VBS v Commissioner of Taxation
[2005] AATA 1303
•23 December 2005
CATCHWORDS – SUPERANNUATION – disqualification from acting as a trustee or responsible officer of a superannuation entity – application for waiver – application to be made within 14 days of conviction unless exceptional circumstances – meaning of “exceptional circumstances” – decision affirmed.
Administrative Appeals Tribunal Act 1975 s. 37
Corporations Law
Extradition Act 1988
Income Tax Assessment Act 1936
Superannuation Industry (Supervision) Act 1993 ss. 10, 119, 120, 120A, 121, 126B, 126C, 126D, 126E, 126F and 344
Superannuation Industry (Supervision) Legislation Amendment Bill 1995
Cabal v United Mexican States (2001) 180 ALR 593
Chamberlain v R (1983) 153 CLR 514; 46 ALR 608
Owens v Stevens unreported 3 May 1991
R v Steggall [2005] VSCA 278
Re Graham and Australian Fisheries Management Authority (2002) 71 ALD 700
Re VBW and Australian Prudential Regulation Authority [2005] AATA 1294
Sinanovic v R (No 1) (2001) 179 ALR 520
DECISION AND REASONS FOR DECISION [2005] AATA 1303
ADMINISTRATIVE APPEALS TRIBUNAL )
) V2005/590
GENERAL ADMINISTRATIVE DIVISION )
Re VBS
Applicant
AndCOMMISSIONER OF TAXATION
Respondent
DECISION
Tribunal: Deputy President S A Forgie
Date: 23 December 2005
Place: Melbourne
Decision:The Tribunal affirms the decision of the respondent dated 16 June 2005.
S A FORGIE
Deputy President
REASONS FOR DECISION
VBS[1] is a disqualified person within the meaning of s. 120 of the Superannuation Industry (Supervision) Act 1993 (“SIS Act”) as a result of his being convicted of offences in respect of dishonest conduct. As a consequence, he is unable to be a trustee of the corporate trustee of his family’s superannuation fund. That fund is supervised by APRA. He has applied to both the Commissioner for Taxation (“Commissioner”) and the Australian Prudential Regulation Authority (“APRA”) under s. 126B of the SIS Act to waive his status as a disqualified person under the SIS Act. The Commissioner has declined on the basis that he did not lodge his application to waive within 14 days of his being convicted as required by s. 126B(3)(b) and that, within the meaning of s. 126B(4) there were no exceptional circumstances preventing him from doing so. APRA also decided that VBS was outside the 14 day time period but it then decided that there were exceptional circumstances that prevented his making the application. Having accepted the application, it then decided that it was not satisfied that VBS was highly unlikely to be a prudential risk to any superannuation entity and refused his application. VBS has applied for review of the decisions of both APRA and the Commissioner but I am concerned only with the Commissioner’s. His decision requires me in the first instance to consider whether there are exceptional circumstances to allow a longer period than 14 days within which to make his application for waiver. That requires me to consider the concept of “exceptional circumstances”. I have decided that there are no exceptional circumstances in this case.
LEGISLATIVE FRAMEWORK
[1] As a matter of practice, the Tribunal has assigned the applicant a pseudonym. This appears to be a practice that has been adopted in light of s. 344(11) of the SIS Act requires the hearing of any proceeding relating to a reviewable decision is to take place in private. In the absence of an order under s. 35(2) of the Administrative Appeals Tribunal Act 1975, there is a very real question whether, this practice is appropriate simply because there is a “private hearing”. I refer to the reasons given in Re VBW and Australian Prudential Regulation Authority [2005] AATA 1294.
The SIS Act intends “… to make provision for the supervision of certain entities engaged in the superannuation industry, and for related purposes”.[2] Part 15 of the SIS Act is concerned “… to set out rules about the eligibility of trustees, custodians and investment managers of superannuation entities.”[3] It does this in various ways. Of concern in this case are its provisions concerned with what it calls “disqualified persons”. It provides that a “disqualified person” may not intentionally be, or act as, a trustee[4] or a responsible officer[5] of a superannuation entity if the person concerned knows that he or she is such a person. If a person is a trustee of a superannuation entity and becomes a disqualified person, that person must immediately tell the Regulator.[6]
[2] SIS Act, Long Title
[3] SIS Act, s. 119
[4] SIS Act, s. 119(1)
[5] SIS Act, s. 121(2)
[6] SIS Act, s. 121(3). The Regulator in this case is the Commissioner of Taxation: SIS Act, s. 10(1)
Those who are “disqualified persons” are provided for in ss. 120 and 120A of the SIS Act. Only those provisions relating to individuals in s. 120 are relevant:
“(1) For the purposes of this Part, an individual is a disqualified person if:
(a)at any time (including a time before the commencement of this section):
(i) the individual was convicted of an offence against or arising out of a law of the Commonwealth, a State, a Territory or a foreign country, being an offence in respect of dishonest conduct; or
(ii) a civil penalty was made in relation to the person; or
(b)the person is an insolvent under administration; or
(c)the Regulator has disqualified the individual under section 120A.
…
(3)A reference in this section to a person who has been convicted of an offence includes a reference to a person in respect of whom an order has been made under section 19B of the Crimes Act 1914, or under a corresponding provision of a law of a State, a Territory or a foreign country, in relation to the offence.
(4)Division 3 of Part VIIC of the Crimes Act 1914 does not apply in relation to the disclosure of information about a conviction of the kind mentioned in paragraph (1)(a), if the disclosure is for the purposes of this Part.”
A person may apply for waiver of the status of a disqualified person. That is provided for in s. 126B of the SIS Act. Only ss. 126B(1) to (4) are relevant in this case:
“(1) An individual may apply to the Regulator for a declaration under section 126D waiving his or her status as a disqualified person for the purposes of this Part only if:
(a)he or she is a disqualified person solely because of the operation of subparagraph 120(1)(a)(i); and
(b)the offence leading to him or her being a disqualified person is not an offence involving serious dishonest conduct as described in subsection (2).
(2)For the purposes of paragraph (1)(b), an offence involves serious dishonest conduct if the penalty actually imposed for the offence is:
(a)a term of imprisonment of at least 2 years or such longer period (if any) as is specified in the regulations; or
(b)a fine of at least 120 penalty units or such larger fine, if any, as is specified in the regulations.
(3)An application must:
(a)be in writing; and
(b)be made within 14 days after the commencement of this subsection[[7]] or the person’s conviction, whichever is the later; and
(c)…
(d)…
(e)…
(f)…
(4)The Regulator may accept an application meeting conditions referred to in subsection (3) other than paragraph (3b) after the end of the period referred to in that paragraph only if the Regulator is satisfied that there are exceptional circumstances that prevented the application from being made within that period.”
[7] The subsection commenced on 6 January 1996.
Generally, the Regulator must decide an application under s. 126B within 60 days of receiving it.[8] If the Regulator thinks that it will take longer than that to decide the application, the Regulator may extend the period for another 60 days but no more.[9] Section 126D sets out the decisions that the Regulator must make in certain circumstances. If the Regulator does not make a decision within that period, the Regulator is taken to have decided to refuse the application under s. 126D(3).
[8] SIS Act, s. 126C(1)
[9] SIS Act, s. 126C(2)
When the Regulator is the Commissioner, the matters that he must take into account are set out in s. 126D(1A):
“If, having regard to any of the following:
(a)the offence to which the application relates;
(b)the time that has passed since the applicant committed the offence;
(c)the applicant’s age when the applicant committed the offence;
(d)the orders made by the court in relation to the offence;
(e)any other relevant matter;
the Commissioner of Taxation is satisfied that the applicant is highly unlikely to:
(f)contravene this Act; and
(g)do anything that would result in a self managed superannuation fund not complying with this Act;
the Commissioner must, by notice in writing given to the applicant, make a declaration waiving the applicant’s status as a disqualified person for the purposes of this Part.”
APRA is also required to take the first five matters into account[10] but in relation to a different question. That question is whether “… the applicant is highly unlikely to be a prudential risk to any superannuation entity …”.[11]
[10] SIS Act, ss. 126D(1)(a)-(e)
[11] SIS Act, s. 126D(1)
Section 126E deals with the effect of a person’s applying for a declaration waiving his or her status as a disqualified person. Section 126E(1) applies if:
“(a) a person is a disqualified person; and
(b)the person is eligible to make application for a declaration waiving his or her status as a disqualified person; and
(c)the person makes application for such a declaration under subsection 126B(3) within the application period specified in that subsection;
…”
If the section applies, the consequences are that:
“the person is treated, for the purposes of this Act, (other than the purpose of the application for the declaration) as not being, and as never having been, a disqualified person until that application is decided.”[12]
[12] SIS Act, s. 126E(1)
If the Regulator decides to make a declaration in relation to a person meeting the description set out in ss. 126E(1)(a), (b) and (c), the SIS Act applies as if the person had never been disqualified.[13] If the Regulator decides not to make a declaration, the person again becomes a disqualified person from the date of the decision.[14]
[13] SIS Act, s. 126E(2)(a)
[14] SIS Act, s. 126E(2)(b)
If the person is a disqualified person, who is eligible to make an application for a declaration waiving his or her status as a disqualified person, and makes an application for waiver under s. 126B(4), the person continues to be a disqualified person for the purposes of the SIS Act pending the decision.[15] If the Regulator decides to make a declaration waiving the person’s status as a disqualified person, the person is treated for the purposes of this Act as if the person had never been a disqualified person.[16]
[15] SIS Act, s. 126E(3)(d)
[16] SIS Act, s. 126E(3)(e)
BACKGROUND
In this case, there is no dispute between the parties regarding the facts leading to VBS’s application. In light of that and on the basis of the material that includes his statement and the documents lodged under s. 37 of the Administrative Appeals Tribunal Act 1975 (“T documents”), I have made the findings of fact set out in the following paragraphs.
VBS is a Certified Practising Accountant (“CPA”) and has worked in his profession since 1963. He established his own practice in 1980 and continues to practise. Between August 1993 and 1995, he stole $153,000.00 from accounts that he operated in a fiduciary capacity as a liquidator and as a trustee under the Bankruptcy Act 1966. As a consequence, VBS was convicted on 3 June 1999 of ten counts of theft and sentenced to terms of imprisonment amounting to 18 months’ imprisonment of which 14 months was suspended for two years. The period of imprisonment was served and the two years passed without incident. I am satisfied that VBS was not dishonest before he committed the offences and has not been since. On the basis of the evidence of a clinical psychologist, Mr Leslie Posen, and a consultant psychiatrist, Dr Lester Waston, as well as his own evidence, I am satisfied that VBS is unlikely to offend again. He has repaid all of the money he misappropriated.
VBS’s membership of the Australian Society of Certified Practising Accountants (“ASCPA”) was suspended for a period of 12 months. One of the consequences of his suspension was that he was unable to audit superannuation funds during that period. His period of suspension concluded over five years ago. Just before the conclusion of his suspension, VBS gave the Australian Prudential Regulation Authority (“APRA”) an undertaking that he would not act as the auditor of a superannuation fund for a period of approximately 2½ years. As a result of his conviction, he was effectively disqualified by operation of s. 229(3) of the Corporations Law, then in force, from acting as a director of a company for a period of five years after his release from prison in October 1999. At the time of his conviction, VBS had been a registered tax agent under the Income Tax Assessment Act 1936 but his registration was suspended for a two month period from September to October 1999.
I accept that VBS knew that his conviction led to his being disqualified as a trustee of a superannuation entity. He had thought it appropriate to wait until he could be a director of a company before he applied for his disqualification to be waived. VBS has asked for his disqualification to be waived so that he is capable of being appointed as a director of the corporate trustee of his family’s superannuation fund. At present, that fund remains under APRA’s supervision. He first applied for waiver on 15 June 2004 and resubmitted it on 18 October 2004. A delegate of APRA decided on 16 December 2004 to decline to waive VBS’s disqualification. In the first instance, the delegate noted that VBS had not made his application within 14 days of his conviction as required by s. 126B(3) of the SIS Act. Despite that, he accepted VBS’s application under s. 126B(4) on the basis that there were exceptional circumstances that prevented his application being made in the 14 day period. He then declined the application on the basis that he was not satisfied that VBS was highly unlikely to be a prudential risk to any superannuation entity.
I find that, at the date of his conviction, VBS had been unaware of the fact that he only had 14 days from that date within which to apply for APRA to waive the disqualification. This accounts for his not applying during the term of his imprisonment for he did take other action during that time. He did, for example, instruct his solicitor to make a submission on his behalf to the ASCPA.[17] Once he was released, I accept that he had to work very hard to take his practice up to date and to cope with high workload demands due to the implementation of the activity statement regime.
[17] T documents at T8-62 -T8-68
VBS sought internal review of the decision by APRA’s delegate on 17 January 2005. A little later, on 18 February 2005, VBS applied to the Commissioner for waiver of his status as a disqualified person in relation to being a trustee of self‑managed funds. A delegate of the Commissioner advised him on 10 March 2005 that he had not applied within 14 days of his conviction and that there were no exceptional circumstances requiring him to accept the application under s. 126B(4) of the SIS Act. As a consequence, the delegate rejected his application.
CONSIDERATION
On behalf of VBS, Mr Bigmore QC submitted that I should have regard to the matters addressed in s. 126D(1A). The matter of the time that has passed that is addressed in s. 126D(1A)(b), and so his rehabilitation, would be meaningless unless the expression “exceptional circumstances” were interpreted to include demonstrated rehabilitation over a lengthy period. Mr Bigmore referred to the Explanatory Memorandum to the Superannuation Industry (Supervision) Legislation Amendment Bill 1995 (“Bill”) introducing s. 126D as an amendment to the SIS Act. In introducing it as well as ss. 126B, 126C, 126E and 126F, the Explanatory Memorandum noted:
“87. … These sections have been inserted TO ALLOW THE Commissioner to waive the disqualified person requirements for trustees, and responsible officers of trustees, investment managers and custodians of superannuation entities, if the Commissioner believes, given the information provided, that the person is highly unlikely to be a prudential risk to a superannuation entity.
88. Currently the impact of the disqualified person provisions means, for example, that even persons whose only offence was a minor offence involving dishonesty 20 years ago, for example shoplifting, are disqualified persons and cannot act as a trustee, or as responsible officers of trustees, investment managers or Custodians. These are new sections will enable the Commissioner to waive the disqualified person status of such an individual.”
The Explanatory Memorandum goes on to set out the effect of each section introduced by the Bill but it does not add anything.
I will begin with the meaning of the expression “exceptional circumstances”? It has been used and considered in a number of varying contexts. These were referred to by Senior Member Handley and Mr Ermert, Member in Re Graham and Australian Fisheries Management Authority,[18] who concluded that the expression means to “form an exception; unusual instance; extraordinary”.[19] I agree with this interpretation but I have looked to two other cases for assistance in how to determine what does form an exception, represent an unusual instance or deserve the description of being extraordinary.
[18] (2002) 71 ALD 700
[19] (2002) 71 ALD 700 at 705
General principles to assist in determining what are exceptional circumstances can be gleaned from a passage from the judgment of Hedigan J in the recent case of Owens v Stevens.[20] His Honour was considering cl. 15 of Schedule 5 to the Magistrates Court Act 1989 (Vic):
“The use of the phrase ‘exceptional circumstances’ is not unknown in the legal lexicon. Section 13 of the Bail Act is a well-known example. Exceptional is defined, contextually, in the Oxford English Dictionary (2nd Edition Volume V), … as meaning ‘unusual, special, out of the ordinary course’. This does not mean any variation from the norm. The facts must be examined in the light of the Act, the legislative intention, the interests of the prosecuting authority, the defendant and the victims. It may be that the circumstances amounting to exceptional must be circumstances that rarely occur and perhaps be outside reasonable anticipation or expectation.”[21]
Earlier, in Cabal v United Mexican States,[22] Kirby J had also considered the meaning of “exceptional circumstances” in the context of applications to the High Court to exercise its implied powers under the Constitution. Those implied powers may only be exercised where exceptional circumstances have been shown.[23] Messrs Cabal and Pasini were the subject of extradition orders made under the Extradition Act 1988. Kirby J said:
“ In extradition cases … there are two principal purposes of justice that have to be reconciled in deciding whether ‘exceptional circumstances’ are demonstrated. First, there is the policy of the law that the procedures of the Act will be effectively and expeditiously concluded. Doing this will avoid, as far as may reasonably be achieved, the interruptions or frustrations of the process by the flight of the subject who secures liberty before the determination has been carried into effect. Secondly, there is the policy of the law that, in certain exceptional circumstances, the subject of an extradition determination will be restored to liberty out of deference to the general tendency of our law favourable to personal freedom and resistant to the detention of persons in custody where such detention is unnecessary to achieve the purposes, relevantly, of extradition and is arbitrary or oppressive in the circumstances and cannot be fully justified.
…
… The purpose of obliging the applicant for bail to demonstrate ‘special’ or ‘exceptional’ circumstances is to focus the attention of the court on the reasons why detention in custody pending surrender is the normal rule. Any why something unusual and extraordinary is necessary to depart from that rule.”[24]
[20] Unreported 3 May 1991 quoted with approval in R v Steggall [2005] VSCA 278
[21] R v Steggall [2005] VSCA 278 at [12]
[22] (2001) 180 ALR 593
[23] Chamberlain v R (No 1) (1983) 153 CLR 514; 46 ALR 608 at 518-520; 609-611 and see also Sinanovic v R (No 1) (2001) 179 ALR 520 at 522 [11]
[24] (2001) 180 ALR 593 at 601
Applying the principles in this case, I begin with the purpose inherent in the provisions of the SIS Act. That inherent purpose is to protect members of the public and those of their investments directed to providing for their retirement or later years. A necessary corollary of that purpose is that the SIS Act is intended to protect the public purse as members of the public who are able to provide for their own retirements do not need to look to income maintenance or social security payments of some kind. One way in which the SIS Act achieves its purpose is by regulating those who may be involved in the management of a superannuation entity. In part, it does so by reference to certain categories of persons. In relation to some of those categories, such as those under s. 120A, Parliament has retained an element of discretion in the decision-maker. In relation to s. 120(1)(a)(i), with which I am concerned, there is no discretion just as there is no discretion if a person is an insolvent under administration. If a person is convicted of an offence coming within s. 120(1)(a)(i) the status of a disqualified person is immediately applicable. Whereas an insolvent under administration can cast off the status of a disqualified person once the administration is completed, the convicted person cannot. The only way in which the convicted person can cast off the status is if it is waived.
Having given the power to waive, Parliament clearly intends that it be used. For all that, though, it is equally clear that it intends issues of disqualification to be both raised and decided quite quickly. The 14 day time limit within which to lodge the application suggests the former and the maximum 120 day time limit within which a decision must be made suggests the latter. The provisions in s. 126E relating to the impact of an application upon a person’s status as a disqualified person are more neutral. If an application is made within 14 days of conviction, the speedy time limits for the decision are consistent with the applicant’s not being regarded as a disqualified person unless the Regulator refuses the application. If made outside that time limit, the person’s being regarded as a disqualified person unless the Regulator decides to waive that status is consistent with the delay in making the application.
Some of the matters that the Regulator must take into account in deciding an application that has been made within 14 days of conviction do not, on their face, sit quite happily with an expedited time frame. They sit more comfortably with those applications made within 14 days of the day on which s. 126B(3)(b) came into operation. I have in mind particularly the time that has passed since the person committed the offence and that person’s age at the time. Both tend to suggest that the greater the time that has passed since the offence, the greater the chance of the application’s succeeding if that person has undergone rehabilitation. No mention, though, is made of rehabilitation in s. 126D(1A).
Determining what circumstances will amount to “exceptional circumstances” will have regard to both the SIS Act’s objective that the applications be made and decided quickly with the objective that applications may be made out of time and decided according to the same criteria as those made within time. What is clear from s. 126B(4) is that the exceptional circumstances must bear upon that 14 day time period. They may not bear upon the person and that person’s individual circumstances since being convicted however outstanding that person’s rehabilitation and achievements.
VBS has relied on his lack of knowledge of the requirements of the SIS Act and his associated problems with his professional associations as a result of his conviction as well as his disqualification from acting as a director of a company. These would be matters that could be expected to be quite common for a person who is a trustee or responsible officer of a superannuation entity at the time of conviction and becomes a disqualified person under the SIS Act. That is so even though they may not be quite common for every person who is convicted of an offence of dishonesty with a penalty of less than two years’ imprisonment. I do not, however, think that the SIS Act requires me to have regard to what amount to exceptional circumstances by reference to persons other than those who are in similar circumstances to VBS. It could also be expected to be quite common that a person would find it difficult to demonstrate rehabilitation and the like if there is a relatively short period between the dishonest conduct and the date of the conviction. That is not the case here. VBS had approximately five years between the end of the period in which he committed his offences and being convicted of them. Certainly, for applications made within 14 days of the commencement of s. 126B on 6 January 1996, that period of time might prove to be substantial indeed but not for those made in relation to convictions on or after that date.
VBS’s lack of knowledge of his entitlement to apply for a waiver in the brief window of opportunity offered by the SIS Act also seems to me insufficient to take his case to the level of an exceptional circumstance. Sadly, that may be a common occurrence but.
On its face, s. 126B(3)(b) seems somewhat unfair in permitting those who were convicted on or after 6 January 1996 a period of only 14 days in which to make an application. The result is that they have a much shorter time within which to establish the matters set out in s. 126D than those who were convicted long before. Unfortunately, the function of the Tribunal is not to give the parties a just result but a just result according to the law and based on the material available to it.
For the reasons I have given, I affirm the decision of the respondent dated 16 June 2005.
I certify that the twenty-six preceding paragraphs are a true copy of the reasons for the decision herein of
Deputy President S A Forgie,
Signed: ...............................................................
Nathaniel Wills Associate
Date of Hearing 18 November 2005
Date of Decision 23 December 2005
Counsel for the Applicant Mr G. Bigmore QCSolicitor for the Applicant Ms L. Bloch
Bazzani Brand Lawyers
Counsel for the Respondent Mr C. Sievers
Solicitor for the Respondent Mr E. Chiaw
ATO Legal Services Branch
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