Re Toohey and Tax Agents' Board - [2008] AATA 262

CATCHWORDS – TAX AGENTS – application for re-registration – “fit and proper person” – whether applicant a fit and proper person to prepare tax returns and transact business on behalf of taxpayer – public protection – obligations of a tax agent – failure to lodge tax returns – whether special circumstances exist – decision affirmed.

PRACTICE & PROCEDURE – whether relevant date to satisfy re-registration criteria time of application, Board’s decision or time of the Tribunal’s review – difference between an application for registration and re-registration – merits to be reviewed at the time of the Board’s decision.

WORDS AND PHRASES – “because of”, “fit and proper”, “may”, “should be disregarded”

Crimes Act 1914 s 6
Criminal Code ss 11.1, 11.4 and 11.5
Income Tax Assessment Act 1936 ss 251C, 251J(1), 251JA, 251JB, 251BC, 251JB, 251JC, 251JG, 251K, 251KG(a)-(b), 251L(1), 251M(1), 251N(1) and 251N(2A).
Income Tax Regulations 1936 rr 156(2) and 159
Taxation Administration Act 1953 ss 8N, 8T and 8U

Allonah Pty Ltd v The Ship “Amanda N” (1989) 21 FCR 60; 90 ALR 391
Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25
Australian Broadcasting Tribunal v Bond and Others (1990) 170 CLR 321; 21 ALD 1; 94 ALR 11
Beadle v Director-General of Social Security (1985) 60 ALR 225
Dranichnikov v Centrelink (2003) 75 ALD 134; 53 ATR 270

Finance Facilities Pty Ltd v Federal Commissioner of Taxation (1971) 127 CLR 106

Freeman v Secretary, Department of Social Security (1988) 19 FCR 342; 15 ALD 671; 87 ALR 506
Green v R (2000) 133 NTR 1; 9 NTLR 138
Groth v Secretary, Department of Social Security (1995) 40 ALD 541
Hella (Australia) Pty Ltd v Secretary of the Department of Industry, Tourism and Resources (2006) 94 ALD 797
Hughes and Vale Pty Ltd and Anor v State of New South Wales and Ors [No.2] (1955) 93 CLR 127
Jess v Scott (1986) 12 FCR 187
Leach v R (2007) 232 ALR 325
New South Wales Bar Association v Murphy [2002] NSWCA 138
R v D’Orta-Ekenaike [1998] 2 VR 140; 99 A Crim R 454
Re Budai and Tax Agents Board of New South Wales (2002) 51 ATR 1058
Re Carbery & Associates Pty Ltd and Tax Agents’ Board (2001) 46 ATR 1106
Re Egulian and Tax Agents’ Board of New South Wales (1991) 91 ATC 2060
Re Fitzgibbon and Tax Agent’s Board of Queensland (1993) 29 ALD 926
Re Modini and Tax Agents’ Board of Queensland (2007) 98 ALD 466; [2007] AATA 1921
Re Singh and Minister for Immigration and Citizenship (2007) 99 ALR 341; [2007] AATA 2023
Re Webb and Tax Agents’ Board of Queensland (1992) 28 ALD 464; 92 ATC 2,101
Ryde v Secretary, Department of Family and Community Services [2005] FCA 866
Samad v District Court (NSW) (2002) 209 CLR 140; 189 ALR 1
Sclater v Horton [1954] 2 QB 1
Secretary, Department of Family and Community Services v Chamberlain (2002) 68 ALD 357
Shi v Migration Agents Registration Authority [2007] FCAFC 59; (2007) 158 FCR 525; 240 ALR 23; 95 ALD 260
Stasos v Tax Agents’ Board (1990) 21 ALD 437; 21 ATR 974
Surinakova v Minister for Immigration and Ethnic Affairs (1991) 33 FCR 87; 26 ALD 203
TheHospital BenefitFund of Western Australia Inc v Minister for Health, Housing and Community Services (1992) 39 FCR 225; 28 ALD 50; 111 ALR 1
Toben v Jones (2003) 199 ALR 1; 74 ALD 321
Toohey v Tax Agents’ Board of Victoria [2007] FCA 431
Ward v Williams (1955) 92 CLR 496

DECISION AND REASONS FOR DECISION [2008] AATA 262

ADMINISTRATIVE APPEALS TRIBUNAL )

) 2007/1502
GENERAL ADMINISTRATIVE DIVISION )
Re:PETER TOOHEY
Applicant

And:TAX AGENTS’ BOARD
Respondent

DECISION

Tribunal:                   Deputy President S A Forgie
Date:  2 April 2008
Place:  Melbourne

Decision:
The Tribunal affirms the decision of the respondent dated

24 June 2004.

SA Forgie
Deputy President
REASONS FOR DECISION

Mr Toohey was first registered as a tax agent on 14 July 1976. Apart from a five month period of suspension commencing in 2002, he remained registered until the Tax Agents’ Board of Victoria (Victorian Board) refused his application to be re-registered on 24 June 2004, the Victorian Board refused his application.[1] It did so on the basis that it was not satisfied that he was a fit and proper person to prepare income tax returns and to transact business on behalf of taxpayers in income tax matters. Between 1989 and 2002, Mr Toohey has pleaded guilty to seven charges of failing to lodge his personal income tax returns. Although he was initially convicted in relation to six of the charges, those convictions were set aside on appeal and no convictions have been recorded in relation to any of those offences. Mr Toohey has failed to lodge his returns on other occasions as well as those in relation to which charges were laid. During that time, Mr Toohey has suffered ongoing ill health and experienced business difficulties and increased family responsibilities.

[1] Exhibit 1 at 81-83

In a decision given on 8 February 2006, the Tribunal affirmed the decision. On 21 March 2007, Middleton J allowed an appeal from the Tribunal’s decision and set it aside. He remitted it to a differently constituted Tribunal.[2] I have decided to affirm the decision.

LEGISLATIVE FRAMEWORK

[2] Toohey v Tax Agents’ Board of Victoria [2007] FCA 431

Original registration of a tax agent

Part VIIA of the Income Tax Assessment Act 1936 (ITA Act) provides for the registration of tax agents. Applications are made to a Tax Agents’ Board (Board) established in each State.[3]
[3] ss 251C and 251J(1)

Section 251JA is concerned with the original registration of a tax agent. In the case of a natural person, it requires the Board to register an applicant who satisfies it that:
“(i) the applicant is a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters; and
(ii)the applicant is not an undischarged bankrupt.”[4]
[4] s 251JA(1)

The registration comes into force on the day on which it was granted. That is the effect of s 251JG(1)(a). Registration is for a period of three years unless terminated, cancelled or suspended at an earlier time.[5] Regulation 159 of the Income Tax Regulations 1936 (Regulations) requires the Board to issue a certificate of registration to the newly registered tax agent.
[5] s 251JG(2)

Re-registration of a tax agent

A registered tax agent may apply to the Board that granted his or her original registration for re-registration.[6] He or she must do so within a thirty day period of time before its expiration and that period ends 30 days before the existing registration ceases to be in force.[7]
[6] s 251JB(1)
[7] s 251JB(4)

Section 251JC(1)(a) provides that:
“The Board shall re-register the applicant as a tax agent if the applicant satisfies the Board that:
(a)if the applicant is a natural person:
(i)the applicant is a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters; and
(ii)the applicant is not an undischarged bankrupt.”

If re-registered, the period of registration is three years.[8] That registration comes into force “… immediately after the existing registration ceases or ceased to be in force.’[9] It also continues in force for three years.[10]
[8] s 251JG(2)
[9] s 251JG(1)(b)
[10] s 251JG(2)

Should the Board refuse to re-register an applicant for re-registration, it must serve a written notice of its decision and reasons on that applicant.[11]
Reading ss 251JC(3) and 251JG(2) together, the original registration or preceding re-registration would continue in force until the expiration of the three year term. Given that the application for re-registration can be made no more than sixty days before the expiration of the three year period, a tax agent whom the Board will not re-register will only remain a registered tax agent for something less than two months. If the Board does not decide the application by the time the existing registration expires, the effect of s 251JC(4) is that the tax agent whom the Board has not re-registered will be deemed to have been registered. That deeming provision protects a person from committing an offence during the hiatus been application and decision but registration ceases on being served with notice of the Board’s decision refusing registration.

[11] s 251JC(3)

The scheme of s 251JC(4) is consistent with that in s 251JG(1)(b) in relation to situations in which the Board decides to grant an application to re-register. If the Board makes its decision before the expiration of the prior three year registration period, the re-registration three year period commences immediately upon its expiration. If the Board makes its decision at a later time, the re-registration is deemed to have started on that date.

“Fit and proper person”

The expression “fit and proper person” appears in s 251JA(1) with which I am concerned but, as appears from the summary, in other provisions relating to the registration of a natural person as a tax agent and with the suspension and cancellation of such a person’s registration as a tax agent. Parliament has given guidance as to the manner in which that expression is to be interpreted. It has done so in s 251BC, which provides that:

“Without limiting the generality of an expression used in this Part, but subject to this section, a person is not a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters, as at a particular time, if:
(a)the person is not a natural person;
(b)both of the following conditions are satisfied:
(i)the person was not registered as a tax agent, or as a nominee, for the purposes of this Part immediately before the commencement of section 39 of the Taxation Laws Amendment Act (No 2) 1988;
(ii)the person does not hold such qualifications (whether academic, by way of experience or otherwise) as are prescribed;

(c)the person has not attained the age of 18 years;
(d)the person is not of good fame, integrity and character;
(e)the person has been convicted of a serious taxation offence during the previous 5 years; or
(f)the person is under sentence of imprisonment for a serious taxation offence.”

Nothing in ss 251BC(1)(e) and (f) limits the generality of s 251BC(1)(d).[12]

[12] s 251BC(2)

Regulation 156 of the Regulations prescribes the qualifications for the purposes of s 251BC(1)(b)(ii). Each of the four qualifications contains a component relating to a person’s having been engaged in relevant employment. The time periods vary in each of the four but, as an example, that provided for in r 156(2) requires that the person:
“has:
(i)been engaged in relevant employment on a full-time basis for not less than a total of 12 months in the preceding 5 years; or
(ii)otherwise been engaged in relevant employment to an extent that the Board regards as equivalent to the employment mentioned in subparagraph (i); or
(iii)been engaged in such other employment, and for such time, as the Board regards as equivalent to being engaged in the relevant employment mentioned in subparagraph (i); …”[13]
[13] r 156(2)(c)

Section 251BC(3) is concerned with the particular circumstances of an application for re-registration. It provides that:
“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 person is a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters;
(b)the person is not under sentence of imprisonment for a serious taxation offence; and
(c)the Board is satisfied that, because of special circumstances:
(i)a conviction of the person;
(ii)the doing of an act or thing by the person; or
(iii)an omission of the person;
should be disregarded;
the Board may, in making the decision referred to in paragraph (a), disregard the conviction, the doing of the act or thing or the omission, as the case requires.”

Sections 251BC(4) and (5) go on to provide what is meant by “under sentence of imprisonment”.

The obligations of a tax agent

In most situations, only a registered tax agent may demand or receive a fee for preparing or lodging, on behalf of a taxpayer, a return, notice, statement, application or other document about that taxpayer’s liabilities. Only a registered tax agent may charge for giving advice about a taxation law or for undertaking certain other dealings associated with such a return. That is the effect of s 251L(1) of the ITA Act.

Division 7 of Part VIIA is concerned with the privileges and duties of a registered tax agent. Consistent with the Board’s obligation to cancel a registered tax agent’s registration if that person becomes an undischarged bankrupt or permanently ceases to carry on business as a tax agent, a tax agent who is a natural person must notify the Board if either of those events occurs.[14]
[14] ss 251KG(a) and (b)

In general terms, a registered tax agent may only permit certain persons to undertake work on his or her behalf and is required to ensure that those persons are supervised in a manner specified by the Act. In particular and in so far as a tax agent who is a natural person is concerned, s 251N(1) provides that:
“A registered tax agent or a person not exempted under section 251L shall not allow any person, not being his employee, [or] a registered tax agent ….
(a)to prepare on his behalf, either directly or indirectly, his own or any other income tax return or objection; or
(b)to conduct on his behalf, either directly or indirectly, any business of himself or any other person relating to any income tax return or income tax matter.”

Unless supervised by, and under the control of, either the tax agent or his or her registered nominee, a natural person who is a registered tax agent may not allow any person to prepare an income tax return or objection or to conduct his or her business relating to an income tax return or matter.[15]
[15] s 251N(2A)

If, through the negligence of a registered tax agent, a taxpayer becomes liable to pay a fine or other penalty or a general interest charge under the Act, the registered tax agent is liable to pay to the taxpayer the amount of that fine, penalty, additional tax or general interest charge.[16]
[16] s 251M(1)

Board’s powers to register tax agents and to suspend or cancel registration

Once registered, the Board must re-register a person who continues to fulfil these requirements and who pays the fees and lodges an application within the specified time period.[17] Registration and re-registration as a tax agent continues for a period of three years unless terminated, cancelled or surrendered under the Act.[18]
[17] ss 251JB and 251JC(1)(a)
[18] s 251JG(2)

Section 251K is concerned with the circumstances in which a tax agent’s registration may be, or is required to be, cancelled or suspended by the Board. In the case of a natural person, cancellation is mandatory where he or she becomes an undischarged bankrupt or permanently ceases to carry on business as a tax agent.[19] In several other circumstances specified in the Act, the Board must suspend or cancel a tax agent’s registration but, subject to s 251K(3B), has a discretion as to the length of the period of suspension. Those circumstances arise where a registered tax agent has been convicted of certain offences against ss 8N, 8T or 8U of the Taxation Administration Act 1953 (“TA Act”) or offences against s 6 of the Crimes Act 1914 or offences against ss 11.1, 11.4 or 11.5 of the Criminal Code in so far as those offences relate to offences of the kind referred to in ss 8N, 8T or 8U of the TA Act.[20]
[19] s 251K(3C)
[20] s 251K(1)

In so far as they concern a natural person, the Act sets out other circumstances in which the Board may, in its discretion, cancel a tax agent’s registration. Those circumstances occur upon its:
“… being satisfied that –
(a)any return which has been prepared by or on behalf of the tax agent is false in any material particular; unless the tax agent establishes to the satisfaction of the Board that he had no knowledge of the falsity or that the falsity was due to his inadvertence;
(b)the tax agent:
(i)has neglected the business of a principal; or
(ii)has been guilty of misconduct as a tax agent; or
(c)a registered nominee of the tax agent is not a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters;
(d)if the tax agent is a natural person – the tax agent is not a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters;
(e)…
(f)…”[21]
[21] s 251K(2)
If the Board considers that suspension of a tax agent’s registration is appropriate under s 251K(2) the length of the period of suspension is a matter for the Board’s discretion.[22]
[22] s 251K(3)

BACKGROUND

There was no disagreement between the parties regarding a number of factual matters forming part of the background to the issues that I must decide in this case. In light of that and on the basis of the evidence, both written and oral, I have made the findings of fact set out in this section of my reasons.

Early life

Mr Toohey grew up on a family farm and, after completing Year 12, left school at the age of 16 to work on it. In 1967 and with his father’s assistance, he purchased a small property of eighty four acres suited to potato farming and grazing. From 1967 until 1972, he both worked on the family farm and his own property. He and his wife raised their children on that property and they continue to live there.

Professional practice and business activities

I find that Mr Toohey qualified in 1975 for a Diploma in Business Studies from what is now known as the University of Ballarat. During his course, Mr Toohey won a studentship awarded by the Victorian Department of Education. One of the terms of that studentship was that he gain relevant industry experience. Consequently, between December 1975 and January 1979 he was engaged as an accountant in the manufacturing industry. He was engaged by two separate companies. While engaged by the second, he was responsible for both financial and cost accounting and completed a major revision of costing rates. A further term of the studentship was that he complete a Diploma of Education at the State College of Victoria while working part time as a secondary school teacher. He completed that Diploma in 1979 and commenced work as a teacher in 1980.

In approximately August 1980, he started work as an employee accountant for a firm in Ballarat. He established his own accounting practice on 13 September 1982. In the next seven years, fees grew by 35% per annum. On that basis, he expanded his business activities from late 1988. Between August 1988 and March 1989, he purchased office premises to which he relocated his practice. He also purchased two further farming properties and commenced a registered Hereford cattle stud.

The cattle stud proved more expensive than he had expected and his farming business began to incur very substantial losses. As he had assumed a high level of debt, Mr Toohey experienced significant financial difficulties following the share market crash in October 1987. They were exacerbated by his existing lease and hire purchase commitments regarding the equipment he used.

At the same time, Mr Toohey’s accounting practice suffered a reduction in the fees that it generated as those of his clients who were woolgrowers required fewer of his accounting and taxation services. In order to maintain the commercial viability of his accounting firm, Mr Toohey decided to increase the hours he devoted to it and to reduce the professional staff he employed from five to four. This decision resulted in his losing clients as the professional staff member whom he could no longer employ opened his own accounting practice and some of Mr Toohey’s clients chose to consult him instead.

In late 1993, the mortgagee of one of Mr Toohey’s farming properties advertised a mortgagee sale of that property after it issued a demand for repayment of all debt on his overdraft facilities. At the time, Mr Toohey understood that the interest that was overdue on that facility was $934.00. Mr Toohey obtained cash advances on his credit cards while he negotiated with the mortgagee and tried to save his farming property which generated income and represented a source of future capital gain. By April 1994, he had refinanced much of his debt, saved the property and got himself into even more debt because he had to accept personal liability for the mortgagee’s withdrawing the property from sale.

Throughout the 1990s, Mr Toohey worked long hours in his accounting practice. He sold a part of his farm, a residential property situated on one acre, part of his practice, the office premises from which he conducted his practice and some farm plant and equipment. The proceeds of the sale were used to reduce his debts but those that required planning, development and sub division permits all involved considerable time and effort on his part. His wife also contributed a significant sum to the reduction of his debts.

Membership of professional bodies

He was a member of the Australian Society of Certified Practising Accountants, which is now known as CPA Australia (CPA), from 5 April 1976 until his voluntary resignation on 2 June 2003. From September 1982 until his resignation on 2 June 2003, he held a practising certificate issued by the CPA. His resignation followed his entering a contract to sell his accounting practice and his agreeing not to practise as an accountant within 100 kilometres of his residence. That sale did not proceed but he did not resume his membership of CPA as he considered that his membership of the National Tax and Accountants Association (NTAA) was sufficient and its continuing education programme superior to that of the CPA.

Mr Toohey has been a member of NTAA since 4 July 1997 and has always held a Public Practising Certificate issued by it. On 22 July 2003, he became a Fellow of NTAA and retains that status. He has continued to attend the continuing education programme offered by NTAA.

Particular family responsibilities

Mr Toohey’s father suffered his first heart attack in 1977 when he was just 52 years of age. He suffered many years of poor health before his death on 24 December 1993. By that time, the family farm was not operating profitably and his mother was also ill and unable to cope with its operation. She and he were named as the joint executor’s of Mr Toohey’s father’s will. The major asset left by Mr Toohey’s father was the family farm. The administration of his estate was made difficult by the fact that the farm extended over many separate parcels of land. Mr Toohey’s father owned some of those but he owned something less than a whole interest in the remainder. As Mr Toohey’s mother wished to remain on the farm, he made a considerable effort to improve the productivity and profitability of the farm in order to support her. She died on 10 November 2007.

Mr Toohey’s health

Mr Toohey has always consulted Dr Royce Baxter about his health. Dr Baxter prescribed the anti-depressant Sinequan in 1986 when Mr Toohey presented suffering from stress.[23] In 1996, Dr Baxter diagnosed Mr Toohey as suffering from headaches and a hiatus hernia. He referred Mr Toohey to a neurosurgeon because of the headaches and the pain that he suffered in his arm. Both were associated with severe nerve entrapment in his neck over the C6 distribution. Surgery was considered but not performed.[24]
[23] Exhibit D, Report of Dr Baxter, undated
[24] Exhibit D: Report of Dr Baxter dated 3 February 2005

In 1996, Dr Baxter recorded, there were episodes of pain and depression suffered by Mr Toohey.[25] Dr Baxter noticed that he was very stressed in 1998. At the time, he had marriage problems and he treated Mr Toohey with the anti-depressants. Dr Baxter also prescribed a beta blocker to decrease the effects of stress on his cardio vascular system.[26] Dr Baxter has diagnosed Mr Toohey as suffering from depression and stress[27] as well as anxiety.[28] Mr Toohey’s stress was extreme when he saw Dr Baxter on 28 May 2001 and again on 9 November 2001.[29] Dr Baxter prescribed further anti-depression medication then and again in February 2002.[30] That condition was at its worst in the last six months of 2002 when he was prescribed high dose anti-depressants in the form of Efexor XR 150mg.[31] He had been receiving lower doses of that drug since 27 February 2002.[32]
[25] Exhibit D: Report of Dr Baxter dated 3 February 2005
[26] Exhibit D: Report of Dr Baxter dated 3 February 2005 and see also Exhibit D: undated report of Dr Baxter
[27] Exhibit D: Report of Dr Baxter dated 9 November 2001
[28] Exhibit D: Report of Dr Scott Taylor, a partner of Dr Baxter
[29] Exhibit D: Report of Dr Baxter dated 29 November 2005
[30] Exhibit D: Report of Dr Baxter dated 29 November 2005
[31] Exhibit D: Report of Dr Baxter dated 1 August 2003
[32] Exhibit D: Report of Dr Baxter dated 3 February 2005

Mr Toohey has also suffered from many years from right carpal tunnel syndrome and that has caused him considerable disability. Surgical decompression had been deferred due to Mr Toohey’s business pressures but had become inevitable by July 2002.[33] Surgery ultimately relieved the symptoms.[34]
[33] Exhibit D: Report of Report of Mr Peter Denton, FRACS dated 24 July 2002
[34] Exhibit D: Report of Mr Peter Denton, FRACS dated 6 December 2005

In 1999, Mr Peter Denton diagnosed Mr Toohey as suffering from a hiatus hernia with active oesophagitis and oesophageal ulceration. He prescribed Zantac tablets and advised to take anti-reflux measures that included weight reduction. By December of that year, a gastroscopy revealed that the oesophagitis had healed.[35] In 2002, he was again suffering from reflux oesophagitis and required a further gastroscopy to monitor his response to treatment for that condition.[36] He was found to have a Helicobacter Pylori infection, which was treated with triple therapy.[37]
[35] Exhibit D: Report of Mr Peter Denton, FRACS dated 6 December 2005
[36] Exhibit D: Report of Mr Peter Denton, FRACS dated 24 July 2002
[37] Exhibit D: Report of Mr Peter Denton, FRACS dated 6 December 2005

In November 2002, Mr Toohey diagnosed as also suffering from a severe respiratory infection requiring large doses of cortisone and high dose anti-depressants.[38] He had also suffered several respiratory infections in the years prior to that.[39]
[38] Exhibit D: Report of Dr Baxter dated 1 August 2003
[39] Exhibit D: Report of Dr Baxter dated 3 February 2005

Between 1996 and 2001, Mr Toohey suffered intermittently with intense low back pain that referred to his right hip and the lateral aspect of his lower leg. During those episodes, he reported difficulty in walking, sitting for short periods and sleeping. In a period extending over slightly less than five years, Mr Toohey presented to Mr Nicholas Comino for treatment on 24 occasions.[40] Mr Comino is a remedial soft tissue therapist and he administered treatment that included supervised stretching and a strengthening programme.
[40] Exhibit D, Report of Mr Nicholas Comino dated 1 February 2005

Sometime before December 2007, Mr Toohey was diagnosed as suffering from diabetes. He has complied with the treatment that he needed to take and with the changes that he needed to make to his lifestyle as a result of his having diabetes.

Convictions

There is some confusion over the date of Mr Toohey’s first charge for failure to lodge a return in relation to his own affairs contrary to s 8C of the Taxation Administration Act 1953 (TA Act) and whether it resulted in a conviction. On his application for re-registration lodged on 14 February 1992, he noted it as having occurred in 1989.[41] When he lodged his next application for re-registration on 22 March 1995, he again noted that he had a conviction and attached a letter describing his having been convicted in the Magistrates’ Court at Ballarat for failure to lodge a return for the year 30 June 1991.[42] In both cases, he was asked to disclose convictions in the previous five years. In his letter to the Board dated 17 March 1998, Mr Toohey describes himself as having been convicted.
[41] Exhibit 1 (Documents lodged under s 37 of the Administrative Appeals Tribunal Act 1975 (T documents) at 110
[42] Exhibit 1 at 118 and 120

Handwritten notes of telephone calls made by an unknown person are partly obliterated on the copy of Mr Toohey’s letter to the Board. The notes, presumably written by a member of staff of the Board records that the Magistrates’ Court did not have any computer records dating back to a time before 1991. A telephone call to the “MPO Pros” revealed that the only prosecution had been in respect of the 1989 year. It had resulted in Mr Toohey’s being “fined $500” on 19 September 1990 but did not note a conviction.[43] A further note states that a call to the Ballarat Magistrates’ Court revealed no record of a conviction but that the computer records went back to 1991.
[43] Exhibit 1 at 120

Mr Toohey addressed the matter in his supplementary witness statement.[44] His recollection is now that he pleaded guilty to the charge and he was fined $500 for failing to lodge his income tax return for the year ended 30 June 1989. Although the Magistrates’ Court found the charge to be proven, it did not record a conviction.
[44] Exhibit B at [1]

In view of the notes, it seems to me to be more likely that Mr Toohey’s first charge was that heard on 19 September 1990. It related to the return for the 1989 year and that is likely to be the year that remained in his memory rather than the date of the conviction. Having been closer to the conviction, the information in Mr Toohey’s earlier application is more likely to be more closely aligned to the true state of affairs than the later application. Having regard to the whole sequence of events, I am satisfied that there was only one charge up to 22 March 1995 and that related to Mr Toohey’s personal taxation return for the year ended 30 June 1989, It was heard on 19 September 1990.

As to whether the Magistrates’ Court recorded a conviction against Mr Toohey is a matter on which I am unable to make a finding on the material that I have. Mr Toohey certainly described himself as having been convicted in his application forms and his correspondence with the Board but his supplementary witness statement is to the contrary. He also refers to there being no reference to a prior conviction when the later charges were heard in the Magistrates’ Court. The handwritten notes by the Board do not reveal any conviction at that time and that accords with Mr Toohey’s enquiries with the same court in Ballarat.

On 30 April 2003, Mr Toohey was charged with six counts of failing to lodge returns contrary to s 8C of the TA Act. Those six counts related to the years 1996 to 2001. On 19 September 2003, Mr Toohey pleaded guilty to those charges in the Magistrates’ Court at Ballarat. The Magistrates’ Court imposed a fine of $5,5000 and ordered him to pay costs of $101.40. In addition, it ordered him to lodge the returns within 21 days. He lodged eleven returns between October and November 2003.[45]
[45] Exhibit 1 at 74

On 8 October 2003, Mr Toohey appealed against his six convictions. On 28 May 2004 before Judge Wood of the County Court, the Director of Public Prosecutions withdrew the charges on which the convictions were entered.[46] The charges were withdrawn on the basis that the notice given to Mr Toohey and signed by “Erin Holland, Deputy Commissioner of Taxation” did not purport to be signed by Erin Holland “by authority of the Commissioner” as required by r 171 of the Regulations.

Mr Toohey’s late lodgement of taxation returns for himself or for those with which he had a personal connection

[46] Exhibit 1 at 74 and see also 78

The following table is based on the table attached to the Board’s amended Statement of Facts and Contentions but includes variations reflecting that I have accepted Mr Toohey’s evidence with regard to them. Those variations relate to the years of income between 1992 and 2006. The table also indicates the dates on which the Australian Taxation Office (ATO) sent Mr Toohey a reminder notice where I have been able to ascertain those dates in the material. I note that the Commissioner of Taxation (Commissioner) issued a refund of $10,985.00 to Mr Toohey in respect of the 2006 year.[47]

[47] Exhibit B at [2(b)] and Annexure PJT 3

Year of income	Due Date	Date of ATO notice	Date charged under s 8C	Date charge heard	Date lodged	Delay in lodgement
1992	1993	Estimate Oct 2003	~ 10 years
1993	1994	Estimate Oct 2003	~ 9 years
1994	1995	Estimate Oct 2003	~ 8 years
1995	1996	Estimate Oct 2003	~ 7 years
1996	1997	27/05/97 22/02/2001 12/11/2002	30/04/2003	19/09/2003	29/10/2003	~ 6 years
1997	1998	10/02/2000 22/02/2001 12/11/2002	30/04/2003	19/09/2003	29/10/2003	~ 5 years
1998	12/5/1999	10/02/2000 22/02/2001 12/11/2002	30/04/2003	19/09/2003	30/10/2003	4 years 5 months
1999	21/01/2000	10/02/2000 22/02/2001 12/11/2002	30/04/2003	19/09/2003	30/10/2003	3 years 9 months
2000	30/11/2000	22/02/2001 12/11/2002	30/04/2003	19/09/2003	30/10/2003	2 years 11 months
2001	03/12/2001	12/11/2002	30/04/2003	19/09/2003	30/10/2003	1 year 8 months
2002	31/01/2003	30/10/2003	9 months
2003	14/05/2004	03/06/2004	~ 3 weeks
2004	15/05/2005	07/06/2005	~ 3 weeks
2005	09/09/2005	Not late
2006	15/05/2007	29/10/2007

Mr Toohey was also the executor of his father’s estate and responsible for the lodgement of returns. The following table sets out the lodgement history of the taxation returns for the Estate of the late James F Toohey. On the basis of Mr Toohey’s evidence, I accept that the estate did not owe any tax for the year ended 30 June 2006. I also accept that Mr Toohey was never threatened with prosecution in relation to the late returns and was never charged in relation to them.

A demand was made in relation to each return. In the case of those for the years 1996 to 2001, a reminder was sent on 31/10/2003 and 3 December 2003 with a s 162 notice on 9 March 2004. The information in the table is also consistent with written evidence given Mrs Fay Lynette Toohey, who worked in her husband’s practice as an administrative assistant and who was responsible for lodging the returns with the ATO electronically since 2003.[48]
[48] Exhibit F

Year	Due	Demanded	Date lodged	Delay
1996	Yes	18/06/2004	6 years 46 weeks
1997	Yes	18/06/2004	5 years 46 weeks
1998	12/05/1999	Yes	18/06/2004	5 years 5 weeks
1999	31/11/2000	Yes	29/06/2004	4 years 25 weeks
2000	30/11/2000	Yes	28/06/2004	3 years 30 weeks
2001	03/12/2001	Yes	28/06/2004	2 years 29 weeks
2002	31/01/2003	Yes	28/06/2004	1 year 21 weeks
2003	31/10/2003	Yes	28/06/2004	34 weeks
2004	15/05/2005	No	07/06/2005	3 weeks
2005	15/05/2006	No	06/06/2006	3 weeks
2006	15/05/2007	29/10/2007

As one of the two directors of Blue Sky Investment Pty Ltd, which is the trustee of the Peter Toohey Family Investment Trust, Mr Toohey had responsibility for the lodgement of taxation returns for that company. Mr Toohey is the sole beneficiary of that trust. On the basis of Mr Toohey’s uncontradicted evidence, I find that there was no tax payable in respect of the 2006 year and that he did not receive any demand that the return be lodged. That was not the case in relation to the earlier years and I find that, in relation to the years 1992 to 2002, the ATO sent a second reminder notice on 31 October 2003. That notice required their lodgement without delay.[49] The ATO issued a final notice on 3 December 2003. It did so under s 162 of the ITA Act and required lodgement by 28 January 2004.[50]

[49] Exhibit 2 at 40

[50] Exhibit 2 at 41

Due	Demanded	Date lodged	Lateness
1992	Yes	15/05/2006	11 years approx
1993	Yes	15/05/2006	10 years approx
1994	Yes	15/05/2006	9 years approx
1995	Yes	15/05/2006	8 years approx
1996	Yes	15/05/2006	7 years approx
1997	Yes	15/05/2006	6 years approx
1998	12/05/1999	Yes	24/05/2004	4 years 47 weeks
1999	31/01/2000	Yes	24/05/2004	3 years 44 weeks
2000	30/11/2000	Yes	24/05/2004	3 years 23 weeks
2001	03/12/2001	Yes	24/05/2004	2 years 23 weeks
2002	31/01/2003	Yes	24/05/2004	1 year 14 weeks
2003	31/10/2003	24/05/2004	30 weeks
2004	15/05/2005	No	07/06/2005	3 weeks
2005	09/09/2005	Not late
2006	15/05/2007	29/10/2007

Mr Toohey is the trustee of the PJ & FL Family Trust and, but for $2,600, was its sole beneficiary for the year ended 30 June 2006. The sum of $2,600 was paid to his son, who included that sum in his own income tax return for that year. Mr Toohey included the sum paid to him in his return and received a refund. The history of demands and lodgements in relation to income tax returns that the PJ & FL Toohey Family Trust was required to lodge is set out in the following table. In relation to the 1992 to 1996 years, reminders were sent on 6 November 2003 and 8 January 2004.

Due	Demanded	Date lodged	Delay
1992	Yes	15/05/2004	11 yrs approx
1993	Yes	15/06/2004	10 yrs approx
1994	Yes	15/05/2004	9 yrs approx
1995	Yes	15/05/2004	8 yrs approx
1996	Yes	15/05/2004	7 yrs approx
1997	Yes	24/05/2004	5 yrs 46 wks
1998	12/05/1999	Yes	24/05/2004	5 yrs
1999	31/01/2000	Yes	24/05/2004	4 yrs 14 wks
2000	30/11/2000	Yes	24/05/2004	3 yrs 23 wks
2001	03/12/2001	Yes	24/05/2004	2 yrs 23 wks
2002	31/01/2003	Yes	24/05/2004	1 yr 14 wks
2003	31/10/2003	24/05/2004	30 wks
2004	15/05/2005	No	07/06/2005	3 weeks
2005	No	09/09/2005	Not late
2006	15/05/2007	29/10/2004

Non-compliance with the Board’s requests and history of communications

I have set out in tabular form my findings in relation to Mr Toohey’s communications with the Board and his compliance with any requests it or its Secretariat made of him. I have also interspersed entries in italics to indicate either an administrative step undertaken by Mr Toohey or conversations with the ATO.

Date	Request by Board	Comp-liance?	Date	Alternative response
09/04/2001[51] (Board initiative)	Noted failure to lodge returns for 1992-2000 and asked for written explanation in 14 days.	No
14/05/2001[52] (Board initiative)	Failure to reply noted and asked to respond in writing in 14 days. Advised that failure to respond would lead to Board’s considering his continued registration.	No	16/05/2001	Mr Toohey telephoned Board’s Secretariat promising response by 22 May 2001.[53]
29/05/2001	Mr Toohey telephoned Secretariat advising he would take reply to office but told that it would be acceptable to post it that day.[54]
18/06/2001 (Board response)	During telephone call made by Mr Toohey, an officer of Board’s Secretariat suggested to him that he put “something in writing as soon as possible and mark it to the Secretary’ attention.”[55]	No	18/06/2001	Mr Toohey telephoned Secretariat stating affairs complicated and involved family trusts; it could take him six months to complete the returns.[56]
20/06/2001 (Board response)	Board sent copy of letter dated 09/04/2001 to Mr Toohey by facsimile. Officer of Secretariat “stressed to him the importance of responding to this letter and getting these returns lodged.”[57]	20/06/2001	Mr Toohey telephoned Secretariat asking for a copy of Board’s letter dated 09/04/2001 as he had lost it. He send he would endeavour to respond and lodge the returns.[58]
25/06/2001	Board sent to Mr Toohey a notice to suspend his registration as a tax agent noting that he had not lodged his returns for the years 1996-2000, the ATO had issued Final Notices in respect of them and that he had failed to respond to the Board’s two letters. It required a written response within 14 days and advised that failure to reply could lead to the Board’s suspending him without further notice.[59]	No	25/06/2001 06/07/2001	Mr Toohey telephoned Secretariat discussing his failure to lodge returns since 1992. He referred to his losses in the past and current staffing problems. The officer of the Secretariat advised him to “put everything in writing and deal with ATO as soon as possible.”[60]
26/07/2001	Board decided to suspend Mr Toohey’s registration for five months.[61]	Not applic-able
06/08/2001	The Board wrote to Mr Toohey advising that he was suspended until 06/02/2002.[62]	Not applic-able	13/08/2001 08/10/2001 22/11/2001 12/11/2001	Mr Toohey telephone the Board.[63] Mr Toohey applied to Tribunal for review and stay of Board’s decision[64] and wrote to the Board giving a five page explanation of his circumstances.[65] Suspension stayed.
24/04/2002	Mr Toohey withdrew his application from Tribunal[66] and suspension ran from 24/04/2002 to 23/09/2002.
06/08/2002	ATO telephoned Mr Toohey enquiring about returns for 1996-2000.[67] Deferred lodgement until 27/09/2002 but told that, if not lodged, new final notice would be issued.[68]	No	06/08/2002	Advised unable to prepare returns due to number of medical problems and business problems. Sent medical certificates.[69]
30/01/2003	Final notice given under s 162 of the ITA Act sent 12/11/2002. Notice required returns by 07/01/2003 and, if not lodged, Mr Toohey might be prosecuted.[70] ATO telephoned Mr Toohey advising that returns for 1996-2001 still outstanding despite final notice. Extra time refused and return for 2002 due by 31/01/2002. Advised matter would be referred to prosecutions.[71]	No	30/01/2003	Mr Toohey advised that he had a farm he had to irrigate due to drought and a farm employee had left. He was suffering from angina, carpal tunnel, depression and bad flu as well as poor sleep. Requested suspension of obligation to lodge.[72]
14/02/2003- 30/04/2003	Summons prepared regarding offences under s 8C.[73]	21/05/2003 26/05/2003 29/05/2003	Mr Toohey telephoned re his business problems and said his health not good due to depression. There is a lot of work to prepare returns but will endeavour to do them as soon as he possibly can.”[74] Asked ATO for further time to prepare returns.[75]
21/07/2003	Mr Toohey told ATO he was still working on his 1996-2001 returns. Would send another medical report.[76]	28/07/2003 11/08/2003	Mr Toohey thought he could complete returns within a month and asked for further adjournment.[77] Sought further adjournment.[78]
18/09/2003	A former accountant spoke with ATO regarding Mr Toohey’s affairs. He is helping Mr Toohey sort out his tax affairs.[79]
26/11/2003	The Board wrote to Mr Toohey noting that it was concerned that he had not lodged returns as detailed in the tables above, returns between 1995 and 2002 for the partnership Peter J and Fay L Toohey, had failed to lodge his annual PAYG withholding return for 2002 despite ATO reminder letters of 30/11/2002 and 11 March 2003, and Awesome Results Pty Ltd (Awesome), of which he was a director, had a current debt of $403.75. It requested that he lodge all outstanding returns and, within 28 days, give a written explanation for their late lodgement.[80]	No
10/03/2004	Mr Toohey lodged application for re-registration as tax agent.[81]
02/04/2004	Secretariat of Board telephoned Mr Toohey for response. Sent a copy by facsimile when he advised he had not received it.[82]	Not applic-able	15/04/2004	Mr Toohey wrote to Board addressing late lodgement. He advised that all PAYG obligations met, he had resigned as partnership ceased to exist and no returns required after 1991, lodgement for estate expected by 26/04/2004, returns for family trust “now being lodged” and he not responsible for debt of Awesome as he no longer a director.[83]
05/05/2004	Secretariat of Board responded to Mr Toohey’s letter advising that it had deferred further consideration until a date after the County Court had decided his appeal.[84]	Not applic-able	12/05/2004	Mr Toohey telephoned Board to advise that County Court had been asked for an adjournment as his counsel not available on 27/05/2004.[85]
28/05/2004	Charges withdrawn in County Court.	23/06/2004	Mr Toohey writes to Board confirming telephone advice re County Court appeal and advises all returns lodged. To best of his knowledge, none of his clients ever complained and expresses sincere regret.[86]
07/07/2004	Mr Toohey writes to Board requesting opportunity to appear with his legal representative. He asks Board to provide particulars of concern in order to prepare representations.[87]
14/07/2004	Board writes to Mr Toohey advising of decision made at its meeting on 24/06/2004.[88]	29/07/2004	Mr Toohey applies for review of Board’s decision.

[51] Exhibit 1 at 138

[52] Exhibit 1 at 139

[53] Exhibit 1 at 140 and see also Exhibit A at [35]

[54] Exhibit 1 at 140 and see also Exhibit A at [35]

[55] Exhibit 1 at 141

[56] Exhibit 1 at 141

[57] Exhibit 1 at 142

[58] Exhibit 1 at 142

[59] Exhibit 1 at 143

[60] Exhibit 1 at 144 and see also Exhibit A at [36]

[61] Exhibit 1 at 145

[62] Exhibit 1 at 146-147

[63] Exhibit A at [37]

[64] Exhibit 1 at 154-160

[65] Exhibit 1 at 149-153 and see also Exhibit A at [39]

[66] Exhibit 1 at 166

[67] Exhibit 2 at 4

[68] Exhibit 2 at 6

[69] Exhibit 2 at 4

[70] Exhibit 2 at 7

[71] Exhibit 2 at 9

[72] Exhibit 2 at 9

[73] Exhibit 2 at 11-13

[74] Exhibit 2 at 14

[75] Exhibit 2 at 15 and 17

[76] Exhibit 2 at 19

[77] Exhibit 2 at 20

[78] Exhibit 2 at 21

[79] Exhibit 2 at 22

[80] Exhibit 1 at 45

[81] Exhibit 1 at 47-52

[82] Exhibit 1 at 54

[83] Exhibit 1 at 56-61

[84] Exhibit 1 at 64

[85] Exhibit 1 at 65

[86] Exhibit 1 at 76

[87] Exhibit 1 at 80

[88] Exhibit 1 at 81-83

THE EVIDENCE

The family farm and administering the estate of the late Mr James F Toohey

Mr Toohey also said that he suffered from feeling physically unwell every day. He could not use his right hand and his ability to get things done was impaired. Everything seemed insurmountable. He was already overloaded in 1993 when his father’s estate became his responsibility to manage. He had already been helping his father manage his property before he died. Some of his siblings were not very mindful of their mother’s need for money. They ran stock on the property without paying rent or agistment. The farm was not providing his mother with reliable additional income. He supplemented her income by paying rent to the estate for some 14 years. Initially, Mr Toohey tried to run the family farm as well as his own but he ultimately leased it to various members of the family. That caused some dissension within the family.

Mr Toohey felt that he turned things around on the family farm but, in 2006, the flow of water to a river that had previously serviced the property was diverted to Ballarat. Dams had to be built and water pumped with no notice of the need to do so.

With the passing of his mother on 10 November 2007, Mr Toohey said that he would transmit all the titles to his name as executor, prepare a return to the date of her death and he would no longer have to lease the land.

Mr Toohey’s health

In his written statement, Mr Toohey said that the:
“31. … various medical conditions very severely affected my work capacity consistently over the years. The stress and depression from which I suffered over the years left me feeling overwhelmed and physically unwell. It was not infrequent for me to vomit after eating, particularly after breakfast as I could not see myself ever rising out of the rut I found myself in, which forever seemed to be a deteriorating situation.”[89]
[89] Exhibit A

The stress and depression from which he suffered had affected him since the early 1990s. When he received the letter from the Board dated 9 April 2001, he was particularly stressed and depressed as he had received a Notice to Quit to which I refer in the following section. His health continued to deteriorate throughout 2002. That, in turn, limited his work capacity and consequently placed an increasingly heavy workload on other staff in his practice. Mr Toohey had to be hospitalised with an angina attack on 21 September 2002.[90]
[90] Exhibit A at [44]

In giving oral evidence, Mr Toohey said that did not seek help for his depression and anxiety as he saw that as an admission of weakness. He tried to cope without accepting that medication might alleviate his feelings of depression and anxiety. He did not sleep well at night and so was tired during the day when he had a tendency to nap. His efficiency was reduced and it took him longer to complete tasks. His patience was reduced as were his powers of concentration. Mr Toohey consulted a psychiatrist at one stage as well as attending a programme at a public hospital. He would have consulted the psychiatrist in 1989 or 1990 and the psychiatrist would have prescribed medication but he could not recall what it was.

Mr Toohey could not recall when he consulted Dr Baxter about his depression and anxiety but said that he has consulted Dr Baxter about feeling overwhelmed. He has consulted him about other conditions including migraines from which he has suffered since he had a car accident. A physiotherapist was also consulted about the whiplash he suffered in that accident. Sciatica has also been a problem but Mr Toohey could not recall when it began or the medication prescribed for it.

Mr Toohey could not attribute the difficulties that he had in preparing his returns to any one of his health issues. They all had an impact as did his added responsibilities and sleep apnoea. He suffered from an ulcer and he had difficulty keeping food down. That undoubtedly affected his work capacity, he said.

In cross-examination, Mr Toohey said that he now felt entirely recovered. He is no longer seeing the psychiatrist. In his statement dated 20 September 2007, Mr Toohey said that:
“By February 2003 my financial pressures, marital problems and health issues had all been resolved. From that time I no longer required, or took, any medication whatsoever.”[91]

In cross-examination, Mr Toohey said that this would have been his belief. He felt that he was coping well at that point of time. At that time, he considered himself fit to prepare income tax returns. Also in cross-examination, Mr Toohey acknowledged that he did not lodge the returns until April 2004. That, he said, was due to the cumulative effect of unpaid work in relation to his family responsibilities and his practice. When asked whether work relating to his clients’ or to his own affairs took precedence, Mr Toohey said that something that pays the bills takes precedence and so works relating to clients takes precedence. If he could not pay the staff, he could not remain in practice.

[91] Exhibit A at [50]

Dispute regarding owner of premises from which practice conducted

In late November 2000, Mr Toohey said that he became embroiled in a dispute with the owner of the premises from which he conducted his practice. On 11 April 2001, he was served with a Notice to Quit the premises within one month. He ultimately relocated his practice in December 2003. The dispute took its toll on him as he found it to be very stressful and it took up an enormous amount of his time.[92]
[92] Exhibit A at [33]-[34]

Termination of employment of two accountants

Mr Toohey said in his statement that, when his registration as a tax agent was suspended, three employees in his practice resigned simultaneously. Their resignations took effect from 3 May 2002.[93] At the time, his wife also worked in the practice and two of the three employees were accountants and the third a bookkeeper. He partly replaced them with an accountant whom he engaged from 6 May 2002 but that proved unsatisfactory and the relationship ended very quickly. So too did the employment of another accountant he engaged from 7 June 2002 as his employment ended on 21 September 2002. Mr Toohey engaged another accountant on 22 July 2002. That proved to be a more satisfactory arrangement but that accountant had no taxation experience and so required significant training. In early November 2002, Mr Toohey engaged a fourth accountant and that also proved more satisfactory.
[93] Exhibit A at [41]

In cross-examination, Mr Toohey said that, at this time, he would go in to work on some days and stare at the wall. On others, he did not go in. At the time, he was suffering from sciatica, carpal tunnel and felt physically unwell as a result of depression. He was churning all the time and everything was too much. He said that he continued to do the work for clients.

Mr Toohey also said in his statement that in late January 2003, two of his staff who were accountants offered to purchase 90% of the practice from him. If their offer were not accepted, they indicated that they would resign and contact all clients. Clients told him that the two accountants had already told them of their intention. He terminated their employment.[94] At this time, Mr Toohey had only recently resumed full-time employment in his practice. Between 1 July 2002 and 10 January 2003, Mr Toohey said that he worked only 151 chargeable hours. He spent 50.8 hours on his own personal tax returns and “… through this period much work performed by others within … [his] Practice became ‘stockpiled’ awaiting … review upon resumption of improved health.”[95]
[94] Exhibit A at [48]
[95] Exhibit A at [47]

At this time, Mr Toohey’s registration as a tax agent had been suspended. His clients’ returns were lodged through and invoiced by another practice in Ballarat. His firm prepared the preparation of the financial statements but the other firm finished them. From Mr Toohey’s recollection, that was the period when he was at his “most absolute worst”.

Other factors

Mr Toohey described the difficulties that arose from the illness of one of his brothers:
32.In July 1997 one of my younger brothers died from a brain tumour. During his short illness, over a nine (9) month period up to his death, I gave a priority to assisting him in getting his affairs in order, so to minimize any aggravation due to him. On occasions during that time, I drove him from his home in Springbank in Melbourne and back so he could attend for chemotherapy treatment.”[96]
[96] Exhibit A at [32]

Preparing the returns

In his letter to the Board dated 8 October 2003, Mr Kellock said:
“Together we have been able to assist Mr Toohey bring all his clients matters up to date and to rectify an arrears of BAS for Mr Toohey, personally, and related to business entities that resulted in significant refunds.
The 3 experienced professionals now working in the practice are focused on ensuring that Mr Toohey’s personal returns are lodged forthwith and as close to the 10 October as practically possible. Because of significant tax losses incurred throughout the period 1991 to 1995, which are yet to be claimed, all returns for Mr Toohey and related business entities from the 1992 year onwards need to be prepared. This is a substantial and time consuming process requiring the efforts of all professionals within the practice whilst they at the same time are continuing to attend to client matters which can not be deferred.
As a practice going forward Mr Toohey has to change the nature of his work practices, both for health reasons and professional reasons. He now has the commitment of the part time employee on an ongoing basis and my commitment for 3 days per week till the end of November and then 2 days per week until Christmas 2003. During this period the practice client base will be restructured to focus on the expertise Mr Toohey has in businesses and primary production, thereby downsizing the compliance workload by reducing the total number of clients. During this time Mr Toohey will also look to secure an experienced staff member to replace my time.”[97]
[97] Exhibit 1 at 29

Mr Toohey said in giving oral evidence that, when he was having discussions with the ATO in early 2003, he estimated that it would take him several hundred hours to complete his personal tax returns. His immediate need was to service his clients’ requirements. Their requirements took priority over his own.

He thought that the outstanding returns showed losses and, for the most part, he was vindicated. He has paid outstanding interest and penalties amounting to no more than $15,000. In respect of the years 2004, 2005 and 2006, he received refunds in respect of his own returns. That resulted from ongoing trading losses on his farm and the refund of some imputed tax credits. For those same years, there was no tax liability in relation to his father’s estate and the family trusts. In all, he received refunds in the order of $40,000.

Later in cross-examination, Mr Toohey said that the practice rarely had its focus purely on taxation returns. A good deal of the practice’s work focused on management as his own previous experience had been in industry and he had built his skills in management. Many of his clients had been attracted because of his business management skills.

The most taxation returns that the practice had ever lodged had been between 680 and 700 in 1989. Since then, it has only lodged 100 or so each year but that has been reducing to ten or a dozen now. In 1989, he had five accountants employed in his practice. In 1989, the practice had 200 clients but it now has about 100. Mr Toohey sold part of his practice in 1989 and reduced his accountants from five to four.

By 1996, Mr Toohey had two or perhaps three employees and approximately 130 clients. He could not pay his employees as he was having financial difficulties. At the same time, he was suffering from depression and physical problems. The backlog of work and his inability to manage started to manifest itself. In 1996, he could not cope. He had put an accountant off his payroll and the bank had reduced his drawing facilities by $80,000. At this time, he had 130 clients or so and three accountants in his practice.

When asked why he could undertake work for clients in 1996 but not prepare his own returns, Mr Toohey replied that other pressures had arisen. He had a very significant workload. He was suffering from his health issues and from a high turnover of staff. Previously, his staff had been very stable for five or six years but, perhaps because he was less tolerant or because of his physical and depressive illnesses, he did not retain them as he had done previously.

The charges in respect of the failure to lodge returns for 1996-2001

Mr Toohey said that he was certainly aware of his outstanding lodgement obligations in January 2003 but, until he was served with a summons at his office, had not been aware that a notice had been issued under s 162 of the ITA Act. He had been absent from the office and it was a particularly low point in his depression. His lack of awareness was due to his depressive state. He did not deny having received the notice.

The reasons for Mr Toohey’s being unable to lodge the 2006 returns

In his supplementary witness statement, Mr Toohey set out three reasons why he was unable to lodge the taxation returns for himself, the James F Toohey Estate, the Peter Toohey Investment Trust and the PJ and FL Toohey Family Trust. They were the same on each occasion and read:
“(i) in my accounting practice a number of clients needed urgent assistance due to the drought with the preparation of Exceptional Circumstances and Interest Concession Applications to both the Commonwealth and State Governments. Each of these applications require forward budgets and projections to be prepared, as well as completing the application forms which necessitates obtaining supporting and source documentation from third parties – a task which the clients invariably requested I do either in whole or substantially in part. Such applications (including the completion of the budgets, projections and obtaining third party documentation) took between 5 and 15 hours per application. I was principally responsible for the completion of approximately 20 such applications. This represented a new aspect of my accounting practice which I was unable to obtain additional appropriately qualified staff to assist with, notwithstanding attempting to do so. Consequently, the available time I had to attend to the preparation and lodgement of my 2006 Return was significantly impinged upon;
(ii)due to the drought my farm and my ongoing responsibilities as the Executor of my late father’s estate also took up more of my time than anticipated and my ability to also attend to the lodging of my 2006 Return in a timely manner was significantly impinged upon, although I did arrange my time in a manner to the best of my ability, as detailed below which ensured that the Commissioner was not financially disadvantaged; and.
(iii)my mother continued to receive treatment for cancer (first diagnosed in late October 2005) throughout the year ended 30 June 2007 and into the current financial year. In March 2007 my mother was diagnosed with secondary cancer, despite having been told earlier that her treatment had “stabilized” the cancer. Mother was hospitalized periodically between when first diagnosed in October 2005 and her death last Saturday 10 November 2007. In that time but for the last 5 months of her life when she lived with my sister, my Mother lived at home. Whether my mother was in hospital or at home or with my sister, I was required to attend on my mother. Although I welcomed this responsibility with mostly 2 of my siblings, this took up considerable time and also impinged on my ability to lodge the 2006 Investment Trust Return in a timely fashion.”[98]
[98] Exhibit B at [2(f)], [4(f)], [5(f)] and [6(f)].

In his supplementary witness statement, Mr Toohey also spoke of the need to prioritise his workflow and the factors that he took into account in doing so. He stated:
“7. In my accounting practice, as with all other professional practices, it is always necessary to plan workflow so that nay and all time limits are satisfied. This is particularly so in regard to the preparation and lodgement of income tax returns of clients with the Commissioner. In planning the workflow of my accounting practice in regard to the preparation and lodgement of income tax returns with the Commissioner I was always aware that I was responsible for the timely preparation of my 2006 Return, the 2006 Toohey Estate Return, as well as the income tax return of the Toohey Superannuation Fund, of which Easy Street Superannuation Pty Ltd is the Trustee. I am one of the Directors of Easy Street Superannuation Pty Ltd.
8.When over time and from time to time I needed to reprioritize my workflow in my accounting practice due to the matters detailed in paragraphs 2(f)(i), 2(f)(ii), 2(f)(iii), 4(f)(i), 4(f)(ii), 4(f)(iii), 5(f)(i), 5(f)(ii), 5(f)(iii), 6(f)(i), 6(f)(ii) and 6(f)(iii) hereof, I invariably put my clients’ interests before those of my own in regard to the preparation and lodgement of income tax returns. However, in doing so I was always aware of those income tax returns for which I had the personal responsibility to prepare and lodge with the Commissioner and which of those would result in tax having to be remitted to the Commissioner and which would not. Accordingly, I was particular to ensure that the income tax return of the Toohey Superannuation Fund for the year ended 30 June 2006 was lodged as required on time with the Commissioner since I knew that an assessment would issue to the Trustee thereof requiring tax be paid. That occurred and the tax was paid to the Commissioner promptly. Although, as explained above, I was not unable to lodge each of my 2006 Return, the 2006 Toohey Estate Return, the 2006 Investment Trust Return and the 2006 Family Trust Return as required, I was always aware that there was no tax due to the Commissioner in regard any of those income tax returns.”[99]
[99] Exhibit B at [7]-[8]

Client lodgement rate

The Tax Agent Integrity Unit (TAIU) prepared an Integrity Report dated 30 September 2003. In so far as it related to the lodgement rates by Mr Toohey’s clients, it stated:
“The client lodgement rate for Peter J Toohey & Associates of 64.5% for the 2002 year, is below the national average of 81.56%. The lodgement rate of 12.4% for the 2003 year is also below the national average of 33.87%, as at 27 September 2003.
It is noted that 8.1% of Mr Toohey’s clients have been subjected to demand action, which exposes them to potential penalties.”[100]
[100] Exhibit 1 at 20

Mr Toohey said that he thought the figure of 8.1% was incorrect. He has asked for the names of the clients concerned so that he could check but he has never been given them. No client of his has ever been prosecuted for failure to lodge. I note that an ATO filenote dated 23 April 2002 records that Mr Toohey had telephoned regarding late lodgement penalty. He was concerned that penalties had been imposed on his clients and that they would not pay them and that he could not afford to do so.[101]
[101] Exhibit 1 at 165

Interaction with the Board

In his oral evidence, Mr Toohey said that he had been concerned when he read the Board’s letter of 9 April 2001. He recalled calling the Board and having lengthy conversations. The fact that he did not respond was indicative of his illness. He would have started to write a letter but did not finish it.

When Mr Toohey received the Board’s letter dated 25 June 2001, he took it seriously. That communication related to the Board’s considering the suspension of his registration. Mr Toohey said that he had intended to respond to the Board’s letter but that it took him until November 2001 to do so. He said that he was physically and emotionally unwell. He was not always turning his clients’ work around as quickly as he would have liked. In the earliest days of the practice, three to four weeks was the turn around time but that time standard deteriorated. Mr Toohey said that he never had any complaint from his clients regarding the technical manner in which he performed his work. He certainly had people who were frustrated and long-standing clients commented on his dozing off. At the time, he was still able to give direction to his staff.

Of his conversation with the Board on five occasions,[102] Mr Toohey acknowledged that he had done nothing as a result. People would say that was out of character for him wilfully and deliberately to fail to respond to correspondence of that nature. His failure was a consequence of the pressures and his inappropriate responses and prioritisations were as a result of what he was coping with. His letter dated 12 November 2001[103] was a true reflection of his intentions at the time but a depressed person fails to recognise his or her abilities and what he or she is capable of doing, he said in cross-examination.
[102] Exhibit 1 at 146
[103] Exhibit 1 at 149-153

Mr Toohey said in his statement that he had carried out a significant amount of research and preparation in relation to the application he had lodged in the Tribunal for review of his suspension.[104] In cross-examination, he said that he read and researched cases from the internet regarding accountants who had contested the Board’s decisions. At the time, he thought that he would have to represent himself. He believed that the fact that he paid the debts of his companies when he could have let them “go broke” was evidence of enormous character. The fact that he did so despite his physical and mental illness underlined that evidence.
[104] Exhibit A at [40]

Mr Toohey said that he did not prepare the returns even after his suspension had been served because the task was becoming more daunting all of the time. The impact on his depressive illness was compounding rather rapidly. At the time, he said, he was near suicidal.

Character evidence

Mr Craig John Kellock is a consultant accountant and financial adviser to businesses and their owners. He qualified for a Bachelor of Business from the Ballarat College of Advanced Education in 1983. His first employment as an accountant was with Price Waterhouse in its Audit Division. After 20 months, he moved to a position as a Financial Analyst with Partnership Pacific Ltd, which is owned by Westpac Banking Corporation Ltd. At the end of six months, he became its Senior Analyst but remained only another six months before marrying and moving back to Ballarat. In Ballarat, he worked for Mr Toohey in the preparation of financial accounts and income tax returns for small businesses and primary producers. When Mr Toohey made it clear to him some ten months later that he did not see the firm’s client base as ever supporting a partnership, Mr Kellock left to take up another position with a second tier accounting practice. After three years, during which he completed his professional year, Mr Kellock started his own practice in Geelong. Mr Kellock was first registered as a tax agent in approximately 1986 and did not seek re-registration after he sold his practice in the middle of 2000. He carries out his current consultancy work through a company, which is an authorised representative of an Australian financial services licensee under the Corporations Act 2001.

In addition to his work with Mr Toohey as an employee, Mr Kellock has also worked with him as a consultant between 8 October 2003 and the end of December. Apart from holidays, he has continued to work an average of three days each week for Mr Toohey.

Mr Kellock has observed that the office is computer based both in regard to the preparation of financial accounts as well as in the preparation of income tax returns and Business Activity Statements. The systems are continually updated and able to cope with the needs of the practice’s clients. The manual systems used in the office enable the practice to be administered and managed in an effective manner. Continuing professional education is attended to in that Mr Toohey and the professional staff regularly attend professional development seminars conducted by the ATO, Pitcher Partners Critical Point Network, the National Tax and Accountants Association, the Ballarat Branch of CPA Australia and INSOLINK professional association.

In his letter to the Board dated 8 October 2003, Mr Kellock wrote, in part:
“Notwithstanding only being employed by Mr Toohey for a period of … [10[105]] it was his energy, enthusiasm and passion for helping business people and individuals with matters financial and taxation that inspired me eventually to go into practice for myself. Mr Toohey taught me, more than any other employer, about how to excel in your chosen field by continuing to develop yourself professionally by reading, attending seminars and networking with those who could teach and mentor you. His mental capacity to remember the detail of client particulars and the various provisions of taxation legislation is exceptional.
…
It is my sincere opinion that Mr Toohey is a person who, notwithstanding this unfortunate set of circumstances, is worthy of the Tax Agents Registration Board continuing to support as a registered tax agent who represents the profession well.”[106]
[105] Corrected in Exhibit E at [19]
[106] Exhibit 1 at 28

In his statement of 8 September 2005, Mr Kellock said:
“(a) I know the professional accounting and taxation work of the Applicant, particularly in relation to the preparation of financial accounts and income tax returns and Business Activity Statements to be accurate and of a high standard;
(b)In my dealings with the ATO in relation to Income Tax Returns prepared by the Applicant, I have never received any complaint or criticism from the ATO as to the standard of the preparation of those returns;
(c)The clients of the Applicant hold him in the highest regard personally and professionally, and greatly value his professional advice and service;
(d)The Applicant enjoys a reputation of renowned expertise amongst the rural community in the areas of financial and taxation management of primary producers;
(e)From 2003 I have observed and know from my discussions with the Applicant that he has made a deliberate decision to concentrate on the established clients of the Applicant’s practice and not look to expand that client base beyond the capacity of the Applicant and his practice. This has ensured that the Applicant has been able to continue to service the clients of the Practice in a manner such that those clients are able to comply with their obligations to various regulators including the ATO and ASIC in a timely manner. Further, this has enabled the Applicant to bring his own taxation affairs into order and keep them in order;
…”[107]
[107] Exhibit E at [24]

CONSIDERATION

Are the merits of the decision reviewed at the time of the application, the Board’s decision or the date of the Tribunal’s review?

At the hearing, the parties and I agreed that the date on which the merits of the decision are reviewed is the date of my decision and not an earlier date be it the date of the application or the date of the Board’s decision. In view of the decision to the contrary made by Deputy President Hack in Re Modini and Tax Agents’ Board of Queensland,[108] I will briefly set out my reasons for that conclusion.
[108] (2007) 98 ALD 466; [2007] AATA 1921

I will begin by noting that Modini concerned a decision made by the Tax Agents’ Board of Queensland (Queensland Board) refusing her application for registration as a tax agent. The Queensland Board considered that Ms Modini was not a fit and proper person to be registered as she did not hold the qualifications prescribed under the Regulations. Among the qualifications prescribed by r 156 was that the applicant for registration has “been engaged in relevant employment on a full-time basis for not less than a total of 12 months in the preceding 5 years.”[109] The issue to be decided was whether Ms Modini met that qualification. If the date on which the assessment was to be made was the date of her application for registration, she did but, if it was the date of the Tribunal’s decision, she did not.
[109] Regulations, r 156(2)(c)

Deputy President Hack concluded:
“ I am satisfied that Ms Modini, in the period of five years prior to her most recent application, was engaged in the equivalent of 12 months of employment. Whether that amounted to relevant employment is the next question to be determined. In reaching this conclusion, I have treated the period of five years as concluding at the date of the application, the course adopted by Deputy President McMahon in Re Egulian and Tax Agents’ Board of New South Wales [(1991) 91 ATC 2060]. There is a contrary line of authority, exemplified in the decision of Deputy President Forgie in Re Webb and Tax Agents’ Board of Queensland [(1992) 92 ATC 2101]. Those cases treat the hearing date as the end of the period of five years. Were I to have adopted that latter approach, Ms Modini would have been considerably short of 12 months employment in the preceding five years.”[110]
[110] (2007) 98 ALD 466; [2007] AATA 1921 at 474; [31]

I agree that in Re Egulianand Tax Agents’ Board of New South Wales[111] Deputy President McMahon had regard to the state of affairs as they existed at the date of the application. I agree that I decided in Re Webband Tax Agents’ Board of Queensland[112] that I considered the facts and so Mrs Webb’s entitlement to be registered at the date of my decision. That, however, was only part of my conclusion on that topic. I also decided that I could consider her entitlement to be registered at any time between and including the date of her application and the date of my decision. Unfortunately, that aspect of my decision is not reflected in the passage from Deputy President Hack’s reasons. The principles that I applied in Re Webb would have enabled him to consider Ms Modini’s application for registration as a tax agent at the time of her application, as he did, as well as at any time up to the date of his decision on review.
[111] (1991) 91 ATC 2060
[112] (1992) 28 ALD 464; 92 ATC 2101

For all that, there remains a difference between the decision in Re Egulian and that in Re Webb for each case concerned an application for registration as a tax agent. That is a difference not only in outcome but, more importantly, in the principles that were applied in reaching the outcome. Before analysing the reasons for the differences, I note that there were earlier authorities, to which Re Egulian and Re Webb referred, and later authorities analysing these issues. I attempted to summarise all of them and the principles that can be drawn from them in Re Singh and Minister for Immigration and Citizenship[113] and I will set out two passages from my reasons in that case.
[113] (2007) 99 ALR 341; [2007] AATA 2023

In Re Singh, the then Minister for Immigration and Citizenship (Minister) had refused Mr Malvinder Singh’s application for a grant of Australian citizenship under s 13 of the Australian Citizenship Act 1948 (1948 Act). After the Minister made a decision on Mr Singh’s application, the 1948 Act had been repealed and the Australian Citizenship Act 2007 (2007 Act) had come into operation with effect from 1 July 2007. Mr Singh applied for review of that decision on 2 July 2007. Both when he applied for a grant of Australian citizenship and at the date of the Minister’s decision, Mr Singh no longer met a prerequisite of being a permanent resident of Australia. He regained his status as a permanent resident on 6 September 2007 and so before I heard the matter. An initial issue to be decided was whether Mr Singh’s application was to be decided according to the facts as they existed at the date of his application or as at the date of my decision.

I began my consideration with a statement of the general principles as I understand them to be:
“  … As a general proposition, the Tribunal is not limited to the facts that were before the decision maker. Its role was succinctly stated by Bowen CJ and Deane J in Drake v Minister for Immigration and Ethnic Affairs[114] when they said:
[114] (1979) 24 ALR 577; 2 ALD 60
‘The question for the determination of the Tribunal is not whether the decision which the decision-maker made was the correct or preferable one on the material before him. The question for the determination of the Tribunal is whether that decision was the correct or preferable one on the material before the Tribunal.[115]
28.                  There is, however, a distinction to be drawn between what could generally be described as cancellation decisions on the one hand and entitlement decisions on the other. Decisions relate to a wide and diverse range of matters from a social security pension to a registration to carry out a certain occupation or activity. Cancellation and refusal decisions may take various forms and have different consequences but there remains a distinction between the two.
29.                  The distinction has been made in a number of cases, some of which were brought together by Davies J in Freeman v Secretary, Department of Social Security.[116] His Honour was concerned with a decision to cancel a widow’s pension and he reviewed the earlier decisions of Re Tiknaz and Director-General of Social Services,[117] Jebb v Repatriation Commission,[118] Re Easton and Repatriation Commission[119] and Re McGourty and Repatriation Commission.[120] The principles that can be drawn from his decision are that regard must always be had to the nature of the decision under review. The Tribunal is entitled to take into account all of the facts proved before it but must do so within the confines of the decision under review. So, in the case of Mrs Freeman, Davies J said that the issue to be decided by Tribunal:
‘…was whether, having regard to those facts, the decision to cancel made on 19 May 1987 was the correct or preferable decision, not whether Mrs Freeman had an entitlement to a widow’s pension as at the date of the Tribunal’s decision.”[121]
30.                  His Honour contrasted the task that the Tribunal had to undertake in:
‘… Re Tiknaz, in Re Easton, in Jebb’s case and in McGourty’s case, [where] the decision under review was a decision refusing to grant a pension or benefit that had been applied for. In each case, it was held that there was jurisdiction to consider entitlement not only as from the date of the application but also entitlement up to the date of the tribunal’s decision. This was because the function of the Administrative Appeals Tribunal formed part of an administrative continuum and, in reviewing a refusal to grant a pension or benefit that had been applied for, it was proper for the tribunal to consider the entitlement to the pension not only as at the date of the application for the pension or benefit or at the date of the decision refusing to grant it but also up to the time of the Tribunal’s decision.’[122]
31.                  If limited to reviewing the decision at the time it was made, there are limits on the evidence to which the Tribunal may have regard. Those limits are illustrated by the judgment of Wilcox, Burchett and French JJ in Hospital Benefit Fund of Western Australia Inc v Minister for Health, Housing and Community Services.[123] The limited way in which regard can be had to evidence of events after the date of the decision was referred to a year earlier by Hill J in Surinakova v Minister for Immigration Local Government and Ethnic Affairs.[124]
32.                  The approach I have outlined in the preceding paragraphs accords in principle with that adopted by the majority in Shi v Migration Agents Registration Authority.[125] Special leave to appeal to the High Court has been granted but the majority’s view remains the law by which I am presently bound. This means that I must decide the date on which I consider the merits of the decision under review according to the legislative framework in which the decision is made and the nature of the decision.”[126]
[115] (1979) 24 ALR 577; 2 ALD 60 at 589; 68
[116] (1988) 19 FCR 342; 15 ALD 671; 87 ALR 506
[117] (1981) 4 ALN 44 (Davies J, President, Senior Member Ballard and Dr Garlick, Member)
[118] (1988) 80 ALR 329 (Davies J)
[119] (1987) 12 ALD 777 (Davies J)
[120] (1988) 9 AAR 87 (Davies J)
[121] (1988) 19 FCR 342; 15 ALD 671; 87 ALR 506 at 345; 674; 509
[122] (1988) 19 FCR 342; 15 ALD 671; 87 ALR 506 at 345; 674; 509
[123] (1992) 39 FCR 225; 28 ALD 50; 111 ALR 1 at 234; 58-59; 10-11
[124] (1991) 33 FCR 87; 26 ALD 203
[125] [2007] FCAFC 59; (2007) 158 FCR 525; 240 ALR 23; 95 ALD 260, Nicholson and Tracey JJ, Downes J dissenting.
[126] (2007) 99 ALD 341; [2007] AATA 2023 at 347-49; [27]-[32]

In light of these principles, I considered s 13 of the 1948 Act:
“33. A decision under s 13 is a decision that falls into the class of decision conferring a right, privilege, benefit or entitlement of some sort. Section 13, under which the decision was made, does not link the person’s meeting the criteria it sets out in s 13(1) to any particular time period. It does not, for example, provide that the person must meet them at the time of making an application for a grant of Australian citizenship. Had it been an essential step, Parliament could have provided for it just as it provided in s 13(1), in effect, that the Minister’s power to make a decision was only enlivened once an applicant had made an application in accordance with an approved form. All that s 13(1) requires is that the person satisfies the Minister that he or she meets the criteria. Applying the principles to which I have referred, that means that the Tribunal should, on any review, consider whether Australian citizenship should be granted not only at the date of the application under s 13 but also up to the time of its decision. ”[127]
[127] (2007) 99 ALD 341; [2007] AATA 2023 at 349; [33]

An examination of Re Egulian and Tax Agents’ Board of New South Wales[128] reveals that Deputy President McMahon did not acknowledge that Davies J was concerned with a cancellation decision in Freeman v Secretary, Department of Social Security[129] while he was concerned with an application for registration. As appears from my summary of the authorities, the outcome may be different in each. Although it already appears in the passage from Re Singh, it is worth repeating that Davies J said in Freeman:
“… In coming to its decision, the Tribunal was entitled to take into account all the facts proved before it. But the issue was whether, having regard to those facts, the decision to cancel made on 19 May 1987 was the correct or preferable decision, not whether Mrs Freeman had an entitlement to a widow’s pension as at the date of the Tribunal’s decision.”[130]
[128] (1992) 92 ATC 2101
[129] (1988) 19 FCR 342; 15 ALD 671; 87 ALR 506
[130] (1988) 19 FCR 342; 15 ALD 671; 87 ALR 506 at 345; 674; 509

In the context of the review of an application for registration and a requirement that the applicant have five years of relevant experience, Deputy President McMahon analysed Freeman and applied it in the following way:
“16. It is true that the administrative decision-making process should be regarded as a continuum (as Davies J put it in Jebb v Repatriation Commission (1988) 80 ALR 329). This does not however have the effect of moving the relevant date in all circumstances. In Freeman v Secretary, Department of Social Security (1988) 15 ALD 671 at 674 the same judge observed that although the Tribunal was entitled to take account facts subsequent to the date of the relevant application, the issue remained whether, having regard to those facts, the decision made as a result of the original application was the correct or preferable decision, not whether the applicant, in that case, had an entitlement as at the date of the Tribunal’s decision. His Honour acknowledged that regard must always be had to the nature of the decision which is under review. In my view, the decision in the present case is analogous in its effect to the decision considered in Freeman, in that it does not have an ongoing effect but resolves an issue with a degree of finality.
17. It follows that the relevant period for consideration is the five years from 1 November 1985 to 1 November 1990. [which was the date of Mr Egulian’s application for registration] …”[131]
[131] Re Egulian and Tax Agents’ Board of New South Wales (1991) 91 ATC 2,060 at 2,064

What are special circumstances?

The expression, “special circumstances” is not defined in the ITA Act but it has been considered in the past. I have had regard first to the words of the Full Court of the Federal Court when it said that it is not “... possible to lay down precise limits or precise rules.”[171] Of the expression “special circumstances”, it has been said by Kiefel J in Groth v Secretary, Department of Social Security[172] that:
“… although imprecise [it] is sufficiently understood not to require judicial gloss: Beadle’s case [(1985) 60 ALR 225, 7 ALD 670] (at ALR 229; ALD 674), and for present purposes it is sufficient to observe that it would require something to distinguish Mr Groth’s case from others, to take it out of the usual or ordinary case. It would of course follow that if one were to conclude that something unfair, unintended or unjust had occurred that there must be some feature out of the ordinary.”[173]
[171] Beadle v Director-General of Social Security (1985) 60 ALR 225 at 228 per Bowen CJ, Fisher and Lockhart JJ
[172] (1995) 40 ALD 541
[173] (1995) 40 ALD 541 at 545

More recently, the expression was considered again by Kiefel J in a different context in Secretary, Department of Family and Community Services v Chamberlain.[174] Her Honour adopted similar principles and considered their application in the context of determining the length of a preclusion period when a person has received a compensation payment. In doing so, she clearly referred not only to the circumstances of the individual affected by the preclusion provisions of the Act but to the effect that those preclusion provisions were intended to achieve and the consequences for every person who was affected by them. Having regard to all of the circumstances, would the result be one that is unfair, unintended or unjust so that the circumstances may be described as special?
[174] (2002) 68 ALD 357

Her Honour’s approach is consistent with that taken by the Full Court of the Federal Court, of which she was a member, in Dranichnikov v Centrelink:[175]
“ To some extent the question whether there were special circumstances must depend on how it came about that the error occurred. … Other cases which have considered analogous words such as ‘special reasons’ has [sic] tended to conclude, albeit in different contexts, that what is required will be circumstances which distinguish the case in consideration from the usual case. There will be a requirement that the circumstances are such that takes the case out of the ordinary: Jess v Scott (1986) 12 FCR 187; 70 ALR 185 and the cases in various contexts in which Lockhart, Shepherd and Burchett JJ discuss.”[176]
[175] (2003) 75 ALD 134; 53 ATR 270 (Hill, Kiefel and Hely JJ)
[176] (2003) 75 ALD 134; 53 ATR 270 at 148; [66]

It is also consistent with that adopted by Besanko J in Angelakos v Secretary, Department of Employment and Workplace Relations[177] when he analysed a number of authorities regarding the meaning of “special circumstances” including Beadle, Groth and Dranichnikov as well as Ryde v Secretary, Department of Family and Community Services, [178] in which Branson J had also referred to Jess v Scott[179]. Besanko J concluded that the expression “special circumstances” indicate:
“… something that distinguishes the case from the ordinary or usual case. It may not be easy to postulate the ordinary or usual case other than in quite general terms and, in doing so, close attention must be given to the particular statutory context.”[180]
[177] [2007] FCA 25
[178] [2005] FCA 866
[179] (1986) 12 FCR 187
[180] [2007] FCA 25 at [33]

The particular statutory context with which I am concerned is generally that of the registration, including re-registration, of persons as tax agents. That context assumes that those who are registered will be persons who are fit and proper to prepare income tax returns and transact business on behalf of taxpayers in income tax matters. Identification of the context does not equate with deciding whether a person is a fit and proper person to carry out that task. The decision whether a person is fit and proper is made, in the case of a re-registration application, under s 251JC(1). The task for which I am identifying the context is that of deciding whether one of the matters identified in s 251BC(3)(c) should be disregarded because there are circumstances that are out of the ordinary or the usual run of things and so are “special circumstances”. The very fact that s 251BC(3) permits them to be disregarded makes it clear that some regard at least might otherwise have been given to them in deciding whether the person was fit and proper to carry out the relevant task. Apart from a conviction referred to in s 251BC(3)(c)(i), Parliament has not sought to identify the nature of what the act, thing or omission might be.

Should I disregard Mr Toohey’s omissions because of special circumstances? – findings of fact

I have focused only on Mr Toohey’s omissions and the doing of his acts, because I am satisfied that he does not have any convictions. His pleading guilty to offences does not equate with convictions in respect of those offences but a:
“... plea of guilty amounts to a formal confession of the existence of every ingredient necessary to constitute the offence: see De Kruiff v Smith [1971] VR 761 at 765; R v Henry [1917] VLR 525 at 526.”[181]

Mr Toohey has not sought to treat his pleas in any other way or to deny his failures to lodge the taxation returns for which he was responsible or his failure to respond to the Board’s many requests that he explain his failure to lodge them. He has not sought to deny his failure to meet the timetables that he set from time to time to lodge the returns or that were set for him by either the ATO or the Board. He has not denied his failure to respond to all of the Board’s requests for written explanations as to why he had failed to lodge the returns as required. Whether these are characterised as omissions or as acts is irrelevant for, however they are characterised, they come within the scope of s 251BC(3).

[181] R v D’Orta-Ekenaike [1998] 2 VR 140; 99 A Crim R 454 (Court of Appeal) at 146-147; 462 per Winneke J

The circumstances that Mr Toohey refers to as special relate to his various physical and mental illnesses from which I have found he suffers as well as coping with his business and staffing difficulties and his brother’s illness.

I accept his evidence that his medical conditions have proved debilitating to greater or lesser extents over the years. I also accept that his carpal tunnel syndrome and his depression have interfered with his sleep at various times and that, in turn, has interfered with his level of efficiency during the day. In relation to his depression and anxiety, I am satisfied that he first sought treatment for it in 1989 or 1990 but that he suffered from it for some time before he sought treatment. He continued to receive treatment until at least 2002 and perhaps 2003. On the basis of the evidence in his statement, I am satisfied that Mr Toohey felt himself well again at some time in 2003 and certainly well enough to complete taxation returns. He suffered further depressive episodes after that time and had resume taking medication at some time before the hearing in December 2007.

Mr Toohey has received treatment for his carpal tunnel syndrome and, on the evidence, I am satisfied that he no longer complained of the symptoms of that condition after the operation in 2002 or within a few months of his recovering from it. The unpleasant symptoms of oesophagitis and oesophageal ulceration continued at the same time and caused him great discomfort. Treatment has continued for that condition but there is no mention of it in the medical reports as a debilitating condition after 2002. From time to time, Mr Toohey suffered from low back pain and sciatica between 1996 and 2001 but, on the evidence that I have from him and his treating doctors, I am not satisfied that he has suffered from that condition since then or, if he has, that it has unduly affected his ability to carry out his normal daily activities. He has also suffered from severe respiratory conditions and continued to receive treatment for them. Mr Toohey also receives treatment for diabetes but, on the evidence that I have, I find that the changes that he has made to his lifestyle as a result have not affected the way in which he carries out his normal daily activities in relation to his professional life or that they have an impact on his professional work.

Apart from his depression, I find that Mr Toohey’s conditions had been treated and stabilised or, in the case of carpal tunnel, for example, resolved by some time in 2002. Mr Toohey did not point only to his health but also to his staffing difficulties and business and family pressures. I find that the impact on his ability to manage his responsibilities that was caused by managing his father’s estate began after the date of his father’s death on 24 December 1993 and that it was a significant impact. It was a significant impact on his time as he had to improve the property. It had an impact on his finances as he supplemented his mother’s income between 1993 and 2007.

Mr Toohey’s business difficulties began in the early 1990s. In the year that his father died, 1993, he was already experiencing difficulties in meeting his commitments and faced a mortgagee sale of one of his properties. Those difficulties, I find, continued throughout the 1990s and he worked long hours to earn income to reduce his debts as well as selling some of his assets.

Mr Toohey’s difficulties with the owner of the premises from which he conducts his practice began in late November 2001 and continued. I find that the difficulties he experienced were compounded by the resignation of two of his accountants in May 2002 and the difficulties that he had in finding replacement staff. I find that it would have been a difficult year for him but that, by November 2002, his staffing difficulties had resolved themselves. Although his staffing difficulties had resolved themselves by this time, I find that his health difficulties had not and that his anxiety and depression were at their worst.

I also find that the period of resolution of the staffing difficulties only lasted a short time as two of his accountants resigned in or about January 2003. That period coincided, I find, with a period when Mr Toohey was still suffering from depression and unable to make a contribution of any great significance to his practice. In a little over six months, he contributed only 151 chargeable hours. Since the end of 2003, Mr Toohey has had the assistance of Mr Kellock on an ongoing basis for three days each week.

Should I disregard Mr Toohey’s omissions because of special circumstances? – considered at date of Board’s decision

If I look only at the events up to the date of the Board’s decision on 1 July 2004, I find that there have been a number of factors that have had an impact on Mr Toohey’s ability to carry out his professional duties. His depression has had a significant impact but so too have the other difficulties that he has experienced. The question that I must answer, though, is do they amount to special circumstances? Are they something that take his circumstances out of the usual or ordinary case? As difficult as his circumstances have been, I do not think that they do in relation to the ongoing period that I am considering. If I were looking at a relatively short period of time and at Mr Toohey’s acts or omissions as a result of particular circumstances in that period, I might well reach a different conclusion. In relation to an ongoing period, however, it can be expected that the exigencies of life and business throw up all sorts of difficulties and sadnesses that must be met and dealt with in conducting a professional practice. The pressures that come from family illnesses and managing family affairs for the members of a person’s wider family are not out of the ordinary. Business and financial pressures and health issues are not welcome but are also part of the normal business of living over a period of time. When viewed overall, Mr Toohey’s circumstances are not special circumstances.

Even if I am incorrect in my conclusion and I should be satisfied that Mr Toohey’s circumstances are indeed special circumstances, I am not satisfied that the relevant matters in s 251BC(3) should be disregarded. Again, I am considering the matter at the date of the Board’s decision. A decision to disregard them is made in the context of reviewing whether a person is a fit and proper person to be registered as a tax agent. A tax agent must not only have the necessary knowledge and ability to carry out the duties of the position but must be a person who can be trusted to carry them out. It is a position in which a person has duties to his or her clients but is also entrusted by the Commissioner to carry out those duties according to law. The Commissioner relies on that particularly since the introduction of self-assessment when errors in returns will only be revealed by the audit process rather than by checking each return individually. He relies on tax agents complying with the law so that he can carry out his functions and meet his statutory obligations under the law. Circumstances which are relevant in determining whether a person will be a person who can meet his or her duties and responsibilities as a tax agent as well as be a person who can operate in the necessary atmosphere of mutual trust should not be disregarded.

As I have mentioned, had Mr Toohey found himself in the range of difficult circumstances over a short period of time, I might well have come to a different conclusion. As it is, they extend over a period from the early 1990s to 2003. That is not a short period of time. Even if they are special circumstances, the errors and acts that arose from those special circumstances should not be disregarded. To disregard them would be to disregard the manner in which he dealt with them and, in this case, the manner in which he dealt with them is, in my view, an important factor in determining whether he is a person who is a fit and proper person to be a tax agent.

Should I disregard Mr Toohey’s omissions because of special circumstances? – considered at date of my decision

If I should be reviewing the Board’s decision at the date of my own decision, I do not reach any different decision. The circumstances that Mr Toohey relied on again related to his responsibilities in looking after his father’s estate and his responsibilities in caring for his mother. They included the difficulties caused by the drought on his farm and the need to assist those of his clients who were also affected by the drought. Again, I do not regard these as special circumstances whether I look at them as a group on their own or as part of the whole group of circumstances that existed from the early 1990s. Looking at the whole of Mr Toohey’s circumstances from the early 1990s until 2006, I do not regard them as special circumstances. Again, they are part of the exigencies of life. Certainly, some are a little different from a tax agent who is based in the metropolitan area and who pursues business activities that are not rural based. The fact that Mr Toohey’s activities are rural based or the fact that Mr Toohey has had difficulties in relation to them does not take his circumstances out of the ordinary or usual course of events.

Even if I am incorrect and they should be regarded as special circumstances on one basis or the other or the whole of Mr Toohey’s circumstances should be regarded as special, I am not satisfied that, because of them, his acts or omissions should be disregarded. My reasons are as before. The response of a person to ongoing circumstances such as these is relevant in determining whether he or she will be a person who can meet his or her duties and responsibilities as a tax agent as well as be a person who can operate in the necessary atmosphere of mutual trust. They should not be disregarded.

Should I disregard Mr Toohey’s omissions because of special circumstances? – conclusion

In view of my conclusions, I am not satisfied that Mr Toohey’s circumstances are special circumstances or that, if they are special circumstances, they should be disregarded in deciding whether he is a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters. That is so whether I consider the matter at the date of my decision or at the date of that of the Board.

Is Mr Toohey a fit and proper person to be a tax agent?

I have already summarised some of the cases that have considered what it means to be a “fit and proper person”. I accept that Mr Toohey has always tried to do his best by his clients. Even though I accept his evidence that none of his clients has ever complained about him, I also find that his lodgement rate, at least in the 2002 year, was significantly below the national average. That finding is based on the ATO’s records but is supported to some extent by a note of a comment made by Mr Toohey himself regarding the penalties imposed on his clients and his inability and their unwillingness to pay them.[182]
[182] See [80] above

I also accept that Mr Toohey has always tried to put his clients’ interests above his own. That is so even when his health prevented him from devoting a great deal of attention to his practice. From one point of view, this is a very noble and proper thing to do. The difficulty that I have with his having done so is that he has done so at the expense of his duty to comply with his obligations to file returns for which he was personally responsible. Even more importantly, he has done so on the basis of his assessment of what his obligations to the Commissioner were. That is to say, he made the assessment that he would have little, if any, tax owing in most circumstances and used his assessment of his situation as a reason for failing or omitting to lodge the various returns. His decision to do that was to take from the Commissioner what was the Commissioner’s to decide. Even with self-assessment, it is for the Commissioner to decide what he will audit and what he will not and what tax he assesses as payable. He can only make his choice as to whether to audit or not to audit when a taxpayer has lodged a return. Mr Toohey’s reasons showed a lack of understanding of the reason for lodgement. It also showed that he was not prepared to honour the relationship of trust that must necessarily exist between a tax agent and the Commissioner. Members of the public are entitled to expect that a tax agent will comply with his or her obligations in relation to his or her personal affairs. That is an important indication of whether they can have confidence that the person to whom they entrust their affairs will be careful to ensure that they meet their obligations.

Mr Toohey’s putting his clients’ interests above his own was not entirely altruistic as first appears. He acknowledged that he did so in order to generate income but, in doing so, he again showed that he did not understand his personal obligations or the relationship of trust that existed between him as a tax agent and the Commissioner.

Mr Toohey’s dealings with the Board merely underline what I find to have been his attitude to the Commissioner. I have no doubt that his depression made it very difficult for him to function at times but even in the period in 2003 when he felt that he had recovered, he did not attend to addressing his outstanding obligations to either the Board or the Commissioner. Given the ongoing correspondence and telephone calls, I find his request to the Board on 7 July 2004 for particulars of its concern a little surprising. Not only should he have been aware of the nature of the Board’s concern from their previous communications but, as a tax agent, they should have been patently apparent to him

I look forward to events between the date of the Board’s decision and my decision, I must have regard to Mr Toohey’s failure to lodge returns for the 2006 year indicates that he has not learned to manage his professional affairs so that he can meet his obligations despite the difficulties that we all face. Certainly, Mr Toohey has had his share of difficulties but, whether I consider the matter at the date of the Board’s decision or the date of my decision, I have decided that Mr Toohey is not a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters.

For these reasons, I affirm the decision of the respondent dated 24 June 2004.

I certify that the one hundred and sixty one preceding paragraphs are a true copy of the reasons for the decision herein of
Deputy President S A Forgie,

Signed: .......................................................................
Jayne Haydon Associate

Dates of Hearing 19 November 2007, 7 December 2007 and
10 December 2007

Date of Decision  2 April 2008
Solicitor for the Applicant            Ms E. Kavadas
Charlesworth Josem Partners Pty Ltd

Solicitor for the Respondent Mr S. Linden
Australian Government Solicitor