Rudy Frugtniet and Tax Practitioners Board - [2014] AATA 766

[2014] AATA 766

Division GENERAL ADMINISTRATIVE DIVISION

File Number

2013/0717

Re

Rudy Frugtniet

APPLICANT

And

Tax Practitioners Board

RESPONDENT

DECISION

Tribunal
Egon Fice, Senior Member

Date 23 October 2014

Place Melbourne
The Tribunal affirms the decisions of the Tax Practitioners Board made on
16 January 2013 to terminate Mr Frugtniet’s registration as a tax agent and to preclude him from applying for registration for a period of five years from the date of termination.

........[sgd Egon Fice]................................................................
Egon Fice, Senior Member
TAX AGENTS – Termination of registration as a tax agent – prevented from applying for registration for a period of five years – tax practitioner registration requirements – not a fit and proper person to be registered as a tax agent – applicant refused admission to practise as a barrister and solicitor – complaints lodged by clients
Legislation
Administrative Appeals Tribunal Act 1974 (Cth) s 37
Income Tax Assessment Act 1936 (Cth) s 251BC
Legal Practice Act 1996 (Vic) s 342
Legal Profession Act 2004 (Vic)
Tax Agent Services Act 2009 (Cth) ss 2-5, 20-5, 20-15, 20-45, 20-50, 30-10, 30-15, 30-30, 40-5, 40-25, 60-95, 60-125, 70-10, 90-1
Cases
Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321
Collector of Customs v Agfa-Gevaert Ltd (1996) 186 CLR 389
Frugtniet v Board of Examiners [2002] VSC 140
Frugtniet v Board of Examiners [2005] VSC 332
Frugtniet v Law Institute of Victoria Limited [2012] VSCA 178
Law Institute of Victoria Limited v Frugtniet (Legal Practice) [2011] VCAT 596
Re Davis (1947) 75 CLR 409
Stasos v Tax Agents’ Board of New South Wales (1990) 21 ATR 974
Su v Tax Agents’ Board, South Australia (1982) 61 FLR 1
Secondary Materials
Council of Legal Education and the Board of Examiners ( viewed 17 September 2014
Tax Agent Services Bill 2009 (Cth) Explanatory Memorandum
REASONS FOR DECISION
Egon Fice, Senior Member
23 October 2014

Mr Rudy Frugtniet applied to the then authority, Tax Agents’ Board of Victoria (TABV) on 30 May 2008 seeking registration as tax agent. After Mr Frugtniet had completed a period of acceptable work experience, TABV approved his application for registration as tax agent effective from 1 January 2010 for a period of three years.
The Tax Practitioners Board (the Board) was established by the Tax Agent Services Act 2009 (the TAS Act) which received Royal Assent on 26 March 2009. Most of its operative Parts commenced on 1 March 2010. Its stated purpose was to establish a national Board to register tax agents and BAS agents; to introduce a Code of Professional Conduct for registered tax agents and BAS agents; and to provide for sanctions to discipline registered tax agents and BAS agents (s. 2-5).
On 28 November 2012 Mr Frugtniet applied for renewal of his registration as a tax agent which was to expire on 31 December 2012. Pending a decision by the Board, Mr Frugtniet’s registration continued from 1 January 2013 until the Board made its decision (s. 20-50(2)).
At a meeting held on 16 January 2013, the Board Conduct Committee (the Committee), acting under the delegated authority of the Board, considered Mr Frugtniet’s renewal application and resolved to terminate his registration as tax agent effective from 22 March 2013, and to preclude Mr Frugtniet from applying for registration for a period of five years from the date of termination. Those decisions were made under ss. 40-5 and 40-25 of the TAS Act. The Board determined that Mr Frugtniet ceased to meet the tax practitioner registration requirement that he was a fit and proper person. Mr Frugtniet was notified of those decisions in a letter dated 15 February 2013 from the Acting Secretary of the Board. The Board also provided Mr Frugtniet with what was described as an Updated Notice dated 19 February 2013.
Mr Frugtniet lodged an application with the Tribunal on 18 February 2013 seeking a review of the Board’s decision. The TAS Act provides that an application may be made to the Tribunal for review of the decision made under s. 40-5 terminating the registration of an individual; and a decision made under s. 40-25 determining a period during which application for registration may not be made (s. 70-10).
The issues I am required to determine in this matter are whether:
(a)Mr Frugtniet ceased to meet one of the tax practitioner registration requirements in that he is not a fit and proper person to act as a registered tax agent;
(b)if the answer to (a) is in the affirmative, the Board ought to have exercised its discretion to terminate his registration; and
(c)the Board ought to have exercised its discretion to determine that Mr Frugtniet could not apply for registration for a period of five years following the termination of his registration.
PRELIMINARY MATTER
In his Statement of Facts, Issues and Contentions lodged with the Tribunal on 24 April 2014, Mr Frugtniet claimed that the Board could not find a breach of the Code of Conduct introduced by the TAS Act because it did not conduct an investigation, and there was no basis for any such finding. He also appeared to maintain that the matters raised by the Board were matters which should have been considered under the Code of Conduct. The Code of Professional Conduct (the Code) is in fact set out in s. 30-10 of the TAS Act. While it contains provisions dealing with honesty and integrity, I did not understand the Board as having made its decisions based on any breaches of the Code. The basis for terminating Mr Frugtniet’s registration as tax agent was based on s. 40-5(b) in that he ceased to meet one of the tax practitioner registration requirements, namely, that he is a fit and proper person (s. 20-5(1)(a)).
In his Supplementary Submissions which were lodged in accordance with a Direction I made at the conclusion of the hearing of this matter, Mr Frugtniet contended that the Board had not complied with the TAS Act when conducting its investigation into his conduct. While it is rather difficult to follow Mr Frugtniet’s contentions about this point, as best I can make out, he appears to be claiming that the Board did not conduct an investigation and that the Tribunal was being asked to simply accept that he had breached the Code. With respect to Mr Frugtniet, this assertion is misconceived.
The Board carried out a preliminary enquiry into the affairs of Mr Frugtniet following the publicity given to a decision made by the Victorian Civil and Administrative Tribunal (VCAT) on 8 April 2011. The 8 April 2011 decision held that the Law Institute of Victoria, as a delegate of the Legal Services Board, was justified in in finding that Mr Frugtniet should be a disqualified person for the purposes of Division 3 of Part 2.2 of the Legal Profession Act 2004. The Tax Practitioners Board became aware that the Board of Examiners, which deals with the applications of qualified persons to be admitted to practise law in Victoria, had found that Mr Frugtniet was not a fit and proper person for admission to legal practise on two occasions. The enquiry was conducted by Mr Frank Pietka, a delegate of the Board. There can be no doubt that prior to commencing an investigation pursuant to s. 60-95 of the TAS Act, the Board, by its delegate, can conduct a preliminary enquiry. In fact, the Explanatory Memorandum accompanying the Tax Agent Services Bill 2009 states, at paragraph 217:
When a complaint is made to the Board, the Board will determine whether the complaint is one of substance and whether an investigation is warranted. To do this, the Board may need to gather preliminary information. It may do this by any means it sees fit, for example, by inquiry of the complainant and/or the tax agent or BAS agent to whom the complaint pertains, or by requesting and reviewing documentation provided by the complainant, the client, or obtained from the ATO.
It is only if that preliminary enquiry yields matters of substance that the Board may decide to investigate. This is explained in paragraph 218 which states:
Following its preliminary inquiry, if the Board decides to investigate a matter, it must notify the tax agent, BAS agent, unregistered entity or applicant for registration, as appropriate, in writing, within two weeks after the decision to investigate.
Following Mr Pietka’s enquiry, which included discussions with Mr Frugtniet, the Board decided that it would investigate whether he was a fit and proper person to be registered as a tax agent under the TAS Act. Mr Frugtniet was notified of that decision in a letter dated 20 November 2012 (stated to be 2005, but that is clearly a typographical error). Relevantly, the letter stated:
This letter is formal notification to you that a Delegate of the Board, acting under the delegated authority of the Board, has made an allegation in the attached Submission that you are not a fit and proper person to be registered as a tax agent under the Tax Agent Services Act 2009 (TASA). This may have consequences for your continued registration as a tax agent.
The Delegate has determined that this matter, including the relevant information you have provided in relation to this matter to date, should be put to a Committee of the Board, acting under the delegated authority of the Board, to determine whether you are a fit and proper person within the meaning of the TASA.
On 15 February 2013 the Board notified Mr Frugtniet that his registration as a tax agent had been terminated. Relevantly, the letter stated:
1.We refer to our letter dated 20 November 2012 in which a Delegate of the Tax Practitioners Board (Board) formally notified you of the decision to refer concerns regarding your fitness and propriety and continued registration as a tax agent to the Board Conduct Committee (Committee).
2.…
3.   The Committee resolved to terminate your registration under paragraph 40-5(1)(b) of the TASA on the basis that you have ceased to meet the tax practitioner registration requirement that you are a fit and proper person.
4.   This letter is formal notification of the Board’s decision to terminate your registration. The termination of your registration will take effect from 20 February 2013.
5.   The Committee also decided in accordance with subsection 40-25(1) of the TASA that you may not apply for registration under the TASA for a period of five years (5) years from the date that the termination of your registration takes effect.
In my opinion, the above sequence of events indicates that the Board properly complied with the TAS Act in the conduct of its preliminary enquiry and subsequent investigation by a Committee of the Board into whether Mr Frugtniet was a fit and proper person to be a registered tax agent. He was accorded procedural fairness and given ample time to respond to the allegations made. The decision was made within six months after the date on which the investigation was taken to have commenced in accordance with s. 60-125(3). It is not the case, as was submitted by Mr Frugtniet, that a decision was not made within the six-month period and therefore s. 60-125(7) applied.
GROUNDS FOR TERMINATION OF REGISTRATION
The termination provisions in Subdivision 40-A of the TAS Act deal with the grounds which may give rise to termination of registration. As far as individuals are concerned, section 40-5 relevantly provides:
(1) If you are a *registered tax agent or BAS agent and an individual, the Board may terminate your registration if:
(a)an event affecting your continued registration, as described in section 20-45, occurs; or
(b)you cease to meet one of the *tax practitioner registration requirements; or
(c)you breach a condition of your registration.
Note: The Board may also terminate your registration for breach of the Code of Professional Conduct: see Subdivision 30-B.
Section 20-45 deals with events which may affect the continued registration of a tax agent. It provides:
The following events may affect your continued registration as a *registered tax agent or BAS agent:
(a)you are convicted of a *serious taxation offence;
(b)you are convicted of an offence involving fraud or dishonesty;
(c)you are penalised for being a *promoter of a *tax exploitation scheme;
(d)you are penalised for implementing a *scheme that has been promoted on the basis of conformity with a *product ruling in a way that is materially different from that described in the product ruling;
(e)you become an undischarged bankrupt or go into external administration;
(f)you are sentenced to a term of imprisonment.
The expression tax practitioner registration requirements is defined in s. 90-1 as:
tax practitioner registration requirements means the matters about which the Board must, under Subdivision 20-A, be satisfied before the Board is obliged to grant an application for registration under this Act.
Subdivision 20-A sets out the eligibility requirements for registration. As far as individuals are concerned, it provides:
Individuals
(1) An individual, aged 18 years or more, is eligible for registration as a *registered tax agent or BAS agent if the Board is satisfied that:
(a)the individual is a fit and proper person; and
(b)the individual meets the requirements prescribed by the regulations (including, but not limited to, requirements relating to qualifications and experience) in respect of registration as a registered tax agent or BAS agent; and
(c)the individual maintains, or will be able to maintain, professional indemnity insurance that meets the Board’s requirements; and
(d)in the case of a renewal of registration – the individual has completed continuing professional education that meets the Board’s requirements.
Section 20-15 sets out the criteria for determining whether an individual is a fit and proper person. It provides:
In deciding whether it is satisfied that an individual is fit and proper person, the Board must have regard to:
(a)whether the individual is of good fame, integrity and character; and
(b)without limiting paragraph (a):
(i)      whether an event described in section 20-45 has occurred during the previous 5 years; and
(ii)     whether the individual had the status of an undischarged bankrupt at any time during the previous 5 years; and
(iii)    whether the individual served a term of imprisonment, in whole or in part, at any time during the previous 5 years.
For completion, I should also refer to s. 30-15(2) which sets out the sanctions for failure to comply with the Code of Professional Conduct. Subsection (2)(d) provides that the Board may terminate an applicant’s registration under s. 30-30.
FIT AND PROPER PERSON TO BE REGISTERED AS A TAX AGENT
The expression fit and proper person encompasses not only a range of matters to be considered, but also the activities to which the expression has been applied. This was explained by the High Court of Australia (Mason CJ, Brennan, Deane, Toohey and Gaudron JJ) in Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321. Toohey and Gaudron JJ said, at 380:
The expression “fit and proper person”, standing alone, carries no precise meaning. It takes its meaning from its context, from the activities in which the person is or will be engaged and the ends to be served by those activities. The concept of “fit and proper” cannot be entirely divorced from the conduct of the person who is or will be engaging in those activities. However, depending on the nature of the activities, the question may be whether improper conduct has occurred, whether it is likely to occur, whether it can be assumed that it will not occur, or whether the general community will have confidence that it will not occur. The list is not exhaustive but it does indicate that, in certain contexts, character (because it provides indication of likely future conduct) or reputation (because it provides indication of public perception as to likely future conduct) may be sufficient to ground a finding that a person is not fit and proper to undertake the activities in question.
Given the sections to which I have referred in the TAS Act and the extract from Bond’s case, it appears to me that I should assess fitness and propriety by reference to Mr Frugtniet’s character, integrity, honesty and past conduct. Mr Frugtniet’s fitness and propriety must be assessed in the context of him acting as a registered tax agent.
Davies J dealt with fitness and propriety in the context of a tax agent in the matter Su v Tax Agents’ Board, South Australia (1982) 61 FLR 1. His Honour said, at 4 – 5:
The function of a tax agent is to prepare and lodge income tax returns for other persons. A person is a fit and proper person to handle the affairs of a client if he is a person of good reputation, has a proper knowledge of taxation laws, is able to prepare income tax returns competently and is able to deal competently with any queries which may be raised by officers of the Taxation Department. He should be a person of such competence and integrity that others may entrust their taxation affairs to his care. He should be a person of such reputation and ability that officers of the Taxation Department may proceed upon the footing that the taxation returns lodged by the agent have been prepared by him honestly and competently.
Hill J in Stasos v Tax Agents’ Board of New South Wales (1990) 21 ATR 974 cited with approval what Davies J said in Su. In addition, Hill J said this about a tax agent seeking re-registration or the overturning of a cancellation decision, at page 985:
However, a person who has been shown to be other than a fit and proper person to be registered must satisfy the Tribunal considering his re-registration or cancellation of his registration as the case may be, that he appreciates the significance of his wrongdoing, that he regrets it and that he has rehabilitated himself such that it is truly unlikely that there will be any lapse in the future of the standards which are required of him. The more serious is dereliction from duty the longer may be the time necessary to show this. It will not be sufficient for him to merely express his contrition. The Tribunal must be satisfied on the balance of probabilities that not only is that contrition actually felt, but that he will not again deviate from the high standards required of him as a registered tax agent.
What was said by Hill J in the Stasos case regarding rehabilitation is not new. The High Court of Australia (Latham CJ, Starke, Dixon, McTiernan and Williams JJ) in the matter Re Davis (1947) 75 CLR 409, when dealing with an appeal by a barrister who had been disbarred because he was no longer considered to be a fit and proper person to continue to be a barrister, also dealt with this issue. Latham CJ said this, at 416 – 417:
In exercising this jurisdiction the Court may consider any conduct of the barrister which is relevant to the question of whether he is a fit and proper person to continue to be a barrister. In determining this question immediately recent and more distant behaviour may be taken into account. It is not possible to draw a line at some point of time and to prevent the Court from looking behind that line. When a question arises in 1947 as to whether a person is a fit and proper person to continue as a barrister it is not irrelevant to consider facts which happened in 1934, 1944, or 1946. Such facts may be most informative as to his character. When a considerable period of time has elapsed past facts should be considered in the light of the lapse of time, and weight should be given to the subsequent behaviour of the person concerned.… It would not be reasonable to require a candidate to disclose to the Board, or even to persons whom he approached with a request for certificates, every wrong-doing of his life.…
It may be that he had by that time become a person of good fame, i.e., of good reputation among those who then knew him. But intrinsic character is a different matter. A man may be guilty of grave wrongdoing and may subsequently become a man of good character. If the appellant had frankly disclosed to the Board and to the two solicitors the fact of his conviction, that disclosure would have greatly assisted him in an endeavour to show that he had retrieved his character. But his failure to make such discloser in itself, apart from the conviction, excludes any possibility of holding that he was in 1946, or had become in 1947, a man of good character.

The matters which gave rise to the cancellation of Mr Frugtniet’s registration as a tax agent and his disqualification from applying for registration for a period of five years arose out of the following events:
·on the lodgement of his application form for registration as a tax agent in May 2008 Mr Frugtniet did not bring to the attention of the Tax Practitioners Board that in 2002 and in 2005 the Board of Examiners declined to find that he was a fit and proper person for admission to legal practise in Victoria;
·findings by the Victorian Civil and Administrative Tribunal (VCAT) that the Law Institute of Victoria was justified in finding that Mr Frugtniet was a disqualified person for the purposes of Division 3 of Part 2.2 of the Legal Profession Act 2004 for a period of three years; and
·three complaints received from clients of Mr Frugtniet regarding his conduct when providing tax agent services.
Application as a registered tax agent
On his application form completed on 30 May 2008 Mr Frugtniet ticked the No box in answer to the following questions:
(a)Have you had membership or registration with a professional body or registration board, (including a Tax Agents’ Board), refused, cancelled or suspended in the last 10 years?;
(b)Have you been disbarred, expelled or struck off from the practice [sic] of your profession, or have you been disciplined by a professional body or registration board (including a Tax Agents’ Board) in the last 10 years?;
(c)Is there any other matter which may affect your eligibility for registration?; and
(d)Is there any other matter of which you are aware, which may have an effect on whether the Board would regard you as a fit and proper person or of good fame integrity and character?.
What the Tax Practitioners Board discovered in 2011 was that the Board of Examiners (the body which determines whether legal practitioners should be admitted to practise in the State of Victoria) had, on two occasions, refused Mr Frugtniet admission to practise as a barrister and solicitor. On both occasions, the Board of Examiners found that Mr Frugtniet was not a fit and proper person for admission to practise as a legal practitioner.
On the first occasion, in 2002, following that decision, Mr Frugtniet appealed to the Supreme Court of Victoria (Pagone J) who conducted a hearing de novo in accordance with s. 342 of the Legal Practice Act 1996. The facts described below are taken from the Reasons for Decision by Pagone J in the matter Frugtniet v Board of Examiners [2002] VSC 140 (1 May 2002).
As his Honour set out in paragraph [2], the rules for admission to legal practise required an applicant to make full disclosure of every matter which may have been relevant to the consideration of that person’s fitness for admission, not being confined to any formal charges of criminal offences. The duty to disclose was not limited to criminal charges or convictions but extended to disclosure of any matter which may bear upon the Board’s or the Court’s assessment of an applicant’s satisfaction of the requirement to be a fit and proper person.
Mr Frugtniet disclosed that he had been fined $1000 without conviction by the Broadmeadows Magistrates’ Court on 24 November 1997 for having obtained property by deception (paragraph [3]). This related to the selling of “blacklisted” airline tickets through a travel agency conducted by his wife. Regardless, the Board deferred consideration of Mr Frugtniet’s application because it was not satisfied that he had given sufficient information about the charges disclosed. After further details were provided on Affidavit in October 2001, the Board of Examiners held a further hearing and determined that Mr Frugtniet had failed to establish that he was a fit and proper person as it was of the view that he had not made full and frank disclosure of all the circumstances relevant to the then known offence for which he had been fined without conviction (paragraph [4]). Pagone J then said, at [5]:
The Board of Examiners seems never to have been told by the applicant of three charges which had been laid against the applicant in the early 1990s for perjury (“the perjury charges”), that in 1978 he had been convicted in the United Kingdom when a young man (“the UK Convictions”), or that he had been charged in 1998 with six counts of theft and three counts of attempted theft as an employee of the ANZ bank (“ANZ charges”).
His Honour noted that Mr Frugtniet was acquitted in the County Court of the perjury charges as he held an honest and reasonable belief at the time that he gave evidence to the Travel Agent’s Licensing Authority and that he did not have to disclose the UK convictions because of his understanding of the operation of the laws of the United Kingdom relating to “spent” convictions. Mr Frugtniet was also acquitted of all of the charges relating to the ANZ Bank. However, his Honour noted that the pro-forma affidavit contained in a schedule to the Legal Practice Act 1996 specifically mentioned the need for disclosure of formal charges of criminal offences and not simply convictions. Mr Frugtniet’s evidence was that he had not seen a copy of that schedule at the time of his application.
Pagone J found that the facts surrounding the perjury charges and the ANZ charges were not sufficiently explained by Mr Frugtniet for him to be satisfied that he had discharged the burden to show that he was a fit and proper person to be admitted to practise. His Honour also said the same could be said, with greater force, about the UK convictions. His Honour said he was not troubled about whether Mr Frugtniet was required to disclose the UK convictions but, in considering the background circumstances, that Mr Frugtniet did not do so without having first satisfied himself that there was no doubt that he needed not to do so. In summing up, his Honour said, at [11]:
The evidence before me does not establish to my satisfaction that the applicant is now a fit and proper person for admission. The way in which details of the perjury charges, the ANZ charges and, more particularly, the UK convictions have come to light in this proceeding have not left me with sufficient confidence in the applicant. His obligation was to disclose matters that could inform a judgement about whether he was a fit and proper person for admission to practice. It was not an obligation merely to list convictions or charges, but was an obligation to inform the decision maker of everything that could bear upon the judgement that needed to be made about him and his character. His task was not to select or edit from his life’s experiences only some events that might be relevant to the question, but to disclose every matter that might fairly assist in deciding whether the applicant was a fit and proper person at the time of admission.
His Honour went on to say that the Board of Examiners might have found in Mr Frugtniet’s favour if he had candidly disclosed the matters relating to the perjury charges, the ANZ charges and the UK convictions. Pagone J then said, at [12]:
However, these were matters that only came to light upon investigations undertaken by the Board itself after its adverse decision, after the applicant’s institution of this appeal and after the applicant had filed his first affidavit in this court in support of the appeal. In those circumstances I have no present confidence that the applicant would have disclosed these matters if they had not come to the Board’s knowledge and had the Board not tendered the evidence in the proceeding before me.
His Honour concluded that, on the material before him, he was not satisfied that Mr Frugtniet was a fit and proper person for admission to practise.
At the conclusion of this hearing on 27 June 2014, I made directions permitting the parties to lodge further documents and to make submissions regarding those documents. Specifically, I directed that Mr Frugtniet produce a Notice of Assessment issued by the Commissioner of Taxation to Ms M Galvez-Londono for the 2011 income year and the affidavit he filed in the Supreme Court of Victoria which he claimed supported his view that he had disclosed his UK convictions to the Supreme Court on appeal from the Board of Examiners. I also directed that the respondent reply to those further documents produced by Mr Frugtniet and that the parties lodge further submissions regarding the additional documents lodged with the Tribunal.
The reason why those documents were sought to be produced to the Tribunal was because, when Mr Frugtniet was confronted with the statement made by Pagone J in paragraph [12] which I have set out above, Mr G D Wendler of counsel, who appeared on behalf Mr Frugtniet, and Mr Frugtniet in the course of his re-examination, submitted that where his Honour said, after the applicant had filed his first affidavit, his Honour was stating that those matters had been brought to light by Mr Frugtniet in an affidavit. In fact my notes indicate that when Mr Wendler asked Mr Frugtniet whether the affidavit contained all of the non-disclosed material, he answered: it did. He also suggested that he could not reconcile that with the statement made by Pagone J.
On 11 July 2014 Mr Frugtniet lodged with the Tribunal an affidavit sworn on 7 March 2002 and lodged with the Supreme Court of Victoria in his action against the Board of Examiners. In that affidavit, Mr Frugtniet explained in some detail why he did not include details of his UK convictions in his application to be admitted as a legal practitioner in Victoria.
In response to that document, Mr D Brown, a solicitor employed by the Australian Government Solicitor who acted on behalf of the Board, obtained from the Supreme Court of Victoria three affidavits filed in Mr Frugtniet’s appeal proceeding in 2002. They included his first affidavit sworn 8 November 2001 as well as an affidavit sworn by Mr Page, a legal executive in the office of the Director of Public Prosecutions of the State of Victoria and Mr Blythman, a solicitor who acted on behalf of the Board of Examiners.
In his submissions regarding those additional documents, Mr Brown pointed out that the additional affidavit lodged by Mr Frugtniet was in fact lodged after the affidavits of Mr Page and Mr Blythman. It was those affidavits, Mr Brown submitted, which disclosed to the Supreme Court details of Mr Frugtniet’s criminal charges and convictions in the UK. There can be no question that Mr Brown is correct. In fact Mr Frugtniet’s affidavit of 7 March 2002 expressly refers to Mr Blythman’s affidavit and he confirmed that he did not include the details provided by Mr Blythman upon making his application for admission to practise. According to Mr Brown, the fact that Mr Frugtniet did not make it clear that his affidavit of 7 March 2002 was filed subsequent to the affidavits made by Mr Page and Mr Blythman, which in fact revealed his history of criminal charges and convictions in the UK to the Supreme Court of Victoria, revealed the following:
·Mr Frugtniet had again been exposed as a person who was loose with the truth (a statement made by Gillard J in a second Supreme Court of Victoria appeal in August 2005);
·Mr Frugtniet had further entrenched a pattern of conduct which raised a substantial question mark concerning his honesty, character and reputation, a pattern which has been remarkably consistent over the last decade and was again evident in the course of this proceeding; and
·Mr Frugtniet’s pattern of conduct and his apparent preparedness to mislead the Tribunal, provided a strong endorsement of the Board’s decision to terminate his registration as a tax agent and to preclude him from applying for registration for a period of five years.
In his further submissions Mr Frugtniet said that the Tribunal could not take the mere fact of past prosecution for perjury and fraud offences as demonstrating general bad character and unfitness to be registered as a tax agent per se. He did concede that the Tribunal could take into account past conduct concerning his obligation to fully disclose previous offences in any jurisdiction whether a charge, dismissed, convicted or acquitted, to the Board of Examiners. Nevertheless, Mr Frugtniet submitted that it was important to take into account the underlying reasons why he did not disclose the criminal charges and convictions in the UK in the late 1970s. He submitted:… it is not always the case that the application should disclose a fact of a charge and acquittal.
With respect to Mr Frugtniet, as Pagone J said in his reasons for decision (paragraph [2]):
For an applicant to establish fitness for admission to practice, it is necessary for disclosure of all matters which bear upon the applicant’s fitness for admission to practice. The Rules provide in schedule 8 a pro-forma affidavit for an applicant to adopt and complete which includes a paragraph in which the applicant asserts having “made full disclosure” of “every matter which is relevant to consideration of my fitness” for admission to practice including “but not being confined to any formal charges of criminal offences”. The words chosen in the schedule emphasising both the depth of information needed to be produced and the breadth of subject matter to be covered. The duty to disclose is not limited to criminal charges or convictions. The duty extends to a disclosure of all else which may bear upon the Board’s, or the Court’s, assessment of an applicant’s satisfaction of the requirement to be a fit and proper person.
I should also mention briefly what Gillard J said in Mr Frugtniet’s second appeal to the Supreme Court of Victoria in August 2005. This followed a second unsuccessful application to be admitted to practise as a legal practitioner in Victoria on 27 July 2004. His application was again refused on the fit and proper person ground. Gillard J emphasised the fact that the nature of such appeals is by way of hearing de novo. In other words, it is based upon evidence placed before the court on that particular application.
At the outset, Gillard J said, at [17]:
I interpolate to observe that the appellant gave evidence on this appeal admitting his wrongdoing and dishonesty in the past and informing the Court that he was a changed person and would not indulge in any dishonest or wrongful conduct in the future. Of course in considering the question of his fitness, the Court is bound to take into account his conduct in the past. This establishes his reputation and character particularly in relation to honesty and fair dealing. If his reputation, based as it is on his past, shows he is a man who is dishonest and cannot be trusted he must show that today his past is behind him, he has turned over a new leaf and can be trusted to pursue an honest career in the law.
As to Mr Frugtniet’s acquittal on a number of charges, Gillard J said, at [19]:
Whilst he is entitled to rely upon the presumption of innocence and the judgement of acquittal the fact is that he is a person who has been charged with crimes of dishonesty in respect of events over a period from 1989 to 2000. It is clear from the form of affidavit in Schedule 8 that the fact of him being charged with crimes of dishonesty is relevant to the questions of good character, reputation and fitness and propriety to be admitted to practise and must be disclosed to the board. The very fact that he was charged with offences of dishonesty over a substantial period of time places a heavy burden upon him to persuade this Court on the appeal that he is a man of good character and reputation and a fit and proper person to be admitted to practise as a lawyer. A matter of substance is that there is a pattern of conduct which raises real questions concerning the honesty of the appellant. Another disturbing feature is that he allows himself to be put into a position where allegations of dishonesty are made against him.… All these matters have to be carefully weighed giving, of course, full effect to the presumption of innocence and his acquittals, in determining whether he is a person who is fit and proper to be admitted to practise.
And, after referring to some other decisions of the Court, his Honour said, at [22]:
In my opinion the cases establish that an acquittal of a person applying for admission to practise of itself must be given full effect to. However, that would not preclude the Admission Board from fully investigating and considering all the circumstances which may lead to a decision that the applicant is not a fit and proper person. Absent a full and proper investigation in my opinion it is not open to an admission Board to draw any adverse inference against an applicant because he or she has been charged with the criminal offence and is subsequently acquitted. Of course, each case must be considered in relation to its particular circumstances.
In concluding, Gillard J said: The appellant carries with him a massive bag of dishonest conduct. It is a pattern of conduct committed over an extensive period. After outlining the conduct which was of some concern to the Court, Gillard J said, at [68]:
His pattern of conduct raises a substantial question mark concerning his honesty and his character and reputation. He is a person who does not appear to have learned from his experiences during 1989 to 2000. He carries a very heavy burden of persuading this Court that he is a person of good character and reputation and a fit and proper person to practise law. He has not discharged that burden. The way he has presented himself to this Court shows a man who is loose with the truth and is prepared to distort the truth if he thinks it will help him. Often he was asked questions which he failed to answer and went off on some tangent seeking to minimise his criminality in the past. The evidence does not persuade me that the appellant has learned from his past experience, or that he is a person motivated to tell the truth.
I should also refer to s. 251BC of the Income Tax Assessment Act 1936 (ITAA 1936) which was in force of time Mr Frugtniet made his application. That section dealt with a fit and proper person to prepare income tax returns. Relevantly, it provided:
(1) Without limiting the generality of an expression used in this Part, but subject to this section, a person is not a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters, as at a particular time, if:
(a)…
(b)…
(c)…
(d)the person is not a 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.
The significance of what is set out in s. 251BC(1) is that convictions or imprisonment for serious taxation offences are to be considered in addition to whether or not the person is of good fame, integrity and character. In other words, there may be reasons other than convictions for those offences which may preclude an applicant from being registered as a tax agent. Necessarily, the implication is that the matters and circumstances which might give rise to criminal charges being laid, irrespective of the outcome, may play a part in determining whether a person is of good fame, integrity and character.
This brings me back to the answers Mr Frugtniet provided on his application form to be registered as a tax agent. In his witness statement which was admitted into evidence, Mr Frugtniet said that upon registration he enquired about the eligibility requirements by contacting the Tax Practitioners Board. He said he was told they were found in the TAS Act. He then said that there was nothing contained under the provisions of the TAS Act requiring him to disclose the applications he had made for admission to practise as a legal practitioner. He said the same of his application for registration as a migration agent. As to the first question which was of concern to the Board, whether he had membership or registration with a professional body or registration board refused, cancelled or suspended, Mr Frugtniet said in evidence that the Board of Examiners was not a professional body or registration board. He claimed the Board of Examiners was a statutory body.

With respect to Mr Frugtniet, the question needs to be considered in its context, not simply the literal meaning of two words. As the High Court of Australia (Brennan CJ, Dawson, Toohey, Gaudron and McHugh JJ) said in Collector of Customs v Agfa-Gevaert Ltd (1996) 186 CLR 389, at 396 – 397:
The meaning attributed to individual words in a phrase ultimately dictates the effect or construction that one gives to the phrase when taken as a whole and the approach that one adopts in determining the meaning of the individual words of that phrase is bound up in the syntactical construction of the phrase in question. In R v Brown (31), a recent House of Lords decision, Lord Hoffmann said:
“The fallacy in the Crown’s argument is, I think, one common among lawyers, namely to treat the words of an English sentence as building blocks whose meaning cannot be affected by the rest of the sentence… This is not the way language works. The unit of communication by means of language is the sentence and not the parts of which it is composed. The significance of individual words is affected by other words and the syntax of the whole.”
The function of the Board of Examiners is set out in Division 4 of the Legal Profession Act. Relevantly, it provides:
2.3.10 Functions of Board of Examiners
(1) The functions of the Board of Examiners are –
(a)to consider applications by person for admission to the legal profession under this Act;
(b)to recommend to the Supreme Court that an applicant is –
(i) eligible for admission; and
(ii) a fit and proper person to be admitted.
On its website, the Council of Legal Education and the Board of Examiners says this about its function:
The Council of Legal Education and the Board of Examiners jointly regulate entry to the Legal Profession in Victoria.…
The Board determines eligibility of individual applicants for admission and provides the certificate upon which the Supreme Court relies when admitting an applicant to practice as an Australian lawyer.
While I accept that it is accurate to describe the Board of Examiners as a statutory body, that simply describes its genesis. However, the question is directed to an organisation’s function and, in this case, to a body which deals with the accreditation or right to practise in certain professions. Effectively, the Board of Examiners determines the right of suitably qualified professionals to practise as barristers and solicitors of the Supreme Court of Victoria. While it might be true to say that it simply provides a certificate relied upon by the Supreme Court to admit a person to the profession, its function is no different to that of a registration board. In practice, its function is to determine which persons are eligible to be admitted and those which are not.
It follows, in my opinion, that Mr Frugtniet’s answer to the question dealing with membership or registration by a professional body or registration board was plainly incorrect. Having been directed to the TAS Act and particularly those requirements setting out the eligibility for registration as a tax agent, Mr Frugtniet must have been aware that whether he was a fit and proper person to be registered as a tax agent was a relevant consideration. Furthermore, given the two applications he made for admission to practise as a legal practitioner in Victoria and that the function of the Board of Examiners was to determine whether he was a fit and proper person to be admitted, undoubtedly would have alerted him to the need to make full disclosure of all matters which would go to his fame, integrity and character. He deliberately chose to answer No to that question.
Regarding the question which asks him to answer whether he had been disbarred, expelled or struck off from the practise of his profession or was disciplined by a professional body or registration board, I believe his answer to that question was correct.
However, I do not agree with his answer given to the question whether there was any other matter which may affect his eligibility for registration. Plainly, s. 20-5(1) of the TAS Act states that the very first eligibility criterion is that the individual is a fit and proper person. Having been through two Supreme Court appeals where extensive reasons for judgement were given by the judges concerned including the fact that in determining whether a person was fit and proper to be admitted to practise as a legal practitioner, he must have been aware that full disclosure needed to be made of all matters which may impact on that finding. It is not restricted simply to convictions for criminal offences. In his case, as Gillard J said in the passage I have quoted at [43], it was particularly important for him to make full disclosure of his conduct in the past because that established his reputation and character particularly in relation to honesty and fair dealing. Given his past conduct, he needed to show that this was behind him and that he could now be trusted to pursue an honest career. It follows that the answer which Mr Frugtniet gave to this question was false. Furthermore, I find that he must have been aware that it was false.
The application for registration as a tax agent had a final catch all question requiring an applicant disclose any other matter which may have an effect on whether the Board would regard him or her as a fit and proper person or of good fame, integrity and character. Plainly, this question required him to disclose all of the events to which I have referred above. Once again, his No answer was incorrect.
Mr Frugtniet also relied on the fact that the Migration Agents Registration Authority (MARA), after examining the judgements of Pagone and Gillard JJ, concluded that it was not satisfied that he was not a fit and proper person. I had in evidence two letters from MARA dated 19 July 2002 (the first letter) and 19 December 2005 (the second letter) to Mr Frugtniet. Both letters deal with the concerns MARA had following the judgements delivered by Pagone J in 2002 and Gillard J in 2005. The first letter stated that it was open to MARA to be satisfied that Mr Frugtniet might not be a person of integrity or otherwise was not a fit and proper person to give migration assistance. That was because in completing this application for registration as a migration agent, he provided information which was false or misleading in a material particular. The second letter appears to set out similar grounds.
The first problem I have with both letters is that they are so heavily redacted, presumably by Mr Frugtniet, that they raise serious questions regarding their utility. The redactions were not made simply to avoid the disclosure of personal information of a private nature but rather, they obliterate large passages of text which are clearly relevant to enable a proper understanding of what was said. The second problem is that MARA in both letters offered Mr Frugtniet the opportunity to respond. In the two letters by which MARA notified Mr Frugtniet of the outcome of its investigation, which are dated 3 February 2003 and 26 July 2006 respectively, it is noted that Mr Frugtniet responded to the first letter on 14 August 2002, 24 October 2002 and 5 December 2002 and to the second letter on 31 January 2006. None of those letters in response were in evidence.
The second problem with Mr Frugtniet relying on his migration agent registration applications is that the questions, as best I can determine from the redacted documents, are significantly different to the questions he was required to answer when seeking admission to practise as a lawyer. Generally, they asked whether he had ever been the subject of an investigation or enquiry by a professional association, corporate regulatory agency or consumer organisation or had he ever been the subject of an investigation by a Department of the Commonwealth or State Public service. In the second letter, the author said that Gillard J was faced with determining the effect that should be given to an applicant who had been charged with criminal offences and acquitted, but the remainder of the passages dealing with that point have been redacted. Nevertheless, the author of that second letter said that it was open to MARA on the evidence before it to be satisfied that Mr Frugtniet had lodged applications for repeat registration which he knew to be false or misleading in a material particular. MARA also stated that Mr Frugtniet may have demonstrated that he may not be a person of integrity or may otherwise not be a fit and proper person to give immigration assistance. It then requested that Mr Frugtniet provide a response to what was set out in that letter. As I have already said, Mr Frugtniet’s response was not put into evidence. I therefore am unable to determine the reasons for the decision made by MARA which was conveyed to Mr Frugtniet in the 26 July 2006 letter where it said that it was not satisfied that he was not a person of integrity or not a fit and proper person to give immigration assistance.
In my respectful opinion, because of the way Mr Frugtniet has attempted to use the MARA application findings in this proceeding, by what appears to be a redaction of matters which he did not wish to disclose to the Tribunal thereby leaving those matters which, undoubtedly, were favourable to this application, is another example of the concerns a reasonable person would hold regarding Mr Frugtniet’s character and integrity.
VCAT Findings regarding the Werribee Magistrates’ Court proceedings
In August 2010 the Law Institute of Victoria Ltd (LIV) appointed an investigator to conduct an investigation into Mr Frugtniet’s conduct in an incident which occurred at the Werribee Magistrates’ Court on 25 May 2010. It was alleged that Mr Frugtniet purported to act as a solicitor for a client in a proceeding before that court. It was alleged that he told the barrister for the other party that he was a solicitor and, when asked by the Magistrate which firm he worked with, he said that he was a sole practitioner. At that time, Mr Frugtniet was not an Australian legal practitioner as his admission to practise had been refused. The LIV claimed that Mr Frugtniet’s conduct on that day was in the nature of a contempt of Court which could be made the subject of a charge before VCAT. The proceeding was brought under s. 2.2.6(1)(b) of the Legal Profession Act and was not a proceeding in the nature of contempt.
The LIV, in its capacity as a delegate of the Legal Services Board, applied to VCAT for an order specifying that Mr Frugtniet is a disqualified person for the purposes of Division 3 of Part 2.2 of the Legal Profession Act. Section 2.2.6 of the Legal Profession Act provided:
2.2.6 Order disqualifying persons
(1) The Board may apply to the Tribunal for an order that a person (other than an Australian legal practitioner) is a disqualified person for the purposes of this Division if the person –
(a)has been convicted of a relevant offence; or
(b)in the opinion of the Board has been a party to an act or omission that, if the person had been an Australian legal practitioner, may have resulted in a charge being brought in the Tribunal.
(2) The Tribunal may order that the person is a disqualified person for the purposes of this Division, for a specified period or indefinitely.
(3) If an order under this section specifies that a person is a disqualified person indefinitely, the person may apply to the Tribunal to have the order revoked.
(4) The Tribunal, on application under subsection (3), may revoke an order if it considers it appropriate to do so.
(5) A person against whom an order is made under this section may appeal to the Court of Appeal on a question of law.
Judge Jenkins, Vice President, heard LIV’s application in February, March and April 2011 and handed down her decision on 8 April 2011. She ordered that Mr Frugtniet is a disqualified person for the purposes of Division 3 of Part 2.2 of the Legal Profession Act for a period of three years.
The application brought by the LIV was based on the affidavit of Mr Lowry, who was the barrister for the other party in the Werribee Magistrates’ Court, and a transcript of the proceeding in that court. The transcript makes it clear that the Magistrate asked Mr Frugtniet which firm he worked with and his answer was sole practitioner. When the Magistrate repeated his answer, Mr Frugtniet responded: That’s right. According to Judge Jenkins, Mr Lowry confirmed the extract of transcript which was in evidence before her. Furthermore, Mr Lowry gave an account of the conversation had with Mr Frugtniet at the Court where Mr Frugtniet confirmed that he was a sole practitioner. He also confirmed that he acted for the first named plaintiff in the proceeding in which he was appearing. Mr Lowry denied that Mr Frugtniet told him he was appearing as a spokesman for the plaintiffs under a power of attorney.
Also in evidence before VCAT was a General Power of Attorney made on 5 May 2010 which appeared to have been signed and stamped by Mr David Christie, Registrar, Magistrates’ Court of Victoria. Mr Christie gave evidence that he was not at the Werribee Magistrates’ Court on 25 May 2010 but was at the Sunshine Court. Mr Christie testified that he had never stamped a power of attorney. Furthermore, Mr Christie confirmed that if a Power of Attorney was produced to a Registrar, its existence and the fact that it was placed on the court file would have been recorded on the computer. A subsequent search of the court file was unable to locate the document.
On the other hand, Mr Frugtniet testified that on arrival at the counter at the Magistrates’ Court he explained who he was and that he appeared as a spokesman pursuant to a power of attorney, handing the original over-the-counter. He asked whether that could be stamped and a stamped copy given to him. He said that the original Power of Attorney was stamped and he was given back a copy of the stamped original. On announcing his appearance in court, Mr Frugtniet said that he appeared through a power of attorney as a spokesperson for his client. Mr Frugtniet also said that when he used the expression sole practitioner, he was merely referring to the fact that he was a sole practitioner migration agent, tax agent and conveyancer. He believed that the Magistrate had the Power of Attorney in front of him. Mr Frugtniet testified that he took great care to explain to the plaintiffs that he had not been admitted to practise; that he was not a barrister or solicitor; and he was not allowed to practise as a barrister or a solicitor. Mr Frugtniet’s client confirmed that he signed a Power of Attorney in favour of Mr Frugtniet on 5 May 2010 and saw him hand that over the counter at the Werribee Magistrates’ Court on 25 May 2010 and receive, in return, a copy of that stamped document.
Her Honour was highly critical of the evidence given by Mr Frugtniet and the other witnesses who supported his claim. On the other hand, she found that the evidence given by Mr Lowry, which was supported by objective contemporaneous evidence by way of notes made in his day book, should be accepted as a truthful and accurate account of what happened on that day. She found that Mr Frugtniet’s conduct on that day constituted a contempt of court. Her Honour then said:
However, by his conduct in this case the Respondent has failed to demonstrate any insight into his behaviour and failed to express any responsibility or remorse. Indeed he has denied any transgressions whatsoever, notwithstanding clear and objective evidence.
Furthermore the manner in which the Respondent has chosen to defend himself in this case raises very serious questions as to his willingness and capacity to be an honest and reliable witness.
Mr Frugtniet lodged an application in the Supreme Court of Victoria – Court of Appeal seeking a stay of the orders made by VCAT. That application was heard by Harper JA and MacCaulay AJA on 17 June 2011. The Court handed down its decision on the same day, refusing to grant the stay. MacCaulay AJA said, at [20]:
Mr Frugtniet wilfully and consciously lied to a court and practitioner. In the face of several years of refusal for admission based upon dishonesty, and with the clear knowledge of the seriousness of appearing without being admitted, his conduct assumes a significant level of gravity, in my view. Added to that, the circumstances reveal that there appears to have been some degree of planning undertaken by Mr Frugtniet in order to get around the limitation which he faced. I refer here to his alleged use of and reliance upon a power of attorney as the justification for being permitted to appear in Court and to represent the persons who he referred to as his clients.
And, at [23]:
Insofar as it may be a ground of the proposed appeal that it was not open for her Honour to conclude, as she did, that Mr Frugtniet had lied, in my view there was an abundance of evidence upon which her Honour could have so found. Any appeal on this ground would be bordering on hopeless.
I should also mention briefly what Harper JA said in agreeing with MacCaulay AJA. That is because it raises a familiar methodology of arguing employed by Mr Frugtniet. That is, to attempt to argue the meaning of words in a phrase without regard to their context. His Honour said, at [34] – [35]:
That seriousness [of the offending], I think, can be demonstrated by a very brief reference to what I understand to be a transcript of the proceedings before the magistrate at Werribee where the magistrate asked the applicant to identify the firm with whom he worked. The answer from the applicant was ‘Sole practitioner, your Honour’. The magistrate then repeated, in the form of a question, what the applicant had said: ‘Sole practitioner?’ to be accorded the reply ‘That’s right’.
It was put by Mr Monagle for the applicant in his submissions to this Court that there is some doubt about the meaning of the expression ‘sole practitioner’ and that it can refer to persons who are not legal practitioners. Indeed it can refer, no doubt, to persons other than legal practitioners; but in the context of the exchange between the applicant and the magistrate, there could be no doubt, in my opinion, that the applicant was informing the magistrate that he was a legal practitioner properly entitled to appear for a client in litigation which the magistrate was then in the course of hearing.
The VCAT matter then went on appeal to the Supreme Court of Victoria – Court of Appeal which was heard by Warren CJ, Nettle JA and Beach AJA. The Appeal Court allowed Mr Frugtniet’s appeal in so far as it related to a finding by VCAT that he was guilty of contempt of court because Judge Jenkins applied the wrong standard of proof. She decided that question on the balance of probabilities rather than on the beyond reasonable doubt standard. The Appeal Court nevertheless accepted that the contempt finding was superfluous to the reasoning on which VCAT based its order that Mr Frugtniet was a disqualified person. The Court also set aside VCAT’s costs orders. Otherwise, it dismissed the appeal.
Complaints lodged by clients
Mr Frugtniet conducted his business as a tax agent, migration agent and what he generally described as a business and tax consultancy under the name Unique Mortgage Services. His office was located on Bourke Street, Melbourne and he used a post office box for receipt of mail.
On 27 September 2011 three tax clients of Mr Frugtniet, Mr C Pineda, Mr J Galvez-Londono and Ms M Galvez-Londono lodged complaints with the Board regarding his conduct in respect of income tax returns for the 2010 income year. The essence of each of these complaints was similar. The complainants alleged that on completing their income tax returns, Mr Frugtniet informed them as to the amount they could expect by way of tax refund. Those expected amounts were subsequently paid into the complainants’ bank accounts as tax refunded by the ATO. However, subsequently, they discovered that their refunds were in fact substantially in excess of the amount which had been credited to their bank accounts. The balance appeared to have been retained by Mr Frugtniet. The discrepancies were as follows:
(a)Mr Pineda – tax refund amount $7935.96 – payment to bank account amount $1850;
(b)Mr Galvez-Londono – tax refund amount $3919.78 – payment to bank account amount $1951; and
(c)Ms Galvez-Londono – tax refund amount $3291.86 – payment to bank account amount $1603.92.

Although documents and witness statements from all three complainants were provided by the Board under s. 37 of the Administrative Appeals Tribunal Act 1974, only Ms Galvez-Londono was available for cross examination. For that reason, I have only taken into account the documents which she lodged in support of her complaint against Mr Frugtniet. In any event, the complaints made by the two other persons are identical save for the amounts involved.
In her witness statement which was made on 1 February 2012, Ms Galvez-Londono explained that she was interviewed by two investigators from the Board on that day. She testified that she had engaged Mr Frugtniet of Unique Mortgage Services to complete her tax return for the 2011 income year following recommendation by a friend. Ms Galvez-Londono said that in late July 2011 she telephoned Mr Frugtniet and made an appointment to see him at his office on 28 July 2011. However, on arriving for her appointment, she found Mr Frugtniet was not at his office. After telephoning Mr Frugtniet, she arranged to provide her employer’s tax summary for the 2011 income year by slipping that document under his door. Mr Frugtniet said he would telephone her to discuss her tax return.
When Mr Frugtniet had not contacted her as he said he would, she said that in the first week of August 2011 she telephoned him. She agreed to pay Mr Frugtniet $75 for preparing and lodging her tax return. No further charges were mentioned or agreed upon. Ms Galvez-Londono said she told Mr Frugtniet that she wanted to claim for the expenses of travelling between worksites in her car, some charitable donations and the expenses of working from home. Mr Frugtniet apparently asked her about her laundry and dry cleaning expenses and whether she was a student and a permanent resident. She told Mr Frugtniet she was not a student and that she was a resident with citizenship. Mr Frugtniet said he would prepare her return and call her back.
On the same day, Mr Frugtniet called Ms Galvez-Londono and told her that her refund would be about $1600 but she could maximise her return. She said Mr Frugtniet mentioned something about her residence but, in any event, she had to sign an authorisation so that payment of her tax refund would be paid into his bank account. She said Mr Frugtniet told her that if she agreed to have the refund paid into his bank account, the refund would be $2980.
Ms Galvez-Londono said that on 4 August 2011 she received an email from Mr Frugtniet enclosing an account for preparing her income tax return and providing her with an estimate of $1603.92 as her tax refund. Attached to that email was a Trust Account Authority Letter which she signed on 5 August 2011. She said Mr Frugtniet had called her on three occasions explaining that the Trust Account Authority Letter was required to maximise her tax refund. She said Mr Frugtniet did not provide her with a copy of her completed 2011 income tax return. Ms Galvez-Londono said her brother paid Mr Frugtniet the $75 fee on 5 August 2011 and he provided her brother with a receipt. She said that on 10 August 2011 she emailed to Mr Frugtniet the electronic lodgement declaration and the electronic funds transfer consent. I should explain that the electronic lodgement declaration that Ms Galvez-Londono sent to Mr Frugtniet on 10 August 2011 was most likely the second as it appears she also signed such a document on 9 August 2011. That was after she said she had the conversation with Mr Frugtniet about maximising her income tax return.
In the course of her interview with the Board investigator, she was shown part of her 2011 income tax return which was some three pages in length. She noted that there was a deduction claim in the amount of $5500 for work-related car expenses. She said she did not know how that figure had been calculated and that while she did tell Mr Frugtniet she had travelled 4744 km working from various sites, she had not been told what the amount of the deduction would be. She also noted a claimed deduction for work-related uniform/protective clothing/laundry expenses in the amount of $790. She did not know how that figure had been calculated. She said she had some cleaning expenses of around $150 and had purchased uniform shoes in the amount of $80. Ms Galvez-Londono was also shown a deduction claim for self education expenses in the amount of $3950. She did not know how that figure had been calculated as she did not have any self education expenses in 2011 and did not ask Mr Frugtniet to make that claim.
Ms Galvez-Londono testified that around late August or early September 2011 she discussed with a friend of hers, who also used Mr Frugtniet to complete his tax return, discrepancies in her friend’s tax return and that prompted her to contact the ATO to obtain a copy of her Notice of Assessment. When she received the notice which was dated 31 August 2011, she noted the ATO had assessed her for a tax refund of $4091.76. She had an existing amount of $799.90 owing to the ATO and the balance of the refund, $3291.86, was paid into Mr Frugtniet’s account. After confirming with the ATO that $3291.86 had been paid into Mr Frugtniet’s account, she sent him an email requesting that he pay that sum to her as soon as possible. Ms Galvez-Londono attached to that email the Notice of Assessment she had received from the ATO. In response, Mr Frugtniet sent an email stating that he had maximised the full available deductions and that he would be deducting a fee of $500 from that sum. She said Mr Frugtniet told her that if she did not agree to that course, he would lodge an amended income tax return so that the ATO could calculate the appropriate tax and refund to her the correct amount.
The evidence given by Ms Galvez-Londono to the effect I have stated above is supported by emails between her and Mr Frugtniet over the relevant period. It is of some significance, in my opinion, to record verbatim the statements made by Mr Frugtniet in the course of the email exchanges. After Ms Galvez-Londono sent to Mr Frugtniet an email dated 7 September 2011 at 11:15 am explaining that she had become aware of the true refund provided by the ATO, Mr Frugtniet responded on the same day at 12:19 pm:
As [you] would recall your instructions after your brother had attended was to authorise the remittance of your refund to me, so that your existing liability was incorporated into your tax return to maximise the complete deductions and provide you with the maximum refund.
On your instructions I maximised the full available deductions, but was not informed by you that you had further outstanding debt which was deducted accordingly. I will deduct your outstanding liability to me which is $500 and have your account credited as agreed subject to your confirmation via email of same.
However, if this was not what you agreed to, I will be more than happy to do an amended return so that the tax office can calculate the appropriate tax, and refund you the correct amount and I will not pursue recovering from you the outstanding liability and look forward to receiving your instructions in this regard.
Ms Galvez-Londono responded by email at 1:32 pm and said:
I signed a form that I attach bellow [sic], which says that my return for the year 2011 was $1603.92. Then you toll [sic] me to maximise my return if I signed the “trust account authority” letter. After you finished processing it you called me and over the phone you said that my return was $2980. Now I ask for my notice of assessment and I realise that my return was really $4091.76. Something not quite clear there.
Mr Frugtniet answered by email on the same day at 1:57 pm saying:
It is regrettable that notwithstanding your email with instructions after you had informed me to increase your liability so that you would get a refund of $2980.00, and failing to inform me that you had an outstanding debt, you seek to deny your liability to me and abuse me which I reject.
As part of the same email you sent and your initial instructions you forwarded what you would have received which was $1603.92, so that your instructions to provide greater deductions and receive $2980.00 after paying your liability to me you which you now deny is unacceptable, in that part of what I conveyed to your brother when he returned the stuff to you was precisely what I am telling you now.…
You were suggesting to me that since you were an Australian citizen that nothing could affect you, to which I informed you in procuring residency if any information was false or misleading, it can be revoked and thus citizenship revoked, but for some unknown reason you seem to think this is not possible, hence, I suggest you get proper advice.
Ms Galvez-Londono responded by email on 7 September 2011 at 2:22 pm saying:
Let me remind you that I was ok with the $1600 and you called me three times to offer me maximisation. I don’t understand what this tax has to do with my citizenship, I remember you asked me when I applied for permanence [sic] residency and I told you 27^th of July, I didn’t suggest anything because if I pay for an accountant is because I have no clue what is claimable and what is not, and I don’t provide false information. THAT WAS YOUR SUGGESTION.…
I am not going to authorise you to do anything because I don’t trust you. As I said you do what you think you should do that I will do the same.
Mr Frugtniet responded by email on 10 September 2011 at 8:11 pm. The first paragraph is significant because of its apparent threatening tone. Mr Frugtniet said:
It is of note that you accept signing a form, in that it is important that you remember that your tax return is prepared in accordance with the information supplied by you, and therefore the signed declaration I receive from you that the information provided to me for the preparation of this document is true and correct is what I submit, hence the following arises.
I will ensure that your tax return in respect of your earlier instructions is accordingly incorporated and an amended tax return submitted to the tax office, so that you receive an amended tax assessment notice which will take account of the fact that tax that was outstanding previously and not disclosed to me will be calculated as part of any new assessment and I will credit the tax office account with the total amount that I received and have held in trust, upon receipt of the amended tax assessment notice.
The reference by Mr Frugtniet to the amended tax assessment notice, taking account of prior outstanding liabilities to the ATO, is peculiar. It appears Mr Frugtniet was suggesting that Ms Galvez-Londono should have disclosed the prior liability to him in order to provide an accurate income tax return. Of course, that makes no sense whatsoever. The assessment of tax payable is made simply on what is returned in a taxpayer’s income tax return. The amount refunded to the taxpayer following assessment will alter if there is an existing liability.
In a responding email dated 12 September 2011 at 12:57 pm, Ms Galvez-Londono explained why she had formed the view that her tax return was not prepared on the information she gave to Mr Frugtniet. She said:
I doubt that my tax return was prepared only with the information supplied by me. When I sign that form you did not give me a copy of detailed information of what you actually claimed, you just gave me a figure ($2980) over the phone. I think there are some discrepancies between the information I gave you and what you actually claimed as I never knew that the result of this return was $4091.71. Could you please give me a copy of all my claims for the tax return 2011??
Not having received a response from Mr Frugtniet, Ms Galvez-Londono sent him another email on what appears to be 16 September 2011 stating she had not yet received her 2011 income tax return. She also asked Mr Frugtniet to provide her with a copy of the amended income tax return if he decided to lodge one.
Mr Frugtniet finally responded in an email dated 19 September 2011 at 8:05 pm. This email is significant for the very clear threat that Mr Frugtniet makes. He said:
I draw your attention to the following matters and confirm that you will receive your amended tax return/assessment the 2011 from the tax office directly in due course, which I believe will be within the next 7 – 10 working days.
In order to avoid such un-substantiated allegations and my repudiation of same in accordance with you [sic] initial instructions which you allege were changed, although you accepted to receive $2980, if that were true, would make you complicit in seeking to defraud the Commonwealth Government.
However, to avoid this continuing any further I reiterate that notwithstanding non-disclosure of amount owing to tax office by you, the correct legal procedure is for you to receive the correct assessment/return the 2011, which I will implement.
Ms Galvez-Londono responded by email on 20 September 2011 at 08:54 am. After denying any suggestion that she was complicit in an attempt to defraud the Commonwealth Government, she repeated what she had said in previous emails. As far as lodging an amended income tax return is concerned, she said:
I said that I do not authorise you to do any amendment because I want to do it myself with the taxation office.
In his evidence in chief, Mr Frugtniet said that when he told Ms Galvez-Londono that he expected her to get a refund of $1600, she was unhappy. He also said he told her to review her deductions. He agreed that he told her that she needed to maximise her deductions. Mr Frugtniet said Ms Galvez-Londono was unhappy when she signed the electronic lodgement declaration on 4 August 2011 and the accompanying electronic funds transfer consent. On the electronic lodgement declaration, the total deductions are said to be $3907. The taxable income was said to be $58,896. However, on the income tax return in evidence before me, which appears to be the only income tax return lodged for the 2011 income year, the total deductions claimed amounts to $10,915. Ms Galvez-Londono appears to have signed a second electronic lodgement declaration which is dated 9 August 2011, with total deductions said to amount to $10,915.
In cross-examination, Mr Frugtniet was taken to the email he sent to Ms Galvez-Londono on 7 September 2011 and the comment he made about the revocation of her citizenship. He agreed that he made that statement but denied that it was a threat and that he was simply reminding her of what could happen. He also denied that he had phoned Ms Galvez-Londono on three occasions offering to maximise her return. When asked whether he had provided Ms Galvez-Londono with an amended tax return, he responded: No. He agreed that she had previously asked for copies of her income tax return but did not respond to the question whether he had given a copy to her. In fact, when he was asked whether only one return was lodged with the ATO, he denied that and said that he did a recalculation. However, that answer was, of course, non-responsive and I had no evidence before me of an amended income tax return for the 2011 income year. Mr Frugtniet was also asked if he provided Ms Galvez-Londono with details of the claim that he had lodged on her behalf and his answer was: not in the context of the dispute. Again, and with respect to Mr Frugtniet, that answer was unclear at best and, in any event, non-responsive. He also denied that he told Ms Galvez-Londono that if she agreed to have the refund paid into his account, the refund would be $2980.
In his witness statement Mr Frugtniet said that in October 2011, he amended Ms Galvez-Londono’s income tax return in accordance with her initial instructions and returned the surplus funds in his account to the ATO. In addition, he handed over to Victoria Police the returns and cheque amounts forwarded to him by the tax office in respect of the three persons who had complained. This statement was in effect similar to that recorded in the submissions he made to the Board Conduct Committee by email on 18 July 2012. The suggestion was that he voluntarily offered these documents to Victoria Police. In his response to the Board letter of 26 June 2012 he said:
In this regard I had full and proper authority to lodge the tax returns, retain the funds in trust, but on discovering that false information had been provided I was requested by complainants to provide them with the funds held in trust which I was not prepared to do, instead in accordance with my obligations the funds were returned to the tax office, with confirmation that it was debited to our account with as requested amended assessments formally provided to them through Peter Romanis of Victoria Police.
However, when asked in cross-examination whether that was the case, Mr Frugtniet said no, the police contacted him. In fact, Mr Frugtniet provided a copy of an ANZ Cash Management Account which discloses a debit entry of $3291.86 made on 6 October 2011. Mr Frugtniet claimed that was the return of the surplus monies he held on trust for Ms Galvez-Londono. The problem with that claim is that while I have no doubt the monies were returned to the ATO as that is disclosed in Ms Galvez-Londono’s running account, the Cash Management Account does not appear on its face to be a trust account. If those monies were in fact held on trust, I have no doubt that the account would be clearly described as a Trust Account. It was not.
In cross-examination, Ms Galvez-Londono was referred to an email she sent to Mr Frank Pietka from the Board. Quite plainly, her statement of evidence dated 1 February 2012 was drafted by Mr Pietka. Although it was suggested that it was not in fact her statement, she not only signed that statement, she also declared the statements contained in that document to be true and correct in the belief that making a false statement under the circumstances could cause her to be liable to the penalties of perjury.
Ms Galvez-Londono was also taken to the electronic lodgement declaration and electronic funds transfer consent she signed on 4 August 2011 and the trust account authority letter which she signed 5 August 2011. When asked about that authority, she said that she did not understand anything to do with trusts. She was then directed to the second electronic lodgement declaration which she signed on 9 August 2011 and which had the amended total deductions amount of $10,915 entered in it. When asked to explain why she signed that document after signing the first electronic lodgement declaration on 4 August 2011 which indicated total deductions of $3907, she responded by saying she didn’t think she signed twice. When referred to her income tax return where the sum of $10,915 is claimed as a deduction, she said that she never gave Mr Frugtniet that figure.
Mr Wendler then referred Ms Galvez-Londono to a notice received from the ATO which was in fact a Statement of Account for the period 24 August 2011 to 27 August 2011. Mr Wendler incorrectly referred to that as a Notice of Assessment. That notice has Ms Galvez-Londono’s home address on it and it was suggested to her that she was aware of the initial assessment indicating that a further sum of $3291.66 was held on her behalf by Mr Frugtniet. She denied that was the case and maintained she had requested the Notice of Assessment from the ATO which was subsequently sent to her. In fact, that claim is supported by the email Ms Galvez-Londono sent to Mr Frugtniet on 7 September 2011 at 11:15 am enclosing a Notice of Assessment.
The evidence regarding this issue strongly supports the claims made by Ms Galvez-Londono. In particular, the emails between Ms Galvez-Londono and Mr Frugtniet, which were drafted well before Ms Galvez-Londono so much as thought about making the complaint to the Board, provide the most accurate account of what transpired at the relevant time. Furthermore, the fact that Mr Frugtniet discussed in those emails that he could, as he put it, maximise Ms Galvez-Londono’s tax return, is cause for serious concern. It appears that Mr Frugtniet used the word maximise as a euphemism for lodging a return with inflated claims. The only legal method that I am aware of which could provide a taxpayer the best possible outcome is for the taxpayer to fully disclose all income and all deductions, mindful of the need to be able to substantiate all claimed deductions in excess of $300. I accept that Ms Galvez-Londono was not familiar with the taxation law of this country, being a recent immigrant. It is understandable that she relied on Mr Frugtniet to provide her with sound and lawful taxation advice.

Furthermore, the fact that Mr Frugtniet obtained authority from Ms Galvez-Londono to receive tax refunds into his trust account when that was no sound reason for doing so, given that she had already paid his $75 fee, and only on the basis that he could maximise her income tax return, would cause a reasonably knowledgeable taxpayer to raise questions. Mr Frugtniet did not provide a copy of the completed return to Ms Galvez-Londono and, although he denied it, my view is the Notice of Assessment was apparently sent to him at his post office box, as was the case with the remaining two complainants. Regardless, in an attempt to discredit Ms Galvez-Londono, Mr Frugtniet directed my attention to the Statement of Account provided by the ATO on 31 August 2011 which was clearly addressed to her home address.
In accordance with the directions I made at the conclusion of the hearing, Mr Frugtniet also purported to provide me with the Notice of Assessment which I understood was the notice which he received from the ATO. Mr Frugtniet submitted:
The Applicant refers to the Notice of Assessment of [M] Galvez for the year ended 2011 the pages printed at the time including that which was also forwarded via email by [M] Galvez referred in the section 37 with the print seemingly over printing, although it is important to keep in mind that the first page last line states: Please see over for important information about your assessment which is labelled as Important Information on page 2, although no statement of account was attached. It is to be noted that the tax returns whether it was the original or amended contained the address details for [M] Galvez which was also the postal address as evidenced in this section 37 documents including that exhibited by the Investigators to [M] Galvez so that complete details would be known to her no sooner it was posted.
With respect to Mr Frugtniet, that is not an accurate statement about the Notice of Assessment which he lodged with the Tribunal. The cause for the over printing on that Notice is most likely that it is a copy of the notice which Ms Galvez-Londono attached to her email of 7 September 2011 at 11:15 am. It does contain her home address and not Mr Frugtniet’s post office box number as do the notices regarding the two remaining complainants which were included in the section 37 documents. That is readily explained as Ms Galvez-Londono said she contacted the ATO and asked that her Notice of Assessment be sent to her. It appears that her Statement of Account was included as it was also addressed to her home address. The fact that her income tax return also contains her home address is not indicative of anything. Every income tax return is required to have the postal address of the taxpayer inserted. Mr Frugtniet did not provide copies of Ms Galvez-Londono’s income tax return nor an amended income tax return which he claims was completed. If in fact an amended income tax return was lodged, it was clearly done without Ms Galvez-Londono’s authority.
Despite the ATO refunding to Ms Galvez-Londono the net sum of $3291.86, Mr Frugtniet did not inform her that he held that sum in his purported trust account (there was no evidence that it was a trust account). It was only when Ms Galvez-Londono became suspicious after discussions with the other persons who complained about his conduct that she contacted the ATO asking for her Notice of Assessment. When she discovered that the Notice of Assessment indicated she was entitled to a return of $4091.76 based on the income tax return lodged by Mr Frugtniet, she complained. Had she been the person attempting to defraud the Commonwealth as Mr Frugtniet suggested, there would be no reason whatsoever for her to lodge a complaint with the Board.
The evidence discloses that once Mr Frugtniet was found out to be acting improperly in relation to her income tax return, he attempted to dissuade Ms Galvez-Londono from making a complaint by suggesting that her citizenship status could be at risk for making false and misleading statements in her income tax return. He then attempted to shift blame to her by stating that he simply completed the income tax return in accordance with her instructions. He plainly did not and it appears that the income tax return which he lodged with the ATO had highly inflated deductions of which Ms Galvez-Londono was not aware. He also said that he would lodge an amended income tax return but there is no evidence that he did so. He attempted to confuse Ms Galvez-Londono by suggesting that an amended tax return would take into account the fact that tax was outstanding previously and not disclosed to him. The fact that a taxpayer has an outstanding debt to the ATO has no effect whatsoever on a taxpayer’s assessment in any particular income year. It may affect the net outcome, as it did in this case, but it cannot affect the assessment.
Finally, in his email of 19 September 2011 Mr Frugtniet suggested that Ms Galvez-Londono might be complicit in seeking to defraud the Commonwealth Government. In my opinion, that may be taken as an admission of his conduct while seeking to apportion blame to Ms Galvez-Londono. I find, on the balance of probabilities, that this was a scheme devised by Mr Frugtniet and implemented by him in an attempt to deprive the Commonwealth of funds to which he was not entitled. It is, without question, disgraceful conduct by a registered tax agent.
CONCLUSION
On taking into account all of the documentary evidence before me and the oral evidence provided by Mr Frugtniet I have formed the view that he failed, except for one question, to truthfully answer the questions to which I have referred at paragraph [26] on his application for registration as a tax agent in May 2008. The enquiry raised by those questions clearly went to his fitness and propriety to act as a tax agent. If, as he contended, he had put his past misdeeds behind him, I would have expected him to have disclosed his past conduct, including charges of which he was acquitted, which would then indicate sincerity in having changed from the person he was. That he chose not to do so, must be cause for concern that he has not changed his behaviour. In fact, the judgements of Pagone and Gillard JJ are highly critical of Mr Frugtniet’s failure to disclose his past misconduct. As Gillard J said, if his past conduct shows him to be a man who is dishonest and cannot be trusted, he must show that his past is behind him and that he can be trusted to pursue an honest career. I find that Mr Frugtniet has failed to do so in answering the questions in his application in the negative.
I have also found the way in which Mr Frugtniet attempted to exculpate himself to be most disturbing. For example, his arguments about the Board of Examiners not being a professional body or registration board were wholly unmeritorious in the context in which he was required to make disclosure to the Board regarding his fitness and propriety to act as a tax agent.
Similarly, Mr Frugtniet’s explanation for his conduct when he appeared before the Werribee Magistrates’ Court is cause for serious concern. Despite transcript of that proceeding clearly indicating that he held himself out to be a sole practitioner (inferring that he was admitted as a legal practitioner) to the Magistrate, he then gave a totally implausible explanation including the suggestion that he was referring to the conduct of his practice as a migration agent, tax agent and conveyancer. It also appears as though Mr Frugtniet concocted a power of attorney for the purpose of establishing his right to appear on behalf of his clients. If that was the basis upon which he appeared, it begs the question why his response to the Magistrate was that he was a sole practitioner. In his supplementary submissions lodged with the Tribunal on 8 August 2014, Mr Frugtniet attempted to excuse his conduct by suggesting he had a brain snap and acted out of loyalty to a friend. I must say that every excuse Mr Frugtniet offered simply appears to make the situation worse than it was at the outset.
Finally, the most recent matter for concern was the complaint lodged by Ms Galvez-Londono regarding her tax return for the 2011 income year. His conduct in that matter indicates that he has learnt nothing from the past and that his dishonest behaviour has continued unabated. I find that he is clearly not a fit and proper person to be registered as a tax agent. He should not be permitted to deal with other people’s money in any circumstances.
I find that the decisions of the Tax Practitioners Board made on 16 January 2013 (Mr Frugtniet notified by letter dated 15 February 2013 and later by an updated notice dated 19 February 2013) to terminate his registration as a tax agent and to preclude him from applying for registration for a period of five years from the date of termination were correct. I affirm those decisions.

I certify that the preceding 109 (one hundred and nine) paragraphs are a true copy of the reasons for the decision herein of Senior Member Egon Fice
...[sgd].....................................................................
Associate
Dated 23 October 2014

Dates of hearing 26-27 June 2014

Date final submissions received 8 August 2014

Counsel for the Applicant Mr G.D. Wendler

Advocate for the Respondent Mr D. Brown

Solicitors for the Respondent Australian Government Solicitor

Division	GENERAL ADMINISTRATIVE DIVISION
File Number	2013/0717
Re	Rudy Frugtniet
APPLICANT
And	Tax Practitioners Board
RESPONDENT

Tribunal	Egon Fice, Senior Member
Date	23 October 2014
Place	Melbourne

Dates of hearing	26-27 June 2014
Date final submissions received	8 August 2014
Counsel for the Applicant	Mr G.D. Wendler
Advocate for the Respondent	Mr D. Brown
Solicitors for the Respondent	Australian Government Solicitor