Morrissey and Tax Agents' Board of Queensland
[2004] AATA 1078
•15 October 2004
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2004] AATA 1078
ADMINISTRATIVE APPEALS TRIBUNAL )
) Nos Q2003/1038 and Q2004/149
GENERAL ADMINISTRATIVE DIVISION ) Re CRAIG MORRISSEY Applicant
And
TAX AGENTS' BOARD OF QUEENSLAND
Respondent
DECISION
Tribunal Mr RG Kenny, Member Date15 October 2004
PlaceBrisbane
Decision The Tribunal affirms the decisions under review.
....................[Sgd].....................
RG Kenny
Member
CATCHWORDS
TAX AGENT- review of decision suspending registration as a tax agent – whether applicant was guilty of misconduct as a tax agent – whether applicant is a fit and proper person to prepare income tax returns and transact business on behalf of tax payers – failure to respond or failure to respond adequately to correspondence from the Tax Agents’ Board – failure to notify Tax Agents’ Board of employment status of nominee – competence and conduct of applicant as a professional tax agent – discretion to cancel registration not exercised – decision to suspend applicant affirmed
Income Tax Assessment Act 1936 ss 251BC, 251KG, 251KK
Income Tax Regulations 1936 reg 161
Adamson v Queensland Law Society Incorporated [1990] 1 QdR 498
Re Cowlishaw and Tax Agents’ Board of Queensland [1999] AATA 412
Re Pappalardo and Tax Agents’ Board of Victoria [2003] AATA 990
Roylance v General Medical Council [2000] 1 AC 311
Stasos v Tax Agents' Board (1990) 21 ALD 437
Re Su and Tax Agents' Board of South Australia (1982) 61 FLR 1REASONS FOR DECISION
15 October 2004 Mr R G Kenny, Member Background
1. Craig Morrissey is a chartered accountant and has practised as a taxation agent since 1996 when he was registered in that capacity by the Tax Agents’ Board of Queensland (the Board). Since 2000, he has conducted his business from offices in the suburbs of Brisbane utilising various business entities, namely Morrissey and Associates, Australian Mobile Accountants, Australian Mobile Accountants Pty Ltd, Stones Corner Taxation Service Pty Ltd and Morrissey, Chartered Accountants. Mr Morrissey’s practice was related, in large part, to the preparation and lodgement of taxation returns with the Australian Taxation Office (ATO), lodging in excess of 10,000 returns in the financial years ending in 2001, 2002 and 2003.
2. On 8 December 2003, the Board suspended Mr Morrissey’s registration as a tax agent in accordance with sub-paragraph 251K(2)(b)(ii) of the Income Tax Assessment Act 1936 (the Act) for the period ending on 20 January 2004. In a further decision, dated 20 January 2004, the Board imposed a second period of suspension on Mr Morrissey for a period of 12 months commencing 1 March 2004. On 12 December 2003 and 25 February 2004, respectively, Mr Morrissey sought review of those decisions by the Administrative Appeals Tribunal (the Tribunal). Since then, the Tribunal stayed the operation of the Board’s decisions and Mr Morrissey continues to practise as a tax agent pending the Tribunal’s decision in these matters.
3. At the hearing, the respondent was represented by Ms M Brennan of counsel and Mr Morrissey appeared for himself. The following material was taken into evidence:
Exhibits 1-2 documents prepared in accordance with section 37 of the Administrative Appeals Tribunal Act 1975 (the T documents) for application Q2003/1038 and Q2004/149 respectively;
Exhibit 3transcript of proceedings, dated 9 May 2003, of a hearing of the Disciplinary Committee of the Institute of Chartered Accountants;
Exhibit 4statement, dated 16 July 2003, detailing the terms and conditions of employment of Lisa Garvey by Stones Corner Taxation Services;
Exhibit 5statement, dated 6 July 2004 (with annexures 1-18) by Karl Hill;
Exhibit 6statement, dated 5 July 2004 (with annexures 1-9) by Richard Bull;
Exhibit 7statement, dated 6 July 2004 (with annexures 1-7) by Lisa Garvey; and
Exhibit 8statement, dated 3 July 2004 (with annexures 1-17) by Barry Prange.
Issues and Legislation
4. The Board is established under Part VIIA of the Act and is responsible for the registration and regulation of tax agents. On 1 February 2002, Mr Morrissey applied to the Board for re-registration as an individual tax agent and, on 13 March 2002, he applied for registration of the company, Stones Corner Taxation Services Pty Ltd, as a tax agent. Mr Morrissey was the sole director and shareholder of that company. These applications were accepted by the Board in August 2003. In the intervening period, there was considerable correspondence between Mr Morrissey and the Board in relation to the manner in which he conducted his business, in particular, in respect of the arrangements he had with employees and the supervision and control mechanisms that he had in place in respect of preparation and lodgement of taxation returns.
5. The first period of suspension imposed by the Board in December 2003 was based upon its finding that Mr Morrissey was guilty of misconduct as a tax agent in respect of events involving him, two former clients, the clients’ accountant at that time and the Board. The decision was made in reliance on sub-paragraph 251K(2)(b)(ii) of the Act which enables the Board to suspend or cancel the registration of any tax agent upon being satisfied that the tax agent has been guilty of misconduct as a tax agent.
6. The second period of suspension imposed by the Board in January 2004 was based upon its findings that Mr Morrissey had made a misrepresentation to the Board in relation to the employment status of the agent who had been appointed by the Board as his nominee, that he failed to advise the Board that the nominee was no longer employed by him and that he had demonstrated willingness to mislead or deceive the Board. That decision was made in accordance with paragraph 251K(2)(d) of the Act which enables the Board to suspend or cancel the registration of any tax agent upon being satisfied that the tax agent is not a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters.
7. Ms Brennan submitted that, while the evidence before the Tribunal was sufficient to sustain the periods of suspension imposed by the Board, it was also sufficient to justify the cancellation of Mr Morrissey’s registration as a tax agent. Accordingly, the issues for the Tribunal to determine are whether the requirements of sub-paragraph 251K(2)(b)(ii) and/or paragraph 251K(2)(d) of the Act are met and, if so, whether Mr Morrissey’s registration should be suspended or cancelled.
The First Suspension Period
8. From March 2000 until February 2003, Mr Morrissey’s clients included Barry and Marie Prange who conducted a fishing business from Gladstone and who arranged their business affairs through the BJ and MA Prange Family Trust (the family trust) and a company, Gameway Pty Ltd, of which they were the sole shareholders and directors. The Board’s decision on 8 December 2003 was based upon Mr Morrissey’s conduct in relation to the taxation matters of Mr and Mrs Prange, his dealings with the accountant they consulted in February 2003, Richard Bull, and his failure to communicate appropriately with the Board in respect of those matters.
9. In February 2003, Mr and Mrs Prange engaged Mr Bull, a tax agent carrying on his business in the Gladstone area, to attend to their personal, business and family trust account matters for the 2002 financial year. Mr Bull wrote to Mr Morrissey on 3 February 2003 to ascertain whether there was any ethical objection to his undertaking the taxation-related work for Mr and Mrs Prange and also requesting that Mr Morrissey provide him with copies of notices of assessment, details of debtors, creditors, borrowing costs, loan schedules, company register, trust deed and any other relevant documentation that he held in relation to the Prange’s financial affairs. On 5 February 2003, Mr Morrissey responded and advised that there was no ethical objection to Mr Bull’s engagement and that all relevant documentation that he had held in relation to Mr and Mrs Prange had been forwarded to them.
10. Mr Bull obtained information from the ATO to the effect that Mr and Mrs Prange’s individual tax returns had not been lodged for the years 1999, 2000 and 2001 and that the return for the family trust had not been lodged in 1999 or 2001. The family trust return for 2000 was lodged on 1 November 2001. In March 2003, Mr Bull made several attempts to contact Mr Morrissey by telephone but these were unsuccessful and messages he left were not returned. On 25 March 2003, Mr Bull sent a facsimile transmission to Mr Morrissey advising him that the taxation returns, as noted above, had not been lodged and again requesting information to enable him to complete the 2002 taxation returns. He received no reply. On 27 March 2003, Mr Bull referred the matter to the Board and sought its assistance in obtaining the relevant information from Mr Morrissey.
11. In his evidence, Mr Morrissey said that he had completed the taxation returns for 1999, 2000 and 2001 and had forwarded them to Mr and Mrs Prange for signature but had received no reply. He said that, as no signed copies of the original returns had been returned to him, he was not able to lodge the returns with the ATO.
12. On 28 March 2003, the Board wrote to Mr Morrissey requesting an explanation for the matters raised by Mr Bull and, on 4 April 2003, Mr Morrissey replied to the Board advising that the originals had not been returned by Mr or Mrs Prange and that he held no records in relation to them. On 23 April 2003, the Board again wrote to Mr Morrissey requesting that he forward new copies of the relevant returns to Mr Bull and also the relevant depreciation schedule and detailed balance sheet as at 30 June 2001 which had been requested by Mr Bull in his previous correspondence. On 22 May 2003, the Board again wrote to Mr Morrissey requesting that he attend to the requests previously made. On 28 May 2003, an officer of the Board, Judy Park, spoke to Mr Morrissey and advised him that the forms had not yet been received and he said that he would arrange for one of his staff members to forward further copies of the returns to Mr Bull on the following day. By 11 June 2003, Mr Bull had not received the new copies of the returns and, again, Ms Park spoke to him by telephone. She was advised that he had forwarded new copies of the relevant returns but that they had come back to his office marked “return to sender”. In his evidence, Mr Morrissey confirmed that this had happened. At that stage, Mr Bull arranged for Mr and Mrs Prange to sign the “client copy” of each return which had been sent to them originally as duplicates for their own records. These were then forwarded by Mr Bull to the Board and, in turn, to Mr Morrissey for lodgement. The returns were then lodged by Mr Morrissey later in that month.
13. On 14 July 2003, the Board again wrote to Mr Morrissey requesting the depreciation schedule and balance sheets relating to Mr and Mrs Prange’s business and nominated a response time of 14 days. As there was no response by 30 July 2003, Ms Park contacted him by telephone and was advised that he had called for the Prange’s files from his firm’s archives and would respond to her by facsimile transmission on the following day. As no response had been received by 6 August 2003, Ms Park again contacted Mr Morrissey by telephone and he said he would provide her with a facsimile response on the following day. No response had been received by 20 August 2003 and, again, Ms Park telephoned Mr Morrissey’s office. He was unavailable and she left a message for him to return her call. There was no response.
14. In addition to preparing taxation returns for Mr and Mrs Prange, Mr Morrissey also maintained the statutory registered office of Gameway Pty Ltd and invoiced the company for the preparation and lodgement of annual returns for the Australian Securities and Investments Commission (ASIC). This involved a fee of $95 for Mr Morrissey’s work and a fee of $200 for ASIC.
15. In his evidence, Mr Prange said that, on receiving the taxation forms for 1999, 2000 and 2001 from Mr Morrissey, he had arranged for them to be signed by himself and Mrs Prange and had then immediately returned the signed taxation documents to Mr Morrissey. He said that he also sent the ASIC documents and the cheques to Mr Morrissey in the amounts invoiced for the work that was done and also for the lodgement of the ASIC forms. He said that, subsequently, the company had been advised by ASIC that the documentation had not been lodged for 2001 and that a further lodgement fee and a late payment penalty had to be made by the company.
16. On 26 September 2003, the Board sent a notice to Mr Morrissey requesting that he show cause why his registration as a tax agent should not be suspended or cancelled. In the notice, Mr Morrissey was requested to provide his response in writing by close of business on 14 October 2003 and he responded by letter on that date.
17. On 3 November 2003, Mr and Mrs Prange instructed Dibbs Barker Gosling, Lawyers, to act on their behalf to recover documents from Mr Morrissey. On 20 November 2003, Karl Hill, a solicitor in that practice, wrote to Mr Morrissey requesting that he provide to them documents including the detailed balance sheet and depreciation schedule for the year ending 30 June 2001. By facsimile transmission dated 21 November 2003, Mr Morrissey advised that he held no information in respect of Mr and Mrs Prange. In telephone conversations between Mr Hill and Mr Morrissey on 24 November 2003 and 16 December 2003, Mr Morrissey again denied that he had any documents relating to Mr and Mrs Prange. On 11 December 2003, a further letter was written by Mr Hill to Mr Morrissey again requesting documentation. Mr Morrissey responded on 15 December 2003 again asserting that he held no records in respect to Mr Prange or his related entities. He said that he had none of those records and that all of the records that he held had been returned to Mr Prange.
18. In his letter, dated 15 December 2003, to Mr Hill, Mr Morrissey, while asserting that he had returned all records to Mr Prange, stated that Mr Prange had an obligation under the Act to keep these records for a period of seven years. He then declared that he had brought the absence of records in Mr Prange’s possession to the attention of the Small Business Audit Division of the ATO and that he had an appointment with that body on 22 December 2003 “to commence the required action”. He asserted that substantial penalties would be applied to Mr Prange.
19. In a further telephone conversation on 19 December 2003, Mr Morrissey conceded that he did have documentation relating to Mr and Mrs Prange and said that he would forward it to Mr Hill. On 22 December 2003, Mr Hill wrote to Mr Morrissey advising him that he had not yet received the documents. On the same day, Mr Morrissey acknowledged receipt of that letter and again indicated his willingness to provide the documents to Mr Hill. On 7 January 2004, they were forwarded to Mr Hill. They comprised approximately 200 pages of photocopied material. Whilst it did not include a depreciation schedule as at 30 June 2001, it did include a balance sheet as at that date.
20. In his evidence, Mr Hill referred to a telephone call which was received by a solicitor in his practice from an unidentified caller on 21 November 2003. A minute of the telephone conversation was annexed to his affidavit. It recorded that, on being advised that Mr Hill was not available, the caller became extremely abusive. The telephone number was identified as being that of Mr Morrissey’s business and Mr Morrissey confirmed this in his evidence. Mr Hill said that, in the conversation that he had with Mr Morrissey on 24 November 2003, he made reference to the abusive call. He said that Mr Morrissey denied that he had made the call and said that he would conduct an investigation amongst his staff to determine who had done so. In his evidence, Mr Morrissey said he had been unable to ascertain who had made the call and he also said that no apology had been made to Mr Hill. Mr Morrissey was inconsistent with his responses concerning his understanding of the language which had been used in the abusive phone call. Initially, he said that Mr Hill had told him what had been said in the phone call on 24 November 2003; but he then said that he was not made aware of the content of the phone call until some time during 2004.
The Second Suspension Period
21. Mr Morrissey’s application for re-registration as an individual tax agent, made in February 2002, and his application for registration of Stones Corner Taxation Services Pty Ltd as a tax agent, made in March 2002, were finally accepted by the Board in August 2003. During the intervening period, the Board had expressed concerns to Mr Morrissey about some aspects of his practice. These included the arrangements that he had with particular employees, including Paul Yared. There was also concern at the lack of supervision of employees.
22. On 17 June 2002, the Board issued a notice to Mr Morrissey requesting that he show cause why his application for re-registration should not be rejected. In part, this related to Mr Morrissey’s activities with another entity, Australian Mobile Accountants Pty Ltd and, eventually, at a meeting on 22 April 2003, the Board decided to censure Mr Morrissey in respect of various technical breaches of the Act. Mr Morrissey was notified of this by letter dated 23 April 2003 and advised that the applications for registration and re-registration had been deferred pending a response by Mr Morrissey to various concerns expressed by the Board including:
“The Board notes the large number of clients you appear to have i.e. in excess of 7,000 and it is not satisfied that it is practical for you to adequately exercise appropriate supervision and control over the preparation of these returns, particularly when noting that you have a client base that appears, at least in part, to be serviced away from your office. Therefore the Board would expect that you would reduce your client numbers or appoint at least one nominee as a matter of urgency.”
23. In his letter of response, dated 9 May 2003, Mr Morrissey gave a summary of his practice and described Paul Yared as one of his full-time employees. In that letter, Mr Morrissey said that he intended to conduct his practice per medium of the company, Stones Corner Taxation Services Pty Ltd, as soon as it was registered. Mr Morrissey stated that he would like to appoint a nominee and said that he had commenced advertising for candidates. He also said that, if Stones Corner Taxation Services Pty Ltd was registered, he undertook to appoint a nominee immediately. In that letter, Mr Morrissey also stated that he had already prepared and lodged, in the ten months ending 30 April 2003, approximately 8,000 income tax returns.
24. The Board resolved its concerns about the lack of supervision of Mr Morrissey’s employees by requiring him to appoint another registered tax agent as a nominee for himself and for the company. On 13 June 2003, the Board wrote to Mr Morrissey indicating that it would be willing to approve the application of Stones Corner Taxation Services Pty Ltd provided there was an application for an appropriate nominee for that company. In July 2003, applications were made for Lisa Garvey to be appointed as a nominee of both Mr Morrissey and of Stones Corner Taxation Services Pty Ltd. On 11 August 2003, the Board approved the applications of Mr Morrissey and of Stones Corner Taxation Services Pty Ltd as registered tax agents. The Board also approved the application of Ms Garvey as the nominee of Mr Morrissey and the applications of Ms Garvey and Mr Morrissey as nominees of Stones Corner Taxation Services Pty Ltd.
25. Lisa Garvey is a qualified accountant and was working in Victoria as a registered tax agent when she responded to Mr Morrissey’s advertisement for a position in his business. She worked for Mr Morrissey from 14 July 2003 to 22 October 2003 on a part-time basis. Ms Garvey worked, initially, for two days per week and this was reduced to one day per week in the fortnight before she finished working there. She was paid on an hourly basis and received no payment after 22 October 2003. She said that she had no knowledge of Stones Corner Taxation Services Pty Ltd and that she had been employed by Mr Morrissey. She said that she was aware that she had been appointed as his nominee but was not aware that she had been appointed as a nominee for the company. Ms Garvey said that, when she resigned from the employ of Mr Morrissey, he had not requested a written resignation. She said that there was a conversation about the future in which Mr Morrissey said that, if she was in Queensland during the busy tax period of the following year, she might be able to do further work for him. Ms Garvey said that she did not undertake to work for Mr Morrissey in the future.
26. The documents provided by Mr Morrissey to the Board in relation to Ms Garvey’s appointment as a nominee included statements of the terms and conditions of her employment both in relation to him and for the company. Ms Garvey said that she wrote her name on the documents and signed and dated them and indicated that she was employed on a part-time basis. Copies of those documents were annexed to her affidavit and, in her evidence, she said that the name of the employer, in each case, was not on the document when she completed it and she noted that the tick that she placed in the box against “part-time” work had been lined out and that a tick had been placed in the “full-time” box. She said that she had not done this. The forms were in evidence and, in the first of those, the employer’s name is Morrissey and Associates and, in the second form, it is Stones Corner Taxation Services. On the second document, item 8 refers to the proposed days and hours of duty and the inserted notation reads: “8.00am – 5.00pm Monday to Saturday”. In his evidence, Mr Morrissey agreed that he had written that entry and he also said that Ms Garvey had not been employed by Stones Corner Taxation Services Pty Ltd but by him.
27. The letter, dated 12 August 2003, which confirmed the Board’s registration of Stones Corner Taxation Services Pty Ltd as a tax agent and Ms Garvey as a nominee thereof contained the following material:
“NOMINEE INFORMATION
Under Section 251N of the Act, the tax agent must not allow any person –
§ to prepare any income tax return; or
§ to conduct any income tax business (including return preparation and advisory work)
except under the supervision and control of a registered nominee of the tax agent.
It is very important that you be aware of and understand the nature and effect of section 251N of the Act. The supervision, for which the Section calls, has been described as ‘real and substantial supervision’. What is (or is not) real and substantial supervision will vary from circumstance to circumstance. In part, the Section calls for the knowledge and experience of the registered nominee to be readily available to other employees and to clients (most essential in this era of self assessment), during the course of conduct of the business.
Because of past abuses, it is now the policy of the Board to issue certain cautions to newly registered nominees –
§ you should not take a passive role in the tax agency business;
§ you should not sign an income tax return unless it has been prepared in circumstances which were supervised and controlled by you;
§ you should avoid any arrangement which results in you being remunerated on a ‘per return’ basis;
The Board is aware of arrangements which exist between some tax agents and their nominees where the nominee takes little or no part in the supervision of return preparation and advisory work. The typical arrangement is for the nominee to receive a fee (or other incentive) in return for his or her signature on a return. That is commonly known as the ‘tame nominee’ arrangement. Even where working papers are made available to the nominee, if returns are prepared in circumstances over which the nominee had no supervision and control, it is the Board’s opinion that the arrangement offends against Section 251N. Where arrangements exist, in breach of Section 251N, it would be open –
§ to the Commissioner to prosecute both the tax agent and the registered nominee;
§ to the Board to cancel or suspend the registration of the tax agent and the registration of the nominee;
§ to the Board to cancel or suspend any individual registration, as a tax agent, of the registered nominee.
If you have any concerns about these issues, you should resolve them with the registered tax agent immediately. It is the Board’s belief that, if these matters are handled with common sense and in an honest and professional way, tax agents and nominees will avoid difficulties under Section 251N.
OTHER INFORMATION
The company’s executive officers should refer to Section 251KK of the Income Tax Assessment Act 1936, and Income Tax Regulation 161(3) for information concerning the obligations of tax agents to notify the Board of various changes.”
28. The letter, dated 19 August 2003, which confirmed the Board’s registration of Mr Morrissey and the appointment of Lisa Garvey as his nominee, made reference to various obligations under reg 161(3) of the Income Tax Regulations 1936 (the regulations) including that of notifying the Board of the resignation of any nominee of the registered tax agent. In another letter dated 19 August 2003, Mr Morrissey was advised by the Board of Ms Garvey’s appointment as a nominee and the letter included the following:
“If the registration of Ms Garvey as nominee is no longer desired or if Ms Garvey ceases to be an employee of Craig W Morrissey, please notify the Board accordingly as soon as practical.”
29. On 6 November 2003, the Board wrote to Mr Morrissey and advised that Ms Garvey had telephoned the Board and revealed that she was no longer employed by him. Ms Garvey formally advised the Board of her resignation by letter dated 5 December 2003. She also sent a facsimile transmission to Mr Morrissey at that time and advised him that she was officially terminating her employment and the position as nominee in relation to taxation matters. In his evidence, Mr Morrissey said that he did not receive this message.
30. In mid-2003, Mr Morrissey made arrangements to purchase the practice of Bonnie Behan, a registered tax agent on the Gold Coast. Settlement was to take place in July but this did not eventuate. Ms Behan registered a complaint with the Board concerning some aspects of Mr Morrissey’s behaviour during negotiations and enclosed a facsimile transmission, dated 27 June 2003, from Mr Morrissey’s firm to her. In his evidence, Mr Morrissey conceded that he had written this message. It included the following:
“Any deal to purchase your practice does hinge on you agreeing to remain as a nominee – tax agent of our company. This does not mean that you have to work for us.
This does not expose you to any risks, all risks are with our company not you personally. It is however, necessary so that we have time to get another suitable nominee trained up and registered and to keep the tax agents’ Board happy.”
31. On 3 October 2003, the Board wrote to Mr Morrissey and referred to matters raised by Ms Behan and suggested that Mr Morrissey’s comments concerning Ms Behan’s role as a nominee could be interpreted as an indication of his willingness to mislead or deceive the Board.
Mr Morrissey’s Submissions
32. Mr Morrissey submitted that matters raised by the respondent were not sufficient to justify finding that he was guilty of any misconduct as a tax agent or that he was not a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters.
33. In respect of the first suspension period, he submitted that the whole thing turned upon his dealings with one client when, in fact, he had dealt with approximately 25,000 clients over the previous three years. He said that he had a very large practice and that the busy nature of his office meant he was not always able to respond immediately to phone calls and letters from clients or from the Board. He said that there had been no complaint by Mr Prange or Mr Bull about the quality of the work he had done in completing the taxation returns and he had lodged them as soon as he received the signed copies in June 2003. He said that no complaints had been made by them to the Institute of Chartered Accountants of Australia (ICAA) or the ATO. Mr Morrissey submitted that Mr and Mrs Prange suffered no detriment from his actions as no penalties had been imposed by the ATO. He said that the incident involving one client could not constitute misconduct and that much more serious allegations needed to be made for misconduct to arise. He conceded that he had previously been the subject of disciplinary proceedings by the ICAA in relation to another matter but that it had not resulted in a suspension of his practicing certificate but only a fine. He said this had been paid.
34. In respect of the second suspension period, Mr Morrissey submitted that there was no evidence of poor supervision and control of employees in his practice. In relation to Ms Garvey's position, he said that, in all of its dealings with him, the Board had not required him to have a full-time nominee in the practice. He also submitted that it had not been necessary for him to advise the Board that she had resigned because, in fact, he considered that she had continued to be employed by him, though not undertaking work or receiving payment, until he was advised by the Board of her resignation. In relation to the email message sent to Ms Behan, he submitted that this did not constitute an attempt to mislead or deceive the Board but, rather, it reflected his wish to keep the Board happy although he conceded that this was a poorly expressed statement.
35. Mr Morrissey said that he regretted what had occurred and that he had expressed his remorse to the Board. He said that he had implemented various new procedures and processes into his business and had down-sized his operations to ensure that these things would not happen again.
Consideration
36. The evidence given in this matter by Mr Morrissey differs in material particulars from that given by the respondent’s witnesses. In evidence was a transcript of proceedings conducted on 9 May 2003 by the Disciplinary Committee of the ICAA which, as noted above, Mr Morrissey was required to appear before. The Committee found that Mr Morrissey was liable to disciplinary action because of a failure by him to observe a proper standard of professional care, skill or competence in relation to an engagement to prepare financial statements and a taxation return for a particular client for the year ended 30 June 2000 and that he failed to respond in a timely manner in respect of complaints by various clients. At that hearing, Mr Morrissey was asked about Paul Yared. Mr Morrissey told the Committee that Mr Yared was his employer. He said that he was employed as a nominee tax agent by Mr Yared and was paid a fixed salary by Mr Yared. He said that he was paid a wage and said:
“Between July and October I might work 20 hours a week for him. This time of the year I work 1 hour a week and get paid accordingly.”
37. In his letter to the Board, dated 9 May 2003 (see paragraph 23 above), where he gave a summary of his practice, Mr Morrissey described Paul Yared as one of his full-time employees. That was on the same day as the proceedings of the ICAA Committee. In the Tribunal proceedings, Mr Morrissey was asked for an explanation of the discrepancy in respect of descriptions of Mr Yared’s status. Mr Morrissey replied that he had not been under oath when he made the statements to the Disciplinary Committee and that Mr Yared was his employee. Such an admission makes it extremely difficult to accept Mr Morrissey as a witness of truth. This is particularly so where his evidence is in direct conflict with other evidence which is entirely credible. That description is applicable to the evidence of Mr Bull, Mr Prange, Mr Hill and Ms Garvey and I accept their evidence where it conflicts with that of Mr Morrissey.
38. The evidence of Mr Prange conflicts with that of Mr Morrissey in relation to the return of signed documentation and invoiced amounts to Mr Morrissey’s office. The annexures to Mr Prange’s affidavit carry notations of dates of returned mail and also of cheque numbers. I am satisfied that the taxation and ASIC documentation as well as the payments to Mr Morrissey for his work and for forwarding to ASIC were returned in the manner that Mr Prange stated. In that regard, I note that the 2000 family trust taxation return was, in fact, lodged by Mr Morrissey in November 2001 and this supports Mr Prange’s evidence that the material was forwarded to Mr Morrissey in a timely way. Mr Morrissey submitted that no detriment was suffered by Mr and Mrs Prange because of his actions. I reject that contention. Their company paid a second annual fee to ASIC for 2001. This had been sent to Mr Morrissey but not passed on to ASIC. The company was also fined for late lodgement of the annual fee. Mr and Mrs Prange were also in the position where they needed to engage a solicitor to assist them in their dealings with Mr Morrissey and this was because of Mr Morrissey’s failure to supply documentation that they requested.
39. Mr Morrissey also submitted that the taxation returns were eventually lodged by him with the ATO. While I accept that this occurred, Mr Morrissey can take little credit for doing so. The signed copies that Mr and Mrs Prange provided in June 2003 were the duplicate client copies. Mr Morrissey gave evidence that he sent additional copies to them in May 2003 but that these had been returned marked “return to sender”. No record of this was produced in evidence by Mr Morrissey. More significantly, there is no evidence that the return of the documents resulted in Mr Morrissey bringing that to the attention of Mr Prange, of Mr Bull, of Mr Hill or of the Board. By then, even if not before, Mr Morrissey must have been aware of the importance of the documents being made available for signature. In evidence were Ms Park’s minutes of telephone conversations between her and Mr Morrissey on 28 May 2003 and 6 June 2003. These record that Ms Park advised Mr Morrissey that the documents had not been received and that Mr Morrissey said that he had sent them and would do so again. Another minute prepared by Ms Park records that, on 11 June 2003, she telephoned Mr Morrissey and was then told that the documents had been returned to him. Mr Morrissey took no steps to remedy any mail delivery problem that may have arisen.
40. Some of Mr Morrissey’s actions in not returning phone calls and letters in a timely manner may be capable of explanation by the busy nature of his practice. But this can not explain all of these. In particular, it does not explain his unwillingness to admit to possessing relevant documentation relating to Mr and Mrs Prange. Indeed, on several occasions, he denied having them in his possession. This was not correct. After many months and several requests by Mr Prange, Mr Bull, Mr Hill and the Board, Mr Morrissey eventually provided a bundle of documents comprising some 200 pages. In his evidence, Mr Bull said that he had required the documentation to assist him in completing the 2002 returns and had been able to utilise some of the documents that were eventually delivered up by Mr Morrissey.
41. Mr Morrissey submitted that he made changes to his practice to ensure that lodgement procedures were appropriate. He may well have made changes to procedures in his office. However, it was not only the flawed procedures which were responsible for the delay in his providing the detail required by Mr Bull to complete their taxation returns in 2002. Once alerted to the failure to lodge returns by Mr Bull, Mr Morrissey made no enquiries and took no steps to remedy the situation until the Board became involved and, more particularly, until Mr Prange engaged the services of Mr Hill. Clearly, Mr Morrissey manifested no interest in providing assistance to his former clients.
42. Mr Morrissey, in his letters to the Board, expressed regret for what had happened and submitted that he had demonstrated remorse. However, this was not evident in his dealings with Mr Prange or in the way in which he conducted his cross-examination of Mr Prange and Mr Bull during the hearing. It was Mr Prange’s evidence that, on one occasion when he spoke to Mr Morrissey on the telephone, he was told not to phone the office again or Mr Morrissey would obtain an order against him. I accept Mr Prange’s evidence in that regard. As late as in December 2003, he threatened to report Mr Prange to the Small Business Audit Division of the ATO. Mr Morrissey was also critical of Mr Prange in the way that he conducted his financial affairs and kept records of them. He was also critical of Mr Bull’s qualifications and experience. The matter was not about Mr Bull’s practice. Rather, it was about Mr Morrissey’s. He was critical of Mr Bull for making complaint to the Board. In questioning Mr Bull, he asked him whether Mr Bull was aware of any legal or ethical obligation that he had to provide the information Mr Bull had been seeking.
43. A reading of the letters sent by the Board to Mr Morrissey confirms that he had not been required, in specific terms, to appoint a nominee to a full-time position. Nevertheless, the size Mr Morrissey’s practice, the level of concern expressed by the Board in relation to his supervision of staff and the frequency of contact by the Board with Mr Morrissey prior to his re-registration in August 2003 indicate that this was the Board’s intention. Importantly, I am also satisfied that this was Mr Morrissey's understanding of the Board’s position in that regard. In his evidence, he conceded that he had written on the document which listed the terms and conditions of Ms Garvey’s employment for Stones Corner Taxation Services that she would be working from 8 am to 5 pm from Monday to Saturday. In evidence, Ms Garvey said that this entry was not on the document when she signed it. She also said that she ticked the “part-time” box on the document. I accept her evidence in relation to both of those matters and am satisfied that Mr Morrissey added his notation after Ms Garvey signed. I am also satisfied that the amendment of the entry of “part-time” to “full-time” was made at that time. I accept Ms Garvey’s evidence that she was at no time offered full-time work and that, at the most, she was employed for two days per week. The document misrepresented to the Board the employment status of Ms Garvey and this was relied on by the Board in making its decision to appoint her as a nominee, to re-register Mr Morrissey and to register the company. The Board had made it very clear to Mr Morrissey that it required that appointment of a nominee as a precondition to its making decisions about registration.
44. In his evidence, Mr Morrissey said that he was aware of his duty to notify the Board if his nominee left his employment. This obligation was referred to by the Board in its letters to him. In the case of Stones Corner Taxation Services Pty Ltd, this obligation is established under regulation 161(3) and a failure to notify constitutes an offence under 251KK of the Act. However, contrary to Mr Morrissey’s undertaking to the Board, Ms Garvey was not employed by that company. In relation to her employment by Mr Morrissey, the obligation arose under the regulations. Regulation 161(1) requires the Board to maintain a register in which it enters the relevant particulars in respect of each person who is a registered tax agent. This includes the details of the tax agent’s nominees. Regulation 161(3) requires the tax agent to notify the Board, “as soon as practicable”, where any particular entered in the register in relation to a nominee is no longer correct. This includes the fact of the resignation of a nominee. In addition, section 251KG of the Act makes it an offence if a tax agent does not notify the Board, forthwith, if a nominee of the tax agent ceases to be employed by the tax agent.
45. Mr Morrissey submitted that Ms Garvey was still in his employment after 22 October 2003 when she resigned to return to Victoria. I do not accept that. Neither do I accept that this was Mr Morrissey’s belief at the time. A written resignation was not tendered at that time; but this was not required. After speaking with the Board, Ms Garvey sent a facsimile transmission to Mr Morrissey on 5 December 2003 advising him formally of her resignation. I have noted that Mr Morrissey claims not to have received this even though it bears the number that appears on the letterhead of Mr Morrissey’s documents at that time. In a letter, dated 6 January 2004, Mr Morrissey wrote to the Board and, in relation to Ms Garvey, he wrote:
“I have received no resignation from Ms Garvey and will utilise her skills when she returns from Melbourne in July 2004. I have discussed this with her and she is aware that her position is ‘open’ for her.”
46. In her evidence, Ms Garvey said that she did not give any indication to Mr Morrissey about her future intentions of employment with him and I accept Ms Garvey’s evidence that she gave no undertaking to return to work for him in 2004. Ms Garvey resigned from Mr Morrissey’s employment on 22 October 2003 and has not worked for him since. He was obliged to advise the Board of this as soon as practicable after 22 October 2003. In his case, the obligation was particularly high because of the great significance that the Board had placed on the role of the nominee in his practice.
47. Mr Morrissey gave evidence that he downsized his practice after Ms Garvey left. However, at the time when he was in correspondence with the Board about the appointment of a nominee, he was continuing to process returns at levels which reflected those of earlier years. On 9 May 2003, he told the Board that he had already prepared and lodged, in the ten months ending 30 April 2003, approximately 8,000 income tax returns and, in June, he was negotiating the purchase of a Gold Coast business to expand his practice.
48. I have noted the contention of the Board in its second suspension notice and Ms Brennan in her submissions that the document that Mr Morrissey sent to Ms Behan on the Gold Coast indicated that he was willing to mislead or deceive the Board in relation to employing a nominee. This was in relation to the reference to the pending purchase of her practice by Mr Morrissey as hinging on her remaining a nominee even though she would not be required to work for him. Mr Morrissey submitted that this was merely an example of a poorly expressed statement but I do not accept that explanation. However, at that stage, Mr Morrissey had not received the appointment letters from the Board about nominees and the active role that was expected of them in the running of a tax agent’s practice (see paragraphs 27 and 28 above).
49. For its decision of 8 December 2003 for the first period of suspension, the Board relied upon sub-paragraph 251K(2)(b)(ii) of the Act. This enables the Board to suspend or cancel the registration of any tax agent upon being satisfied that the tax agent has been guilty of misconduct as a tax agent. The Act does not define the term “misconduct” and Ms Brennan referred to the decisions of the Full Court of the Supreme Court of Queensland in Adamson v Queensland Law Society Incorporated [1990] 1 QdR 498 at 507 and of the Privy Council in Roylance v General Medical Council [2000] 1 AC 311 at 331 as providing guidance for the meaning of “misconduct” in the Act. Those cases were concerned with misconduct in the context of proceedings involving, respectively, a legal practitioner and a medical practitioner but I accept the contention of Ms Brennan. In the context of a tax agent’s registration, the test to be applied is whether Mr Morrissey’s conduct violated or fell short, to a substantial degree, of the standard of professional conduct observed or approved by registered tax agents of good repute and competency.
50. In Re Cowlishaw and Tax Agents’ Board of Queensland [1999] AATA 412, the Tribunal found that the following constituted misconduct in that case: failing to file tax returns within a reasonable time, or at all, in some cases; failing to respond to telephone calls and correspondence; misleading clients by falsely telling them that their returns had been filed with the ATO; failing to pass on correspondence from the ATO to clients; and shifting the blame for delays onto the client. These are matters that are applicable to Mr Morrissey. The matters are detailed above in paragraphs 8 to 20 and 38 to 42. He failed to file tax returns after they had been returned to him by Mr Prange; he shifted the blame for his inaction onto Mr and Mrs Prange; he failed to respond to Mr Prange’s telephone calls and warned him not to phone the office again or he would obtain an order against him; he falsely denied that he held records relating to Mr and Mrs Prange though, when pressed by Mr Hill, he was able to produce some 200 pages of documents; he further delayed in producing those documents after he advised Mr Hill that he had them; he demonstrated an absence of interest in resolving the matter by not advising Mr Bull or the Board or Mr Prange that the second set of originals he forwarded in May 2003 had been retuned to him; he failed to lodge annual returns with ASIC; he failed to forward the $200 lodgement fee sent to him by Mr Prange to ASIC; he threatened to make disclosures about Mr Prange to the ATO; and he failed on several occasions to respond in a timely way to letters and phone calls from the Board and from Mr Bull. Unlike the situation in Cowlishaw, Mr Morrissey’s conduct related to only the one set of clients. However, it also related to Mr Bull and the Board and continued over a period of more than nine months. I am satisfied that Mr Morrissey’s conduct fell short, to a substantial degree, of the standard of professional conduct observed or approved by registered tax agents of good repute and competency and that it amounted to misconduct for the purposes of sub-paragraph 251K(2)(b)(ii) of the Act.
51. For its decision of 20 January 2004 for the second period of suspension, the Board relied upon paragraph 251K(2)(d) of the Act which enables the Board to suspend or cancel the registration of any tax agent upon being satisfied that the tax agent is not a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters. Section 251BC of the Act provides a meaning of that term and, in so far as relevant, it reads:
“(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 of good fame, integrity and character;…”
52. The term “fit and proper person” in the context of paragraph 251K(2) of the Act was referred to by Davies J in the Tribunal decision Re Su and Tax Agents' Board of South Australia (1982) 61 FLR 1 (at 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.”
53. The matter was also referred to by Hill J in Stasos v Tax Agents' Board (1990) 21 ALD 437. There, reference was made to the privileged position that registration bestows on a tax agent who is thereby able, for payment, to hold him/herself out to the general public as a person who is regarded as suitable to prepare income tax returns and to transact business on behalf of taxpayers in relation to taxation matters. His Honour also referred to the responsibilities that this brings (at 443-4):
“The conferral of this privilege upon registered tax agents carries with it a consequent set of obligations and responsibilities. A person is required, before being registered as a tax agent to demonstrate that he is a fit and proper person to prepare income tax returns and transact business on behalf of clients in tax matters and, inter alia, that as at the date of application he is of good fame, integrity and character. Accordingly it is necessary that he demonstrate that he has the necessary knowledge and experience to equip himself to perform these tasks (cf Tax Agents' Board (Qld) v Seymour (1990) 90 ATC 4262; Re Crowley and Tax Agents' Board (NSW) (1990) 90 ATC 2005; and Re Culmer and Tax Agents' Board (1990) 90 ATC 2018).
Once registered, however, the tax agent must keep up to date with the massive changes to the income tax law, no easy task in the present time, so that he can properly advise and represent his clients. That is a responsibility which comes with the privileged position in which he is placed. Negligence in the performance of his duties will bring not only the normal consequences in damages in tort, but will render the agent liable to the client statutorily under s 251M of the Act.
In addition to the tax agent dealing with his client, he will, almost invariably have dealings with officers of the Australian Taxation Office and perhaps the boards or tribunals to which I have already referred. 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 commissioner and his officers must be able, also, to accept the word of a tax agent when acting for a taxpayer in negotiations, and a fortiori in matters proceeding in a Board, the Administrative Appeals Tribunal or indeed a court it is imperative that the honesty and integrity of the tax agent not be called into doubt. So it is that it is a requirement, not only of initial registration, but of remaining on the register that a tax agent be a fit and proper person to perform the duties of a tax agent and bear the responsibilities that come with those duties.”
54. Matters relied on by the Board for the second period of suspension were Mr Morrissey’s misrepresentation in relation to the employment status of Ms Garvey, his failure to advise the Board that she was no longer employed by him and that he had demonstrated willingness to mislead or deceive the Board as revealed through his dealings with Ms Behan. These matters are detailed above in paragraphs 21 to 31 and 44 to 48. I am satisfied that Mr Morrissey did misrepresent to the Board that Ms Garvey was employed on a full-time basis in the documents lodged for her appointment as a nominee and that she was to be employed by Stones Corner Taxation Service Pty Ltd. I am satisfied that he failed to notify the Board that Ms Garvey had resigned in October 2003. I am also satisfied that his intended means of engaging the services of Ms Behan as a nominee but without requiring her to work for him manifested a willingness to mislead or deceive the Board. Considered by themselves, those matters identify Mr Morrissey as a person who is not fit and proper to prepare income tax returns and transact business on behalf of taxpayers in income tax matters for the purposes of paragraph 251K(2)(d) of the Act. That finding is reinforced by his manner of dealing with the Board, Mr Bull and Mr Prange in relation to the financial affairs of Mr Prange. Additionally, there was a clear admission by Mr Morrissey that he was willing to be untruthful merely because he was not under oath. Of course, that is the situation in which he would be operating during his daily dealings with clients and officers of the ATO.
Imposition of a Sanction
55. The Board’s decisions were to impose periods of suspension on Mr Morrissey’s registration. Ms Brennan’s submission was that his registration should be cancelled. Both of these are available options under sub-section 251K(2) of the Act. Mr Morrissey submitted that even a period of suspension was too harsh because of his need to earn an income and because he had restructured his practice since these matters arose. It has been stated often that the imposition of a penalty such as suspension or cancellation of a right to practise in a certain profession is not about punishment of the individual directly affected but, rather, about providing some measure of protection to the public: see Re Su and the Tax Agents' Board of South Australia (1982) 61 FLR 1. I am satisfied that the actions of Mr Morrissey are such that the discretion to impose a sanction should be exercised in his case to give effect to that protective role.
56. The cancellation of registration should be left for the more extreme cases of misconduct such as, for example, where serious offences have been committed in the exercise of the tax agent’s functions: see, for example, Re Pappalardo and Tax Agents’ Board of Victoria [2003] AATA 990. In this case, Ms Brennan submitted that there had been dishonesty in relation to the misappropriation of monies received from Mr Prange but this was not established and may be capable of explanation by the nature of Mr Morrissey’s practice. Nevertheless, the conduct of that practice was the responsibility of Mr Morrissey who, in a relatively brief period in practice on his own behalf, has come to the attention of regulatory authorities on several occasions. While I am satisfied that Mr Morrissey’s conduct amounted to serious breaches of his obligations, I am also satisfied that they can be answered by suspension of his registration and that the periods imposed by the Board are appropriate in each case.
Decision
57. The Tribunal affirms the decisions under review.
I certify that the 57 preceding paragraphs are a true copy of the reasons for the decision herein of Mr RG Kenny, Member
Signed: Sarah Oliver
AssociateDate of Hearing 24 September 2004
Date of Decision 15 October 2004The Applicant appeared in person
Counsel for the Respondent Ms M Brennan
Solicitor for the Respondent Australian Government Solicitor
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