MORTIMER and TAX AGENTS' BOARD OF SOUTH AUSTRALIA
[2010] AATA 140
•26 February 2010
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2010] AATA 140
ADMINISTRATIVE APPEALS TRIBUNAL )
) No 2009/0060
GENERAL ADMINISTRATIVE DIVISION ) Re BRIAN WILLIAM MORTIMER Applicant
And
TAX AGENTS' BOARD OF SOUTH AUSTRALIA
Respondent
DECISION
Tribunal Senior Member R W Dunne Date26 February 2010
PlaceAdelaide
Decision The Tribunal affirms the decision under review.
..............................................
R W DUNNE
(Senior Member)
CATCHWORDS
TAX AGENTS – re-registration denied – whether applicant a person "not of good fame, integrity and character" – conviction of a “serious taxation offence” during the previous 5 years – whether applicant’s circumstances amounted to “special circumstances” – whether applicant “not a fit and proper person” – decision affirmed
Income Tax Assessment Act 1936 ss 251A, 251BC(1)-(3), 251JC(1) and (2), 251QA
Taxation Administration Act 1953 ss 8A, 8B, 8C, 8E
McKay v Tax Agents’ Board of Tasmania (1994) 94 ATC 2057
Cowlishaw and Ors v Tax Agents’ Board of Queensland (1999) 99 ATC 2231
Carbery & Associates Pty Ltd v Tax Agents’ Board of Queensland (2001) ATC 2025
Re Adamec and Tax Agents’ Board of Victoria [2005] AATA 913
Re Su and Tax Agents’ Board, South Australia (1982) 61 FLR 1
Toohey v Tax Agents’ Board of Victoria (2008) ATC 10-012
Re Beadle and Director-General of Social Security (1984) 6 ALD 1
McCoy v Tax Agents’ Board of New South Wales (2006) ATC 2449
Reichert v Tax Agents’ Board of New South Wales (2005) ATC 2066
Toohey v Tax Agents’ Board of Victoria (No 2) [2008] FCA 1796REASONS FOR DECISION
26 February 2010 Senior Member R W Dunne introduction
1. The applicant (Brian William Mortimer) has been a registered tax agent for 25 years. On 20 August 2008, his application for re-registration as a tax agent was refused by the respondent (“Board”). The reason for the refusal was because he had failed to lodge his 2005 and 2006 personal income tax returns and his business activity statements for the March 2006, June 2006 and June 2007 quarters and had been convicted of offences under the Taxation Administration Act 1953 (“TAA”). He also failed to adequately respond to the Board’s correspondence between June and December 2007 which the Board considered amounted to misconduct as a tax agent. Mr Mortimer has, pursuant to s 251QA(b) of the Income Tax Assessment Act 1936 (“ITAA”), applied to this Tribunal for a review of the Board’s decision to refuse his application for re-registration as a tax agent.
2. At the hearing, Mr Mortimer was self-represented and Mr Parkyn and Mr Uglesic, from the office of the Australian Government Solicitor, represented the Board. The Tribunal received into evidence the T documents (Exhibit R1), the supplementary T documents (Exhibit R2) and the further supplementary T documents (Exhibit R3), lodged pursuant to s 37 of the Administrative Appeals Tribunal Act 1975, and the applicant’s documents comprising extracts from Mr Mortimer’s Tax Agent Portal with the Australian Taxation Office (“ATO”) (Exhibit A1).
3. What follows are extracts from a table, relating to this application for review and submitted by the Board, outlining communications between the applicant and the Board and conversations involving the applicant since he was first registered as a tax agent on 26 September 1984. The applicant raised no objection concerning the content of the extracts.
Date
Communication/Event
26 September 1984
Applicant registered as a tax agent.
27 March 2001
Applicant lodges application for re-registration as a tax agent.
19 October 2001
Applicant pleads guilty and is convicted of offences pursuant to s 8C of the TA Act for failing to lodge his 1998 to 2000 personal income tax returns.
10 December 2001
The Board requests the applicant to provide details of the reason for his failure to lodge his 1998 to 2000 personal income tax returns, which resulted in his conviction on 19 October 2001.
3 April 2002
The Board again requests the applicant to provide details of the reason for his failure to lodge his 1998 to 2000 personal income tax returns, which resulted in his conviction on 19 October 2001.
6 June 2002
The Board requests the applicant to “show cause” why his re-registration as a tax agent should not be refused, suspended or cancelled.
12 July 2002
The Board contacts the applicant by telephone in relation to his failure to respond to the “show cause” letter sent to him on 6 June 2002.
28 August 2002
The applicant responds to the Board’s letter to “show cause” dated 6 June 2002.
17 October 2002
The Board advises the applicant that his registration will be renewed.
5 March 2007
The Board receives the applicant’s application for re-registration as a tax agent.
5 June 2007
The Board writes to the applicant requesting an explanation as to why he has failed to lodge business activity statements for the March 2006, June 2006, September 2006, December 2006 and March 2007 quarters.
27 June 2007
The Board writes to the applicant requesting a response to its correspondence dated 5 June 2007.
26 July 2007
The Board writes to the applicant requesting information regarding his failure to lodge business activity statements and personal income tax returns.
25 October 2007
The Board again writes to the applicant requesting information regarding his failure to lodge business activity statements and his personal income tax returns.
4 December 2007
The Board again writes to the applicant requesting information regarding his failure to lodge business activity statements and his personal income tax returns.
16 May 2008
The applicant pleads guilty and is convicted of five offences under s 8C(1)(a) of the TAA. A penalty totalling $2,050.00 is imposed.
25 June 2008
The applicant enters into a payment arrangement with the ATO in relation to his outstanding taxation liabilities. He defaults on this payment arrangement.
8 July 2008
The Board writes to the applicant requesting him to “show cause” why his application for re-registration as a tax agent ought not be refused.
23 July 2008
The Board again writes to the applicant requesting him to “show cause” why his application for re-registration ought not be refused.
20 August 2008
In the absence of a response to its letter of 23 July 2008, the Board advises the applicant by letter that his re-registration as a tax agent has been refused.
2 December 2008
The applicant writes to the Board requesting reconsideration of the decision to refuse his re-registration as a tax agent.
8 December 2008
The applicant enters into a further payment arrangement with the ATO in relation to his outstanding taxation liabilities.
issues
4. The following are the issues before the Tribunal:
(a) Whether the applicant committed and has been convicted of a serious taxation offence during the previous 5 years?
(b)Whether the applicant is not of “good fame, integrity and character”?
(c) Whether the applicant is not a “fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters”?
(d) Whether special circumstances existed such that the conviction referred to in paragraph (a) above should be disregarded?
legislative framework
5. Part VIIA of the ITAA deals with the registration of tax agents. When application is made for re-registration, the Board, if satisfied of the matters set out in s 251JC(1) of the ITAA, is required to re-register the tax agent. If the Board is not so satisfied, it shall refuse to re-register the tax agent (see s 251JC(2)). Section 251JC(1) relevantly reads:
“251JC Re-registration of tax agents
(1)The Board shall re-register the applicant as a tax agent if the applicant satisfies the Board that:
(a) if the applicant is a natural person:
(i)the applicant is a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters; and
(ii) the applicant is not an undischarged bankrupt;
(b) …
(c) …
(d)in all cases—the applicant has not permanently ceased to carry on business as a tax agent.”
6. One of the matters that the Board must be satisfied of is that the applicant for re-registration is “a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters”. This expression is often referred to as the “fit and proper person” requirement. Section 251BC of the ITAA sets out some particular circumstances where a person is not a fit and proper person. Section 251BC relevantly reads:
“251BC Fit and proper persons to prepare income tax returns
(1)Without limiting the generality of an expression used in this Part, but subject to this section, a person is not a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters, as at a particular time, if:
(a) …
(b) …
(c) …
(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) …
(2)Nothing in paragraph (1)(e) or (f) limits the generality of paragraph (1)(d).
…”
7. Where, in considering an application for re-registration as a tax agent and whether a person satisfies the fit and proper person test, the Board is satisfied that, because of “special circumstances” a conviction of the person or the doing of an act or thing by the person should be disregarded, under s 251BC(3)(c) the Board may disregard those matters. Section 251BC(3) relevantly reads:
“(3) Where:
(a) a Board is required, in considering an application for:
(i) re‑registration as a tax agent; or
(ii) …;
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.”
8. Where the applicant for re-registration as a tax agent has been convicted of a “serious taxation offence” during the previous 5 years (see s 251BC(1)(e)), certain provisions of the ITAA and the TAA will apply. Those provisions relevantly read:
Income Tax Assessment Act 1936
“251A Interpretation
In this Part, unless the contrary intention appears:
…
serious taxation offence means:
…
(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 20 penalty units;
(B) imprisonment.
…”
Taxation Administration Act 1953
“8A Interpretation
(1) In this Part, unless the contrary intention appears:
…
taxation offence means:
(a) an offence against a taxation law; or
(b) an offence against:
(i) section 6 of the Crimes Act 1914; or
(ii) section 11.1, 11.4 or 11.5 of the Criminal Code;
being an offence that relates to an offence against a taxation law.
…
8B Interpretation
(1) A reference in this Subdivision to a relevant offence is a reference to:
(a)an offence against section 8C, subsection 8D(1) or (2) or section 8H; or
(b) an offence against:
(i) section 6 of the Crimes Act 1914; or
(ii) section 11.1, 11.4 or 11.5 of the Criminal Code;
being an offence that relates to an offence of a kind referred to in paragraph (a) of this subsection.
(2)For the purposes of this Subdivision, a person who is convicted of an offence against section 8C or subsection 8D(1) or (2) (in this subsection referred to as the subsequent offence) shall be treated as having been previously convicted of a relevant offence (in this subsection referred to as the earlier offence) if:
(a)the person was convicted of the earlier offence on an occasion earlier than, but not more than 5 years earlier than, the person’s conviction of the subsequent offence; or
(b)the person is convicted of the earlier offence and the subsequent offence before the same court at the same sitting and the earlier offence was committed:
(i)at a time or on a day earlier than, but not more than 5 years earlier than, the subsequent offence; or
(ii)at the same time, or on the same day, as the subsequent offence.
…
8C Failure to comply with requirements under taxation law
(1)A person who refuses or fails, when and as required under or pursuant to a taxation law to do so:
(a)to furnish an approved form or any information to the Commissioner or another person; or
…
is guilty of an offence.
…
8E Penalties for failure to comply with requirements under taxation law
(1)Subject to subsections (2) and (3), an offence against section 8C or subsection 8D(1) or (2) is punishable on conviction by a fine not exceeding 20 penalty units.
(2) Subject to subsection (3), where:
(a)a person is convicted of an offence against section 8C or subsection 8D(1) or (2); and
(b)the court before which the person is convicted is satisfied that the person has previously been convicted of a relevant offence;
the penalty that the court may impose in respect of the first‑mentioned offence is a fine not exceeding 40 penalty units.
…”
background and evidence of applicant
9. Mr Mortimer is 52 years of age. He has been a registered tax agent since 26 September 1984. His re-registration fell due and he applied on 27 March 2001. On 19 October 2001 he was convicted for failing to lodge his 1998 to 2000 personal income tax returns. Following letters and telephone calls to him by the Board, he was advised that his registration would be renewed. On 16 May 2008, he was convicted for failing to lodge his 2005 and 2006 personal income tax returns and his business activity statements for the March 2006, June 2006 and June 2007 quarters. Fines totalling $2,050 were imposed.
10. Mr Mortimer married in April 1984, his wife being Canadian. Three children were born during the marriage. Over time and although counselling took place, difficulties developed in the marriage and the parties separated in July 2000. The wife travelled to Canada with the children in January 2001 when they were aged 15, 11 and 4. In December 2003, Mr Mortimer was divorced from his wife. As a result, he has been estranged from his three, now adult, children who reside with their mother in Canada. After the family’s departure, he continued to engage in counselling and although the counsellor did not indicate that he considered Mr Mortimer was depressed, he posed questions that suggested he was in favour of using drugs for depression. He said his general practitioner, Dr Peter Joseph, in a report dated 3 June 2009, had subsequently diagnosed his condition as depression.
11. When questioned about the receipt of correspondence from the Board in 2008, Mr Mortimer said he had difficulty with mail coming from the Board. At the relevant time, his post office address was difficult to get to from his office. He had only one staff member who was on holidays when the Board’s mail was received and he was delayed in collecting it from his post office address. He said he had received all the letters from the Board sent to him before July 2008, but in June/July 2007 he was probably at his lowest point as far as motivation was concerned.
12. In cross-examination by Mr Parkyn, Mr Mortimer agreed that, in 2002, he had given the Board an undertaking that his taxation lodgements would be kept up to date. When pressed, he acknowledged that his lodgements were not being kept up to date. When further pressed, he acknowledged that his business activity statement for the March 2009 quarter, due to be lodged on 12 May 2009, was lodged on 17 November 2009. His business activity statements for the June 2009 quarter and the September 2009 quarter were also not lodged on time. He had defaulted in a payment arrangement with the ATO, entered into on 8 December 2008, in respect of an outstanding taxation liability.
13. Mr Parkyn referred the applicant to his outline of argument in which he had said he had “a general inclination to not obey authority”. When asked to explain his statement, Mr Mortimer said:
“What that means to me is that given a choice, I would rather not obey authority. There are some authorities that you have to obey, isn’t there? Taxation Boards are one of those.” [Transcript, page 20]
Mr Mortimer acknowledged that his personal lodgement history was terrible and that his communication with the Board was also terrible. He said it was one of “those fear and trepidation things”.
14. When asked by the Tribunal about the extent to which his marriage breakdown and depression had affected the prosecutions for non-lodgement in May 2008, Mr Mortimer said that the marriage breakdown was a lesser issue. The bigger issue was the loss of access to and loss of connection with his children. These losses were the drivers of his depression.
consideration
Has the applicant committed and been convicted of a “serious taxation offence” during the previous 5 years?
15. From the extracts appearing in paragraph 3 of these reasons, the applicant acknowledged that on 16 May 2008 he was convicted (in the Adelaide Magistrate’s Court) under s 8C(1)(a) of the TAA for failing to lodge his 2005 and 2006 personal income tax returns. He was fined a total of $800. On the same occasion, he was convicted for failing to lodge his business activity statements for the March 2006, June 2006 and June 2007 quarters. He was fined a total of $1,250. Under the TAA, by virtue of s 8E(2) when read with s 8B(2), the five offences were punishable by a fine exceeding 20 penalty units (or the equivalent of $2,000) and so are serious taxation offences as defined in s 251A of the ITAA. It was clear at the hearing that the applicant accepted that he had been convicted of a serious taxation offence during the previous 5 years.
Is the applicant a person “not of good fame, integrity and character” and “not a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters”?
16. Section 251JC of the ITAA relevantly requires that the Board (and, upon review, the Tribunal) shall re-register the applicant as a tax agent if he satisfies the Board (and the Tribunal) that he is a fit and proper person to be registered as a tax agent. The starting point for this consideration is s 251BC(1) of the ITAA, which sets out circumstances where a person does not satisfy the fit and proper person requirement. In the applicant’s case, the relevant provisions in s 251BC are paragraphs (d) and (e), that is, where the person is not of good fame, integrity and character or has been convicted of a serious taxation offence during the previous 5 years. As the applicant has been convicted of a serious taxation offence within the required 5 year period, it follows that he does not satisfy the fit and proper person requirement. However, it is clear from sub-paragraph 251JC(1)(a)(i), when read with s 251BC(1), that the question of fitness and properness is not limited to the matters outlined in paragraphs (a) to (f) of s 251BC(1). Although the requirements of paragraph 251BC(1)(e) have been established, subject to the exercise of the discretion in s 251BC(3), it follows that the applicant is not a fit and proper person. However, a consideration of these matters is not exhaustive of all the matters that may be considered in determining whether a person is fit and proper. The wider consideration of fitness and properness is possible from the wording of s 251BC(1). As was stated by Deputy President P Gerber in McKay v Tax Agents’ Board of Tasmania (1994) 94 ATC 2057 (at paragraph 35):
“35. I am satisfied that the effect of s 251BC, and particularly sub-s 251BC(1), in relation to sub-s 251JC(1) is that I am able to consider a multiplicity of factors (it being, however, unwise to attempt to define the factors which may be taken into account) when deciding whether the applicant is ‘a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters’; not being bound merely to consider the various factors in sub-s 251BC(1). However, I am bound to consider the criteria in sub-s 251BC(1) for the reason that if any of them are made out (subject to the discretion contained in sub-s 251BC(3)) I am compelled to find that the applicant is not such a fit and proper person. In other words, if I were to find, for example, that the applicant was ‘not of good fame, integrity and character’, it must be concluded that the applicant is not ‘a fit and proper person (etc)’ for the purposes of sub-s 251JC(1).”
17. In terms of the other matters that may be considered, the Tribunal notes that the applicant consistently ignored communications from the Board, particularly in relation to his application for re-registration made on 5 March 2007. Between 5 June 2007, when the Board first wrote to the applicant concerning his application for re-registration, and 4 December 2007 the applicant simply ignored the Board letters that were sent to him. In his evidence, he said that his depression was then probably at its lowest point as far as motivation was concerned. However, he later acknowledged that his lack of communication with the Board was “terrible”. He said:
“Yes. My communications with the Tax Agents’ Board is one of those fear and trepidation things, because probably more than the fines of (sic) the prosecutions and things like that is my own judgment of myself for having let it got – get to that stage in the first place. And to give some explanation that would satisfy me as to why I did that is difficult, so to try and convince, you know, four or five other people is something that I find difficult to do – I found difficult to do.” [Transcript, page 24]
18. In considering the duty of tax agents to co-operate with the ATO and communicate with the Board, in Cowlishaw and Ors v Tax Agents’ Board of Queensland (1999) 99 ATC 2231, Senior Member D W Muller said (at paragraphs 8 and 9):
“8. The Tribunal takes the view that it is incumbent upon tax agents to co-operate with the officers of the ATO. The Tribunal regards the lack of co-operation of the applicants with Ms. Asadullah and Mr. Plotzki, as a serious breach of the proper conduct of a tax agent's business. It amounts to a serious neglect of the business of a tax agent.
9. The material placed before the Tribunal also shows that the applicants failed to adequately respond to correspondence from the Tax Agents' Board. The Tribunal regards the failure to treat the Tax Agents' Board with proper respect, as a serious neglect of the business of a tax agent.”
19. As already mentioned, if a person is convicted of a serious taxation offence, s 251BC of the ITAA makes it clear that they do not satisfy the fit and proper person requirement. In considering disqualification for conviction of a serious taxation offence, in Carbery & Associates Pty Ltd v Tax Agents’ Board of Queensland (2001) ATC 2025, Senior Member R D Fayle said (at paragraph 49):
“49. … However, if one of the factors sets out in s 251BC(1) is present, then the person cannot be such a fit and proper person. In particular, paragraph s 251(1)(e) disqualifies a person who has been convicted of a serious taxation offence during the previous 5 years (that is, prior to the application for re-registration). …”
20. The effect of a conviction on a person’s good fame, integrity and character was further considered by Member Dr G Hughes in Re Adamec and Tax Agents’ Board of Victoria [2005] AATA 913, when he said (at paragraph 76):
“76. … The integrity of a tax agent who has been convicted of an offence, albeit in a personal capacity, which is of a nature integral to his professional duties, must necessarily be called into question.”
21. Furthermore, in Re Su and Tax Agents’ Board, South Australia (1982) 61 FLR 1 at pages 4-5, Davies J, sitting as the President of the Tribunal, spoke of the need for a tax agent to be a person of good reputation, competence and ability when he said:
“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.
There are certain convictions which, in themselves, may be inconsistent with the holding of a tax agent's registration. If a lawyer is convicted of fraud, his name may be struck from the roll of practitioners, for fraud is inconsistent with the practice of the law. If a doctor is convicted of a serious offence relating to illegal drugs, his name may be struck from the register because the offence is inconsistent with the task which medical practitioners perform. If a tax agent is convicted of an offence of tax evasion, his name may be taken from the register, for tax evasion is inconsistent with the role which tax agents are called upon to perform.
If offences for which a tax agent is convicted are not of that character, they may nevertheless justify the removal of his name from the register if, of themselves, or in combination with other factors, they indicate that the tax agent is not a person of such integrity and competence that clients' affairs should be entrusted to him or that he is not of such integrity and competence that officers of the Taxation Department may place reliance upon returns prepared and lodged by him. …”
22. The applicant did not argue with any of the submissions put by Mr Parkyn in relation to his lodgement history or his failure to communicate with the Board over an extended period. He acknowledged in his outline of argument that he had “a general inclination to not obey authority” and, early on in the hearing, he said:
“I really appear before you today saying that, on the face of all this, I would probably conclude that I am not a fit and proper person to be a tax agent.” [Transcript, page 8]
Later, when he was cross-examined by Mr Parkyn, he agreed that his business activity statements for the March 2009 quarter, the June 2009 quarter and the September 2009 quarter, which had been due for lodgement on 12 May 2009, 11 August 2009 and 11 November 2009 had all been lodged late on 17 November 2009. Given the extended history of late lodgements, the Tribunal is of the view that this adversely reflects on his good fame, integrity and character and that he is not a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters.
Were there special circumstances existing such that the conviction of a serious taxation offence should be disregarded?
23. It was Mr Mortimer’s contention that, because of the breakdown of his marriage, the loss of access to and the loss of connection with his children and the onset of his depression as a result of these happenings, these circumstances amounted to special circumstances within the meaning of that expression in s 251BC(3)(c) of the ITAA. It is clear that there is only a single discretion in s 251BC(3)(c). Where special circumstances are established, the conviction of the person is automatically disregarded in deciding whether to register the person as a tax agent. There is no scope in the operation of the section for the exercise of any further discretion through the use of the words “the Board may” at the end of s 251BC(3). The test of special circumstances must be applied at the time of the relevant conviction(s) referred to in s 251BC(1)(e). However, in considering whether the applicant’s conviction of a serious taxation offence and his failure to communicate with the Board should be disregarded, Deputy President S A Forgie formulated the following test in Toohey v Tax Agents’ Board of Victoria (2008) ATC 10-012 (at paragraph 113) when she said:
“113 Section 251BC(3)(c) clearly relates to the question in s 251BC(3)(a). Reading the two together, it appears that there are two questions that must be resolved. The first is whether there are special circumstances. If there are, it does not automatically follow that the person’s conviction, act or thing or omission will be disregarded in making the decision whether the applicant for re-registration is a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters. The question posed by s 251BC(3)(c) is whether, the Board, and so the Tribunal, is satisfied that, ‘because of’ special circumstances, those matters ‘should be disregarded’. That seems to me to raise a question of causation and a question of appropriateness.” [Emphasis added]
24. As to its meaning, although the term “special circumstances” does not have a statutory definition, it has been considered by the Tribunal and the Federal Court in a number of decided cases. In Re Beadle and Director-General of Social Security (1984) 6 ALD 1 at page 3, the Tribunal, comprising Toohey J (Presidential Member), Member I A Wilkins and Member Dr J G Billings, said:
“An expression such as ‘special circumstances’ is by its very nature incapable of precise or exhaustive definition. The qualifying adjective looks to circumstances that are unusual, uncommon or exceptional. Whether circumstances answer any of these descriptions must depend upon the context in which they occur. For it is the context which allows one to say that the circumstances in one case are markedly different from the usual run of cases. This is not to say that the circumstances must be unique but they must have a particular quality of unusualness that permits them to be described as special.”
25. The case of Toohey has already been referred to in paragraph 23 above. In it, Deputy President Forgie considered a series of unfortunate events in the life of Mr Toohey over a long period of time. In considering whether those circumstances constituted “special circumstances”, the learned Deputy President said at paragraphs 150 and 152:
“150. … The question that I must answer, though, is do they amount to special circumstances? Are they something that take his circumstances out of the usual or ordinary case? As difficult as his circumstances have been, I do not think that they do in relation to the ongoing period that I am considering. If I were looking at a relatively short period of time and at Mr Toohey’s acts or omissions as a result of particular circumstances in that period, I might well reach a different conclusion. In relation to an ongoing period, however, it can be expected that the exigencies of life and business throw up all sorts of difficulties and sadnesses that must be met and dealt with in conducting a professional practice. The pressures that come from family illnesses and managing family affairs for the members of a person’s wider family are not out of the ordinary. Business and financial pressures and health issues are not welcome but are also part of the normal business of living over a period of time. When viewed overall, Mr Toohey’s circumstances are not special circumstances.
…
152. As I have mentioned, had Mr Toohey found himself in the range of difficult circumstances over a short period of time, I might well have come to a different conclusion. As it is, they extend over a period from the early 1990s to 2003. That is not a short period of time. Even if they are special circumstances, the errors and acts that arose from those special circumstances should not be disregarded. To disregard them would be to disregard the manner in which he dealt with them and, in this case, the manner in which he dealt with them is, in my view, an important factor in determining whether he is a person who is a fit and proper person to be a tax agent.”
26. It was Mr Parkyn’s submission that, not only must the circumstances in which the applicant found himself at the time be relevant to the question of whether they are special, but also how he dealt with those circumstances. The manner in which he dealt with those circumstances is set out in the extracts appearing in paragraph 3 of these reasons. Mr Parkyn submitted that the manner in which the applicant dealt with the circumstances does not amount to special circumstances. In the Tribunal’s view, applying what Deputy President Forgie said in Toohey, the manner in which he dealt with the circumstances is an important factor in determining whether he satisfies the fit and proper person requirement, rather than whether it amounts to special circumstances .
27. The decision in Toohey was appealed to the Federal Court before Middleton J (reported as Toohey v Tax Agents’ Board of Victoria (No 2) [2008] FCA 1796). The appeal was ultimately upheld and, in remitting the matter back to the Tribunal for determination, Middleton J said (at paragraph 16):
“16. … In determining whether a person is a fit and proper person the enquiry is directed not only to whether improper conduct has occurred, but whether it is likely to occur again, and whether the community will have confidence that it will not occur … The Tribunal should have considered and, more importantly, evaluated all the material which was raised as to ‘special circumstances’ in the context of a separate and ultimate enquiry of whether the appellant, at the time of the Tribunal’s decision, was the prescribed fit and proper person.” [Emphasis added]
Having regard to Mr Mortimer’s comments in his outline of argument that he had a general inclination to not obey authority, the Tribunal is concerned that his improper conduct is likely to occur again and it may be that the community will not have confidence that it will not occur.
28. Mr Mortimer contended that the breakdown of his marriage and, more particularly, the loss of his children, together with the onset of his depression, amounted to “special circumstances”. He said that he had been diagnosed with depression by his general practitioner, Dr Peter Joseph. In the Tribunal’s view, that it not evident from the report from Dr Joseph dated 3 June 2009. Dr Joseph speaks of the past history of depression that was told to him by Mr Mortimer. However, there is no formal diagnosis of depression recorded in Dr Joseph’s report. Moreover, the Tribunal notes that Dr Joseph only assumed the care of Mr Mortimer as his general practitioner in January 2008, some 7 years after the upheaval that he suffered when his wife ad children left him in January 2001.
29. Circumstances which were similar to those of Mr Mortimer can be found in the decisions of the Tribunal in McCoy v Tax Agents’ Board of New South Wales (2006) ATC 2449 and Reichert v Tax Agents’ Board of New South Wales (2005) ATC 2066. In McCoy, when discussing the issue of special circumstances, Senior Member N Bell said (at paragraphs 10-14):
“10. Mr McCoy gave evidence of his marriage breakdowns in 1997 and 2000. He said he had developed acute depression, sometimes being unable to get out of bed, but has made ‘tremendous progress’ and sees his psychiatrist each month. He said his depression was the substantial cause of his delay in lodging returns, but he can now keep his depression separate from his professional affairs. He said his work for his clients does not involve him emotionally and so he is able to do it.
11. I note the report of Dr T Stanley, Psychiatrist, to the effect that Mr McCoy suffers from an affective disorder with depression which is partly constitutional and exacerbated by external events including marriage breakdown. Dr Stanley described an inability to organise his life which led to a loss of control over his finances, and delays in dealing with clients’ tax returns and his own. He was optimistic that, with ongoing treatment, Mr McCoy will be able to competently manage his affairs.
12. I note that, at the date of hearing, Mr McCoy still had an outstanding tax return to be lodged with the Taxation Office for 2005. There is also an unresolved debt to the Taxation Office but it appears it is being negotiated and Mr McCoy is in the process of selling his house to raise the funds to repay the amount that is settled on.
13. I note there is no evidence of complaints about Mr McCoy by any of his clients, but I am concerned about the ‘inability to organise his life’ described by Dr Stanley. This is a dangerous ailment in a person whose professional responsibility is to assist and represent clients’ dealings with the Taxation Office.
14. In any event, I do not consider the circumstances relied on by Mr McCoy to be ‘special’. It is an unfortunate fact of modern life that many people are afflicted by depressive illness and many more experience marriage breakdown and its effects, both emotional and financial. While I sympathise with Mr McCoy’s predicament and I encourage him in the progress of his recovery, I do not consider that his circumstances are sufficiently special to warrant his serious taxation offence being disregarded for the purposes of considering whether he is a fit and proper person to be a tax agent. It is unnecessary, having reached this view, for me to consider whether the other conduct alleged by the Board should be disregarded.”
30. In Reichert, it was necessary for Deputy President RNJ Purvis QC to consider whether Mr Reichert’s circumstances were “special”. In paragraphs 18-21 of his reasons, he said:
“18. The question is as to whether there was anything that was unusual, extraordinary, peculiar or special that occurred in his accounting practice or his life. Was there something that went beyond the vicissitudes of life that explains let alone justifies his conduct? Do the circumstances of his life have that necessary particular quality of unusualness of being uncommon or exceptional that permits them to be described as special.
19. Mr Reichert experienced hardship in his employment history but many others experience a similar hardship. He experienced hardship in selling and building a home. He experienced a financial loss in selling the investment property. He suffered ill health as did his wife. He helped and tended to the welfare of others. Unfortunately people do experience loss, suffer ill health and involve themselves to their own detriment in the help of their fellow human beings.
20. The taxation legislation is designed to give protection and to guard the welfare of those who would rely upon the professional assistance afforded by tax agents. Clients rely upon their agent to proffer appropriate advice and attend to their affairs in a timely and proper manner. Commission of a serious taxation offence is taken to be an indicia of a lack of fitness and ability to discharge the duties and responsibilities of a tax agent. It is only where strict enforcement of the prohibition created by the Act would be unjust, unreasonable or otherwise inappropriate that re-registration should be permitted.
21. In my opinion Mr Reichert was well aware of the fact that he had not prepared and lodged his own taxation returns over the relevant 15 years. He prevaricated. He deferred their preparation. Other factors entered his life, which he looked upon as more pressing, more urgent. No one of the events relied upon by him as explaining the delay was itself exceptional, unusual or uncommon. They were each such as many people experience. Considered together they take the matter no further. The failure to prepare and lodge the returns, an obligation resting upon all taxpayers, was not a technical default. It was a breach knowingly and methodically maintained for a number of years. It had the effect of achieving what the Act sought to prevent. A tax agent who is competent and who is to obey the law should be able to lodge his own tax return within the time allowed. I agree with the opinion expressed in Carbery and Associates Pty Limited v Tax Agents’ Board of Queensland [2001] AATA 107; (2001) ATC 2025 where at 2033 it was stated:
‘In the opinion of the Tribunal this failure ... to comply with basic requirements of the Australian Taxation Office in regards to its conditions for lodgement of the personal income tax returns of tax agents is tantamount to gross dereliction of a fundamental duty. This failure is exacerbated, in the opinion of the Tribunal, because it is a failure to comply by a person who himself, is responsible for the management of his clients income tax compliance requirements.’”
31. The circumstances Mr Mortimer described that he found himself in are indeed sad and unfortunate. However, as was said by Senior Member Bell in McCoy, it is an unfortunate fact of modern life that many people are afflicted by depressive illness and many more experience marriage breakdown and its effects, both emotional and financial. Having sympathetically considered Mr Mortimer’s circumstances, the Tribunal is of the view that they are not “special circumstances” within the meaning of s 251BC(3)(c) of the ITAA. It follows that his conviction(s) of a serious taxation offence during the previous 5 years should not be disregarded.
conclusion
32. For the reasons stated above, the Board was correct to refuse the applicant’s application for re-registration. He has been convicted of a serious taxation offence during the previous 5 years. In addition, the Tribunal is of the view that he is (or was), at the time of the hearing, a person “not of good fame, integrity and character” pursuant to s 251BC(1)(d) of the ITAA. It must be concluded that he is not “a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters” for the purposes of s 251JC(1) of the ITAA 1936.
decision
33. The Tribunal affirms the decision under review.
I certify that the 33 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member R W Dunne
Signed: ............J Coulthard...........................................
AssociateDate of Hearing 17 November 2009
Date of Decision 26 February 2010
Advocate for the Applicant Self-represented
Counsel for the Respondent Mr N Parkyn
Solicitor for the Respondent AGS
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