated with the DNR for Canehire’s acquisition of the freehold.
8.In November 2002, Mr Ham and his business partner in property development ventures, Mr Russell Kempnich, established the Fison Avenue Unit Trust (“FAUT”), with Canehire as trustee. The unit holders were companies respectively controlled by Mr Ham and Mr Kempnich.
9.Later that month, Canehire accepted an offer by the DNR to acquire the freehold to the property. The acquisition price was paid from an advance made by South East Property Developments Pty Ltd (“SEPD”), a property development company controlled by Mr Ham and Mr Kempnich. The advance was subsequently repaid from monies borrowed by Canehire, the repayment of which was guaranteed by Mr Ham and Mr Kempnich. A deed of grant of the land in favour of Canehire was registered in February 2003. No reference was made to any trust.
10.After acquiring the freehold, Canehire made improvements to the property to facilitate its letting to a new lessee.
11.The property was sold by Canehire in October 2008 for $4,892,030.00. The proceeds were used to discharge indebtedness to Canehire’s secured lender, with the balance paid to SEPD, which expended the monies in development projects. No part of the proceeds was paid to the HPT or any of its beneficiaries.
The legal proceedings.
12.After Mr Holzapfel and the other beneficiaries became aware of the sale, Canehire was removed as the trustee of the HPT and replaced by Themis Holdings Pty Ltd (“Themis”). Themis in turn commenced proceedings in the Queensland Supreme Court for equitable compensation against Canehire and Mr Ham.
13The crux of the dispute was whether there was an agreement between Mr Holzapfel and Mr Ham that the freehold be purchased on trust for the HPT, as Themis contended, or whether the agreement was that Canehire purchase the freehold in its own right (as Mr Ham contended).
14.Themis also asserted that if Mr Ham’s version of the agreement was not accepted, then Canehire had acted in breach of its duty, and Mr Ham was knowingly concerned in that breach. Alternatively, if Mr Ham’s version were accepted, it was said that version was insufficient to constitute fully informed consent of the HPT beneficiaries, so that Canehire acted in breach of its duty, and Mr Ham was knowingly concerned in that breach.
15.In March 2014, Philippides J found in favour of Mr Holzapfel’s version of the agreement. Her Honour gave judgment for Themis on its claim for equitable compensation.
16.In the course of delivering her judgment, Philippides J made the following comments and findings in respect of Mr Ham’s conduct:(a) “... there are important matters relating to Mr Ham’s evidence which undermine his credibility and cause me to reject his evidence. In addition to the fact that the defendants’ pleaded case underwent a number of amendments, including during the trial, Mr Ham’s actual evidence did not even then accord with aspects of the pleaded case.”
(b)Mr Ham “did not inform Mr Holzapfel that he would involve a partner, who would be entitled to receive a share, let alone 50 per cent, of the net proceeds of sale before any payment to the HPT. Mr Holzapfel was not told of Mr Kempnich before 2008.”
(c)“Mr Ham did not tell Mr Holzapfel that he and the beneficiaries would lose all beneficial interest in the property and that the beneficiaries would have no right to share in the sale proceeds of the property no matter how profitable.”
(d)“In short, Mr Ham kept Mr Holzapfel in the dark about the manner in which he was dealing with the property. He did not explain the nature of the additional borrowings or provide updated valuations as they came to hand. To do so would have risked alerting Mr Holzapfel to the fact that the Fison Avenue property was being used as security to advance the property development interests of Mr Ham and his partner Mr Kempnich, about whom Mr Ham accepted he deliberately failed to inform Mr Holzapfel.”
(e)“... Canehire acted in breach of its fiduciary duty and breach of trust by paying away the profits derived from the sale of the property.”
(f)“Mr Ham was at the relevant times the directing mind and will of Canehire and was knowingly concerned in the breach of duty and trust committed by Canehire and therefore liable to compensate the plaintiff in equity...”
(g)“... Mr Ham, as the controlling mind of Canehire, was consciously acting dishonestly in paying away the proceeds of sale. He had actual knowledge that the proceeds lawfully belonged to the beneficiaries of the HPT (knowing full well the terms of the agreement with Mr Holzapfel were that the freehold was to be acquired for the HPT), that Mr Holzapfel had not consented to Canehire distributing the proceeds to any other party, and that he was acting contrary to the express trust constituted by the agreement in so doing.”
17.Her Honour also accepted the argument advanced by Themis that Mr Ham’s version of the agreement with Mr Holzapfel “smacked of recent invention”. She agreed that it seemed “highly implausible” that the simple fact of the agreement as asserted by Mr Ham would not have been conveyed at some stage in response to the increasingly serious matters raised with him by Mr Holzapfel’s lawyer, describing Mr Ham’s explanation for that failure as verging “on the absurd”.
In his evidence before the Tribunal, Mr Ham stated:
It is not an exaggeration to say that there is not a day that does not pass without my thoughts returning to this Case and the outcome. Initially I was angry and upset about the decision by the Court. However, with the passing of time, I have gradually become capable of viewing the whole affair objectively. I now unreservedly accept the Court’s decision and simply stated, believe it was my fault that the Case occurred at all. I should never have entertained any course of action which could result in a benefit to me.
[Emphasis added]
The Board’s case before the Tribunal was not based just on the findings made in Themis Holdings v Canehire or that these findings had formed the basis of his exclusion from membership of CAANZ, but also on his failure to disclose either the outcome of Themis Holdings v Canehire litigation and the CAANZ PCT proceedings to the Board prior to the disclosure made to the Board by CAANZ.
Though Senior Member Cotter accepted, quite properly, that the findings made in Themis Holdings v Canehire did not bind him, for reasons which he explained he chose to adopt them. It is not necessary to detail that explanation, because no error of law is said by Mr Ham to have been involved in the adoption of the findings. Given their adoption, it is convenient to term Mr Ham’s conduct as revealed by those findings the “relevant conduct”.
The Tribunal accepted that none of the relevant conduct concerned Mr Ham’s conduct as a tax agent. That no conduct as a tax agent informed the Tribunal’s failure to be satisfied that Mr Ham was a fit and proper person for registration as a tax agent assumed much importance in the way in which his case was presented in relation to the second question of law.
As did Mr Ham in his submissions, I commence with a consideration of the meaning and effect of the provisions governing registration.
Materially, s 20-5(1) of the TAS Act provides:
Eligibility for registration as a tax agent, BAS agent of tax (financial) adviser; Individuals:
(1)An individual, aged 18 years or more, is eligible for registration as a *registered tax agent BAS agent or tax (financial) adviser if the Board is satisfied that:
a. The individual is a fit and proper person; and
b. …
In turn, s 20-15 of the TAS Act provides:
Criteria for determining whether an individual is a fit and proper person
In deciding whether it is satisfied that an individual is a 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.
As to s 20-45, referred to in s 20-15 of the TAS Act, that section provides:
Certain events may affect your continued registration
The following events may affect your continued registration as a *registered tax agent or 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.
Mr Ham placed emphasis on the words “your continued” in s 20-45 in his submissions. He also referred to the object of the TAS Act, as found in s 2-5:
Object
The object of this Act is to ensure that * tax agent services are provided to the public in accordance with appropriate standards of professional and ethical conduct. This is to be achieved by (among other things):
(a)establishing a national Board to register tax agents, BAS agents and tax (financial) advisers; and
(b)introducing a * Code of Professional Conduct for * registered tax agents, BAS agents and tax (financial) advisers; and
(c)providing for sanctions to discipline registered tax agents, BAS agents and tax (financial) advisers.
Mr Ham also referred to s 20-1, the general guide to Pt 2 of the TAS Act, in which are to be found the provisions governing initial and continued registration:
What this Division is about
You must be registered to provide tax agent services for a fee or to engage in other conduct connected with providing such services. You will be eligible for registration if you are a fit and proper person and have appropriate qualifications and experience.
If you are eligible and apply to the Tax Practitioners Board for registration as a registered tax agent, BAS agent or tax (financial) adviser, you will be registered for a period of at least 3 years. Your registration may be subject to conditions. You may seek to vary these conditions.
Certain events, mainly relating to criminal convictions and bankruptcy, may affect your continued registration.
You may also apply to have your registration renewed.
He emphasised the words, “mainly relating to criminal convictions and bankruptcy, may affect your continued registration” in s 20-1.
Paragraph 80(1)(b) of the TAS Act provides that a Guide such as that found in s 20-1 forms part of that Act. The role of a Guide is specified in s 80-5 of the TAS Act:
The role of Guides in interpreting this Act
(1)A Guide consists of sections under a heading indicating that what follows is a Guide to a particular Subdivision, Division etc.
(2)A Guide forms part of this Act, but is kept separate from operative provisions. In interpreting an operative provision, a Guide may only be considered:
(a) in determining the purpose or object underlying the provision; or
(b)to confirm that the provision's meaning is the ordinary meaning conveyed by its text, taking into account its context in the Act and the purpose or object underlying the provision; or
(c)in determining the provision's meaning if the provision is ambiguous or obscure; or
(d)in determining the provision's meaning if the ordinary meaning conveyed by its text, taking into account its context in the Act and the purpose or object underlying the provision, leads to a result that is manifestly absurd or is unreasonable.
In deciding on behalf of the Board to reject Mr Ham’s application for renewal of his registration, the Committee acted as required by s 20-25(1) of the TAS Act, which provides:
Registration
Grant of application for registration
(1)If you have applied to the Board for a type of registration, the Board must grant your application if you are eligible for registration of that type. Otherwise, the Board must reject your application.
Section 20-50 of the TAS Act provides for lead times within which to seek renewal of registration under s 20-25 but does not otherwise add additional criteria for the renewal of registration. Rather, it states, “renew your registration under section 20-25”. When read in context, particularly in light of the language of s 20-25 of the TAS Act, “may” as used in s 20-50 is not indicative of a discretion as to whether to renew but rather wholly facultative. As with initial registration and for reasons given below, the Board may come under an obligation to renew or an obligation to refuse renewal.
Jurisdiction for the Tribunal to review the decision made on behalf of the Board was conferred by s 70-10(a)(i) of the TAS Act. In turn, that meant that the Tribunal was, by s 43 of the AAT Act, empowered to “exercise all the powers and discretions that are conferred by any relevant enactment on the person who made the decision”. The effect of that provision, to adopt a description in respect of its ultimate Commonwealth legislative progenitor offered by the Privy Council in Shell Company of Australia Ltd v Federal Commissioner of Taxation (1930) 44 CLR 530, at 545 was to place the Tribunal “in the same position” as the Board itself.
That the limits of the Tribunal’s powers and discretions were the same as those applicable to the Board underpinned Mr Ham’s submissions in relation to the statutory scheme for registration and, in particular, what may permissibly occasion an absence of satisfaction that an applicant is a fit and proper person for registration or, as the case may be, renewal of registration as a tax agent.
Mr Ham’s submission was that:
(a)the Object specified in s 2-5 informed the purpose of the TAS Act;
(b)the Guide found in s 20-1 informed the construction of s 20-5;
(c)s 20-45 informed s 20-15 which in turn informed s 20-5.
It was put that to construe the statutory scheme in any other way caused one or more of the sections just mentioned to have no work to do.
From this it was said to follow that, in relation to renewal of registration, unless conduct fell within one of the categories specified in s 20-45 of the TAS Act, it was not relevant for the Tribunal to consider it in deciding whether it was satisfied that Mr Ham was a “fit and proper person”. In turn, it was submitted that, on the facts as found by the Tribunal:
(a)the relevant conduct was neither in respect of the provision of taxation services to the public nor did it relate to any breach of appropriate standard of professional or ethical conduct as a registered agent;
(b)there was no event of the type prescribed in s 20-45;
(c)the relevant conduct on any view did not equate to any such event, all of which involve conviction, penalty or bankruptcy; and
(d)other than the allegations arising from the relevant conduct there was no evidence of any other indicia of a lack of good fame, integrity and character on Mr Han’s part.
Mr Ham’s further submission was that, in consequence, in affirming the decision under review, the Tribunal had misconstrued the statutory scheme and, on the facts as found, ought to have been satisfied that Mr Ham was eligible for the renewal of his registration.
The Board’s position was that the relevant conduct was, on the true construction of the TAS Act, permissibly considered in deciding whether satisfied that Mr Ham was a “fit and proper person”.
Section 20-25 of the TAS Act does not confer a discretion on the Board (and thus the Tribunal in its place) as to whether or not to register or renew the registration of an applicant. Rather, it specifies two alternative statutory obligations, to grant an application or to reject an application. Which of these obligations is engaged is dependent upon whether or not an applicant is eligible for registration (or renewal of registration) of the type for which application has been made.
Having regard to the text of s 20-5 of the TAS Act, eligibility for registration is dependent not upon the existence of particular criteria, but rather upon the Board’s satisfaction as to the existence of those criteria. Thus, in relation to registration the Board’s (and in its place the Tribunal’s) satisfaction was “a condition precedent to the discharge of the obligation to grant or refuse”: Minister for Immigration and Multicultural and Indigenous Affairs v SGLB (2004) 78 ALJR 992 at 998 [37]-[38] per Gummow and Hayne JJ, referring to a like conditioned statutory obligation found in s 65 of the Migration Act 1958 (Cth).
“Satisfaction” that an applicant meets the specified eligibility criteria is a “jurisdictional fact” on which the obligation to register or not to register (or to renew or not to renew registration) depends. There is, as Gummow J stated in Minister for Immigration and Multicultural Affairs v Eshetu (1999) 197 CLR 611, at [130] an awkward quality in so describing this type of condition. That is because, as Isaacs and Rich JJ pointed out in Bankstown Municipal Council v Fripp (1919) 26 CLR 385 at 403, such conditions are employed by Parliament as a means of preventing litigation on jurisdictional facts. In truth, where the “jurisdictional fact” is a state of administrative satisfaction, what is prevented is litigation about the existence of the fact, but not litigation about the administrative conclusion as to “satisfaction” that the fact exists. The basis for that litigation is as stated by Gibbs J in Buck v Bavone (1976) 135 CLR 110, at [118] – [119]:
In all such cases the authority must act in good faith; it cannot act merely arbitrarily or capriciously. Moreover, a person affected will obtain relief from the courts if he can show that the authority has misdirected itself in law or that it has failed to consider matters that it was required to consider or has taken irrelevant matters into account. Even if none of these things can be established, the courts will interfere if the decision reached by the authority appears so unreasonable that no reasonable authority could properly have arrived at it. However, where the matter of which the authority is required to be satisfied is a matter of opinion or policy or taste it may be very difficult to show that it has erred in one of these ways, or that its decision could not reasonably have been reached.
Each of the questions of law specified by Mr Ham seeks to engage with a basis upon which this type of “satisfaction” based “jurisdictional fact” may be reviewed judicially.
According to the contemporary approach to statutory construction, it is necessary in the construction of the TAS Act to strive to give effect to all of the text of that Act and to do so having regard to its subject matter, scope and purpose: ProjectBlue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355. With the TAS Act, this includes giving effect, in those circumstances to which it is applicable, to s 80-5 and, in turn, to the relevant “Guide”.
It does not follow from this that s 20-45 must be construed as prescriptive or exhaustive as to facts which may permissibly inform satisfaction as to whether an applicant for renewal of registration is a “fit and proper person”. “Whether an event described in section 20-45 has occurred during the previous 5 years” is but one of a number of criteria which s 20-15(b) of the TAS Act expressly identifies as not limiting “whether the individual is of good fame, integrity and character” as that term is used in s 20-15(a) of the TAS Act. Given this, it would be an odd construction of s 20-45, defiant of the context in which it appears, to construe it as exhaustive of what may be considered in deciding whether, for the purposes of an application for renewal of registration, to be satisfied that an applicant is a “fit and proper person”. All that s 20-45 of the TAS Act does is to recite a truism, which is that the events it specifies may affect renewal of registration. It does not mean that, if such an event has not occurred, the Board (or Tribunal) must be satisfied that an applicant is a person of good fame, integrity and character and thus a “fit and proper person”.
Further, whatever might otherwise have relevantly been considered in relation to satisfaction that an applicant was a “fit and proper person” for registration (or renewal of registration) as a tax agent, the express specification of “good fame, integrity and character” as a relevant consideration represents a parliamentary value judgment. That value judgment is that the object specified in s 2-5 of ensuring that “tax agent services are provided to the public in accordance with appropriate standards of professional and ethical conduct” is advanced by the Board (or Tribunal) having regard to that criterion (amongst others) in deciding whether it is satisfied a particular individual is a “fit and proper person”. Parliament has chosen not to qualify the criterion, “good fame, integrity and character” by the addition to it of the words, “as a tax agent”.
The expression “good fame, integrity and character” is one of wide import. The meaning of each constituent part is obvious enough as a matter of ordinary English and that, in turn, leads to a conclusion that those constituent parts are not necessarily mutually exclusive. Emphatically, the expression is not confined in its application only to those who have been convicted of criminal offences. Further, it is possible to conceive of adverse circumstances, be they criminal conviction grounded or otherwise, which, viewed in an overall context, perhaps in respect of a period of many years duration and years after those adverse circumstances, do not inexorably dictate a conclusion that a person is not of good fame, integrity and character.
An illustration from history may assist in the understanding of that last observation. The late John Profumo was a long-serving Member of the Parliament of the United Kingdom with a distinguished war record and a promising Secretary of State for War and Privy Councillor who, at age 47, resigned each of these offices on 5 June 1963, after admitting that he had lied to Parliament about his relationship with Christine Keeler, a call-girl who had been separately seeing the Russian naval attaché and spy, Yevgeny Ivanov. At that moment, a conclusion that Profumo was of “good fame, integrity and character” would have been unlikely. But he devoted the rest of his long life to ceaseless, volunteer, charity work and related fundraising. During that latter period, he was in 1975 appointed a Commander of the Most Excellent Order of the British Empire (CBE) in recognition of his charity work, a regular guest of The Queen Mother at Clarence House and an invitee to and attendee at Lady Margaret Thatcher’s 80th birthday party: The Telegraph, Obituaries, John Profumo, 11 March 2006 (Online version: accessed, 31 October 2018). By 1975 and certainly by the end of his life at age 91 in 2006, a very different conclusion as to “good fame, integrity and character” would very likely have been dictated.
Yet further, there is an obvious reputational import in the use of the word, “fame”. But absence of notoriety does not mean that one must be satisfied that an individual of neither good integrity nor good character is a fit and proper person for registration. Implicit in the last observation is a view that the adjective “good” qualifies each of “fame”, “integrity” and “character”. But even if that is not so, the quality of goodness is present in the words, “integrity” and “character”.
The Tribunal correctly recognised (at para 36) that s 20-15 of the TAS specified “matters that the Board is to have regard to when deciding whether it is satisfied that an individual is ‘fit and proper’”. The Tribunal added (ibid), “that phrase is not otherwise defined in the TAS Act”. Necessarily, that additional observation was premised on the implicit proposition that the criteria specified in s 20-15 are not definitionally exhaustive of the meaning of “fit and proper person” but rather, by the use of the word “must”, are made relevant considerations (in the sense described in Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24 at 39-40 (Peko-Wallsend) for the purpose of deciding whether to be satisfied that an applicant falls within that phrase.
The language of the TAS Act is different to that found in the predecessor provisions in the ITAA 1936. In the predecessor, s 251BC materially provided:
251BC Fit and proper persons to prepare income tax returns
(1)Without limiting the generality of an expression used in this Part, but subject to this section, a person is not a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters, as at a particular time, if:
…
(d) the person is not of good fame, integrity and character;
…
It is always necessary to give primacy to present statutory text and context, not to approach construction on the basis of pre-conceptions engendered by the text and context of a predecessor provision. Thus, while it is clear that from, “Without limiting the generality of an expression used in this Part, but subject to this section” in the chapeau to the former s 251BC(1) that “good fame, integrity and character” did not delineate the metes and bounds of “fit and proper person” that does not dictate the meaning to afford s 2-5 and s 2-15 of the TAS Act.
Even so, I am inclined to agree with the implicit proposition present in the Tribunal’s additional observation. Section 20-15 of the TAS Act has nothing to say about what the Board “may” “have regard to”, only what it “must” “have regard to”. That the Board “must” have regard to particular matters doubtless informs the meaning of “fit and proper person” but it is not exhaustive of the meaning of that term.
That conclusion makes the Tribunal’s reference (at para 38) to an observation made by Toohey and Gaudron JJ in Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 at 380 about the expression “fit and proper person” singularly apt:
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. The list is not exhaustive but it does indicate that, in certain contexts, character (because it provides indication of likely future conduct) or reputation (because it provides indication of public perception as to likely future conduct) may be sufficient to ground a finding that a person is not fit and proper to undertake the activities in question.
As used in the context of s 20-5 of the TAS Act, “satisfaction” that an individual is a “fit and proper person” is directed to the end of determining eligibility or otherwise for registration (or renewal of registration) as, materially, a tax agent. That is the context from which it takes its meaning. The matters to which the Board “must” have regard are specified to the end of the Board’s being satisfied (or not) that an individual is a “fit and proper person” for registration as a tax agent. Thus, even though “good fame, integrity and character” is not qualified in s 20-15(a) by the words “as a tax agent”, the end to which the Board must have regard when considering this criterion is satisfaction that the individual concerned is (or is not) a “fit and proper person” so as to be eligible for registration as a tax agent.
Further, statutory context also dictates that the Board’s satisfaction that an individual is (or is not) a “fit and proper person” falls for determination as at the time of considering the application for registration or, as in the present case, renewal of registration. In this regard, the text of the TAS Act does not dictate any different conclusion to that reached by Middleton J in Toohey v Tax Agents’ Board of Victoria (No 3) (2010) 78 ATR 905, at [37] in relation to the previous regime.
To dismiss Mr Ham’s submission that the Tribunal misconceived the statutory scheme and was obliged on the facts found to be satisfied that he was a fit and proper person it is enough to conclude that s 20-45 is not exhaustive of what may be considered in deciding whether, for the purpose of an application for renewal of registration, to be satisfied that an applicant is a “fit and proper person”. Put another way, it was not irrelevant for the Tribunal to have taken into account the relevant conduct, even though none of that conduct constituted an event specified in s 20-45. Moreover, for the reasons just given, the Tribunal was plainly aware, given the reference to Australian Broadcasting Tribunal v Bond, that satisfaction that Mr Ham was a “fit and proper person” fell for determination in the context of an application for renewal of registration as a tax agent.
That present statutory context therefore means that an observation with respect to the earlier regime made by Hill J in Stasos v Tax Agents’ Board of New South Wales (1990) 21 ATR 974 (Stasos) remains apt. His Honour accepted, as had Davies J before him in Re: Su v. Tax Agents Board of South Australia (1982) 13 ATR 192 (Su), that a tax agent needed to be a person of such competence and integrity that persons may entrust their taxation affairs to him or her. He added that a tax agent would almost invariably have dealings with officers of the Australian Taxation Office and perhaps also the Tribunal, observing (Stasos, at 984):
Those dealings must be able to be carried on in an atmosphere of mutual trust. The Commissioner and his officers must be able to accept that, to the best of the ability of the tax agent, returns have been prepared which are true and accurate. This is particularly so now that the Commissioner has proceeded to a system of self assessment, with inaccuracies only coming to light in case of random audit or, presumably, other information coming to the hands of the Commissioner.
The Tribunal cited with approval both Su and Stasos, emphasising particular passages concerning the roles of a tax agent and related ramifications in relation to fitness for registration. This was said by Mr Ham to be indicative of error because, in the present case, “there was no issue of failure to lodge or remit group tax as in Su or tax evasion by the agent through the use of false bank accounts as in Stasos being matters which fall within the remit of a tax agent and are mentioned in the Guide”. It is true that there is no such issue in the present case but to extrapolate from this error on the part of the Tribunal in citing Su and Stasos, is to elevate the facts of those particular cases into statements of principle and impermissibly to render them a substitute for adverting to the text of the TAS Act. The factual context in which each of those cases was decided does not mean that conduct otherwise than as a tax agent is irrelevant to concluding whether a person is a fit and proper person for registration (or renewal of registration) as a tax agent. So much necessarily follows from what the discussion above of the registration scheme in the Tax Act, as well as some further elaboration below in relation to other questions of law raised by Mr Ham.
The Tribunal was very well aware that the relevant conduct was not conduct by Mr Ham as a tax agent. This was made explicit in the following paragraph of the Tribunal’s reasons (at para 41):
41.The relevant conduct need not occur directly in the course of professional practice as a tax agent to impact adversely on the agent’s fitness and propriety. Acts may be “sufficiently closely connected” with the actual practice that they demonstrate the presence of qualities (such as dishonesty or deception) that are inconsistent with fitness and propriety to practise as a registered tax agent.
If anything, this statement by the Tribunal may put what is relevant conduct too narrowly, given the breadth of meaning, in context, of “good fame, integrity and character” in s 20-15(a) of the TAS Act and that s 20-15 is not exhaustive of what may relevantly be considered in relation to satisfaction for the purposes of s 20-5 that an individual is (or is not) a “fit and proper person” for registration as a tax agent. Even allowing for the end to which eligibility satisfaction is directed, the breadth of meaning of “fit and proper person” is such as to admit of the Board sometimes facing like difficult value judgments in circumstances where an individual has been convicted of a grave crime involving no hint of dishonesty or professional competence and in extenuating circumstances. In the context of fitness to remain on the Roll of Counsel, Ziems v Prothonotary of Supreme Court of New South Wales (1957) 97 CLR 279 (conviction and imprisonment of a barrister in respect of manslaughter committed in extenuating circumstances) offers a paradigm example of how reasonable minds might reasonably differ in relation to what ought to be the fate of such an individual in terms of a professional registration dependent upon remaining a fit and proper person. It is hardly unfair to Mr Ham that the Tribunal has adopted such an arguably too narrow approach to the subject of “satisfaction”.
It is convenient at this point to address Mr Ham’s further question that the Tribunal failed to take account of relevant considerations. It was put that the Tribunal had failed to take account of the following:
(a)The findings of Phillippides J of equitable fraud, rather than fraud at common law;
(b)The finding of causation of damage on an equitable claim, rather than a claim at common law;
(c)A finding of a breach of fiduciary obligation of taking for himself a benefit of the opportunity to purchase freehold title to a property, where the plaintiff in the proceedings could never have purchased and where such events occurred more than 10 years before the hearing in the Tribunal.
(d)The relevant conduct did not arise from the provision of taxation services to the public but from a single course of dealing with a single party;
(e)There was no question of competence or integrity on behalf of Mr Ham in dealing with the Australian Taxation Office;
(f)The nature of the relevant conduct as equitable fraud;
(g)The relevant conduct was equitable fraud as opposed to actual fraud for which would give rise to a s 20-45 event;
(h)The relevant conduct arose from a circumstance where the plaintiff in the proceedings could not have taken the advantage of the bargain itself;
(i)The relevant conduct occurred over ten years ago;
(j)Mr Ham had met the judgment of the Supreme Court to the satisfaction of the other party.
It is a misconception of what was stated in Peko-Wallsend as to what constitutes a “relevant consideration” the failure to take account of which amounts to jurisdictional error to characterise any of the foregoing as considerations which either expressly or by necessary implication the TAS Act bound the Tribunal to take into account. They were no such thing. Each of them was a point which could legitimately be put to and considered by the Tribunal in the hearing and determination of the review proceeding. They were not “irrelevant considerations” in the sense described in Peko-Wallsend. But none was a consideration that the Tribunal (or the Board before it) was bound to take into account. The relevant conduct itself was a “relevant consideration” but that was because that conduct formed a foundation of the decision under review by the Tribunal. The points which Mr Ham advanced were just submissions one might make about that relevant conduct. Further, the Tribunal was the place for such points to be advanced on behalf of Mr Ham. Under the TAS Act, it was for the Tribunal, not the Court, to be satisfied that he was a “fit and proper person” for registration.
As it was, having regard to the relevant conduct, the Tribunal concluded (at para 114):
I consider that Mr Ham’s conduct was inconsistent, not only with the qualities of strong moral principles, uprightness and honesty, but also with the “atmosphere of mutual trust”, spoken of in Stasos, that underpins the agent’s relationships with his or her clients, the ATO and the Board.
Given the breadth of meaning of “fit and proper person” and of “good fame, integrity and character”, it was open to take account of the relevant conduct in this way and to this end. Further, the passage quoted from the Tribunal’s reasons makes it pellucid (or, better put, confirms) that Senior Member Cotter was well aware of the end to which he was addressing satisfaction as to whether or not Mr Ham was a “fit and proper person”. Further, he was well aware that the relevant conduct occurred, as at the time of his decision, between nine to fifteen years beforehand (see para 115 of the Tribunal’s reasons). Correctly, Senior Member Cotter stated:
As Hill J observed in Stasos, because a person is not considered fit and proper at the time of the wrongdoing does not mean that they will “for all time be unfit to be re-registered”. That raises questions as to whether, with time, the agent appreciates the significance of his wrongdoing and regrets it, that he has rehabilitated himself such that it is truly unlikely that there will be any lapse in the future of the standards required of him, and that he demonstrate genuine contrition.
For these reasons, the Tribunal did not fail to take into account relevant considerations.
Finally, it was put that the decision was unreasonable. I understood this to mean that it was not reasonably open for the Tribunal not to be satisfied that Mr Ham was a “fit and proper person” for renewal of his registration as a tax agent.
Earlier this year, in Minister for Immigration and Border Protection v SZVFW (2018) 92 ALJR 713 (SZVFW), Kiefel CJ observed at [10]:
10.In the joint judgment in Minister for Immigration and Citizenship v Li, it was explained that a decision made in the exercise of a statutory power is unreasonable in a legal sense when it lacks an evident and intelligible justification. That may be so where a decision is one which no reasonable person could have arrived at, although an inference of unreasonableness is not to be drawn only where a decision appears to be irrational.
[footnote references omitted]
In that same case, at [82], in their joint judgment, Nettle and Gordon JJ stated:
82.Nor is the abuse of statutory power limited to a decision which may be described as “manifestly unreasonable”, or to what might be described as an irrational, if not bizarre, decision that is so unreasonable that no reasonable person could have arrived at it. A conclusion of legal unreasonableness may be outcome focused – where, for instance, there is no “evident and intelligible justification” for the decision. As Gageler J explained in Minister for Immigration and Citizenship v Li, “[r]eview by a court of the reasonableness of a decision made by another repository of power ‘is concerned mostly with the existence of justification, transparency and intelligibility within the decision-making process’ but also with ‘whether the decision falls within a range of possible, acceptable outcomes which are defensible in respect of the facts and law’”.
[footnote references omitted]
These recent pronouncements at ultimate appellate level about unreasonableness as a ground of jurisdictional error confirm that the ground is not confined to the irrational or the bizarre but leave the precise metes and bounds of unreasonableness elusive. They are harmonious with the observation in relation to unreasonableness earlier made by Mason J in Peko-Wallsend, at 41, that, “both principle and authority indicate that in some circumstances a court may set aside an administrative decision which has failed to give adequate weight to a relevant factor of great importance, or has given excessive weight to a relevant factor of no great importance”. That may well be another way of describing what does not fall “within a range of possible acceptable outcomes which are defensible in respect of the facts and law” (emphasis added). Even so, it still, with respect, leaves the metes and bounds of unreasonableness imprecise or elusive. Perhaps those metes and bounds always will be so, save in hindsight and on the facts of a particular case after the judgement in which a conclusion of unreasonableness has been reached on those facts and has become final. In Jacobellis v. Ohio 378 U.S. 184 (1964), Justice Stewart, in explaining why Louis Malle’s film, “The Lovers” was not obscene under the test for obscenity developed in Roth v. United States 354 U.S. 476 (1957), and therefore protected speech under the First Amendment that could not be censored stated, at [197]:
197.I shall not today attempt further to define the kinds of material I understand to be embraced within that shorthand description [“hard-core pornography”], and perhaps I could never succeed in intelligibly doing so. But I know it when I see it, and the motion picture involved in this case is not that.
In reflecting on principle and authority with respect to unreasonableness for the purpose of determining the challenge made to the Tribunal’s decision on the basis of unreasonableness in the absence of “satisfaction” as to eligibility, I was struck by how relevant by analogy seemed his Honour’s candid statement. So I shall not today attempt further to define the kinds of circumstances I understand to be embraced within the shorthand description, “unreasonable” and perhaps I could never succeed in intelligibly doing so, but (at least after Minister for Immigration and Border Protection v Stretton (2016) 237 FCR 1 and Minister for Immigration and Border Protection v Eden (2016) 240 FCR 158) I know it when I see it. And, for reasons set out below, applying what was said about unreasonableness in the passages quoted above from SZVFW, the absence of satisfaction involved in this case is not that.
Senior Member Cotter fairly summarised (at paras 140 to 142) his reasons for not being satisfied that Mr Ham was a fit and proper person for renewal of his registration in this way:
140.To summarise, I am not satisfied that Mr Ham is a fit and proper person. His conduct, over an extended period of time, was inconsistent with the qualities of moral soundness, uprightness and honesty that one would expect of a tax agent. Such conduct was, and is, incompatible with the “atmosphere of mutual trust” which underpins the relationships which tax agents have with their clients, the ATO and the Board.
141.Although the offending conduct happened some years ago, it was particularly serious, striking at the very heart of longstanding client and fiduciary relationships, not to mention friendship. While the conduct was concerned with dealings with the same property over an extended period of time, it is an oversimplification to describe the offending conduct as an isolated instance of lapse or error of judgment. Mr Ham had ample opportunity over the years to redress the wrongdoing. Far from doing that, he continued on his course of conduct and perpetuated the situation.
142.Confronted with Supreme Court litigation and then action by the CAANZ and the Board, Mr Ham remained defiant. There was no contrition or remorse, or any sign of introspection or insight as to his offending conduct until the hearing in this proceeding approached. By then, the statement of contrition and insight he gave was not only late but wanting. It failed to show genuine remorse and a true insight into his wrongdoing. Given that the conduct goes to the fundamental questions of character and trustworthiness, I believe that the risk of recurrence remains.
Having regard to the relevant conduct and to a permissible conclusion as to an absence of insightful contrition on the part of Mr Ham, this absence of satisfaction as so summarised was reasonably open to the Tribunal. It was hardly irrational or bizarre but nothing in what was said in SZVFW as to the greater content of the unreasonableness jurisdictional error ground would support a conclusion.
Because it featured so strongly in Mr Ham’s submissions, I would only add this. That the relevant conduct concerned a species of equitable fraud may be accepted. But that did not render it or the judicial observations made about Mr Ham in Themis Holdings v Canehire irrelevant for the purpose of the Tribunal’s deciding whether it was satisfied that he was a “fit and proper person” for renewal of his registration. Neither did it render irrelevant that he had been excluded from membership of a profession (chartered accountant) and failed of his own motion to inform the Board of this fact. What to make of all this was a matter for the Board and, on review, the Tribunal in its place. For reasons logically expressed and by reference to pertinent authority the Tribunal did this, leading to the reaching, permissibly on the material before it, of an absence of satisfaction. The exhortation of Mason J in Peko-Wallsend, at 40 that the limited role of a court on judicial review in reviewing a discretion “must constantly be borne in mind” applies with equal force in the context of considering a question of law as to whether administrative satisfaction made a condition of a statutory obligation was reasonably open. I have done this. It is nothing to the point, given the Court’s limited role, that others might perhaps have reached a different conclusion.
For these reasons, the appeal must be dismissed.
I certify that the preceding sixty (60) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Logan. Associate:
Dated: 2 November 2018
2
16
6