Hopfner and Tax Practitioners Board

[2019] AATA 851

Hopfner and Tax Practitioners Board [2019] AATA 851 (13 May 2019)

Division:TAXATION AND COMMERCIAL DIVISION

File Number(s):      2019/0508

Re:Rudolf Hopfner

APPLICANT

AndTax Practitioners Board

RESPONDENT

DECISION

Tribunal:Deputy President I R Molloy

Date:13 May 2019

Place:Brisbane

The Applicant’s application for a stay is refused. The interim stay granted on 11 February 2019 is discharged.

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Deputy President I R Molloy

Catchwords

TAX AGENT REGISTRATION – application for a stay of the decision under review – consent stay order in operation – consideration of the applicant’s prospects of success – the consequences to the applicant if a stay is not granted – the public interest – the consequences to the respondent if the stay is or is not granted – whether the application for review will be rendered nugatory if the stay is not granted – any other relevant matters – application for stay of the decision under review refused.    

Legislation

Administrative Appeals Tribunal Act 1975 (Cth)

Tax Agent Services Act 2009 (Cth)

Cases

Burnett and Tax Practitioners Board [2014] AATA 87

Re Dekenic and Tax Agents Board of NSW (1982) 6 ALD 240

Re Scott and Australian Securities Commission (2009) 51 AAR 114

REASONS FOR DECISION

Deputy President I R Molloy  

13 May 2019

INTRODUCTION

1. This is an application for a stay by the Applicant, Rudolf Richard Hopfner, made in a proceeding in which Mr Hopfner seeks to review a decision of the Tax Practitioners Board (“the Board” or “the Respondent”) to terminate his tax agent registration pursuant to s 40.5(1) of the Tax Agent Services Act 2009 (“the Act”).

2. By its decision the Board determined that Mr Hopfner had failed to comply with certain aspects of the Code of Professional Conduct under the Act, and that he had ceased to be a fit and proper person as required under s 20.5(1)(a) of the Act. As well as terminating his registration, the Board decided that Mr Hopfner may not apply for registration under the Act for four years from the date of termination.

3. The decision was made on 13 December 2018 to take effect on 14 February 2019. Mr Hopfner’s application for review is dated 24 January 2019 and his request for a stay was lodged on the same date. An interim stay was granted by consent on 11 February 2019 until further order of the Tribunal.

4. Section 41(2) of the Administrative Appeals Tribunal Act 1975 (Cth) provides relevantly:

   (2)  The Tribunal may, on request being made by a party to a proceeding before the Tribunal … if the Tribunal is of the opinion that it is desirable to do so after taking into account the interests of any persons who may be affected by the review, make such order or orders staying or otherwise affecting the operation or implementation of the decision to which the relevant proceeding relates or a part of that decision as the Tribunal considers appropriate for the purpose of securing the effectiveness of the hearing and determination of the application for review.

5. For the reasons set out below I have decided that the application for a stay should be refused. 

   PRINCIPLES

6. The discretion whether to grant a stay was discussed by Downes J in Re Scott and Australian Securities Commission (2009) 51 AAR 114 at [4]. His Honour identified six factors in considering an application for a stay which have been used as points of reference in subsequent cases:

   ·The Applicant’s prospects of success in the proceeding.

   ·The consequences to the Applicant if a stay is not granted.

   ·The public interest.

   ·The consequences to the Respondent, in carrying out its functions, if the stay is or is not granted.

   ·Whether the application for review will be rendered nugatory if the stay is not granted.

   ·Any other relevant matters including the time the reviewable decision has been in force, and the likely length of time to the hearing.

7. Obviously, the weight, if any, to be given to any particular factor will depend on the facts and circumstances of the case, including the nature and content of the reviewable decision.

   Prospects of Success

8. Mr Hopfner claims that he was not provided with a reasonable opportunity to be heard by the Board. As the proceeding before the Tribunal is a merits review, and not judicial review of the Board’s decision, this in itself (even assuming it is correct) does not mean that his application will succeed. The point he makes, I think, is that when he does have a proper hearing, which he says he was previously denied, the decision will be different. 

9. The Board’s reasons for its decision were based substantially on findings that Mr Hopfner failed to attend to his personal and other tax obligations. There was also a finding that he stated in his annual declaration, on 27 September 2018, that he had no overdue personal tax obligations and that this was false.

10. Mr Hopfner’s tax obligations which were found to be outstanding included failure to make arrangements to pay (or pay in full) a personal tax debt of $40,764.44 which fell due on 6 March 2018; failing to lodge his income tax return for the financial year ending 30 June 2017 by the due date; failing to lodge, in his capacity as trustee for the JTMarketing Trust, income tax returns for the 2015/2016 and 2016/2017 tax years by the due dates; and failing in his capacity as trustee for the JHT Super Fund to lodge tax returns and member contribution statements for the tax years  ending 30 June 2016 and 2017, and unclaimed superannuation monies for the periods ending June 2015 to 31 December 2017 by their respective due dates.

11. Mr Hopfner in his application for review offers explanations for at least some of these matters. He also says he did not knowingly make a false declaration, and that he believed his tax obligations were in order. The review therefore presents disputed questions of fact, and is likely to raise issues of credibility, such as whether, if Mr Hopfner’s declaration was false, his conduct was deliberate, reckless, or negligent, or on the other hand, he acted honestly and reasonably.

12. There were also other findings on which the Board based its determination. They included Mr Hopfner’s failure, on behalf of clients, to manage adequately certain compliance obligations and to lodge income tax returns. These matters were found to go to his competency, and together with the other matters I have referred to, also to whether he was a fit and proper person to hold registration.  

13. By his application for review Mr Hopfner challenges most if not all of these findings. Eventually his explanations may or may not be found to be accurate or adequate. He gave brief oral evidence on the hearing of the stay application but I can draw no conclusion as to his credibility from that or from any of the other evidence. He also refers to his good record over an extended time. There is also reference to his ill health.

14. If all that Mr Hopfner’s advances is accepted, then he has at least an arguable case for saying that the decision of the Board should be set aside, or alternatively that the sanctions imposed by the Board were disproportionately harsh, and that either no or some lesser sanction should be substituted.

    Consequences to the Applicant  

15. Mr Hopfner, according to his witness statement dated 29 April 2019[1], is the executive chairman/director of a group of companies under the umbrella, I understand, of a company JHT Holdings Ltd. The group has four brands which are predominately franchised. One of the brands, JTax, comprises franchised professional business services including tax and accounting.  Mr Hopfner says that he or other employees/office-holders of the JHT Group hold required registrations including with the Tax Practitioners Board.

    [1] Exhibit 4, Witness Statement of Mr Hopfner dated 29 April 2019.

16. He says the tax services ceased to be under “my tax agent registration from July 2018”. The tax services are provided via corporate tax agents J Tax Pettit and Associates and Clinch Advisers. Mr Hopfner says that other people handle “all day to day taxation matters at the coalface.” Mr Hopfner is called on for second opinions in very occasional complex matters. He is also required as a sample reviewer of tax returns prior to lodgement and as a Quality Assurance policy enforcer. Mr Hopfner says he has not conducted primary tax preparation or tax advice interviews as part of his daily management role for more than two years.

17. There is no suggestion that Mr Hopfner’s livelihood will be affected if a stay is not granted.[2] Similarly, there is nothing to say there will be any disruption to the operations of the franchises, or that Mr Hopfner has any clients who will suffer any detriment. Mr Hopfner says that not to have tax agent registration will have a negative impact on related litigation in which he is involved. It was not explained how this would be so. He also says there will be a negative impact on his reputation. I accept that the decision to terminate registration may cause reputational harm, but I do not see how a temporary stay pending a review by this Tribunal would do much if anything to reverse that situation.

    [2] Compare Re Dekenic and Tax Agents Board of NSW (1982) 6 ALD 240, at p. 242; and Burnett and Tax Practitioners Board [2014] AATA 87, at [43].

18. In the end the alleged prejudice to Mr Hopfner really came down to two things. First, Mr Hopfner says he is mid-way through training some new franchisees “and to have my tax agent registration cancelled now will impact on this.” However, the need for registration in this context is limited to Mr Hopfner’s practice of signing-off on the returns prepared in the course of this training. Plainly, with a minor adjustment, he can continue to provide the training.   

19. Secondly, Mr Hopfner says that absent a stay, his memberships of certain professional associations “would be cancelled.”[3] This overstates the situation. The actions of one of the associations he refers to, CPA Australia, have been “placed on hold” until finalisation of the Tribunal process.[4] There is nothing to indicate CPA Australia was influenced at all by the current stay. A second association, the Institute of Public Accountants, expressly refers to the stay, and says “we will put the matter on hold until the AAT has made its determination.”[5] It is unclear, however, whether the Institute would act any differently in the absence of a stay.

    [3] Exhibit 5, Supplementary statement of Mr Hopfner dated 2 May 2019 at [39].

    [4] Exhibit 5, Supplementary statement of Mr Hopfner dated 2 May 2019, Annexure G.

    [5] Exhibit 5, Supplementary statement of Mr Hopfner dated 2 May 2019, Annexure H: Email dated 12 March 2019.

20. A third association, SMSF Association, expelled Mr Hopfner from membership, notwithstanding his application for review[6], but then having been made aware of the stay, reinstated his membership “pending the final outcome of the AAT appeal.”[7] Here there is obviously a risk that, if the stay is discharged, this Association will expel Mr Hopfner again. On the other hand, I expect there is some prospect of the SMSF Association, if it is approached, falling into line with CPA Australia, and placing any further action “on hold” pending the outcome of the Tribunal proceeding. At worst this seems to me to be a minor matter. It was not shown how Mr Hopfner would suffer any real prejudice. I agree with the submission on behalf of the Board that the Applicant would not suffer any serious consequences if a stay is refused.

    [6] Exhibit 5, Supplementary statement of Mr Hopfner dated 2 May 2019, Annexure I: Letter dated 20 March 2019.

    [7] Exhibit 5, Supplementary statement of Mr Hopfner dated 2 May 2019, Annexure I: Letter dated 4 April 2019.

    Public Interest

21. There is a public interest, as recognised in the Act, in maintaining appropriate standards of conduct and ethical conduct amongst tax agents.[8] To this end there is an interest in ensuring that persons, the subject of the sort of findings the Board has made against Mr Hopfner, not be permitted to practise.[9]

    [8] Tax Agent Services Act 2009 (Cth), s 2-5.

    [9] See Tax Agent Services Act 2009 (Cth).

22. On a practical level, however, these matters do not feature strongly in this case. Mr Hopfner has essentially retired from practice and does not have any clients. He has also offered an undertaking not to take on any new clients.

    Consequences to the Board

23. There are no adverse consequences to the Board beyond its interest in fulfilling its duties under the Act in conformity with the matters referred to under the last sub-heading.

    Utility of the review

24. The application for review will not be rendered nugatory if the stay is not granted. Mr Hopfner’s registration will have been terminated in the meantime. However, if successful, the four-year ban on his applying for registration may be set aside or reduced.

    Other relevant matters  

25. The Board adduced evidence to the effect that Mr Hopfner remained in default of his personal or other tax obligations.[10] Mr Hopfner responded to these matters both by a Supplementary Witness Statement dated 10 May 2019[11], and in oral evidence.

    [10] Exhibits 2 and 3, Supplementary T-Documents.

    [11] Exhibit 6, Supplementary witness statement of Mr Hopfner dated 10 May 2019.

26. Some disquiet was expressed on behalf of the Board as to whether, since the Board’s decision, Mr Hopfner had done as much as he could to make good on his obligations. It was also submitted, as I understand it, that he was only prompted to act once the Board revealed it had evidence that there were tax obligations still outstanding. I am not prepared, however, to draw any adverse findings against Mr Hopfner on these, or any other matters, based on the untested documentary evidence, and on the limited oral evidence he gave.

27. The only other matter is the likely date for hearing of the review. I was informed that directions have been made for lodging and serving material in May and June, and for a conciliation conference in mid July 2019. I would be available to hear the review in August or September if it is not sooner resolved. Consequently, it is not unrealistic to think the review could be determined by October this year, when Mr Hopfner’s registration, but for the above events, would fall for renewal.

    CONCLUSION

28. Mr Hopfner appears to have an arguable case but, given the nature of the dispute, which is likely to involve issues of credibility and questions concerning Mr Hopfner’s knowledge or intention, it is not possible to assess the prospects of success at this stage. I cannot assess it as a strong case either way.

29. The application for review can be heard and determined within about five months, and it may possibly be resolved earlier by agreement between the parties.

30. In my view Mr Hopfner will not suffer any real prejudice if a stay is not in place in the meantime. Nor will any clients or third parties suffer any disadvantage.

    DECISION

31. Taking the above considerations and other circumstances into account, I have concluded that the stay should be refused. It follows that the interim order is discharged. 

I certify that the preceding 31 (thirty-one) paragraphs are a true copy of the reasons for the decision herein of Deputy President I R Molloy

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Associate

Dated:            13 May 2019               

Date of hearing:  10 May 2019

Representative for the Applicant:       Tax Legal Solutions

Counsel for the Applicant:                  Anthony Anderson

Representative for the Respondent:   Self-represented  

Counsel for the Respondent:             Marc McKechnie