Shmuel and Tax Practitioners Board
[2019] AATA 2168
•23 July 2019
Shmuel and Tax Practitioners Board [2019] AATA 2168 (23 July 2019)
Division:TAXATION & COMMERCIAL DIVISION
File Number: 2018/5535
Re:Immanuel Shmuel
APPLICANT
AndTax Practitioners Board
RESPONDENT
DECISION
Tribunal:The Hon. Matthew Groom, Senior Member
Date:23 July 2019
Place:Melbourne
The decision under review is affirmed.
.....[sgd]...................................................................
The Hon. Matthew Groom, Senior Member
Catchwords
Applicant’s registration as tax agent cancelled – failure to comply with personal tax obligations – failure to disclose bankruptcy – failure to respond to Tax Practitioner Board enquiries - fit and proper person – professional code of conduct – consideration of personal circumstances - decision affirmed
Legislation
Administrative Appeals Tribunal Act 1975
Bankruptcy Act 1966 (Cth)
Corporations Act 2001 (Cth)Tax Agent Services Act 2009
Cases
Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321
Carter and Tax Practitioners Board (Taxation) [2017] AATA 528
Comino and Tax Agents Board of NSW [2009] AATA 766
Dadwal and Tax Practitioners Board [2018] AATA 2878
Delis and Tax Practitioners Board [2015] AATA 820
Kolya and Tax Practitioners Board [2011] AATA 804
Peterson and Tax Practitioners Board [2018] AATA 93Re Stephen Tien-Ping Su and Tax Agents Board, South Australia [1982] 82 ATC 4284 Toohey and Tax Agents Board of Victoria [2009] AATA 603
REASONS FOR DECISION
The Hon. Matthew Groom, Senior Member
Date: 23 July 2019
INTRODUCTION
This is a review of a decision made by the respondent on 16 August 2018 to terminate the applicant’s tax agent registration in accordance with section 40-5(1)(b) of the Tax Agent Services Act 2009 (the Act) and to restrict the applicant from re-applying for registration for a period of 12 months.
The respondent made its decision based on a finding that the applicant was not a fit and proper person as required under section 20-5(1)(a) of the Act.
The respondent notified the applicant of its decision by letter dated 7 September 2018.
The applicant made application for a review of the decision before this Tribunal on 24 September 2018 in accordance with section 70-10 of the Act.
The issue before the Tribunal is whether the decision made by the respondent to:
(a)terminate the applicant’s registration as a tax agent on the basis that the applicant was not a fit and proper person for the purpose of section 20-5(1)(a) of the Act; and
(b)restrict the applicant from reapplying for registration for a period of 12 months,
is the correct or preferable decision.
A hearing in this matter was conducted on 9 July 2019. The respondent was represented by Ms Mia Clarebrough of counsel and the applicant was self-represented.
LEGISLATIVE CONTEXT
The object of the Act as set out in section 2-5 is to:
ensure that tax agent services are provided to the public in accordance with appropriate standards of professional and ethical conduct. This is to be achieved by (among other things):
(a) establishing a national Board to register tax agents, BAS agents and tax (financial) advisers; and
(b) introducing a Code of Professional Conduct for registered tax agents, BAS agents and tax (financial) advisers; and
(c) providing for sanctions to discipline registered tax agents, BAS agents and tax (financial) advisers.
Under the Act a person is required to be registered to provide tax agent services for a fee, or to engage in other conduct connected with providing such services. Section 20-5 sets out the requirements for registration of an individual as follows:
(1)An individual, aged 18 years or more, is eligible for registration as a registered tax agent, BAS agent or tax (financial) adviser 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, BAS agent or tax (financial) adviser; 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.
Once registered, a tax agent must comply with several requirements, in particular, the Code of Professional Conduct (the Code). The Code is set out in Part 3 of the Act as follows:
Honesty and integrity
(1) You must act honestly and with integrity.
(2) You must comply with the taxation laws in the conduct of your personal affairs.
(3) If:
(a) you receive money or other property from or on behalf of a client; and
(b) you hold the money or other property on trust;
you must account to your client for the money or other property.
Independence
(4) You must act lawfully in the best interests of your client.
(5) You must have in place adequate arrangements for the management of conflicts of interest that may arise in relation to the activities that you undertake in the capacity of a registered tax agent, BAS agent or tax (financial) adviser
Confidentiality
(6) Unless you have a legal duty to do so, you must not disclose any information relating to a client’s affairs to a third party without your client’s permission.
Competence
(7) You must ensure that a tax agent service that you provide, or that is provided on your behalf, is provided competently.
(8) You must maintain knowledge and skills relevant to the tax agent services that you provide.
(9) You must take reasonable care in ascertaining a client’s state of affairs, to the extent that ascertaining the state of those affairs is relevant to a statement you are making or a thing you are doing on behalf of the client.
(10) You must take reasonable care to ensure that taxation laws are applied correctly to the circumstances in relation to which you are providing advice to a client.
Other responsibilities
(11) You must not knowingly obstruct the proper administration of the taxation laws.
(12) You must advise your client of the client’s rights and obligations under the taxation laws that are materially related to the tax agent services you provide.
(13) You must maintain professional indemnity insurance that meets the Board’s requirements.
(14) You must respond to requests and directions from the Board in a timely, responsible and reasonable manner.
Section 40-5(1) of the Act provides that the respondent may terminate a tax agent’s registration as follows:
(1) If you are a registered tax agent, BAS agent or tax (financial) adviser 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.
Under section 20-45 events that may affect your registration include:
(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.
Section 40-25 of the Act provides that if the respondent terminates the tax agent’s registration, it may also determine a period, of not more than five years, during which the tax agent may not reapply for registration.
FIT AND PROPER PERSON REQUIREMENT
The expression ‘fit and proper person’ is not defined in the Act. In giving meaning to the term regard should be had to its statutory context.[1] The expression has previously been considered in the context of tax agents. For example, in Re Stephen Tien-Ping Su and Tax Agents Board, South Australia [1982] AATA 127, 82 ATC 4284 at 4286 Davies J considered the expression in such a context and stated that it required a person to be:
…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.
[1] Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 at 380.
In assessing whether or not the applicant meets the fit and proper person requirement for the purpose of section 20-5(1)(a) the Act specifically requires 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.[2]
[2] Section 20-15.
As noted by Deputy President Humphries in Carter and Tax Practitioners Board (Taxation) [2017] AATA 528 at [62]:
Section 20-15 makes clear that, in assessing whether an individual is a fit and proper person under the Act, the Board must have regard to whether he or she is of good fame, integrity and character. This language is broadly expressed, mandating as part of this enquiry a general overview of an agent’s reputation and conduct, not merely his or her conduct as a tax agent.
Applying the fit and proper purpose test in this case therefore requires a broad assessment having regard to the nature of the role of a tax agent; the conduct of the applicant; whether the applicant is of good fame, integrity and character; and whether there are grounds for confidence that the applicant is able to provide tax agent services in accordance with the Act and maintain reasonably expected standards of professional and ethical conduct[3].
EVIDENCE AND CONSIDERATION
[3] See section 2-5 of the Act.
The respondent contends that the applicant does not meet the fit and proper person requirement for the purpose of section 20-5(1)(a) on the basis that:
(a)The applicant failed to comply with his taxation obligations;
(b)The applicant provided false and misleading statements to the respondent in failing to declare on his annual disclosure to the respondent that he had outstanding tax obligations and had been issued with a default judgment order and a bankruptcy notice;
(c)An event affecting the applicant’s registration, as described in section 20-45 of the Act, had occurred in the past 5 years as he became an undischarged bankrupt on 20 February 2018;
(d)The applicant failed to advise the respondent of this event as required under section 30-35(1)(b) of the Act;
(e)The applicant failed to respond to the respondent in a timely, responsible and reasonable manner as required by the Code;
(f)The applicant failed to meet other statutory obligations as a bankrupt and also as a company director; and
(g)The applicant entered a plea of guilty to a criminal charge involving dishonesty under the Criminal Code of the Commonwealth.
Failure to comply with taxation obligations
The Tribunal Documents produced to the Tribunal by the respondent in accordance with section 37 of the Administrative Appeals Tribunal Act 1975 (the T Documents) support the following findings of fact to the Tribunal’s satisfaction:
(a)On 26 May 2016, the Deputy Commissioner of Taxation commenced proceedings against the applicant in the County Court of Victoria to recover outstanding tax liabilities totalling $109,238.00 plus costs and interest;[4]
(b)The claim by the Deputy Commissioner of Taxation against the applicant arose out of a taxation dispute involving a company by the name of E.C. Services Pty Ltd of which the applicant was at the relevant times the sole director. The dispute relates to a failure by E.C. Services Pty Ltd to pay PAYG withholding liabilities to the Australian Tax Office (the ATO) and the applicant’s failure to comply with a Director Penalty Notice issued by the ATO to pay those liabilities;[5]
(c)On 4 April 2017, the County Court of Victoria entered default judgment against the applicant in the sum of $110,021.60 (including costs). The applicant was not present in court at the hearing of the default judgment;[6] and
(d)A Bankruptcy Notice dated 2 June 2017 was issued in the name of the applicant by the Deputy Commissioner of Taxation, claiming a total debt of $111,653.83 (including accrued interest).[7]
[4] Refer T-Documents, T4, pages 30-37.
[5] Refer T-Documents, T4, pages 32-33.
[6] Refer T-Documents, T4, pages 38-9.
[7] Refer T-Documents, T4, pages 40-41.
The respondent contends that the applicant’s conduct leading up to the default judgment and the default judgment itself is evidence that the applicant has failed to comply with his taxation obligations. The applicant refutes this contention on the basis that he continues to dispute that he is liable for the Director Penalty Notice issued against him and that, as a consequence, the default judgment should not have been entered and the bankruptcy notice should not have been issued. The applicant told the Tribunal that the underlying debt arises out of a franchise agreement dispute with the Bank of Queensland. The applicant told the Tribunal that the Bank of Queensland has acted inappropriately in relation to the franchise agreement and on that basis he does not accept that E.C. Services Pty Ltd is responsible for failing to meet its tax obligations nor that he is liable for the Director Penalty Notice subsequently imposed on him. When asked under cross–examination whether he accepted the default judgment of the County Court of Victoria, he told the Tribunal that he has “concerns”. He acknowledged the existence of the default judgment but he did not agree with it.
There are a number of difficulties for the applicant with respect to his position. First, notwithstanding his claim that there is no proper basis for him being liable or responsible for the debt arising from the Director Penalty Notice, there is no evidence before the Tribunal that the applicant has taken appropriate steps to effectively defend the claim made against him in respect of the debt. There is also no evidence before the Tribunal that he has taken appropriate steps to have the default judgment set aside. In any case, once the default judgment was entered it is beyond dispute that a tax debt crystallised. It is not for this Tribunal to look behind that judgment. The default judgment represents an obligation on the applicant to pay the amount of the judgment to the ATO. Despite this obligation, the applicant has failed to do so. He has also failed to enter into any arrangement for the payment of the debt on terms agreed with the ATO. The evidence before the Tribunal is that the applicant has simply put his head in the sand and maintained a denial in relation to the existence of the debt notwithstanding his clear obligation to pay it.
Having considered the evidence before it the Tribunal is satisfied that the applicant’s failure to ensure his company’s compliance with tax obligations when acting as a director of the company was a failure to comply with his personal taxation obligations.[8] Further it is clear from the evidence that this was not an isolated incident but rather involved a systematic failure that occurred over a number of years. In addition, his failure to meet the obligation arising out of the Director Penalty Notice and the subsequent default judgment are further failures of the applicant to meet his personal tax obligations.
[8] See also Delis and Tax Practitioners Board [2015] AATA 820 at [90].
The Tribunal accepts the contention put by the respondent that a tax agent owes a higher standard of care when it comes to complying with taxation obligations. As stated by Deputy President McDonald in Toohey and Tax Agents Board of Victoria [2009] AATA 603 at [36]:
As a tax agent, the applicant should hold himself up to a higher standard than the general public. He has an intricate knowledge of tax laws and it is reasonable to assume that he knows the importance of lodging tax returns on time. His clients, as well the general public, should be able to entrust their taxation affairs to him and have confidence that he will be able to lead by example and file his tax returns on time as required by the law.
There is clear authority that a failure by a tax agent to comply with taxation obligations is sufficiently serious of itself to justify a finding that a person fails to meet the fit and proper person requirement. Complying with taxation obligations is a fundamental duty of a tax agent and goes to the heart of an agent’s capacity and willingness to perform their function. A failure to comply with taxation obligations must raise serious doubt about the capacity and commitment of an agent to competently handle other people’s taxation affairs. As described by Deputy President Handley and Senior Member Professor Creyke, in the case of a tax agent, compliance with taxation obligations is a matter that goes to the agent’s competence and ability and that “a tax agent’s demonstrated conduct should be above reproach, being central to the service provided to his clients”.[9] In addition, a failure to comply with taxation laws in the conduct of your personal affairs is a breach of the Code, which itself provides basis for termination of a tax agent’s registration under section 30-30 of the Act.
[9] Comino and Tax Agents Board of NSW [2009] AATA 766 at [36].
For these reasons the Tribunal is satisfied that the applicant’s conduct in failing to comply with his taxation obligations must reflect adversely on his good fame, integrity and character, is not consistent with a tax agent maintaining reasonably expected standards of professional and ethical conduct and is therefore not consistent with him meeting the fit and proper person requirement set out in the Act.
False and misleading statements to the respondent
The T Documents include evidence that on 20 October 2017 the applicant submitted his individual tax agent annual declaration to the respondent (the annual declaration). In the annual declaration, in response to the question of whether the applicant has held the status of an undischarged bankrupt or was aware that he will become an undischarged bankrupt the applicant answered ‘no’. In response to the question of whether the applicant has any overdue tax obligations the applicant answered ‘no’. The applicant also declared as follows[10]:
·I have answered all the relevant questions to the best of my knowledge, information and belief, and they are true and correct if every particular.
·I am aware that if I make a statement that is false or misleading in a material particular, then I may be guilty of an offence pursuant to section 8K of the Taxation Administration Act 1953.
·I understand and will comply with the Tax Agent Services Act 2009, including the Code of Professional Conduct.
[10] Refer T-Documents, T4, page 45.
The respondent contends that the applicant was aware that he had outstanding tax obligations at the time of the declaration and was also aware that a bankruptcy notice had been issued in his name and remained outstanding. The respondent contends that notwithstanding this the applicant answered ‘no’ to the relevant questions and in doing so knowingly made a false statement to the respondent.
The applicant denies the respondent’s contentions. The applicant told the Tribunal that he answered the questions truthfully based on the knowledge that he had at the time. He continues to assert that he has no outstanding tax obligations and also denies the validity of the default judgment and the bankruptcy notice for the reasons set out above. When presented with the default judgment and bankruptcy notice in cross-examination, the applicant acknowledged the existence of the documents but denied their validity. He told the Tribunal “I see it but I am not responsible”. The applicant also denies the contention on the basis of his claim that he was not made aware of the default judgment or the bankruptcy notice until he was advised by the trustee in 2018. The applicant denies ever having been served with a copy of the default judgment and bankruptcy notice.
Again, there are a number of difficulties with the applicant’s position. First, as already stated, the Tribunal accepts as a fact that a default judgment had been entered against the applicant for the outstanding debt in April of 2017. The Tribunal also rejects the applicant’s evidence that he was not made aware of the default judgment or the bankruptcy notice before he completed the annual declaration. The T Documents show that by letter dated 24 July 2017 and addressed to the applicant’s home address, the ATO served copies of the bankruptcy notice in the applicant’s name issued on 2 June 2017 together with the Judgment Order obtained in the County Court of Victoria on 4 April 2017. In his evidence the applicant conceded that the address was his correct home address. There was evidence before the Tribunal that the applicant had been receiving other correspondence at that address without difficulty.
The applicant gave evidence he had been in dispute with the ATO for some time in relation to the matter and it is reasonable to assume that he would in those circumstances have been attentive to its progress. In that context, when confronted with the requirement to declare definitively to the respondent whether or not any taxation obligations were outstanding it was incumbent on the applicant to make appropriate enquiries with the ATO as to the status of the ongoing dispute. There is no evidence before the Tribunal that the applicant made any enquires with the ATO in relation to the status of the dispute during the period leading up to the making of his annual declaration. It is reasonable to infer that he did not make such enquiries because he in fact knew the status of the dispute having been served with the default judgment and bankruptcy notice.
It is also clearly convenient to the applicant’s case in these proceedings to claim that he was not notified of the default judgment or the bankruptcy notice prior to the completion of his annual declaration. In addition, having heard his evidence directly the Tribunal found the applicant’s evidence on this point to be unpersuasive particularly having regard to the broader facts.
For the above reasons, the Tribunal finds that the applicant did receive the ATO’s letter dated 24 July 2017, and that he was aware of the default judgment and the bankruptcy notice at the time he completed his annual declaration. The Tribunal is also satisfied that, in completing the annual declaration in the manner that he did, the applicant knowingly misled the respondent in relation to his outstanding tax obligation and also the possibility that he might become bankrupt.
For the applicant to knowingly mislead the respondent is a very serious matter. As stated by Member Webb in relation to the provision by a tax agent of inaccurate information to the respondent in Kolya and Tax Practitioners Board [2011] AATA 804 at [33]:
..as a prospective tax agent and provider of tax services there is an obligation on Mr Kolya to ensure that the information he provides the Board is accurate and correct. This is a serious matter that goes to the important trust that must exist between the Board and the tax agent. The provision of incorrect, incomplete or misleading information to the Board by a tax agent, or a prospective tax agent, is not consistent with the standards of fitness and propriety attaching to registration as a tax agent, or with the standards set out in the Code of Professional Conduct.
For these reasons the Tribunal is satisfied that by misleading the respondent in relation to his outstanding taxation obligations and the possibility that he might become bankrupt the applicant is in breach of his obligations as a tax agent under the Act including his obligations under the Code which requires him to act with honesty and integrity. The applicant’s conduct must reflect adversely on his good fame, integrity and character, is not consistent with a tax agent maintaining reasonably expected standards of professional and ethical conduct and is therefore not consistent with him meeting the fit and proper person requirement set out in the Act.
Event affecting applicant’s registration
The applicant gave inconsistent evidence to the Tribunal in relation to his bankruptcy. On a number of occasions under cross-examination the applicant said ‘no’ in response to the question – “are you an undischarged bankrupt”. However he also gave evidence to the Tribunal that he is seeking to have his bankruptcy annulled. Having heard the totality of the evidence the Tribunal is satisfied that a more accurate description of the applicant’s position is that he acknowledges as a matter of fact that he has been declared a bankrupt however he denies the validity of the declaration on the basis that he disputes the underlying debt that ultimately led to his bankruptcy.
Having considered the materials before it the Tribunal is satisfied that the applicant became an undischarged bankrupt on 20 February 2018, continues to be an undischarged bankrupt and that his bankruptcy is a direct consequence of his failure to meet his personal taxation obligations. The T Documents include a copy of an order of the Federal Circuit Court dated 20 February 2018 that the estate of the applicant be sequestered under the Bankruptcy Act 1966 (Cth).[11] The effect of that order was that the applicant became an undischarged bankrupt on that date. The fact that the applicant was declared an undischarged bankrupt is an event that may affect his registration as a tax agent under section 20-45 of the Act.
[11] Refer T-Documents, T4 pages 46-47.
In accordance with section 20-15 of the Act, in deciding whether or not it is satisfied that an individual is a fit and proper person the respondent, and the Tribunal acting in its place, must have regard to the fact that the person has become an undischarged bankrupt. The Tribunal is satisfied that the fact that the applicant became an undischarged bankrupt in the circumstances in which he did must reflect adversely on his good fame, integrity and character, is not consistent with a tax agent maintaining reasonably expected standards of professional and ethical conduct and is therefore not consistent with him meeting the fit and proper person requirement set out in the Act.
Failure to notify the respondent of bankruptcy
The respondent contends that the applicant failed to notify the respondent of the fact that he had become an undischarged bankrupt as required by section 30-35(1)(b) of the Act.
The applicant denies that he failed to notify the respondent of his bankruptcy in breach of the Act on the basis of his claim that he was not aware that he had been declared bankrupt until informed by the trustee. In his evidence to the Tribunal the applicant described this as occurring in around mid-2018. The documentary evidence before the Tribunal is inconsistent with such a claim. The Creditors Report prepared by the trustee was dated 20 April 2018 and it describes an exchange of emails and other correspondence between the trustee and the applicant commencing on 23 February 2018. The Creditors Report describes emails having been sent by the applicant to the trustee on 24 February 2018 and then further emails from the applicant to the trustee on 1 March 2018, 2 March 2018, 16 March 2018, 19 March 2018, 20 March 2018, 21 March 2018 and 6 April 2018.
Based on all the materials before it, the Tribunal is satisfied that the applicant became aware of the sequestration order and the appointment of a trustee, and therefore his bankruptcy, in February 2018. There is no evidence before the Tribunal that the applicant notified the respondent that he had become an undischarged bankrupt as required by the Act. The respondent noted that it was unclear on the evidence whether the applicant was aware of the continuing disclosure obligations imposed on him by section 30-35 of the Act. The Tribunal accepts the respondent’s contention that regardless of whether the applicant was aware of the obligation ignorance can be no excuse.[12]
[12] Dadwal and Tax Practitioners Board [2018] AATA at [95].
Having considered all of the evidence before it the Tribunal is satisfied that the applicant has breached his obligation to notify the respondent of his bankruptcy as required by the Act. The Tribunal is satisfied that the failure to notify the respondent is serious, given that the obligation is intended to ensure that the respondent is made aware of events that may justify the termination of a tax agent’s registration. The Tribunal is also satisfied that the applicant’s conduct must reflect adversely on his good fame, integrity and character, is not consistent with a tax agent maintaining reasonably expected standards of professional and ethical conduct, and is therefore not consistent with him meeting the fit and proper person requirement set out in the Act.
Failure to respond to the respondent as required by the Professional Code of Conduct
The respondent also contends that the applicant has failed to respond to requests and directions from the Board in a timely, responsible and reasonable manner as required by the Code.
The respondent wrote to the applicant on 23 May 2018 and requested that he explain the reasons for his bankruptcy, his reasons for failing to notify the respondent of it and the reasons why his registration should not be terminated. In response the applicant sent the respondent emails on 28 May 2018, 29 May 2018, 5 June 2018, 12 June 2018, 13 June 2018 and 14 June 2018. The respondent contends that the content of the emails is not consistent with a tax agent’s obligation to respond to a request in a responsible and reasonable manner.
Having reviewed the email correspondence the Tribunal accepts the contention of the respondent. The content of the emails are in substantial part incoherent and rambling. They clearly do not respond to the request made by the respondent in its letter of 23 May 2018. The applicant’s email dated 29 May 2018 is in the view of the Tribunal reflective of the nature of the correspondence. The email includes a photograph cover of a book titled “One man’s View of the World” and reads as follows:
Dear Sir/Madam,
Are you, your organisation, others are denying, while Royal commission on banks, insurance is on in Australia to provide or inform them… about the case against bank of Queensland, Preston Branch.
Further, do you agree, that one can be contracted out of law, as I was told by bank of Queensland employees told me…
Further, you agree, that your obligation is not to look at all cases that ATO, ASIC, CDPP, other has brought about…
Further, you, other agree, I inform you now, that State revenue office was looking to collect payroll tax, still not finalised…
You and others, agree, your, others duty as a professional is not to look at the whole picture but to finalise like what next case to be heard Next month.
If you, other refuse to provide to Royal Commission, let me know before 5th May 2018 and inform, chartered accountants ethical investigation and Royal commission of your intention.
Attached on should be more than enough to finalise your duty. Please provide to ABC 4 corner, Royal Commission, other and inform me when you and other has done as mentioned in this email.
I will leave it your professionalism..
Thank you kindly.
Immanuel.
For these reasons, the Tribunal is satisfied that the applicant’s response as contained in the email correspondence does not meet the standard reasonably expected of a professional tax agent in responding to a request for information by the Board, is not consistent with the Code and not consistent with him meeting the fit and proper person requirement set out in the Act.
Failure to meet other statutory obligations
The respondent contends that the applicant’s conduct outside his activities as a tax agent is also relevant in assessing whether or not the applicant meets the fit and proper person requirement and cites a number of examples it considers relevant including that the applicant has:
(a)Failed to provide his trustee in bankruptcy with assistance required for the trustee to manage his estate;
(b)Failed to lodge a Statement of Affairs with the trustee resulting in a complaint being made against the applicant to AFSA;
(c)Continued to act as a director of a company despite being prohibited from doing so under the Corporations Act 2001 (Cth) (the Corporations Act) as an undischarged bankrupt; and
(d)Failed to provide the liquidator of E.C. Services Pty Ltd with the company’s books and records and a “Report as to Affairs” which resulted in ASIC fining the applicant.
The applicant did not provide any compelling evidence in response to these contentions. He told the Tribunal he was unable to provide a completed Statement of Affairs to the trustee because he was waiting for further information from other agencies and regulatory bodies and was concerned that he would mislead the trustee in the absence of such information being provided to him. The Tribunal does not accept this explanation as an excuse for what are statutory obligations owed by the applicant.
Having considered all of the material before it, including in particular the Creditors Report dated 20 April 2018, the Tribunal is satisfied that the applicant has failed to meet his obligations to the trustee, failed to meet his obligations to the liquidator of E.C. Services Pty Ltd and continued to act as a director of a company while an undischarged bankrupt in breach of the Corporations Act, as contended by the respondent. The Tribunal is also satisfied that this conduct by the applicant further demonstrates an ongoing willingness by him to not comply with legal and regulatory obligations. This conduct must reflect adversely on the applicant’s good fame, integrity and character, is not consistent with a tax agent maintaining reasonably expected standards of professional and ethical conduct, and is therefore not consistent with him meeting the fit and proper person requirement set out in the Act.
Criminal charge
There was evidence before the Tribunal that the applicant has been indicted in the County Court of Victoria on one charge of attempting to dishonestly obtain financial advantage by deception from the Commonwealth contrary to sections 11.1(1) and 134.2 of the Criminal Code (Cth). There was also evidence that the applicant entered a plea of guilty at arraignment for the charge on 20 April 2019. At the hearing the applicant advised the Tribunal that it was his intention to change his plea to not guilty as soon as possible. He told the Tribunal that he denies he is guilty of the charge and that he only pleaded guilty because he “was forced into it”.
The respondent contends that notwithstanding the applicant’s stated intention to change his plea, his formal plea of guilty remains intact and that in those circumstances it is appropriate for the Tribunal to have regard to the guilty plea in making its assessment as to whether the applicant meets the fit and proper person requirement in the Act. While the Tribunal was unpersuaded by the applicant’s explanation of the circumstances leading to his initial guilty plea, given that the applicant has now informed the Tribunal of his intent to change his plea the Tribunal does not consider it appropriate to have regard to either the charge or the guilty plea in making its assessment in the present matter.
Broader contentions
In both his written submissions to the Tribunal and at the hearing the applicant made a number of broader contentions.
Relevance of the franchise agreement, ATO disputes and broader issues
The applicant contends that the matters that were previously before the respondent and that are now before this Tribunal can only be properly considered with a full understanding of the circumstances surrounding his franchise agreement with the Bank of Queensland, the dispute that emerged arising out of that agreement, and also the ATO’s handling of his tax dispute. In the course of his submissions to the Tribunal, as well as in correspondence with the respondent, the applicant has also made a number of vague and unsubstantiated references to discrimination, fraud and breach of privacy, among other matters. At times the applicant appeared to conflate the matters before this Tribunal with the criminal charge that has been brought against him. The applicant has also appeared to conflate the matters before this Tribunal with those considered by the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
Having considered all of the applicant’s submissions and representations, the Tribunal is satisfied that it would be entirely inappropriate for this Tribunal to stray into a wider consideration of the issues raised by the applicant. As described above, the central issue before this Tribunal is a discrete one – it is whether the applicant meets the fit and proper person requirement set out in the Act. Again, as described above, that requires an assessment of the applicant’s own conduct including whether the applicant is of good fame, integrity and character and whether there are grounds for confidence that the applicant is able to provide tax agent services in accordance with the Act and maintain reasonably expected standards of professional and ethical conduct. It does not require a consideration by the Tribunal of the alleged failings of the Bank of Queensland in relation to the applicant’s franchise agreement or the conduct of the ATO in the context of the applicant’s tax dispute as suggested by the applicant. To consider matters of that sort is not relevant to the issue at hand and is clearly beyond the jurisdiction of this Tribunal.
Denial of an opportunity to respond
Also in his written submissions the applicant has claimed that the respondent denied him the opportunity to respond to the issues that had been raised by the respondent and relied on in its decision to terminate his registration. The respondent denies the contention and cites the letter it sent the applicant on 23 May 2018 and the subsequent email exchange. The applicant also provided further responses to the issues raised by the respondent in his communication to the respondent of 12 July 2018 and 13 August 2018. For this reason the Tribunal accepts the respondent’s contention on this point. In any event, the applicant has been able to present his case in the course of these proceedings.
Personal circumstances
In giving his evidence the applicant told the Tribunal of personal circumstances that may have impacted on his ability to manage his affairs and also to respond appropriately to the various tax, legal and regulatory matters he has had to manage in recent years, including that:
(a)he had a heart stent in 2011;
(b)he was suffering from a “very serious medical condition” that caused him to have difficulty sleeping and could result in him collapsing at any time. He said that it was a “very rare condition”, little was known about the condition and that there is no known cure. He told the Tribunal that the condition had particularly impacted him toward the end of 2013 and early 2014 and also again in late 2017 when he was unable to move his left arm;
(c)he underwent a number of surgeries in connection with his “very rare condition” in January and February 2018 to remove “lumps” from his arms;
(d)he had difficulty with his teeth and had two teeth removed at “Dental hospital”; and
(e)his third child was also suffering from a medical health condition and an employee had also suffered health issues.
However, the applicant was unable to provide the Tribunal with any independent corroborating evidence in relation to the serious medical condition, the surgeries or the dental issues he had suffered or the medical conditions of either his child or employee.
The applicant contends that all of these personal circumstances should be taken into account by the Tribunal in assessing his conduct including his inability to secure legal representation or to be present at Court when the default judgment was entered against him, or the sequestration order was made and also in his response to the default judgment, his bankruptcy and his engagement with the respondent. In making this contention the applicant also pointed out that, other than the issues raised by the respondent that are the subject of these proceedings, no prior complaint had ever been made against him either by the respondent or any client since he was first registered as a tax agent in 2003.
The respondent acknowledges the appropriateness of the Tribunal having regard to personal circumstances given the broad discretion the respondent has to decide to terminate a tax agent’s registration. However, the respondent contends that the applicant has provided no compelling evidence as to the nature of the medical condition or the surgeries nor the impact they have had in the management of his affairs or the performance of his function as a tax agent. The respondent did not dispute that there have been no prior complaints raised in respect of the applicant’s conduct as a tax agent.
The Tribunal accepts that in appropriate circumstances regard should be had to extenuating personal circumstances in exercising its discretion to terminate a tax agent’s registration under section 40-5(1) of the Act. The inclusion of the word “may” in the section is consistent with a discretion. Certainly where the decision involves an assessment as to whether the tax agent meets the fit and proper person requirement the Tribunal must give careful consideration to the applicant’s broad circumstances.[13] The Tribunal is certainly mindful of the fact that there is no evidence before it of any prior complaints made against the applicant in his capacity as a tax agent either by former clients or the respondent itself. In respect of the health issues cited, the Tribunal accepts that the applicant has been suffering some form of medical condition and also that the broader experience of dealing with his various tax, legal and regulatory issues is likely to have caused some level of personal stress. However, in the absence of credible independent corroborating evidence, the Tribunal cannot be satisfied as to the precise nature of the health difficulties the applicant has suffered nor the precise impact they have had on his capacity to manage his affairs and to attend to his tax, legal and regulatory issues. In that context and in light of the circumstances of this case the Tribunal is not able to give the applicant’s stated personal circumstances relating to his health any great weight.
[13] See also Peterson and Tax Practitioners Board [2018] AATA 93 at [68].
In addition, any discretion that the Tribunal has to take account of personal circumstances must be exercised in accordance with the overriding object of the Act which is to ensure that tax agent services are provided to the public in a professional and ethical manner. The central purpose of the Act is the protection of the public. With that in mind, the Tribunal is of the view that it would be an inappropriate use of its discretion to disregard the nature and extent of the applicant’s conduct in failing to meet his legal and regulatory obligations and the risk that repeated conduct of that kind may have for existing and future clients of the applicant, as well as the public at large, on the basis of uncorroborated health issues which by the applicant’s own evidence remain ongoing. This is particularly so where, as in this case, the applicant has not demonstrated any reasonable level of acknowledgment, contrition or remorse for his conduct. The Tribunal is also not able to give any great weight to the applicant’s contentions with respect to his child’s medical condition or the health issues experienced by his employee and the impact those circumstances have had on him for the same reasons.
Conclusion
For the reasons stated above, the Tribunal is satisfied that the applicant does not meet the fit and proper person requirement in section 20-5(1)(a) of the Act and that the decision to terminate his registration as a tax agent under section 40-5(1) of the Act is the correct or preferable decision.
12 month restriction period
As described earlier on in these reasons, part of the decision that is the subject of this review was a decision by the respondent to impose a restriction period during which the applicant is in effect prohibited from reapplying for registration with the Board in accordance with section 40-25 of the Act. The restriction period imposed by the respondent was for a period of 12 months effective from 12 October 2018.
The respondent contends that on the basis that the applicant does not meet the fit and proper person requirement and in all the circumstances of his case termination of the applicant’s registration as a tax agent and the imposition of the 12 month restriction period is appropriate given:
(a)The respondent’s role is to protect and maintain standards and reputation of the registered tax practitioner profession; and
(b)The serious nature of the applicant’s conduct, particularly the lack of honesty demonstrated in his dealings with the respondent and inadequate regard for his ongoing obligations as a registered practitioner.
Having considered all of the evidence before it the Tribunal is satisfied that the conduct of the applicant that has given rise to the decision to terminate his registration as a tax agent is sufficiently serious to warrant a period of restriction in reapplying for registration. In all the circumstances of the case the Tribunal is satisfied that the imposition of the 12 month restriction period with effect from 12 October 2018 is the correct or preferable decision. In forming this view the Tribunal is mindful that while the imposition of a restriction period prevents the applicant from reapplying for the duration of that period, on any reapplication the applicant will be required to satisfy the respondent that he meets the fit and proper person requirement and that he satisfies all other requirements for registration before such a reapplication can be successful.
DECISION
The decision under review is affirmed.
65. I certify that the preceding 64 (sixty-four) paragraphs are a true copy of the reasons for the decision herein of The Hon. Matthew Groom, Senior Member
.........[sgd].............................................................
Associate
Dated: 23 July 2019
Date of hearing: 9 July 2019 Advocate for the Applicant: Self-represented Advocate for the Respondent:
Ms Mia Clarebrough Solicitors for the Respondent: Self-represented
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