Ray and Tax Agents Board of Queensland
[2005] AATA 657
•8 July 2005
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2005] AATA 657
ADMINISTRATIVE APPEALS TRIBUNAL )
) No Q2004/304
GENERAL ADMINISTRATIVE DIVISION ) Re LESLIE JAMES RAY Applicant
And
TAX AGENTS BOARD OF QUEENSLAND
Respondent
DECISION
Tribunal Senior Member McCabe Date8 July 2005
PlaceBrisbane
Decision The decision under review is set aside. The applicant is fit to practise as a tax agent but is guilty of misconduct as a tax agent. The applicant is suspended from acting as a tax agent for a period of 90 days. ..............................................
SENIOR MEMBER
CATCHWORDS
PROFESSIONAL QUALIFICATIONS – Tax Agents – cancellation of registration - professional misconduct -– “fit and proper person” – tax agent disqualified from practise because Tax Agent’s Board deemed him not a “fit and proper person” to perform the work of a tax agent – tax agent’s conduct in question – tax agent held to be a “fit and proper person” to perform work as a tax agent – tax agent guilty of misconduct as a tax agent – registration suspended for 90 days.
Income Tax Assessment Act 1936 (Cth), ss 251BC, 251K
Income Tax Regulations 1936 (Cth), ss 168(2), (2a), (3)
Re Su and Tax Agents’ Board (1982) 82 ATC 4284
Budai and Tax Agents’ Board of New South Wales [2002] AATA 1154
Pappalarado and Tax Agents’ Board of Victoria [2003] AATA 990
Morrissey and the Tax Agents’ Board of Queensland [2004] AATA 1078
REASONS FOR DECISION
8 July 2005 Senior Member B J McCabe introduction
1. The Tax Agents’ Board of Queensland (the Board) decided to cancel the registration of Mr Les Ray as a tax agent under s 251K of the Income Tax Assessment Act 1936 (ITAA36) after concluding Mr Ray was not a “fit and proper person” to perform the work of a tax agent. The decision was communicated to Mr Ray in a letter dated 23 April 2004. Mr Ray has asked the Tribunal to review the Board’s decision.
2. The Board’s decision was made after hearing evidence of Mr Ray’s dealings with officers of the Australian Tax Office (the ATO). In particular, the Board concluded Mr Ray unjustifiably:
·abused ATO officers;
·made threats of violence towards ATO officers; and
·attempted to intimidate ATO officers.
3. The Board also concluded the applicant engaged in inappropriate conduct in his dealings with the Board.
4. For reasons I will explain, I have decided to set aside the Board’s finding that the applicant is not a fit and proper person within the meaning of s 251K. I find in substitution that he is guilty of misconduct as a tax agent. I have also varied the sanctions that are to be imposed.
the material before the tribunal
5. The Tribunal was provided with the documents required under s 37 of the Administrative Appeals Tribunal Act 1975. The s 37 (or “T”) documents were bound in three volumes. A transcript of the deliberations of the Board was included in the s 37 documents (T15). The following documents were also tendered in evidence:
·Statement of Lionel Pineda Tayao - dated 14 September 2004 (exhibit 2);
·Schedule of Work Expenses Form (exhibit 3);
·Taxpayers’ Charter – in detail, effective November 2003 (exhibit 4);
·A letter from Leslie James Ray to Lionel Pineda Tayao - dated 14 December 2000 (exhibit 5);
·A letter from Leslie James Ray to Lionel Pineda Tayao with a letter of Andrew Saunders annexed – both dated 19 December 2000 (exhibit 6);
·Decision on Income Tax Review – Year Ended 30 June 2000 concerning Mr David Kacel – dated 30 March 2001 (exhibit 7);
·Letter of Complaint authored by Catherine Kumar on behalf of Angela Jamieson, Anirudh Manoj Kumar and Catherine Kumar – dated 18 October 2002 (exhibit 8);
·A letter from the Deputy Commissioner to Mr Leslie James Ray – dated 3 June 2002 (exhibit 9);
·Email correspondence between Lionel Pineda Tayao and Cameron Andrew Unwin – dated 27 August 2002 (exhibit 10);
·A letter from the Deputy Commissioner to Leslie James Ray – dated 14 August 2001 (exhibit 11);
·A bundle of documents authored by Leslie James Ray (exhibit 12);
·A facsimile from Lionel Pineda Tayao to Leslie James Ray – dated 24 January 2001 (exhibit 13);
·A letter from Lionel Pineda Tayao to Leslie James Ray – dated 2 August 2001 (exhibit 14);
·Statement of Paul John Colombini – dated 10 September 2004 (exhibit 15);
·Email correspondence between Lionel Pineda Tayao and Cameron Andrew Unwin – dated 28 March 2002 (exhibit 16);
·Statement of Ian Stanley Bosley – dated 13 September 2004 (exhibit 17);
·Statement of David Joseph Massingham – dated 14 September 2004 (exhibit 18);
·Email correspondence from Ricky Herbert to David Joseph Massingham – dated 1 October 2001 (exhibit 19);
·ATO Interpretative Decision – 2001/554 (exhibit 20);
·Email correspondence from Paul John Colombini to Cameron Andrew Unwin – dated 13 May 202 (exhibit 21);
·Email correspondence from Cameron Andrew Unwin to Paul John Colombini and Ors – dated 14 May 2002 (exhibit 22);
·Statement of Cameron Andrew Unwin – dated 14 September 2004 (exhibit 23);
·A bundle of tax returns for the year ended 30 June 1999 (exhibit 24);
·Bank statements of Ray Family Pty Ltd and the Ray Family Unit Trust (exhibit 25);
·Schedule of the break up of tax agent business income and expenses between the Family Trust and the Unit Trust (exhibit 26);
·Minute of Ray Family Pty Ltd – dated 30 June 1998 (exhibit 27);
·Minute of Ray Family Pty Ltd – dated 30 June 1999 (exhibit 28);
·Statement of Leslie James Ray – dated 28 October 2004 (exhibit 29);
·Statement of Leslie James Ray with a report of Dr Sue McCulloch, consulting psychologist, attached – dated 22 February 2004 (exhibit 30);
·Statement of Leslie James Ray – dated 22 February 2005 (exhibit 31);
·Transcript record of Interview – dated 31 October 2001 (exhibit 32);
·Extract from The Australian Taxation Office’s Management of its Relationship with Tax Practitioners – Auditor-General’s Performance Audit – tabled 2 December 2002 (exhibit 33);
·Extract from publication of the National Tax & Accountants Association Limited authored by Tony Jones – July 1998 (exhibit 34);
·Email correspondence from Cameron Andrew Unwin to Dean Butler and David Joseph Massingham – dated 11 November 2001 (exhibit 35);
·Email correspondence from Cameron Andrew Unwin to Paul John Colombini – dated 15 April 2002 (exhibit 36);
·Email correspondence from Cameron Andrew Unwin to Paul John Colombini and Ors – dated 13 May 2002 (exhibit 37);
·Tertiary Studies Transcript of Lochiel Glen Seare (exhibit 38);
·Statement of Lochiel Glen Seare – dated 27 October 2004 (exhibit 39).
6. A number of individuals gave oral testimony. The respondent called:
·Lionel Pineda Tayao;
·Cameron Andrew Unwin;
·Paul John Colombini;
·David Joseph Massingham; and
·Ian Stanley Bosley
7. The applicant gave evidence in person. He also called Mr Seare, a former employee of the ATO, and Dr McCulloch.
8. Mr O’Brien of counsel represented the respondent. He was instructed by the Australian Government Solicitor. Mr Hackett of counsel represented Mr Ray. Mr Hackett was assisted by Ms Martin of counsel, and instructed by Morgan Conley Solicitors.
the evidence
9. Mr Ray practised as a tax agent. He was involved in two practices: Les Ray and Associates in Goodna and Personal Tax Services in Ipswich. The two practices were operated at the relevant times by Ray Family Pty Ltd. The income from the Goodna practice was paid into the Ray Family Trust, while the income from the Ipswich practice was paid to the Ray Family Unit Trust (exhibit 29 at paras 2-3).
10. The ATO routinely undertakes statistical analyses of the returns filed by tax agents. The process is known as profiling. One of the objects of profiling is to identify tax agents who file returns that include claims for deductions that are higher than the norm. When a practice comes to the attention of the ATO through the profiling process, the returns of the agent’s clients might be subject to more intensive scrutiny.
11. Mr Ray’s practices were singled out for attention as the result of profiling. The ATO’s first step was to audit 24 of the applicant’s clients to ensure their claims in respect of work related expenses were allowable. The audits occurred in October and November 2000. Mr Lionel Tayao, an ATO officer working in the Tax Agents’ Investigation Unit (the TAIU), dealt with Mr Ray in relation to the audits. Mr Ray says Mr Tayao constantly required him to answer questions and provide information about the claims. Mr Tayao also contacted clients and their employers to verify the claims.
12. Mr Ray says Mr Tayao’s investigation was time-consuming and disruptive. The applicant estimated in his statement that he spent between 50 and 80 hours dealing with the enquiries. He pointed out the audits were occurring at the time of the introduction of the GST. It was a very stressful period. He says it was made worse by Mr Tayao’s approach. The applicant says Mr Tayao was aggressive and insisted on the provision of evidence and information when it was not reasonably required.
13. Mr Ray also dealt with Mr Ricky Herbert, another ATO officer. Mr Herbert had concerns about the schedules of work expenses (“SWE”) prepared on behalf of clients. The SWE form records the details of various types of work related expenses that are the subject of claims for a deduction. The applicant was advised in a letter dated 19 October 2000 he would be required to participate in a SWE review program.
14. The SWE reviews were handled by Mr Tayao. The applicant said Mr Tayao was constantly seeking detailed explanations for what he read in the schedules. A sample of the correspondence received from Mr Tayao is annexed to Mr Ray’s affidavit (exhibit 29). Mr Tayao also spoke with clients and, in some cases, their employers. I note Mr Massingham’s evidence at the hearing that the level of detail required of Mr Ray was not unusual in this kind of audit. Mr David Massingham was the head of the TAIU. He suggested in response to a question from Mr O’Brien that Mr Ray was treated comparatively leniently.
15. The relationship between Mr Ray and Mr Tayao began to break down during this period. Mr Ray wrote letters of complaint about Mr Tayao to Mr Tayao’s superiors at the ATO. In one letter dated 9 January 2001 (exhibit 29 - p11 of the annexure) addressed to Mr Massingham, the applicant criticised Mr Tayao’s investigative methods. The applicant said Mr Tayao would ask leading questions of clients and refrain from asking obvious questions that might elicit information that did not support the conclusions he wished to reach.
16. That was not the applicant’s first letter of complaint. He had written a letter of complaint in relation to a variety of issues on 19 December 2000 (exhibit 6). The ATO responded to that letter with a written explanation under the signature of the deputy commissioner on 15 January 2001. Mr Ray said he was distressed to learn the letter had in fact been written by Mr Tayao. He said he did not realise that until later.
17. Mr Ray took up the theme again in his letter to Mr Massingham dated 23 January 2001 (exhibit 29 – p25 of annexure). That letter accuses Mr Massingham of failing to respond to earlier questions. Mr Ray also complained about the inquisitorial nature of Mr Tayao’s investigations, and suggested his investigative style was the product of ignorance of a tax agent’s work environment.
18. Mr Ray said Mr Tayao and the TAIU next began to audit the affairs of individual clients from March 2001. Mr Tayao required still more detail about claims (Mr Ray said in his statement he was “inundated with requests from Mr Tayao” for information) and conducted field visits to clients’ workplaces. The applicant said in his statement that many of his clients rang him to complain about the conduct of Mr Tayao. The callers apparently said Mr Tayao would attempt to intimidate them and ask them the same questions over and over until he got the answer he was looking for. Mr Massingham agreed in his evidence that field visits did occur, but said they were only in relation to motor-vehicle expense claims.
19. Mr Tayao’s approach to interviews was the subject of comment in Mr Seare’s statement. Mr Seare was formerly a member of the TAIU. He was troubled by Mr Tayao’s performance in an interview that is not connected with this matter. He said in his statement (exhibit 39 at para 25):
My experience in [an] interview conducted by [Mr Tayao] was that he was very aggressive and would not cease pursuing a line of questioning until he thought it appropriate.
20. Mr Massingham disputed this assessment in the course of his oral evidence. He said he heard Mr Tayao conduct interviews on a number of occasions. He said there was nothing objectionable about Mr Tayao’s interviewing style. I also note Mr Tayao and Mr Seare appeared to have a poor working relationship, and that Mr Seare ultimately left the TAIU following a breakdown in his relationship with other staff.
21. There were many exchanges between Mr Tayao and Mr Ray during this period. In his statement, the applicant said he spoke with Mr Tayao regularly. There were also a large number of written communications. The exchanges became increasingly acrimonious as the applicant’s frustration with Mr Tayao and the investigation began to grow. A telephone conversation on 30 March 2001 merits particular mention. The applicant rang Mr Tayao and said: “You really fucked up this time, Lionel.” During the course of the conversation, Mr Ray described Mr Tayao as a “fuckwit”. Mr Ray agreed he said these things. He also agreed he responded to Mr Tayao’s request for a further meeting with the observation: “I would not like another meeting with you because I cannot guarantee your safety.” Mr Ray says he made the comments because some of his more excitable clients had intimated to him what they would like to do to Mr Tayao if they got hold of him. When Mr Tayao asked the applicant if he was making a threat, the applicant replied “Well, you might trip on the door on the way into my office.”
22. When pressed during cross-examination to identify the clients who made the threats, Mr Ray said he was unable to remember. He said in his statement that he did not take these “threats” seriously, although one wonders why he saw fit to mention them to Mr Tayao in the first place. His explanations before the Board and before the Tribunal were unsatisfactory. He suggested at one point, for example, that he was merely seeking to make the technical point that he was not legally responsible for what amounted to the workplace health and safety conditions of ATO employees (see exhibit 18 – annexed letter of the applicant dated 5 April 2005; T15 - Tax Agent’s Board of Queensland Transcript of proceedings, 15 March 2004 at 12; and AAT Transcript of proceedings, 22 February 2005, page 366 at 20). Mr Ray denied he intended to threaten Mr Tayao’s safety.
23. I am not satisfied Mr Ray learned of genuine threats to Mr Tayao’s safety. Some of his clients may have used intemperate language in the course of their complaints to Mr Ray about their dealings with Mr Tayao. In any event, I do not think Mr Ray was actually threatening Mr Tayao’s safety when he communicated what may have amounted to throw-away lines from irritated clients. After hearing Mr Tayao in the witness box, I do not think he felt genuinely threatened, although the applicant’s comments clearly upset him. I think Mr Ray’s comments were (and were treated as) an expression of ill-will and exasperation that did not convey a genuine threat of actual violence.
24. Mr Ray said Mr Tayao made many errors in the course of his investigation. The applicant said he was required to provide information that was lost by the TAIU or ignored, forcing him to spend still more time dealing with questions he had already answered. He said time was wasted trying to respond to questions that did not relate to his clients. There was at least one instance when Mr Ray says his staff spent time searching the files for a client because he had been given the wrong tax file number.
25. Mr Tayao conceded in his cross-examination that he made a number of errors in the course of his work. Mr Hackett took Mr Tayao through communications relating to several other clients of Mr Ray that were suggestive of a zealous approach. There were a number of written communications confirming that mistakes were made: see exhibits 9 and 10. Mr Massingham agreed in cross-examination that Mr Tayao made mistakes. Mr Massingham acknowledged he was required to intervene on several occasions.
26. Mr Tayao was clearly offended by Mr Ray’s conduct. He explained in cross-examination that he felt Mr Ray was rude. He resented the allegations of incompetence and he was irritated that Mr Ray would write long letters that dwelled on any mistakes that had been made. He said Mr Ray would be sarcastic and mispronounce Mr Tayao’s name on purpose. He conceded that the one occasion on which he made a diary note of Mr Ray using profanity related to a mistake he had made.
27. The applicant was clearly infuriated by Mr Tayao. Mr Ray did tell Mr Massingham that Mr Tayao was incompetent and negligent. The applicant thought Mr Tayao’s activities formed part of a campaign against him. Mr Ray said the investigation was disrupting his practice. He complained to his local member of parliament and to the ATO’s Problem Resolution Service and made a series of allegations about the TAIU and its personnel.
28. Mr Massingham acknowledged there were serious problems in the relationship between Mr Tayao and Mr Ray. He agreed they did not cooperate, and they had difficulty communicating. He also agreed there were a number of instances where one or both of Mr Ray and Mr Tayao had misunderstood each other or misinterpreted events which complicated their relationship. Mr Massingham recalled Mr Ray complaining about Mr Tayao on a number of occasions and asking for him to be replaced by someone competent. Mr Massingham said in cross-examination that he thought Mr Tayao was competent notwithstanding the errors in the investigation. He said he regarded Mr Ray’s aggressive complaints as an attempt to intimidate the TAIU and Mr Tayao, although he agreed he did not make that suggestion at the time.
29. The investigation into Mr Ray’s practice and clients widened. Mr Ray was notified in June 2001 that his personal affairs were to be the subject of an audit. He was provided with audit notices in respect of his individual tax returns for the 1998, 1999 and 2000 financial years. The Family Trust returns (but not the Unit Trust returns) for 1998 and 1999 were also to be audited. The audits were carried out by Mr Cameron Unwin, an officer of the TAIU. The audits of clients were continuing during this period, although they were suspended in September 2001 to permit the applicant to concentrate on his own affairs.
30. Mr Ray attended an interview with Mr Unwin at the Mt Gravatt offices of the ATO on 31 October 2001. During a break in the interview while the tape was changed, the applicant commented on the surprisingly relaxed approach to security in the office. He noted no one had asked to see what was inside the boxes he was carrying, and he suggested he could have smuggled in a weapon without difficulty. The applicant also mentioned he owned a number of firearms. (The reference to the firearms may have sounded ominous. Mr Ray’s gun ownership was known to ATO officers as a result of another dispute with Mr Ray’s former partner.)
31. The ATO officers say they felt threatened by the conduct, but that did not stop them from proceeding with the interview. Mr O’Brien for the Board pointed out in submissions that the comment was made several weeks after the terrorist attacks in the United States on 11 September 2001. It is easy to see how the comments might have caused disquiet in those circumstances. After hearing from Mr Ray and Mr Unwin, I am not satisfied he intended the comments as a threat, nor am I satisfied they were treated as such by the participants in the meeting. Even so, I was left with the distinct impression from all the evidence that Mr Ray enjoyed the (admittedly unintended) sense of disquiet that he created with the remarks.
32. The relationship between Mr Ray and Mr Unwin soon became every bit as bad as Mr Ray’s relationship with Mr Tayao. Mr Seare suggested in his statement that the audit was conducted with unusual aggression, although Mr Unwin argued Mr Seare did not have enough experience of audits to make an informed comment. Mr Unwin insisted Mr Ray was not exposed to particularly intense scrutiny compared to other investigations Mr Unwin was handling at the time.
33. Mr Unwin explained in cross-examination that Mr Ray was rude and sarcastic and aggressive. He said Mr Ray accused him of bias and corruption. Mr Ray would demand to know his qualifications and question his suitability to be carrying out audit work. There were a number of rude letters and aggressive phone-calls. In his statement, Mr Unwin said Mr Ray suggested David Massingham instructed him (Mr Unwin) to “get” the applicant. Mr Unwin also suggested in his statement that the applicant said on 13 December 2001 that he was unwilling to provide further information to the TAIU.
34. The poor communication between Mr Ray and Mr Unwin helped to contribute to a glaring error: the audit of Mr Ray’s personal affairs proceeded on the basis that the whole of the income of both practices should have been (but was not) accounted for in the books of the Ray Family Trust. In fact, one of the tax practices acquired by Mr Ray paid its income into the Ray Family Unit Trust. Amended assessments were prepared on the wrong basis which left Mr Ray and his wife with a large tax bill. Mr Unwin sent his proposal to amend the assessments to the applicant in advance of issuing the amended assessment which elicited a further round of angry exchanges.
35. I understand the objections in relation to the amended assessment for the 1998 and 1999 years have subsequently been accepted, and that a decision is anticipated in relation to the 2000 year of income shortly.
36. Mr Ray says the error should never have been made because Mr Unwin should have been asked basic questions about the destination of the income. Mr Ray pointed out separate tax returns had been filed in respect of both trusts and each return noted the respective trusts were engaged in accounting businesses. Mr Unwin agreed he had been shown bank statements that included references to the unit trust. That should have prompted further enquiry. Mr Unwin, for his part, says the applicant failed to provide information that could have clarified the problem, such as the trustee’s resolutions.
37. Mr Seare gave evidence that he was instructed by Mr Unwin to deliver a number of documents to Mr Ray’s business address in Ipswich late one afternoon in September or October 2001. Mr Seare said in his statement that he understood the documents were originally provided by Mr Ray but they were being returned following complaints. Mr Seare said Mr Unwin handed over a quantity of documents but confided he was not releasing all of the documents that had been sought. In his statement, Mr Seare says Mr Unwin was reluctant to return all of the documents because he did not want Les Ray to think he was winning. Mr Seare added that Mr Unwin instructed him to say there was a problem with the photocopiers if there was any question about the missing documents. Mr Seare says he was also told to identify himself as a courier rather than an ATO officer. Mr Seare said the applicant was upset when the documents were delivered and angrily demanded to know where the additional documents were. Mr Seare said he told Mr Ray what he had been instructed to say, but felt bad about it. Mr Seare said he had also been instructed to take a mobile phone with him and call Mr Unwin as soon as the delivery was complete.
38. Mr Unwin flatly rejected this version of events. He said the documents were not retained for longer than usual: it was common practice to retain documents until the audit was completed, and the decision to return some of the documents to Mr Ray early was a special arrangement. Mr Unwin claimed Mr Seare was asked to report in when the job was done because he was a poor performer who required careful supervision.
39. I am troubled by the evidence in relation to this incident in particular. If accurate in every detail, it would suggest Mr Ray has been hounded. Mr Seare presented as a credible witness. Even so, it is clear he had a bad relationship with some of his co-workers in the TAIU, and it appears he departed the TAIU in acrimonious circumstances. I think it is appropriate to treat his evidence with some caution.
40. I am satisfied Mr Unwin was not happy about the decision to return the documents to Mr Ray at that point in the investigation. I am not prepared to conclude he was improperly withholding the documents or sought to frustrate their return on the basis of Mr Seare’s evidence. I do not mean to suggest Mr Seare was dishonest, but it seems to me the relationship between Mr Seare and Mr Unwin had already begun to deteriorate and Mr Seare’s perception of Mr Unwin’s behaviour was probably coloured.
41. Mr Massingham and Mr Paul Colombini (a former manager of the TAIU) gave evidence about the way in which they dealt with Mr Ray’s complaints. I have already noted Mr Ray was upset that at least one response to a letter of complaint in relation to Mr Tayao appeared to have been authored by Mr Tayao himself. Mr Colombini pointed out that an independent review into the complaints was conducted by Mr Dean Butler, an ATO officer based in Melbourne. A copy of the letter following that review dated 18 April 2002 was exhibited to Mr Colombini’s affidavit. The letter contains several factual assertions that do not withstand close analysis. It asserts, for example, that the ATO officers were trained auditors, but that is not the case. Mr Colombini agreed he was not aware of Mr Tayao’s training in particular. The letter also referred to the delivery of a finalised case report – but under cross examination Mr Colombini conceded the case report was not delivered until after the letter was sent (AAT Transcript of proceedings, 9 November 2004 page 162 at 15). Mr Colombini’s evidence makes it clear his inquiries into Mr Ray’s complaints were limited to determining whether procedures had been followed. He conceded he did not carefully scrutinise the relevant files before responding to the complaints. Mr Massingham also appears to have taken an essentially defensive approach to the complaints: he thought Mr Tayao and Mr Unwin were competent.
42. The applicant’s relationship with the officers of the TAIU continued to deteriorate. In May 2002, he decided to write to Messrs Tayao, Unwin and Massingham at their home addresses. The letter to Mr Tayao was dated 2 May 2002. It read:
This is just a quick note to inform you that I have made inquiries into your statements to me yesterday and that I have found those statements to be misleading and untruthful.
My reason for calling you was to establish liability for this debacle, and everyone I spoke to said the same thing. However, I cannot accept the fact that Cameron was responsible solely for the contents of that document, considering that Ray has been actively involved in my case from the start. This is further evidence by the fact that some of the comments in your report have your “signature” all over it, meaning that conclusions were drawn that only you could have come up with.
I cannot impress upon you enough the seriousness of this matter. That report smacks of corruption. You are a member of the team that created it. You may be technologically correct in saying that you didn’t write it, but you assisted in its compilation, which is the same thing.
I am being very fair with Cameron, and this letter further proves that I am trying to be fair to you as well. However, my compassion has a limited shelf life, and when that is exceeded, I will be seeking justice.
You will be well advised that the next time I speak to you that you speak the truth.
43. The letter to Mr Unwin was dated 10 May 2002. It read:
This letter is not an official response to the several phone calls between us over the last two weeks. I will be responding to those matters separately. The purpose of this letter is to show you that conduct during this investigation has been unprofessional and that any impending investigation may have a negative impact on you personally.
The purpose of this investigation has been to destroy my career. Of course, you will deny that, however, the evidence I have clearly shows that you do intend to promote your career at my expense. The Scotts case is a good example. The point that you miss though is that the Tax Act is very specific when it comes to the law. It is not good enough for you to reject my statements because “the Commissioner is not satisfied”. You need proof, and to date Ray has produced nothing. I continue to maintain that I have acted in accordance with the Act, and that I have acted professionally and ethically.
What is about to happen will expose the lies that have come from your office. I can appreciate that you do not have the education and experience that I have, nor do your staff, however, your statements of late indicates that your ignorance of the law may be deliberate.
I suggest you give this some thought.
44. The letter to Mr Massingham was also dated 10 May 2002. It read:
I’ve left several messages with your staff but Ray hasn’t returned any of may calls. I’m a bit disappointed that you continue to ignore my rights as a tax payer and your responsibilities as a taxation officer. The Tax Payers Charter clearly states that this conduct of yours is not acceptable.
During your time as the manager of the TAIU, I wrote to you on at least forty occasions and I sought answers to questions that raised concerns about the deficiencies of your department and your staff. You never responded to any of those allegations, although Ray has made statements to your superiors that Ray has answered those concerns. You know, and I know, that Ray has not answered any of these concerns, because they highlight your gross misuse of the Commissioners powers.
I really don’t expect you to answer this letter, but I would advise you that you are still responsible for your actions, and the impending investigation will involve you.
45. The officers claimed they were all alarmed by receipt of the letters. Messrs Unwin and Massingham said they were particularly concerned because their names were not on the electoral rolls and they had silent unlisted phone numbers. It came out in evidence that the applicant had consulted historical records held by the electoral office to locate their home addresses.
46. Mr Seare’s statement recalled the scene at work the day after the letters were received. He said there was a good deal of excitement. He suggested Mr Unwin in particular appeared to be pleased when he spoke about the letters and Mr Ray’s conduct. Mr Seare says he overheard Mr Unwin saying ‘Now we’ve got him!”, or words to that effect.
47. The witnesses who received the letters agreed that ATO security personnel declined to take any action in respect of the letters. They were also unable to point to an actual threat in the letters that would cause them to fear for their safety. I accept that Mr Unwin in particular felt anxious after receiving the letter. He spoke in his evidence of changing his domestic routine and being concerned about his children.
48. Mr Ray said he was sorry if the recipients of the letters took his initiative the wrong way. He did not apologise for writing the letters, however.
49. I read the statements of Messrs Tayao, Unwin and Massingham and listened carefully to their evidence. I am satisfied none of them believed they were in any genuine danger from Mr Ray as a result of the letters. I also accept after hearing Mr Ray that he did not intend to communicate a threat of violence when he wrote the letters. But I am satisfied Mr Ray intended to upset the recipients of the letters. While he insisted under cross-examination that he saw nothing wrong with writing to the tax officers at their homes, it is clear from the evidence that he knew the tactic would cause consternation. He was writing the letters for shock value.
50. The ATO complained to the Board about the applicant’s conduct. The Tribunal was provided with a copy of the transcript of the hearing before the Board held on 15 March 2004 (document T 15). Mr Ray was unrepresented at that hearing. He was not a cooperative witness: see, for example, his unhelpful responses (at T 15 at 893pp) to questions from the chairman about the letters he wrote to the tax officers at home. He repeated the allegations he had made against the various ATO personnel. In particular, he described the tax officers as “corrupt”. Mr Bosley, the Secretary of the Board, confirmed the applicant refused to give evidence on oath at the outset of the hearing even though the regulations require that he do so: see regulations 168(2), (2a) and (3) of the Income Tax Regulations 1936.
51. Mr Ray sought to justify his combative approach to the Board in part on the basis that it is not really independent of the ATO. Mr Bosley explained the structure of the Board and confirmed it was funded by the ATO. The Board is chaired by Mr George Fox, a Toowoomba solicitor who is also a former president of the Queensland Law Society. While his sitting fees are paid by the ATO, he is not a public servant and there is no reason to doubt his independence.
52. Evidence was also led from a psychiatrist who examined Mr Ray. Dr McCulloch suggested Mr Ray’s aggressive behaviour was explicable by stress – general work stress and the unusual stress that arose out of the audit of his own tax affairs, and those of his wife. Dr McCulloch also said the behaviour was out of character. She concluded in her report dated 29 October 2004 that the applicant was suffering from an adjustment disorder (exhibit 30 – page 8 of attached report). She formed that opinion in part on the basis that she had been told he had a satisfactory working relationship with the ATO prior to and apart from the incidents considered in these proceedings. She was also not aware of some aspects of the conduct in this case, like the letters sent to the home addresses. She opined that Mr Ray would benefit from anger management training and other treatment. She said she believed Mr Ray would commence treatment under her care in due course.
analysis of the evidence
53. The evidence suggests Mr Ray is an intense man given to outbursts of anger. He does not have a high regard for officers of the TAIU. The evidence did not suggest any want of competence on his part, although some of the returns he filed on behalf of clients were amended following the audits. His own affairs appear to have survived scrutiny, at least in relation to the 1998 and 1999 years of income. (A decision in relation to the 2000 year of income was not available at the time of the hearing.)
54. Mr Ray says he simply snapped under the pressure of dealing with a Kafkaesque bureaucracy. He argues the investigation was carried out incompetently and vindictively. He insisted on describing the investigation as corrupt. He says his aggressive behaviour towards the TAIU officers was understandable when viewed in that context. He says the ATO has failed to comply with its obligations under the Taxpayer’s Charter to treat him fairly and reasonably and to assume he was behaving honestly unless given a reason to do otherwise. He regrets his aggressive behaviour but says it was a reasonable response to the provocations he faced. He is not convinced there is anything wrong with writing to the tax officers at their unpublished home addresses.
55. The officers of the TAIU deny they acted improperly. The respondent accepts mistakes were made in the course of the investigation, but points out those mistakes were understandable in circumstances were the applicant would not cooperate in breach of his obligations under the Taxpayer’s Charter. I was also invited to assume some mistakes were both reasonable and inevitable: any investigation might involve identifying and following false leads. I am satisfied Mr Tayao and Mr Unwin in particular disliked Mr Ray and had a poor working relationship with him that deteriorated over time. Mr Tayao’s investigative style irritated Mr Ray and, it seems, a number of Mr Ray’s clients.
56. It is clear Mr Ray developed a poisonous relationship with Messrs Unwin and Tayao and (to a lesser extent) Mr Massingham. The problem began because of Mr Ray’s prickly disposition which came to the fore soon after the inquiries commenced. That prickliness is an unfortunate feature of his personality. The prickliness was aggravated by the personal styles of Mr Tayao and Mr Unwin. Mr Ray’s behaviour almost certainly offended Messrs Tayao, Unwin and Massingham, which caused them to respond negatively – triggering still more prickliness from Mr Ray. The perception that managers within the TAIU were not listening to his concerns only served to increase Mr Ray’s sense of grievance.
57. I am not satisfied the TAIU officers acted corruptly in any sense or misused their position. Even so, I am satisfied the TAIU did not handle Mr Ray’s affairs as sensitively or effectively as it might have done in the spirit of the Taxpayer’s Charter. The disintegrating relationship between Mr Ray and the officers investigating his affairs was obvious to everyone. Regardless of who was the source of the conflict, it would have been better if the management of the unit had at least considered whether there was a benefit in adopting different strategies for dealing with Mr Ray. One alternative was to replace the investigators with fresh personalities who used a different investigative style. There may have been other alternatives. If some thought had been given to this issue, Mr Ray’s spiralling anger might have been kept within bounds.
58. While I am concerned about the failure to consider whether there were better ways to handle Mr Ray, Mr Ray must ultimately accept responsibility for his own conduct. He was the author of his own acts. Whether or not he had a right to be dissatisfied with his treatment at the hands of the TAIU, his reactions were the product of his own choice.
the law
59. The power to suspend or cancel the registration of a tax agent is contained in s 251K of ITAA36. The Board (or, on review, the Tribunal) may suspend or cancel registration in a variety of circumstances. Of particular interest in this case, the Board may act if it is satisfied the tax agent:
· has been guilty of misconduct as a tax agent (s 251K(2)(b)(i)) or
· is not a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters.
60. I will deal with the issue of fitness first. Section 251BC(1) says a person is not a fit and proper person if the person is not of good fame, character and integrity: s 251K(1)(d). The requirement of fitness has also been considered in a number of cases. Mr Hackett and Mr O’Brien both referred me to the decision of Davies J in Re Su and Tax Agents’ Board (1982) 82 ATC 4284. In that case, his Honour explained (at 4286-7):
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.
61. Mr Hackett pointed out in his written submissions that there was no attack on Mr Ray’s technical competence. There was no suggestion he could not be trusted with the tax affairs of his clients. There was no suggestion of dishonesty or want of diligence. There was no evidence before me to suggest he was a person with a bad reputation. The evidence did not suggest the ATO could not rely on him. I do not think the evidence before me justifies a finding that the applicant is not a fit and proper person.
62. I am satisfied there is evidence of misconduct. The applicant’s verbal and written abuse of the TAIU officers did him no credit even if he believed he had good reason to be upset with them over the conduct of the investigation. The extravagant allegations of corruption were also improper because they were made without an adequate factual basis. The uncooperative behaviour before the Board at its hearings was also problematic.
63. I think the most serious examples of misconduct were the communications with the TAIU officers that were intended to have shock value. I refer in particular to the letters addressed to the officers at their homes. (I accept the reference to the poor security at the ATO reflects an unfortunate joke, although the suggestion to Mr Tayao that he would not be safe if he attend the applicant’s offices is also of concern.) At least two of the officers who received letters had unlisted addresses. The applicant had to go to some lengths to find out where they lived. He must have known they would have been troubled if they were contacted at home given the lengths they had gone to conceal their addresses. While I accept the applicant was not attempting to threaten the TAIU officers, I am satisfied he knew that writing to the officers in these circumstances would cause them discomfort. That is not an acceptable tactic for a tax agent.
penalty
64. I note the Tribunal has decided in other cases that the power to deregister a tax agent is designed to protect the public: see, for example, Budai and Tax Agents’ Board of New South Wales [2002] AATA 1154; Pappalarado and Tax Agents’ Board of Victoria [2003] AATA 990. Mr Ray does not represent a danger to the public, whatever the difficulties in his dealings with the ATO.
65. I am also mindful that deregistration is the most serious penalty which can be imposed. The Tribunal observed in Morrissey and the Tax Agents’ Board of Queensland [2004] AATA 1078 that deregistration ought to be reserved for the most serious examples of misconduct. I do not think that deregistration is warranted in this case.
66. I note Mr Ray has expressed his contrition for the abusive behaviour. I also accept he was under considerable pressure at the time which might have caused him to lash out and use intemperate language. That contrition counts in his favour. Dr McCulloch’s evidence suggests that conduct is unusual in any event. Mr Hackett also argued Mr Ray has expressed contrition for the shock tactics (especially writing the letters to the tax officers at their unlisted addresses) although his apology was qualified.
67. The applicant’s conduct – particularly in relation to the use of shock tactics – merits more than a reprimand. A period of suspension is required. After having regard to the medical report, the behaviour of the tax officers, the applicant’s apologies and his conduct (including his conduct before the Board and his qualified apology for writing to the tax officers at their homes), I think he should be suspended for a period of 90 days.
conclusion
68. The decision under review is set aside. The applicant is fit to practise but he is guilty of misconduct as a tax agent and should be suspended from acting as a tax agent for a period of 90 days.
I certify that the 68 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member B J McCabe.
Signed: .....................................................................................
Associate: Sam J AppletonDates of Hearing 8 – 10 November 2004
22 – 25 February 2005
Date of Decision 8 July 2005The applicant was represented by Mr Hackett of counsel and assisted by Ms Martin of counsel.
The respondent was represented by Mr O’Brien of counsel.
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