MAURICE HOURANI and TAX PRACTITIONERS BOARD
[2012] AATA 518
•7 August 2012
[2012] AATA 518
Division GENERAL ADMINISTRATIVE DIVISION File Number(s)
2010/5015
Re
MAURICE HOURANI
APPLICANT
And
TAX PRACTITIONERS BOARD
RESPONDENT
DECISION
Tribunal Deputy President S E Frost
Date 7 August 2012 Place Sydney The decision under review is affirmed.
............[sgd]............................................................
Deputy President S E Frost
CATCHWORDS
TAXATION AND REVENUE – tax agents – registration – fit and proper person – improper dealings with client monies – conduct during tax audit – privilege against self-incrimination – decision under review affirmed
LEGISLATION
Administrative Appeals Tribunal Act 1975 (Cth) s 60
Evidence Act 1995 (Cth) ss 4, 128
Tax Agent Services Act 2009 (Cth) s 20-5, 20-15
CASES
Ex parte Tziniolis; Re the Medical Practitioners Act (1966) 67 SR(NSW) 448
REASONS FOR DECISION
Deputy President S E Frost
7 August 2012
Maurice Hourani applied to the Tax Practitioners Board for registration as a tax agent. The Board refused his application. It was not satisfied that he was a “fit and proper person”. As a result he was not eligible for registration. Mr Hourani has applied to the Tribunal for review of that decision.
Like the Board, I am not satisfied that Mr Hourani is a fit and proper person. As a result, I will affirm the decision to refuse him registration as a tax agent. My reasons follow.
THE LEGISLATIVE PROVISIONS
Under s 20-5 of the Tax Agent Services Act 2009 (Cth) (TAS Act), an individual such as Mr Hourani is “eligible for registration” as a tax agent if the Board is satisfied that, among other things, he is a “fit and proper person”. In deciding whether it is satisfied that Mr Hourani answers that description, the main question to which the Board must have regard is whether he is of “good fame, integrity and character”: s 20-15 of the TAS Act.
On review, these are the questions that the Tribunal, standing in the shoes of the Board, must consider.
A PRELIMINARY QUESTION CONCERNING S 128 OF THE EVIDENCE ACT
Before the hearing, Mr Hourani’s counsel foreshadowed that Mr Hourani may wish to claim the privilege against self-incrimination and for that reason may ask the Tribunal to give a certificate in his favour under s 128 of the Evidence Act 1995 (Cth). Section 128 provides:
128 Privilege in respect of self-incrimination in other proceedings
(1)This section applies if a witness objects to giving particular evidence, or evidence on a particular matter, on the ground that the evidence may tend to prove that the witness:
(a) has committed an offence against or arising under an Australian law or a law of a foreign country; or
(b) is liable to a civil penalty.
(2)The court must determine whether or not there are reasonable grounds for the objection.
(3)If the court determines that there are reasonable grounds for the objection, the court is to inform the witness:
(a) that the witness need not give the evidence unless required by the court to do so under subsection (4); and
(b) that the court will give a certificate under this section if:
(i)the witness willingly gives the evidence without being required to do so under subsection (4); or
(ii)the witness gives the evidence after being required to do so under subsection (4); and
(c) of the effect of such a certificate.
(4)The court may require the witness to give the evidence if the court is satisfied that:
(a) the evidence does not tend to prove that the witness has committed an offence against or arising under, or is liable to a civil penalty under, a law of a foreign country; and
(b) the interests of justice require that the witness give the evidence.
(5)If the witness either willingly gives the evidence without being required to do so under subsection (4), or gives it after being required to do so under that subsection, the court must cause the witness to be given a certificate under this section in respect of the evidence.
(6)The court is also to cause a witness to be given a certificate under this section if:
(a) the objection has been overruled; and
(b) after the evidence has been given, the court finds that there were reasonable grounds for the objection.
(7)In any proceeding in an Australian court:
(a) evidence given by a person in respect of which a certificate under this section has been given; and
(b) evidence of any information, document or thing obtained as a direct or indirect consequence of the person having given evidence;
cannot be used against the person. However, this does not apply to a criminal proceeding in respect of the falsity of the evidence.
Note: Subsection 128(7) differs from subsection 128(7) of the NSW Act. The NSW provision refers to a NSW Court instead of an Australian Court.
…
Mr Hourani submitted that the Tribunal has jurisdiction to give a certificate under s 128 based on the following:
a. Section 60(3) of the Administrative Appeals Tribunal Act 1975, (‘AAT Act’) states that a witness in the Tribunal is entitled to certain protections. The subsection is in the following terms:
Subject to this Act, a person summoned to attend or appearing before the Tribunal as a witness has the same protection, and is, in addition to the penalties provided by this Act, subject to the same liabilities, as a witness in proceedings in the High Court. (Emphasis added)
b. The High Court of Australia is a court to which the Evidence Act applies by force of section 4 of the Evidence Act because it is a “federal court”, as defined in the Dictionary to the Evidence Act.
c. The courts have said that the privilege against self-incrimination is a substantive “protection”, rather than a rule of evidence: Pyneboard Pty Ltd v Trade Practices Commission (1983) 152 CLR 328 at 309 [sic]. Accordingly, a provision that protects witnesses against self-incrimination, such as s 128, should properly be regarded as a “protection” within the terms of s 60(3).
d. The conjoint operation of s 60(3) of the AAT Act and ss 4 and 128 of the Evidence Act permits the Tribunal to award an evidentiary certificate on terms that are similar to those prescribed by s 128, because this is the protection that is available to a witness in the High Court.
e. It is no obstacle to the grant by the Tribunal of a certificate that s 128 empowers a ‘court’ to grant certificates. It is well established that where one statute (‘the primary statute’) incorporates and gives effect to a provision from another statute (‘the incorporated statute’), the provision from the incorporated statute applies mutatis mutandis in conjunction with the primary statute: Georgoussis v Medical Board of Victoria [1957] VR 671, Amalgamated Television Services Pty Ltd v Australian Broadcasting Tribunal (1984) 1 FCR 409. Accordingly, it is open for the Tribunal to apply s 128.
The Board opposed the application.
At the commencement of the hearing, both parties made oral submissions on the issue. After taking into account Mr Hourani’s witness statement and both parties’ oral submissions, I declined to give a certificate. I did so for the following reasons.
In dealing with courts and other adjudicative bodies, the Evidence Act refers to four distinct concepts – “court”, “federal court”, “ACT court” and “Australian court”. All of them, except “court”, are defined terms. The word “court” must therefore take its ordinary meaning, which is a judicial body constituted for the hearing and determination of cases.
The only one of the defined expressions broad enough to include the Tribunal is “Australian court”, since it is “a person or body authorised by an Australian law, or by consent of parties, to hear, receive and examine evidence”: paragraph (e) of the definition. But the actual giving of a certificate under s 128 is the preserve of a “court”, not an “Australian court”: subs (2), (3), (5) and (6). And the Tribunal, put simply, is not a court within the ordinary meaning of that word.
It follows that the Tribunal cannot give a certificate under s 128 of the Evidence Act. The submission at (e) in [6] above does not alter that outcome.
THE FACTUAL BACKGROUND
The Board’s concerns with respect to Mr Hourani’s fitness and propriety stem from things that Mr Hourani did during the period from about 2000 or 2001, to 2005.
What follows is an account of events and circumstances from Mr Hourani’s perspective. Unless otherwise indicated, I accept Mr Hourani’s account as an accurate statement of events as he understands them to have been. That is not to say that I necessarily accept that the events occurred as he describes them, but I do accept that this is his view of what occurred. If events occurred as Mr Hourani describes them, then his employer at the time is cast in an extremely unfavourable light. It would not be fair for me to make findings about the involvement of the employer in these events because he has not been represented here and he has had no opportunity to counter Mr Hourani’s version of events. For present purposes it is sufficient to record, and if necessary make findings in relation to, what Mr Hourani observed, how he processed what he observed, and how he reacted to it. Whether his observations are accurate is another question, and one that does not need to be answered in the context of these proceedings.
Improper dealings with client money
During the period of concern to the Board, Mr Hourani had been employed in a professional practice known as MSB Taxation & Accounting Services. MSB operated in a number of suburban locations, including Bankstown, Fairfield, Merrylands, Liverpool, Bossley Park, Blacktown and Campbelltown. Mr Hourani started working for the practice in 1995 and stayed there until 2006. His duties included providing financial and taxation advice, preparing financial statements and preparing tax returns.
MSB was owned and operated by an accountant and registered tax agent named Mofid Bebawy. Mr Hourani was 25 years old when he met Mr Bebawy and started working for MSB. At the time he was MSB’s only employee. Mr Bebawy seems to have been something of an entrepreneur. By about 2002 he had established a number of businesses under the name “Advance”, including Advance Home Loans and Advance Travel Centre. He eventually employed about 120 people across the Advance group. At one stage, in about 2000, according to Mr Hourani, the MSB accounting practice had as many as 27,000 clients.
When Mr Bebawy decided to open the MSB office in Fairfield, he chose Mr Hourani to run that office. It appears to have been a successful venture, with the office growing to a practice roughly 80% the size of the main practice in Bankstown.
Mr Hourani developed what he described as a “very close” professional relationship with Mr Bebawy. Mr Hourani says that he regarded Mr Bebawy as a friend and mentor. Apart from their professional relationship, they also socialised to some extent. They would sometimes have lunch together on weekdays. On occasion Mr Hourani would go to Mr Bebawy’s house for dinner on Friday nights. He would sometimes go to Mr Bebawy’s house on Sunday mornings, before going to church.
Some time in around 2000 or 2001, according to Mr Hourani, Mr Bebawy told Mr Hourani that the MSB trust account was not in order. He said that he needed to deposit client cheques, drawn in favour of the Australian Taxation Office (ATO), into Mr Hourani’s bank account. Mr Bebawy promised that once the MSB trust account was in order, he would no longer need to do this.
Mr Hourani started to see amounts of money being deposited into his bank account. He assumed that they were client cheques, deposited by Mr Bebawy. Mr Hourani says that he did not regard this money as belonging to him; it was, he assumed, MSB’s clients’ money.
Mr Hourani said in his witness statement:
[12] … I saw myself as helping a friend out, in order to overcome a short term business difficulty. It did not cross my mind that there was anything suspicious about Mr Bebawy’s request.
After a while Mr Bebawy, instead of depositing the cheques himself, started giving the cheques to Mr Hourani, with instructions to deposit the cheques into his, Mr Hourani’s, account. Mr Hourani’s witness statement continues:
[16] … I did notice that, on each cheque, the name of the payee had been crossed out and re-written as my own name. I did not personally witness any of the alterations that were made to these cheques, but I initially thought that Mr Bebawy was doing no more than cutting some corners because of the problem with his trust account that he had mentioned.
[17] The process by which client funds were withdrawn from the bank account from 2000 to 2004 was that I would write a bank cheque for the ATO. Second, I would write the client’s ABN. Third, I would send it to the ATO. I paid the other funds from the account to Mr Bebawy, in accordance with instructions that he would give me. Here too, my initial assumption was that these were proper payments of professional fees.
That is a somewhat sanitised version of events. In fact, as Mr Hourani explained in his oral evidence[1], a client’s monthly or quarterly Business Activity Statement (BAS) liability (for example, $x) would be calculated and communicated to the client. The client would draw a cheque in favour of the ATO for $x, and deliver the cheque to MSB. Mr Bebawy would alter the figures on the BAS so that the apparent liability ($y) was less than originally calculated. Mr Bebawy would alter the name of the payee on the cheque from “ATO” to “Maurice Hourani”. He would instruct Mr Hourani to deposit the cheque into Mr Hourani’s bank account. He would instruct Mr Hourani to draw a bank cheque for $y in favour of the ATO. The BAS would be lodged with the ATO declaring a liability of $y and the bank cheque for $y would be forwarded to the ATO. Mr Bebawy would instruct Mr Hourani to deliver $(x-y) to Mr Bebawy in cash.
[1] Transcript, 5 March 2012, p. 56.44-p. 57.13
Clearly enough, Mr Hourani was assisting Mr Bebawy with the wilful understatement and underpayment of MSB clients’ taxation liabilities, and with the misappropriation by Mr Bebawy of clients’ money. He says that he had no choice but to do what Mr Bebawy told him to do because Mr Bebawy threatened him with physical violence if he refused.
The ATO audit of Mr Hourani’s tax affairs
On 3 May 2004 the ATO notified Mr Hourani that it intended to audit his tax affairs. One of the issues it wanted to examine was an apparent discrepancy between the income as reported to the ATO in his 2001 and 2002 tax returns, and the income disclosed to the National Australia Bank for the purpose of raising a loan. The loan was to support the purchase of a unit in a residential development which was being marketed through one of Mr Bebawy’s entities.
Mr Hourani says that he did not complete any of the information in the loan application form; he and his wife merely signed the form in blank, and the financial and other information was added either by someone from Advance Home Loans (a Bebawy enterprise, which would have received a commission from NAB) or by an employee of NAB itself.
On 18 May 2004, Mr Bebawy, on behalf of Mr Hourani, explained to the ATO that the cause of the discrepancy was the fact that Mr Hourani was carrying on a business activity separate from his employment with MSB. A week later, on 26 May 2004, Mr Hourani told the ATO in an interview that the income disclosed to the financial institution was correct, and that the source of the additional income was a separate bookkeeping business that Mr Hourani conducted.
Mr Hourani admits that what he told the ATO on 26 May 2004 is false.
He says that he lied to the ATO under pressure from Mr Bebawy, Mr Bebawy’s motivation presumably being to deflect attention from any involvement Mr Bebawy may have had in the making of the false statements to the financial institution. Mr Hourani also says that many of the answers given to the ATO during the interview were given after Mr Bebawy prompted him, in Arabic, how he should answer the questions.
THE CASE IN SUPPORT OF MR HOURANI’S APPLICATION
Mr Hourani acknowledged, through his counsel, that “perhaps he should have done more or perhaps he should have done things slightly differently”[2] in the period 2000 to 2005 but says that since then he has shown himself to be a person of good character. He relies on the evidence of Nicolas Karam, his current business partner, that of Rhonda Farah, the office manager of his current business, and that of Father Melhem Antoine Hailkal, the parish priest at Mr Hourani’s local church. Both Mr Karam and Ms Farah previously worked with Mr Hourani at MSB.
[2] Transcript, 5 March 2012, p. 28.31-32
Mr Hourani also relies on the evidence of Talal Abou-Saleh, another former employee of MSB. Mr Abou-Saleh told the Tribunal that when Mr Hourani left MSB to set up a business with Mr Karam, Mr Bebawy became angry about the potential loss of clients to the new business. He told Mr Abou-Saleh to tell Mr Hourani that he, Mr Bebawy, would drive Mr Hourani and Mr Karam into bankruptcy and cause them to lose their money and their homes.
Mr Hourani stresses the fact that in 2000 to 2005, he was a junior accountant with no professional qualifications, who was significantly influenced by, dependent on and vulnerable to Mr Bebawy. He was unable to report the wrongdoing because of the physical threats Mr Bebawy had made to him, and because Mr Bebawy had arranged things to make it look as though Mr Hourani, rather than Mr Bebawy, was the villain. He had a rational fear that he would be held responsible for Mr Bebawy’s actions.
THE BOARD’S CASE
The Board submits that its decision should be affirmed, for reasons that include the following:
·that Mr Hourani lied to and misled the ATO;
·that he was knowingly concerned in the defrauding of the ATO and some clients of MSB, and that he otherwise fell short of the high standards of competence and propriety required of a registered tax agent;
·that he lied to the Tribunal;
·that any threats that were made to him (and it is unlikely that there were any such threats, or if there were, they were not serious) cannot excuse his behaviour;
·that he lacks remorse concerning, and insight into, his previous wrongdoing.
The Board submits that the evidence of Mr Karam, Ms Farah and Mr Abou-Saleh does not support Mr Hourani’s claims that he was subjected to threats of physical violence by Mr Bebawy. It also submits that the character evidence of Father Hailkal is of no assistance to Mr Hourani because Father Hailkal was unaware of the allegations of wrongdoing against Mr Hourani.
Furthermore, the Board submits that Mr Bebawy’s claimed prompting of Mr Hourani as to the answers he should give to questions put to him by ATO officers did not occur. The two ATO officers who interviewed Mr Hourani produced their file notes of the interviews. The file notes made no reference to discussions in Arabic between Mr Hourani and Mr Bebawy, and both officers said that if there had been such discussions they would have objected, and noted the fact in their file notes.
ANALYSIS
Some of the things Mr Hourani did in the period 2000 to 2005 might be explained, but not justified, on the basis of his junior status, lack of experience and general reluctance or inability to stand up to his employer and mentor. If that were the full extent of it, then subsequent exemplary (or at least unblemished) professional behaviour may be sufficient to support a finding that he is currently a fit and proper person to be registered as a tax agent.
But that is not the full extent of it.
There are some elements of Mr Hourani’s narrative that I do not accept. For example, and in relation to the ATO interview on 26 May 2004, I consider it highly improbable that Mr Bebawy prompted Mr Hourani’s answers in the way he described. Such behaviour is unlikely to have been allowed without objection; if it had even been attempted, I am satisfied that the officers would have mentioned it in their file notes.
I am also not persuaded that Mr Bebawy threatened physical violence against Mr Hourani. Mr Karam, Ms Farah and Mr Abou-Saleh all fell short of supporting Mr Hourani’s assertions, and I dismiss Mr Karam’s oral statement that Mr Bebawy, when referring to Mr Hourani, had threatened to “chop [his] head”, as a fabrication, since nothing of the kind was included in his witness statement.
In any event, and most significantly, Mr Hourani has failed to demonstrate any real insight into the seriousness of his earlier conduct. At no stage – even to this day – has he ever explained to the clients, clearly and comprehensively, how they were defrauded, nor the role he played in those affairs. He says, even now, that the extent of the explanation that he provided to clients was that their cheques had been deposited into his account but that the money had gone to the Tax Office. He has never told them that some of the money that they had intended for the Tax Office had gone to Mr Bebawy, in cash. And he was unable to explain why, even now, the clients have not been put fully in the picture. All he could tell me was that “if they wanted to know they would have asked further questions, Senior Member, but they did not”[3].
[3] Transcript, 9 March 2012, p. 323.1-2
The clear impression is that, in 2000 to 2005, Mr Hourani’s major concern, when he realised what was being done, was for his own position, and the impact that the events of that period might have on his own tax affairs and, possibly, his chances of becoming a registered tax agent in the future. The clients’ interests did not figure in his thinking then, and they appear not to trouble him unduly now.
He says that he has rehabilitated himself, and that he now knows what is the right thing to do. If faced with similar circumstances he would react differently. He would risk losing a client, if it meant doing the right thing by the law.
I cannot accept that. He still holds the view, for example, that the action of signing a blank application form for finance from a bank, and leaving it to a third party to complete the information in circumstances where, on his version, there was an expectation that the form would be lodged with the bank without any review of that information by him, has “got nothing to do with being fit as a tax agent”[4].
[4] Transcript, 9 March 2012, p. 306.6-7
In a broader sense, and having rejected Mr Hourani’s assertion that he acted under the threat of physical violence, I must conclude that Mr Hourani’s behaviour – not only in respect of the treatment of the client funds deposited into his bank account, but in allowing Mr Bebawy to use his bank account in the first place, when the reason put to him was that the MSB trust account was not in order; also in respect of his lying to the ATO about the non-existent bookkeeping business – resulted from an inadequate appreciation of the wrongfulness of his actions, combined with a weakness of character, the continued existence of which I cannot exclude on the evidence before me.
In Ex parte Tziniolis; Re the Medical Practitioners Act (1966) 67 SR(NSW) 448, Walsh JA, with whom Wallace P agreed, said at 461:
… Reformations of character and of behaviour can doubtless occur but their occurrence is not the usual but the exceptional thing. One cannot assume that a change has occurred merely because some years have gone by and it is not proved that anything of a discreditable kind has occurred. If a man has exhibited serious deficiencies in his standards of conduct and his attitudes, it must require clear proof to show that some years later he has established himself as a different man. …
There is no such proof. Father Hailkal’s character evidence does not assist Mr Hourani because Father Hailkal was not aware of what was alleged against Mr Hourani.
CONCLUSION
I am not satisfied that Mr Hourani is a fit and proper person to be registered as a tax agent. The Board’s decision is affirmed.
I certify that the preceding 46 (forty -six) paragraphs are a true copy of the reasons for the decision herein of Deputy President Frost. .....[sgd]...................................................................
Associate
Dated 7 August 2012
Dates of hearing 5-9 March, 21 May 2012 Counsel for the Applicant Mr J Hyde Page Counsel for the Respondent Dr J Renwick SC
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