Jones and Tax Agents' Board of New South Wales

[2002] AATA 1246

DECISION AND REASONS FOR DECISION [2002] AATA 1246

ADMINISTRATIVE APPEALS TRIBUNAL        Nº N2002/570
GENERAL ADMINISTRATIVE DIVISION
  Re:         David Wayne Jones
  Applicant

And: Tax Agents' Board of New South Wales

Respondent

DECISION

Tribunal:       P.J. Lindsay, Senior Member
Date:              26 November 2002
Place:            Sydney

Decision:For the reasons given orally at the hearing, the decision under review is affirmed.

(sgd) P. J. Lindsay
  Senior Member

©        Commonwealth of Australia          (2002)CATCHWORDS Registration of tax agent cancelled – former tax agent convicted of misappropriating clients' funds and sentenced to gaol – application for re-registration as tax agent – whether applicant fit and proper person – whether applicant not of good fame, integrity and character – decision affirmed.
Income Tax Assessment Act 1936, s. 251A, s.251BC
Re Su and Tax Agents' Board (SA) (1982) 61 FLR 1
Clearihan v Registrar of Motor Vehicle Dealers in the Australian Capital Territory (1994) 117 FLR 455
mckay and Tax Agents Board Tasmania (1994) 94 ATC 2,057
Australian Securities Commission v Kippe and Anor (1996) 67 FCR 499
Stasos v Tax Agents Board (1990) 21 ALD 437

REASONS FOR DECISION

P.J. Lindsay, Senior Member

1. Mr David Jones has applied for a review of the decision by the Tax Agents' Board (the Board), dated 4 April 2002, not to grant his application for registration as a tax agent. The Board was not satisfied that he was a fit and proper person to prepare income tax returns. At the hearing Mr Jones, who was not represented, gave evidence. Mr M. Allatt, of the Australian Government Solicitor, appeared for the Board. The Tribunal had before it the documents lodged under s.37 of the Administrative Appeals Tribunal Act 1975.

2. A number of documents were tendered at the hearing as follows:

   ·reference (undated) of Accounting Mastery Pty Limited signed by Mr K. Kyriacou, managing director: Exhibit A1

   ·reference dated 26 August 2002 of Edward C. Burton Pty Limited, signed by Mr Ed Burton: Exhibit A2

   ·report of Dr Jennifer A. Thompson, consultant psychiatrist, dated 8 August 2002: Exhibit A3 

   ·reference of AdraCare, Adventist Development and Relief Agency, signed by Mr D. E. Haupt, dated 23 September 2002: Exhibit A4

   ·reference of Pastor Ross Chadwick dated 23 September 2002: Exhibit A5 

   ·reference of Mr William Meywes, of Australian Wholesale Financial Services dated 18 September 2002: Exhibit A6

   ·reference of Mr Brad Gordon dated 7 June 2001: Exhibit A7

   ·reference of Reverend Peter Baines dated 29 August 2002: Exhibit A8

background

1. Mr Jones, who is 46, was first registered as a tax agent on 20 June 1985.  His registration was cancelled in 1988 for a short period because he failed to pay his renewal fee and did not provide the Board with the requisite particulars to enable his registration to be renewed.  On 5 February 1997, the Board cancelled Mr Jones' registration.  Earlier, the Board had written a show cause letter to him on 1 October 1996 (T22).  Therein, the Board referred to a number of complaints that had been received from his clients and the Australian Taxation Office (ATO). 
   The complaints included: his failure to pay refunds promptly; the negotiation of refund cheques without apparent authorisation; the dishonouring of cheques drawn on his trust account; the difficulty clients have encountered in contacting him in business hours; depositing of cheques payable to the ATO into his trust account; tardiness in lodging returns and submitting information provided by clients subject to audit; and a failure to attend ATO interviews at appointed times.  Altogether, there were 21 complaints. In the event, the Board cancelled his registration because it was (T29):

   Satisfied that you had neglected the business of a principal and had been guilty of misconduct as a tax agent.

2. Subsequently, Mr Jones was convicted of offences against the Crimes Act 1900 (NSW) relating to his mis-appropriating more than $21,000 of his client's money. In relation to one client, Mr Jones pleaded guilty to fraudulently mis-appropriating $15,650 that the company had given to him for payment of its tax liabilities. Mr Jones was sentenced to 12 months periodic detention. The Magistrate described his actions as a gross breach of trust (T30).

3. Mr Jones appealed against the conviction to the District Court.  When the appeal was heard, a further nine charges of fraudulent mis-appropriation and one count of obtaining a benefit by deception were also heard.  In all, the charges involved a total sum of approximately $100,000.  On 27 November 1997, Judge Phelan convicted Mr Jones of the offences and sentenced him to 18 months imprisonment and 2 1/2 years parole.
   evidence

4. Mr Jones told the Tribunal that he was released from gaol in May 1999 and a little later he gained work as a bookkeeper.  He left that position in October 1999 and commenced with a firm called ISIS Financial Services doing accounting and taxation work.  This involved him preparing income tax returns and financial statements for partnerships, companies, individuals and superannuation funds.  Mr Jones left that position in December 2000 and began working for a firm of chartered accountants and stayed there until October 2001, when he started with his current employer, Accounting Mastery Pty Limited.

5. Mr Jones' current work is the preparation of income tax returns and accounting and financial records.  In cross-examination, he said that it is not crucial for him to be registered as a tax agent in order that he earn a living.  There is plenty of tax and accounting work around. He conceded that he can work under the supervision of a registered tax agent, but he wants to work for himself.  He would like his children to be proud of him.  Although Mr Jones says he has introduced about ten clients to the Accounting Mastery practice, he has not received any financial reward for so doing.  He believes however that if he were re-registered and commenced in his own practice, those clients would go with him.

6. On 19 February 2002, Mr Jones applied for re-registration as a tax agent.  In his application (T32) Mr Jones disclosed his convictions.  After initially disagreeing with Mr Allatt, he acknowledged the convictions arose out of work he did as part of his business as an accountant and tax agent.  He said his fraudulent and other activities that were the subject of complaint to the Court, occurred during a three year period.  By way of explanation Mr Jones said that due to marital difficulties he had a nervous breakdown.  He found it hard to work.  He stole the money, he said, not to gamble or lead a lavish lifestyle, but to pay his mortgage, a car loan and for the schooling of his two children.  Mr Jones is now divorced and sees his children during periods of access.

7. He says he acts informally as a counsellor to ex-prisoners.  He also does charitable work for AdraCare, attending on Friday nights at their current Cabramatta premises to chat and share a meal with those he described as "substance abusers".  Dr Thompson, consultant psychiatrist, reported on 8 August 2002  (Ex A3) that she first met Mr Jones on his first day of imprisonment.  In her opinion, he has never wavered in his desire for rehabilitation and to regain his children's love and respect.  In her opinion, he does not have a psychiatric illness.
   findings and consideration

8. The legislation relevant to this application is found in s.251BC of the Income Tax Assessment Act 1936 (the Act), which provides:

   (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:
   (a) the person is not a natural person;
   (b) both of the following conditions are satisfied:
   (i) the person was not registered as a tax agent, or as a nominee, for the purposes of this Part immediately before the commencement of section 39 of the Taxation Laws Amendment Act (No. 2) 1988;
   (ii) the person does not hold such qualifications (whether academic, by way of experience or otherwise) as are prescribed;
   (c) the person has not attained the age of 18 years;
   (d) the person is not of good fame, integrity and character;
   (e) the person has been convicted of a serious taxation offence during the previous 5 years; or
   (f) the person is under sentence of imprisonment for a serious taxation offence.
   (2) Nothing in paragraph (1)(e) or (f) limits the generality of paragraph (1)(d).
   (3) Where:
   (a) a Board is required, in considering an application for:
   (i) re-registration as a tax agent; or
   (ii) re-registration of a nominee of a tax agent;
   to decide whether the Board is satisfied that a particular person is a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters;
   (b) the person is not under sentence of imprisonment for a serious taxation offence; and
   (c) the Board is satisfied that, because of special circumstances:
   (i) a conviction of the person;
   (ii) the doing of an act or thing by the person; or
   (iii) an omission of the person;
   should be disregarded;
   the Board may, in making the decision referred to in paragraph (a), disregard the conviction, the doing of the act or thing or the omission, as the case requires.
   …

Section 251A of the Act defines a 'serious taxation offence' to mean:

(a) an offence against section 134.1, 134.2, 135.1, 135.2 or 135.4 of the Criminal Code, being an offence that relates to a tax liability within the meaning of the Taxation Administration Act 1953; or
(c) an offence that is:
(i) a taxation offence within the meaning of Part III of the Taxation Administration Act 1953; and
(ii) punishable on conviction by either or both of the following:
(A)a fine exceeding $2,000;
(B) imprisonment.

1. Mr Allatt submitted that Mr Jones is not a fit and proper person within the meaning of s.251BC(1), because he is not of good fame, integrity and character, notwithstanding five years have elapsed since his convictions. Mr Allatt emphasised that the offences that Mr Jones committed arose out of his practice as a tax agent and accountant. They were serious matters and the fact that Mr Jones may not have been convicted of a 'serious taxation offence' as defined in s.251A did not mean the offences should not be regarded as serious. For the respondent, iIt was further submitted that in assessing his character, the references by Mr Jones' recent employers should be given little weight because they do not take into account, or indeed refer to his convictions.

2. Mr Jones emphasised that until his actions that led to his convictions, he had led an honest and law abiding life.  His marriage has now ended and he feels better equipped to go forward, contribute to society and make his children proud of him. 

3. In coming to its decision the Tribunal has taken into account the oral and written evidence and the submissions. The Tribunal is mindful of the decision of Davies J in Re Su and Tax Agents' Board of South Australia (1982) 61 FLR 1, and the following passage regarding the term, 'fit and proper person' in the context of s. 251K(2) of the Act (at p.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.

4. The Tribunal is satisfied that Mr Jones' wrongful conducted extended over several years from 1994 to 1997.  He committed serious offences involving fraudulent mis-appropriation of clients tax refund cheques, fraudulent mis-appropriation of clients' cheques payable to the ATO, drawing cheques on his trust account that were subsequently dishonoured and although not directly involving a client's taxation affairs, the forging of documents that led to the client's loss of an investment of $50,000.  The Tribunal finds that this conduct and his convictions reflect adversely on his good fame, integrity and character.

5. The decision-maker, including the Tribunal, will not find a person to be a fit and proper person to prepare income tax returns, or transact taxpayers business, if the Tribunal considers the person not to be of good fame, integrity and character.  In addressing Mr Jones' good fame, integrity and character the Tribunal is mindful that although these qualities overlap, they are not identical.  The references of AdraCare (Exhibit A4) and of Reverend Baines of the prison chaplaincy service (Exhibit A8) attest to Mr Jones' good character.  The convictions involving, as they do, gross dishonesty, are relevant in determining whether Mr Jones is of good faith and integrity.  Certainly, these convictions weigh heavily against him as a tax agent invariably handles money belonging to clients.  The Tribunal  notes in this respect the approach of Miles CJ in Clearihan v Registrar of Motor Vehicle Dealers in the Australian Capital Territory (1994) 117 FLR 455, where his Honour deals with the effect of a spent conviction (at p.461):

   … when character is under consideration for a purpose connected with a trade or profession, different considerations apply according to the nature of the trade or profession.

Convictions of the nature in question here suggest that Mr Jones lacks an appreciation of what is required of registered tax agents.

1. The purpose of the legislation concerning the registration of tax agents is to protect the public. The Tribunal adopts the following dictum from Australian Securities Commission v Kippe and Anor (1996) 67 FCR 499, in relation to a banning order made under the Corporations Law (at 508):

   The immediate and direct legal effect intended by a banning order is not to impose a penalty or punishment on the person concerned, but to be preventive in that it removes a perceived threat to the public interest and to public confidence in the securities and futures industry by removing that person from participation therein.

The Tribunal finds that notwithstanding the lapse of five years from the date of Mr Jones' conviction, the nature of those convictions is such that, at this point, he is not of good fame, integrity and character.  The decision in McKay and Tax Agents Board Tasmania (1994) 94 ATC 2057, can be distinguished because it involved convictions not involving dishonesty in the conduct of a tax agent's business. The Tribunal also considers it relevant that Mr Jones has not yet repaid the entire $100,000 that he mis-appropriated, with $20,000 odd remaining unpaid.

1. The Tribunal notes Mr Jones' evidence that if re-registered, he would not conduct a trust account.  However, that matter alone would not necessarily exclude his receiving funds belonging to others.  The passage from Su's case quoted above notes that the ATO will also have dealings with Mr Jones, and those dealings will require him to be a person in whom they can repose trust.  The Tribunal considers it relevant in this regard, that at the time Mr Jones lodged his application for re-registration, his own income tax return for the 2000-01 year was late.  Mr Jones was unable to offer a reason for his tardiness.  Prior to his registration being cancelled in February 1997, some of his dealings with the ATO on behalf of clients had not been carried out on a timely basis.  It was a matter raised in the show cause letter.  At this point in time, Mr Jones has been working again as an accountant and tax adviser, as opposed to a bookkeeper, for just over three years.  The Tribunal considers that this period of time is not sufficient for Mr Jones yet to demonstrate he has the capacity to conduct taxation affairs on behalf of clients.  The Tribunal is mindful also of the judgment of Hill J in Stasos v Tax Agents' Board (1990) 21 ALD 437 where his Honour said (at 445):

   … 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.

For the above reasons the Tribunal is not satisfied to the requisite standard that Mr Jones will not deviate again from the high standard of registered tax agents.  Mr Jones could, of course, reapply at some future time.  His convictions, per se, do not imply that he will remain a person who is not of good fame, integrity and character.  For the reasons stated above, the decision under review therefore should be affirmed and the Tribunal so orders.

I certify that the 17 preceding paragraphs are a true copy of the reasons for decision herein of Mr P. J. Lindsay (Senior Member):

Signed:         
          ..................................................................................……………………………….

Associate

Date of Hearing  26 November 2002
Date of Decision  26 November 2002

Solicitor for Applicant                  Unrepresented
Solicitor for Respondent            Mr M. Allatt, Australian Government Solicitor