Tritone Nominees Pty Ltd v International Professional Services Pty Ltd
[2010] QCAT 704
•7 December 2010
| CITATION: | Tritone Nominees Pty Ltd v International Professional Services Pty Ltd [2010] QCAT 704 |
| PARTIES: | Tritone Nominees Pty Ltd |
| v | |
| International Professional Services Pty Ltd |
| APPLICATION NUMBER: | MCDO183-10 |
| MATTER TYPE: | Other minor civil disputes matters |
| HEARING DATE: | 19 October 2010 |
| HEARD AT: | Coolangatta |
| DECISION OF: | Julie Cowdroy, Member |
| DELIVERED ON: | 7 December 2010 |
| DELIVERED AT: | Brisbane |
ORDERS MADE: | The respondent pay to the applicant the sum of $3,939.81 within 30 days. |
| CATCHWORDS: | Professional services rendered – taxation returns – error in disclosure, whether accounting firm liable for penalty interest imposed by taxation office and cost of audit work carried out by another firm – failure to respond to correspondence |
APPEARANCES and REPRESENTATION (if any):
| APPLICANT: | Tritone Nominees Pty Ltd was represented by Mr Anthony Russo |
| RESPONDENT: | International Professional Services Pty Ltd was represented by Mr Illingworth, Mr Sidhu & Mr Reed |
REASONS FOR DECISION
BACKGROUND TO THE DISPUTE
Mr Russo has an interest in Tritone Nominees Pty Ltd. In about December of 2006, he engaged International Professional Services Pty Ltd (IPS) to provide accounting services. Mr Russo has a number of business entities and IPS was engaged by him to prepare his personal tax returns as well as those for other entities for the year 2006-2007.
The tax returns were lodged with the Australian Taxation Office in approximately June of 2008. By letter dated 1 July 2009, the Australian Taxation Office (ATO) office wrote to Mr Russo advising him that they had sent a letter dated 22 September 2008 to IPS seeking clarification of certain aspects of what appeared to be an understated trust distribution in the amount of $36,744.00. As no response had been received, the ATO indicated its intention to carry out a tax audit.
The applicant paid Noel Box & Associates to provide the audit information to the ATO. Mr Russo paid to the ATO a shortfall interest charge relating to the understated distribution. The applicant claims the interest paid to the ATO and the amount he paid to Noel Box to provide the information for the ATO audit. His claim is in the sum of $3,931.81. The respondent denies liability for the claim in its entirety.
HEARING
The matter was heard at Southport on 19 October 2010. Mr Reed appeared as well as Messrs Illingworth, Reed and Sidhu, all of whom are directors of International Professional Services Pty Ltd.
THE ISSUE
Is the respondent liable for all or any part of the applicant’s claim?
APPLICANT’S CASE
Mr Russo considered that IPS were negligent in not passing on the letter from the ATO dated 22 September 2008 to him or at least replying to the ATO. By letter dated 12 August 2009 the respondent advised that the discrepancy between the amount of loss distributed from the trust and the amount taken up in the applicant’s personal tax return arose due to a technical error.
Mr Russo contended that this error, coupled with the respondent’s failure to respond to the ATO’s letter, had caused him to incur the costs claimed. He had changed accountants after the 2006-2007 returns had been lodged, but the ATO still had IPS on record as his accountant because they had lodged the returns.
When Mr Russo received the letter dated 1st July 2009 (which was addressed to him C/- of Noel Box, (who presumably had lodged the applicant's 2007-2008 returns and were the accountants on record by that time)), he wrote to Mr Illingworth on 8 July 2009, enclosing a copy of the letter from the ATO and asked him to respond to the ATO’s queries because he had paid him to complete the 2006-2007 returns. In his mind, that included attending to any queries that arose.
Mr Russo rang the office of IPS the next day and was told that Mr Illingworth was not in the office. He emailed him on 10 July 2009 with no response and then sent a letter on 8 August 2009 to Mr Illingworth, asking him to respond to the ATO. As there was still no response, Mr Russo wrote to the ATO on 10 August 2009, advising that Mr Illingworth was ignoring his communications and he sent a copy of that letter to Mr Illingworth.
On 12 August 2009, Mr Illingworth wrote to the applicant, advising that he did not have any record of the letter from the ATO dated 22 September 2008. Copies of the correspondence sent by Mr Russo were provided to the Tribunal.
Mr Russo stated that he had requested a waiver or remission of the penalty interest from the ATO over the telephone but this was denied. He indicated that he had engaged the services of Noel Box to prepare and lodge his 2008 and 2009 returns because he was dissatisfied with the standard of service provided by IPS as well as their costs. He had changed accountants before he was aware that there was a problem with the 2006 returns.
RESPONDENT’S CASE
The respondent denied receiving the letter of 22 September 2008 from the ATO. Mr Sidhu advised that even if it had been received, IPS would not have been in a position to respond on behalf of Mr Russo because he was no longer a client. IPS did not advise the ATO they were no longer acting for him.
The respondent had not received advice from Mr Russo that their services were no longer required, however, because the firm had not heard from him and were only engaged to prepare and lodge the 2006-2007 returns, they considered they were no longer engaged.
The respondent contended that the penalty interest would have been waived if it had been involved with discussions with the ATO on the basis that it would have indicated that an error was made by IPS. Consequently, it should not be liable for the penalty interest charged.
The respondent considered that the costs charged by Mr Box were excessive if they related solely to answering the audit queries. Whilst admitting there was a mistake made in the 2006 returns, it was contended that this could have easily be remedied without additional cost.
During June and July of 2009, Mr Illingworth was overseas and he was not available to respond to Mr Russo's correspondence in early July. As soon as he returned from overseas, he responded to the letter dated 8 August 2009. During his absence, any correspondence from Mr Russo was not attended to, but left for him to deal with when he returned.
There was a repeated theme expressed by Mr Illingworth and Mr Sidhu that, had IPS been permitted to respond to the ATO’s queries, the interest charge would have been waived. It was the firm’s practice to request waiver or remission in writing and indicated disbelief that Mr Russo would have been able to facilitate a request for waiver and the refusal conveyed by telephone.
FINDINGS AND CONSIDERATION
Mr Russo seeks relief for all the costs he has incurred. The respondent denies it is liable for any of those costs. However, the incident which set the subsequent consequences in motion was caused by an error made by IPS. Whilst it may have been easily rectified, the fact remains that it was not and Mr Russo incurred considerable costs.
There was an emphatic denial by the respondent that it received the letter from the ATO. No explanation was given as to why this was the case. The correspondence from Mr Russo on all occasions was received, although not necessarily attended to promptly. It was contended by Mr Sidhu that IPS considered that it no longer acted for Mr Russo and that the firm did not have the necessary authority to respond on his behalf. By implication, this suggests that even if the letter had been received, it did not automatically follow that IPS would have responded to the ATO’s queries.
I am mindful also of the fact that the applicant wrote two letters to the firm whilst Mr Illingworth was overseas and it was not attended to. That action would suggest that, as it no longer considered him a client, anything from him was not attended to when received. Leaving correspondence for a month until a partner’s return from overseas I would not consider good business practice.
Viewed in totality, the respondent’s arguments were indicative of a strong desire to distance itself from Mr Russo once the taxation returns had been completed. It must bear some of the liability for the events that followed. The argument that they would have managed to waive the penalty interest is academic.
Apart from the contention that the fees charged by Mr Box were in excess of its charges, no specific evidence was given as to why the charges were unreasonable. Whilst it was suggested that work other than the audit was encompassed in the bill, the respondent gave no specific evidence on this topic.
On the basis that the initial error was made by the respondent, I find that the respondent is liable for the cost of the audit fees of Noel Box Services ($1,980) and the penalty interest paid to the ATO ($1,959.81). Accordingly, I order that the respondent pay to the applicant the sum of $3,939.81 within 30 days.
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