Re Adamec and Tax Agents' Board of Victoria
[2005] AATA 913
•20 September 2005
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2005] AATA 913
ADMINISTRATIVE APPEALS TRIBUNAL Nº V2004/1172
GENERAL ADMINISTRATIVE DIVISION
Re: PETER ADAMEC
Applicant
And: TAX AGENTS’ BOARD OF VICTORIA
Respondent
DECISION
Tribunal: Dr Gordon Hughes, Member
Date:20 September 2005
Place:Melbourne
Decision:The Tribunal affirms the decision under review.
(sgd) Gordon Hughes
Member
TAX AGENT ‑ re‑registration denied – applicant not of “good fame, integrity and character” – conviction of a “serious taxation offence” within the last five years – absence of “special circumstances” – applicant not a “fit and proper person”
Income Tax Assessment Act 1936 ss 251A, 251BC, 251JC
Taxation Administration Act1953 ss 8A, 8B, 8D, 8E
Re Reichert and Tax Agents' Board of New South Wales [2005] AATA 188
Re Su and Tax Agents' Board of South Australia (1982) 61 FLR 1
Re Beadle and Director‑ General of Social Security (1984) 6 ALD1
Re Ivovic and Director ‑General of Social Services (1981) 3 ALN N95
Re Pappalardo and Tax Agents' Board of Victoria [2003] AATA 990
Re Carbery and Associates Pty Ltd and Tax Agents' Board of Queensland [2001] 46 ATR 1106
Re Cowlishaw and Ors and Tax Agents' Board of Queensland [1999] AATA 412
REASONS FOR DECISION
20 September 2005 Dr Gordon Hughes, Member
THE DECISION UNDER REVIEW
1. This is an application by Mr P. Adamec (the applicant) for a review of a decision made on 30 August 2004 by the Tax Agents' Board of Victoria (the respondent) to decline to grant re-registration of the applicant as a tax agent. The matter was heard before the Tribunal on 14 July 2005. Mr D. Gillard appeared for the applicant and Mr P. Sest appeared for the respondent.
THE RELEVANT LEGISLATION
2. The applicant’s application for renewal was considered by the respondent pursuant to sections 251BC and 251JC of the Income Tax Assessment Act1936 (the Act). Specifically, the decision to decline to grant re‑registration was made in accordance with section 251JC(2) of the Act.
3. The relevant legislation is set out below.
4. Section 251BC of the Act provides:
251BC(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:
…
(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
…
(2) Nothing in paragraph (1) (e) or (f) limits the generality of paragraph (1) (d).
(3) Where:
(a)a Board is required, in considering an application for:
(i) re-registration as a tax agent; or
(ii) re-registration of a nominee of a tax agent;
to decide whether the Board is satisfied that a particular person is a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters;
…
(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.
…
5. Section 251JC of the Act provides:
251JC(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…
(2) The Board shall refuse to re-register the applicant in any other case.
6. Section 251A of the Act defines “serious taxation offence” as:
…
(c)an offence that is:
(i)a taxation offence within the meaning of Part III of the Taxation Administration Act 1953; and
(ii)punishable on conviction by either or both of the following:
(A)a fine exceeding $2,000;
(B)imprisonment.
7. Section 8B of the Taxation Administration Act 1953 (the Administration Act) provides:
8B.(1) A reference in this Subdivision to a relevant offence is a reference to:
(a) an offence against section 8C…
(2) … a person who is convicted of an offence against section 8C … (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:
…
(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
…
8. Section 8E of the Administration Act provides:
8E.(1) Subject to subsections (2) and (3), an offence against section 8C … is punishable on conviction by a fine not exceeding $2,000.
(2) Subject to subsection (3), where:
(a) a person is convicted of an offence against section 8C …; 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 $4,000.
REASONS ADVANCED FOR ORIGINAL DECISION
9. The respondent, in its letter to the applicant of 30 August 2004, advised the applicant of the decision to decline re‑registration, and stated:
"…
The Board determined that your continued failure to comply with your personal taxation obligations and respond in writing to the Board correspondence, despite written reminders, in addition to your failure to satisfactorily attend to your clients' taxation requirements meant that you were not of good fame, integrity and character".
10. The respondent further stated that the following matters had been taken into account:
"(1)Your continued failure, despite written reminders to respond in writing to written requests sent to you by the Board.
(2)Your continued failure to comply with your personal taxation obligations. The Board noted your previous conviction for the non-lodgement of your 1997, 1998 and 1999 personal income tax returns and subsequent one month suspension. The Board also noted that since that conviction you have failed to lodge all your personal income tax returns by their required due dates. Your 2003 personal income tax return is still outstanding, despite written requests from the Board for its lodgement.
(3)Your failure to comply with the tax obligations of your associated entities. The Board noted that the partnership of P J Adamec & D A Cox has failed to lodge its 2003 partnership return andsix business activity statements, covering the March 2003 to June 2004 quarters, despite written requests from the Board for their lodgements.
(4)The Board has received five complaints from your clients within the previous year. These complaints involve your failure to attend to the clients' taxation requirements within a timely manner. The last complaint specifically concerned your failure to forward on a client's tax refund for a period of eight months. The Board considers that tax agents should pass a refund onto their client as soon as possible and periods in excess of two weeks are considered unreasonable."
11. In other words, the respondent concluded that the applicant fell within the criteria prescribed by section 251BC(1)(d) of the Act, being "not of good fame, integrity and character", and that it was therefore required by section 251JC(2) of the Act to refuse re‑registration.
12. The respondent did not refer to section 251BC(1)(e) of the Act in its letter; but it was contended at the hearing, and not contested by the applicant, that the applicant's prior conviction for non‑lodgement of personal income taxation returns constituted a "serious taxation offence" for the purposes of that provision.
13. It follows that the principal issue for this Tribunal to consider, given that it is conceded that the applicant has been convicted of a serious taxation offence during the previous five years as provided in section 251BC(1)(e) of the Act, is whether there are "special circumstances" as prescribed by section 251BC(3)(c) of the Act which would justify the disregarding of that conviction. Whether the applicant is a person who is "not of good fame, integrity and character," as provided in section 251BC(1)(d), becomes a secondary issue.
APPLICANT’S PERSONAL CIRCUMSTANCES
14. In order to put into context and assess the conduct of the applicant which led to the respondent's decision to decline re‑registration, it is necessary to have regard to a range of personal issues which confronted him over the course of the decade during which the conduct occurred. It is the applicant's contention that, when taken into account, these circumstances are sufficient to rebut the conclusion that he is "not of good fame, integrity and character" or that they amount to "special circumstances" for the purposes of section 251BC(3) of the Act.
15. The applicant told the Tribunal that in late 1992 the applicant's wife was diagnosed with breast cancer, resulting in surgery and protracted chemotherapy. The applicant referred to his emotional trauma as "indescribable", with his stress compounded by the need to care for his daughter, who was completing her Year 11 studies at the time.
16. In early 1993, the applicant's mother‑in‑law was diagnosed with bowel cancer. While adding to the applicant's emotional stress, this development also increased his domestic responsibilities as his mother‑in‑law was no longer able to assist with the care of his wife and daughter.
17. In 1983 the applicant commenced a partnership in an accounting practice, with offices in Blackburn and Melbourne. During 1991 and 1992 this partnership began to deteriorate. His partnership duties placed him under strain because his partner did not, adequately share the workload. The applicant also found it stressful to be commuting to the Melbourne office on a regular basis. In October 1995 the partnership was dissolved in acrimonious circumstances, with the partner taking over the Melbourne practice and the applicant retaining the Blackburn practice.
18. In early 1997, the applicant's wife was diagnosed with cancer of the cervix, resulting in a full hysterectomy followed by regular consultations with physicians. This increased the personal pressures on the applicant, added to which (or as a consequence of which) the relationship with his wife began to deteriorate.
19. Between 1997 and 2000 the applicant was involved in legal proceedings with his former business partner. The applicant told the Tribunal he was "stressed to the max at the time", particularly as his former partner had been a long standing friend.
20. In October 1999 the applicant's mother‑in‑law died. He had enjoyed a close relationship with her and was deeply traumatised. His mother‑in‑law had also been a useful "sounding board" for him in general discussions regarding his business affairs.
21. Following his mother‑in‑law's death, it became apparent to the applicant that his father‑in‑law was suffering from dementia. Thereafter, his father‑in‑law required constant care and his condition progressively deteriorated.
22. The introduction of Goods and Services Tax legislation from 1 July 2000 compounded the applicant's stress. His business manager at the Blackburn office, who had been of great assistance to him in his practice, decided to retire rather than familiarise himself with the new regulations. A succession of accountants and other staff subsequently resigned as a result of being unable to cope with the pressure of the new legislation. At this time, the applicant told the Tribunal, he was spending "most of the time in the practice", leaving him with "no home life". His "stress levels were going through the roof at the time".
23. In October 2001, the applicant's computer system malfunctioned and client records were lost. The applicant spent "countless hours" over the course of the next year rebuilding his client database.
24. In March 2003, the applicant went into partnership with a client. The partnership was known as J P Adamec and D A Cox, trading as Jocelyn Florist/Café (Ademec Cox partnership). It was intended that the applicant would contribute some capital and attend to the "paperwork" but would otherwise be a "silent partner". The applicant's partner, Debbie Cox, became illand it was necessary for the applicant to take on significantly greater responsibilities in that business than had been intended. He began dividing his time between his accounting practice and the florist/café. The applicant told the Tribunal that his involvement with the florist/café directly affected his ability to cope with his accounting practice but he persisted for some time in the hope that the forest/café would become a profitable venture. The business lost money, however, and was sold in or around August 2004.
25. In November 2004, the applicant's father died. He had been ill with cancer for 12 months and had required constant attention in the 5 months prior to his death. The applicant visited him almost daily over the latter period and accompanied him to medical appointments. It would seem the relationship between the applicant and his father was in some respects uncomfortable but the applicant nevertheless felt a sense of responsibility to offer ongoing support. During this time the applicant stated that his "stress levels were out of this world".
26. There was evidence that in recent times, the applicant's personal circumstances have improved. The applicant gave evidence that he was "coping better" and his wife gave evidence of his improved demeanour at home.
27. Evidence was given by a psychologist, Dr Robert Sands that the applicant had been suffering from a combination of post traumatic stress disorder, grief, depression and possibly general anxiety disorder. This would explain a tendency to focus on certain matters while ignoring other events which were occurring at the same time. Dr Sands noted an improvement in the applicant's condition between late 2004 and early 2005. However, he acknowledged under cross‑examination that there was no certainty that the applicant's condition was now stable or that there would be no recurrences.
APPLICANT’S CONDUCT
28. It is now appropriate to consider the conduct which the respondent took into account in determining that the applicant was "not a fit and proper person to prepare income taxation returns and transact business on behalf of taxpayers in income tax matters".
Your continued failure, despite written reminders, to respond in writing to written requests sent to you by the Board.
29. The evidence disclosed that the applicant consistently failed to meet deadlines imposed by the respondent for written replies to its periodic requests for information. It is relevant to itemise these instances in order to emphasise both the consistency of this behaviour and also the significance of the matters in respect of which the respondent was seeking a reply.
30. The Applicant's failure to communicate with the respondent related to four distinct issues of consequence: the threatened suspension of his registration in 2001; his failure to lodge taxation returns and business activity statements in 2003; a complaint lodged by David and Kerry Welch in 2003; and a complaint lodged by Kevin Sharp in 2003.
Suspension of Registration – October 2001
31. On 18 June 2001 the respondent wrote a "show cause" letter to the applicant notifying him of the respondent's belief that there were grounds to cancel or suspend his registration as a tax agent and providing him with the opportunity to respond. The letter required a reply within 14 days. The letter concluded with the words:
“...
I remind you also that your failure to reply within the time may lead to the matters being determined by the Board without any further notification to you…
A reply was not received within the prescribed timeframe.
32. On 9 July 2001 the respondent wrote a further letter to the applicant about his failure to reply to the respondent's letter of 18 June 2001. The letter requested a response by 23 July 2001. Again there was no reply within the prescribed timeframe.
33. On 1 August 2001 the applicant finally wrote to the respondent in reply to the respondent's letter dated 18 June 2001; although the applicant claimed to have responded to the letter of 18 June 2001 by facsimile on 4 July 2001.
Failure to Lodge Returns and Business Activity Statements – August 2003
34. On 8 August 2003 the respondent wrote to the applicant about his failure to lodge a personal income taxation return for the year ended 30 June 2002; his failure to lodge his previous six business activity statements; and his lodgement program. A response was requested within 14 days. A response was not received within that timeframe.
35. On 3 September 2003 the applicant wrote to the respondent, replying to the respondent's letter dated 8 August 2003. The applicant stated that he had not replied because he had been in constant contact with Ms Emily Cruso, Assistant Secretary to the respondent. The respondent ultimately accepted the applicant's explanation.
Welch Complaint
36. On 25 March 2003 the respondent wrote to the applicant about a complaint lodged by the applicant's clients David and Kerry Welch ("the Welch complaint"). A reply was requested within 14 days but was not received. On 30 April 2003, and again on 27 May 2003, the respondent wrote to the applicant about his failure to reply to the respondent's letter of 25 March 2003, and a reply was requested within 14 days in each instance.
37. On 4 June 2003, the applicant sent a facsimile to the respondent dated 2 June 2003, asking the respondent to contact him. Ms Cruso telephoned the applicant the next day and the applicant undertook to contact her further once he had spoken to his lawyer. Nothing further was heard despite telephone messages being left for the applicant on 30 June 2003 and 1 July 2003.
38. On 2 July 2003 the respondent wrote to the applicant about his failure to reply to the respondent's letters of 25 March 2003, 30 April 2003 and 27 May 2003, and to messages left at the applicant's office on 30 June 2003 and 1 July 2003. The respondent stated that:
"…if you fail to provide an acceptable response, I will have no option but to refer the matters for the Board to consider in relation to your continued registration as a tax agent".
There was no response by the applicant to this letter.
39. On 18 July 2003 the respondent again wrote to the applicant. The respondent stated:
"…if you fail to provide an acceptable response by Friday 25 July 2003, then I will have no option but to refer the matter to the Board for consideration of your continued registration as a tax agent".
40. On 24 July 2003 the applicant wrote to the respondent and requested that the respondent contact him. He requested the respondent to ring him the next day to discuss the matter. He added: "I am certainly not ignoring you". Thereafter, on 25 July 2003 and 30 July 2003 the respondent left telephone messages for the applicant at the office. The applicant told the Tribunal that he was in contact with his clients during this period, and that he was "under pressure" at the time, particularly as his business partner was ill.
41. On Friday 1 August 2003 the applicant wrote to the respondent about his attempts to contact the respondent. He said he had tried to contact the respondent but "I have had many appointments and couldn't hold on". He added that "on Monday I have allocated time and will hold until I get you".
42. On Monday 4 August 2003 the respondent left telephone messages at the office of the applicant which were not returned.
43. On 3 September 2003 the applicant finally wrote to the respondent, in reply to the letter dated 25 March 2003. On 3 October 2003 the applicant again wrote to the respondent in response to a request for further information.
44. In other words, despite the seriousness of the complaint and the seriousness of the potential consequences, and despite repeated deadlines set by the respondent for a reply, the applicant gave no substantial response and made no serious effort to contact the respondent between 25 March and 3 September 2003.
Sharp Complaint
45. On 3 December 2003 the respondent wrote to the applicant about a complaint lodged by Kevin Sharp, a client of the applicant ("the Sharp complaint"). The respondent requested a reply within 14 days but did not receive one.
46. On 10 February 2004, and again on 9 March 2004, the respondent wrote to the applicant about his failure to reply to the respondent's letter dated 3 December 2003.
47. On 28 March 2004 the applicant wrote to the respondent requesting extra time to reply to the respondent's letter dated 3 December 2003. The Applicant stated that he had been "checking with the client himself". In other words, no attempt was made to communicate with the respondent regarding a serious complaint between 3 December 2003 and 28 March 2004.
Your continued failure to comply with your personal taxation obligations. The Board noted your previous conviction for the non-lodgement of your 1997, 1998 and 1999 personal income tax returns and subsequent one month suspension. The Board also noted that since that conviction you have failed to lodge all your personal income tax returns by their required due dates. Your 2003 personal income tax return is still outstanding, despite written requests from the Board for its lodgement.
48. On 22 May 2001 the applicant was convicted in the Melbourne Magistrates' Court for offences under section 8C(1)(a) the Administration Act for failing to lodge income taxation returns in respect of each of the 1997, 1998 and 1999 financial years. The applicant was fined $750 and ordered to pay costs of $93.50.
49. The applicant gave evidence to the Tribunal that his failure to lodge his personal income taxation returns during these years was the result of the many stresses that he was facing between 1997 and 2000. He said, variously, that he "just ran out of time to do them", that he "basically forgot about them" and that he considered that his "client's work was more important" than discharging his personal taxation obligations.
50. As a consequence of this conviction, the applicant was informed by the respondent that his licence to act as a tax agent would be suspended for one month. The applicant gave evidence that, upon receipt of this notification, he met with Mr Frank Pietka, then Secretary to the respondent, to discuss the appeal process. He said that Mr Pietka reassured him that the suspension was not significant and the appeal process could be drawn out, and therefore it would be easier for him to simply serve his one month's suspension. Based on this reassurance, the applicant says, he did not appeal the decision. The applicant told the Tribunal that, in retrospect, he should have appealed the decision. Instead, he effectively took a holiday. Mr Pietka was not called to give evidence regarding his recollection of his conversation with the applicant.
51. In relation to his subsequent taxation returns, the applicant advised the Tribunal that his 2003 personal income taxation return had been lodged in February 2005. The applicant said that he had completed the preparation of his personal income taxation return for the 2003 financial year in about May 2004, save that he could not fully complete it until he had received details of his distribution from the Adamec and Cox partnership. As discussed below, the applicant said he was unable to complete the Adamec and Cox partnership taxation returns for a variety of reasons, which he considered to be beyond his control. He said he requested advice from the respondent in June 2004 as to whether he could lodge his personal income taxation return prior to completion of the Adamec and Cox partnership taxation return "but the Board never told me what to do". He also wrote to the Deputy Commissioner of Taxation to formally request an extension of time for lodging the taxation return but he did not receive a response. Accordingly he elected to wait until he could reconstruct all the records from the Adamec and Cox partnership before lodging his personal return in February 2005.
Your failure to comply with the tax obligations of your associated entities. The Board noted that the partnership of P J Adamec & D A Cox has failed to lodge its 2003 partnership return and six business activity statements, covering the March 2003 to June 2004 quarters, despite written requests from the Board for their lodgements.
52. The applicant gave evidence that he relied upon his business partner, Debbie Cox, to keep full and proper records of the business. One of the assistants left that business in about May 2003 and took with her many of the financial records. The records were not recovered until about 2004. With Ms Cox suffering ongoing bouts of sickness, and devoting a significant amount of time to caring for her ill daughter, the partnership returns were not completed within the required time frames due to "these financial and time pressures, and the lack of adequate information". All outstanding income taxation returns and business activity statements in relation to the Adamec and Cox partnership were lodged in February 2005.
The Board has received five complaints from your clients within the previous year. These complaints involve your failure to attend to the clients' taxation requirements within a timely manner. The last complaint specifically concerned your failure to forward on a clients' tax refund for a period of eight months. The Board considers that tax agents should pass a refund onto their client as soon as possible and periods in excess of two weeks are considered unreasonable.”
53. The Tribunal heard evidence of various complaints lodged by clients, not just over the 12 months leading to the decision to decline re‑registration. In December 1996, a complaint was received on behalf of Sydney and Brendo Raymond (the Raymond complaint); in December 2000, a complaint was received on behalf of Tsatsaris Nominees Pty Ltd (the Tsatsaris complaint); in October 2003, a complaint was received on behalf of David and Kerry Welch(the Welch complaint); in November 2002, a complaint was received on behalf of Patricia Morrison (the Morrison complaint); in June 2003, a complaint was received on behalf of Kevin Sharp (the Sharp complaint; in July 2003, a complaint was received on behalf of J F and L J O'Neill Enterprises Pty Ltd (the O’Neill); in February 2004, a complaint was received by Alan Vidot (the Visot complaint); and in June 2004, a complaint was received by Mrs Margaret Kramer (the Kramer complaint).
54. In all but the Vidot and Kramer complaints, the respondent ultimately elected not to take action against the applicant.
55. In relation to the Raymond complaint, the applicant was notified in a letter from the respondent dated 18 December 1996 that a complaint had been made about the fact that the applicant had not lodged the 1993, 1994 and 1995 taxation returns of the complainants with the Australian Taxation Office (the ATO) until 1996; without the complainants having sighted or signed those documents; and without forwarding the assessment notices and final notices for payment to the taxpayers. The applicant responded on 14 January 1997 with an explanation, and on 24 February 1997, the respondent wrote to the applicant, expressing its concern that he had lodged incomplete taxation returns with the ATO without the complainant's signature, authority or sighting of the completed taxation returns. The applicant was advised that serious consideration had been given to the suspension of his registration but a decision had been made not to do so. Nevertheless, the letter from Mr Pietka, added:
"…
Although the Board has accepted the explanations provided in your letter, it is stressed however, that the occurrence of complaints of a similar nature in the future will bring into serious question whether your registration should be suspended or cancelled on the grounds of you not being a “fit and proper” person to act on behalf of clients.”
56. In relation to the Tsatsaris complaint, the applicant was notified in a letter from the respondent on 21 December 2000 that a complaint had been received from the daughter of a client to the effect that penalties and interest had accrued in relation to a 1990 assessment; a penalty and interest had been imposed in relation to the non‑lodgement of a company tax assessment for 1997; a penalty had been imposed for late lodgement of the 1998 taxation return; and there had been a failure to return telephone calls or answer correspondence regarding these issues. The applicant sent a letter of explanation to the respondent on 1 August 2001. He says he spoke to the client, understood the matter to have been resolved and heard nothing further in relation to it.
57. In relation to the Welch complaint, the respondent notified the applicant in a letter dated 25 March 2003 that a complaint had been made about his tardiness in responding to queries regarding the preparation of personal taxation returns over a period of time, and about interest and penalties incurred for late lodgements in 2002. The applicant did not reply to the respondent until 3 September 2003, providing supplementary information on 3 October 2003. The respondent ultimately advised the applicant on 3 November 2003 as follows:
"…Please be advised that the Board has acknowledged and accepted the explanations provided in your response of 3 October 2003. The Board would like to advise that all complaints lodged against your firm remain on file and any future complaints of a similar nature may not be viewed in the same light."
58. In relation to the Morrison complaint, the respondent notified the applicant in a letter dated 14 November 2002 that a complaint had been received regarding the applicant's tardiness in communications, including tardiness in remitting a refund cheque which was issued on 26 August 2002 and not received until October 2002. The applicant did not respond to the respondent until 15 January 2003 but in the event, received a letter from the respondent dated 20 January 2003 which stated:
"…After examining the response you have provided we are satisfied that this matter has been addressed and is now finalised".
59. In relation to the Sharp complaint, the respondent notified the applicant in a letter dated 3 December 2003 that a complaint had been made regarding the applicant's conduct between 2000 and 2002, including: allegations of failure to lodge personal and partnership income taxation returns; invoicing for taxation returns which had not been lodged; and failure to return telephone phone calls. The last communication received from the respondent was on 7 April 2004, in which the applicant was given "until the end of April 2004 to resolve the issues and respond to the Board letters". The applicant stated that he resolved the issues directly with the client in early 2004 and that his business partner had advised the respondent to this effect by telephone in April 2004.
60. In relation to the O'Neil complaint, the respondent notified the applicant in a letter dated 7 August 2003 that a complaint had been made by a client that "the progress of her tax work … is now well overdue" and complaining generally about a tardiness in responding to the client's enquiries. The applicant responded on 1 September 2003 that client’s records had been forwarded to her new accountant some months beforehand. However, the respondent subsequently advised the applicant on 3 November 2003 that this assertion was disputed by the client's new accountant. It is not apparent that the applicant heard anything further from the respondent specifically in relation to this issue.
61. There remain two issues which it would appear were deliberately left unaddressed by the respondent, pending a consideration of the applicant's entitlement to a renewal of his registration.
62. In relation to the Vidot complaint, the respondent notified the applicant in a letter dated 11 March 2004, that Alan Vidot had complained that there had been an unacceptable delay in the completion of his 2001 personal income taxation return. In his complaint to the respondent received on 11 February 2004, Mr Vidot stated that the applicant's "excuses range from staff resigning, staff illnesses, incompetent staff and moving premises". The client complained that he had placed numerous calls to the applicant's office and received numerous promises which had not been fulfilled. On 7 April 2004, the respondent advised the applicant that his application for re‑registration would not be considered while such unresolved complaints remained outstanding. On 10 June 2004, the applicant told the respondent that the matter with Mr Vidot appeared to be resolved but he had heard nothing further.
63. In relation to the Kramer complaint, the client complained about the applicant's failure to deliver a refund cheque drawn by the ATO. The cheque had been received by the applicant in December 2003 but was not forwarded to the client until June 2004. The applicant's explanation was that this was a "simple oversight". His staff was responsible for remitting the cheque to the client but neglected to do so. The cheque had been retained in the file when the file was closed. The applicant heard nothing further from the respondent specifically in relation to this complaint, other than the reference to this matter in the letter of 30 August 2004 notifying him of the decision not to renew his registration as a tax agent.
Additional issue – failure to disclose "serious taxation offence"
64. Other issues were raised by the respondent's representative at the hearing which the Tribunal was invited to take into account in determining whether the applicant is a person 'not of good fame, integrity and character'. One related to the non‑disclosure by the Applicant, in his application for renewal of registration, of his previous conviction for non-lodgement of personal income taxation returns.
65. When the applicant submitted his application for re‑registration on 2 March 2004, one of the questions on the application form was:
"Has the applicant…been convicted of any offence… (including any offences under any Act administered by the Commissioner of Taxation, eg failure to lodge an income tax return)…during the previous 5 years? Ensure all convictions are disclosed."
The applicant answered "No". The applicant told the Tribunal that it was not his intention to make a false statement. The previous conviction "just wasn't in my mind". He said he "totally forgot about it".
SERIOUS TAXATION OFFENCE
66. The Tribunal is satisfied that the applicant's conviction on 22 May 2001 amounted to a "serious taxation offence" within the meaning of the Act. A "serious taxation offence" is defined in section 251A of the Act as an offence within the meaning of Part III of the Administration Act and which is punishable by, inter alia, a fine exceeding $2,000. Section 8C of the Administration Act provides that it is an offence for a person to fail to furnish a return to the Commissioner of Taxation. Section 8E of the Administration Act provides that the fine for a first offence is $2,000 but for a subsequent offence is $4,000. Section 8B(2) of the Administration Act provides that a conviction will be regarded as a "subsequent offence" if, inter alia, the person is convicted of an earlier offence at the same time as the subsequent offence. The applicant was convicted of 3 offences under section 8C(1)(a) on 22 May 2001, the cumulative effect was that 2 of those 3 offences were punishable by a fine not exceeding $4,000. Therefore the applicant has been convicted of a serious taxation offence. It follows that the respondent was obliged to refuse to re‑register the applicant under section 251BC(1)(e) of the Act, subject to there being no "special circumstances" for the purposes of section 251BC(3)(c) of the Act.
SPECIAL CIRCUMSTANCES
67. Having established that the applicant committed a "serious taxation offence", the question confronting the Tribunal is whether "special circumstances" exist which, pursuant to section 251BC(3)(c) of the Act, would warrant the offence being disregarded in determining whether the applicant is a fit and proper person to be a tax agent. Unquestionably, the applicant has been subject to serious stresses in both his domestic and business affairs over the past 10 years, many of them beyond his own control, but the existence of such stresses, unfortunate as they may be, does not necessarily constitute a "special circumstance".
68. The term "special circumstances", which is not statutorily defined, was considered in different circumstances, Re Beadle and Director‑General of Social Security (1984) 6 ALD 1. It was said at page 3 that such circumstances need not be unique "but they must have a particular quality of unusualness that permits them to be described as special". In Re Ivovic and Director‑General of Social Services (1981) 3 ALN N95, it was said at N97 that "special circumstances" are such that would render strict imposition of liability "unjust, unreasonable or otherwise inappropriate" and that while such circumstances did not have to be extreme or unique, "there needs to be something that takes the matter out of the usual or ordinary case".
69. In Reichert and Tax Agents' Board of New South Wales [2005] AATA 188, the Tribunal summarised the issues confronting it in similar circumstances at paras 18-20:
…
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.
…
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.
70. No‑one would deny that the applicant has experienced a difficult and distressing period of his life over the last 10 years or so. However, I find it difficult to accept, that these events are sufficiently unusual as to amount to "special circumstances" as that term is used in the Act. Family sickness, bereavement, domestic responsibilities, personality clashes in the workplace, fluctuating work loads and failed business ventures are not uncommon. Unquestionably the applicant's misfortune was accentuated by the fact that all of these challenging personal events confronted him within a relatively short period of time; but this does not alter the fact that such events are prone to occur to anyone. No doubt, some people are better equipped, psychologically, than others to cope with these vicissitudes, but this cannot alter the characterisation of the events themselves. In making an allowance for "special circumstances", the authorities provide that something more than misfortune is required. The existence of professional standards would become impossibly compromised if they were to be subject, as a matter of course, to the prevailing domestic harmony, physical wellbeing and general equanimity of the individual professional.
71. The applicant contends that the respondent’s decision to deny re‑registration has damaged his partnership will cause him personal hardship and will jeopardise the livelihood of his existing employees. The Tribunal accepts that this might well be the case but such considerations cannot in themselves be categorised as “special circumstances". Rather, these are the inevitable consequences of the sequence of events which led to the respondent's decision.
72. In reaching this conclusion, the Tribunal is mindful that the Act is designed to protect the public. As stated by Davies J in Re Su and Tax Agents' Board of South Australia (1982) 61 FLR 1 at page 11, "…this is not a situation where personal hardship [to the applicant] can be allowed to prevail over community interest".
CONCLUSION REGARDING “SERIOUS TAXATION OFFENCE AND “SPECIAL CIRCUMSTANCES
73. The Tribunal therefore concludes that the applicant has been convicted of a "serious taxation offence during the previous 5 years" for the purposes of section 251BC(1)(e) of the Act and is thus deemed by the legislation to be "…not a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers…" in the absence of "special circumstances". The Tribunal further concludes that "special circumstances" as required by section 251BC(3)(c)(i) of the Act do not exist, such as to justify the disregarding of the conviction. Having reached this conclusion, it follows from section 251JC(1)(a)(i) of the Act that the applicant is deemed not to be a "fit and proper person" and that, pursuant to section 251JC(2), re-registration must be refused.
GOOD FAME, INTEGRITY AND CHARACTER
74. It follows from the above conclusions that it is unnecessary to consider, separately, whether the applicant is "not of good fame, integrity and character" for the purposes of section 251BC(1)(d) of the Act. Nevertheless, I will do so for the sake of completeness.
75. I am of the opinion that a refusal to re‑register the applicant would also have been justified under section 251BC(1)(d). There are a number of bases which, individually and collectively, support this conclusion.
76. The fact of the applicant's conviction of a "serious taxation offence" is an issue which is relevant to section 251BC(1)(d) as well as section 251BC(1)(e) of the Act. The two are not mutually exclusive (section 251BC(2)). 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.
77. The applicant's repeated failure to respond in a timely fashion to communications from the respondent evinced at best a prevailing state of inefficiency, and at worst a cynical disregard for the authority and role of the respondent. As stated by Senior Member Dwyer in Re Pappalardo and Tax Agents' Board of Victoria [2003] AATA 990 at paragraph 32, "[a] person who is competent, and fit and proper to be a tax agent would clearly appreciate the importance of responding fully and promptly to correspondence from a regulatory authority". Similarly, it was stated in Re Cowlishaw and Ors and Tax Agents' Board of Queensland [1999] AATA 412 at paragraph 9 that "[t]he Tribunal regards the failure to treat the Tax Agents' Board with proper respect, as a serious neglect of the business of a tax agent". It may be the case that the applicant had explanations for his failures to communicate in respect of his threatened suspension of registration in 2001 and his failure to lodge returns in 2003, but he still missed the initial deadlines for responses in both instances. There were no excuses for his tardiness in communicating with the respondent in respect of the Welch and Sharp complaints, and I consider the occasional attempts to leave messages to be inadequate and somewhat cynical and insincere.
78. The repeated failure of the applicant to lodge his own income taxation returns likewise calls into account his fitness to practise as a tax agent. It is insufficient for the applicant to state that he disregarded his own obligations because he was giving priority to his clients. While this explanation may be true, it evinces either severe personal disorganisation (which in turn is likely to impact adversely on his professional duties) or a severe lack of regard for the very legal framework within which he practises his profession. Either way, this places the applicant's clients at risk. As Davies J stated in Re Su at page 7:
"…It is not necessarily the case that a practitioner who does not look after his personal affairs does not properly attend to the affairs of his clients. But incompetence in relation to one's own affairs more often than not has an effect sooner or later in relation to the affairs of a client..."
79. Similarly, In Re Pappalardo Senior Member Dwyer stated at paragraph 19 that a failure of a tax agent to lodge a taxation return beyond the period allowed in a final notice served on the tax agent was an indication that the person was not a "fit and proper person" to perform the functions of a tax agent.
80. In relation to the complaints lodged against the applicant, the cumulative effect is of more significance than then individual effect. Looked at individually, it can be seen that some matters were resolved and some did not, in the respondent’s view, warrant further action (although it must be emphasised that this does not equate with exoneration). In a busy practice, it is perhaps not surprising or particularly unusual that an individual client might, reasonably or unreasonably, become frustrated by a perceived lack of attention or oversight on occasions. Nevertheless, the pattern of escalating complaints in more recent times cannot be ignored; it is suggestive of a practice in danger of spiralling out of control, and of a practitioner who is seemingly unable to cope with either the volume or complexity of his business.
81. The applicant's failure to disclose his prior conviction over non‑lodgement of his personal income taxation returns, when applying for re‑registration, is of particular concern. I have difficulty accepting that this was a mere oversight by the applicant. At its best, it was an oversight so gross as to call into question the applicant's ability to function competently at the time; more likely, however, it was an attempt by the applicant to conceal a material fact from the respondent. Although the factual situations are not identical, I note the conclusion of Senior Member Fayle in ReCarbery and Associates Pty Ltd and Tax Agents' Board of Queenland (2001) 46 ATR 1106 at paragraph 18 that a failure to disclose information regarding a prior serious tax offence "raises questions about [the] honesty and integrity" of a tax agent. Similarly, in Re Su Davies J stated at page 10 that "[a] person who does not complete such a form accurately is not a person of sufficient competence and integrity to hold the privilege of acting for clients in the preparation and lodgement of their income tax returns".
82. I observed that the applicant exhibited a strong proclivity to blame others for his mistakes. At various times he attributed responsibility to his staff, his business partners (at both the accountancy business and the florist/café), the ATO and to the respondent itself. It may well be the case that in isolated or even repeated instances, others contributed by their actions to the difficulties which confronted the applicant. This does not excuse, however, an inability to meet those challenges (which are, after all, a fact of life) and to conduct his business with a level of professionalism achieved by the vast majority of practitioners who confront their own personal obstacles on a periodic basis. As stated by Davies J in Re Su at page 7), "…all these matters were matters with respect to which [the applicant] had ultimate responsibility and the duty to take a personal interest. The problems that arose reflect upon his competence".
83. In a similar vein, I formed the view that the applicant's expressions of regret or contrition were largely confined to circumstances in which there was simply no-one else to blame. In my opinion, the applicant's expressions of regret did not evince an adequate appreciation of his shortcomings and did not provide me with confidence that he accepted any degree of responsibility or that there would be no further demonstrations of inadequate performance in the future.
84. Accordingly I am of the view that the respondent was entitled to deny re-registration to the applicant under section 251BC(1)(d) of the Act on the grounds that the applicant is "not of good fame, integrity and character". For the same reasons expressed above, in relation to section 251BC(1)(e) of the Act, I do not accept that "special circumstances" existed which would, under section 251BC(3)(c)(ii) or (iii), justify the disregarding of the behaviour which lead to this conclusion.
85. For the above reasons, the Tribunal affirms the decision under review.
I certify that the eighty‑five [85] preceding paragraphs are a true copy of the reasons for the decision herein of
Dr G. Hughes, Member
(sgd) Olympia Sarrinikolaou
Clerk
Date of Hearing: 14 July 2005
Date of Decision: 20 September 2005
Counsel for applicant: Mr D. GillardSolicitor for applicant: Consult Solicitors
Counsel for respondent: Mr P. Sest
Solicitor for respondent: Australian Government Solicitor
13
3
0