VCA v Australian Prudential Regulation Authority

Case [2008] AATA 580

Abichandani and Australian Securities and Investments Commission [2016] AATA 879 (8 November 2016)

Division

Taxation and Commercial Division

File Number(s)

2015/5994

Re

Manoj Abichandani

APPLICANT

And

Australian Securities and Investments Commission

RESPONDENT

DECISION

Tribunal Mr P W Taylor SC, Senior Member
Date 8 November 2016
Place Sydney

The decision under review - the ASIC disqualification decision of 30 October 2015 - is set aside. In substitution I decide that the applicant is not disqualified from being an approved SMSF auditor.

........................[sgd]................................................

Mr P W Taylor SC, Senior Member

CATCHWORDS

DISQUALIFICATION – registered SMSF auditor – “fit and proper person” – audits signed by applicant – whether audits were done by the applicant – ASIC’s findings and submissions of misleading and deceptive conduct – assertions of false evidence in the course of proceedings – applicant found to be a fit and proper person – decision set aside

LEGISLATION

Administrative Appeals Tribunal Act 1975, s 2A, s 31(1AB)

Superannuation Industry (Supervision) Act 1993, s 3(1), s 6(1), s 35C(1), s 128, s 128D(1), s 128P, s 130F(2), s 344

Superannuation Industry (Supervision) Regulations 1994

Superannuation Laws Amendment (Capital Gains Tax Relief and Other Efficiency Measures) Act 2012

CASES

Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321

Brown v Jam Factory Pty Ltd (1981) 53 FLR 340

Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592

Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304; (2009) 257 ALR 610

Campomar Sociedad, Limitada v Nike International Ltd [2000] HCA 12; (2000) 202 CLR 45

Claudius Ash & Co Ltd v Invicta Manufacturing Co Ltd (1911) 28 RPC 597

Equity Access Pty Ltd v Westpac Banking Corporation (1990) ATPR 40-994

Gipps v Gipps [1978] 1 NSWLR 454

Hughes & Vale Proprietary Ltd v State of New South Wales (No 2) (1955) 93 CLR 127

Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191

Smith v NSW Bar Association (1992) 176 CLR 256

MacKenzie v The Queen (1996) 190 CLR 348

VCA v Australian Prudential Regulation Authority [2008] AATA 580

Ziems v The Prothonotary (1957) 97 CLR 279

SECONDARY MATERIALS

Explanatory Memorandum, Superannuation Laws Amendment (Capital Gains Tax Relief and Other Efficiency Measures) Act 2012

Legal Profession Uniform Conduct (Barristers) Rules 2015, rule 64, rule 65

Regulatory Guide 243 – Registration of self-managed superannuation fund auditors

REASONS FOR DECISION

Mr P W Taylor SC, Senior Member

8 November 2016

  1. Mr Abichandani holds various bachelor degrees in commerce and accounting.  He has been a superannuation fund auditor since 1995, and a member of the National Institute of Accountants since at least April 2005.  Since 2009 he has been a technical consultant, relating to self managed superannuation fund (“SMSF”) issues, to a private company that provides online legal document delivery and management services.  Following legislative amendments made by the Superannuation Laws Amendment (Capital Gains Tax Relief and Other Efficiency Measures) Act 2012, he became registered as an approved SMSF auditor, under…

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Details
AGLC
VCA v Australian Prudential Regulation Authority [2016] AATA 879
Case
[2008] AATA 580
Decision Date

CaseChat Overview and Summary

In the case of VCA v Australian Prudential Regulation Authority, the primary dispute involved the disqualification of Mr. Abichandani as a registered Self-Managed Superannuation Fund (SMSF) auditor. The Australian Securities and Investments Commission (ASIC) had found Mr. Abichandani to have engaged in misleading and deceptive conduct and submitted that he was not a "fit and proper person" to hold such a registration, leading to his disqualification. Mr. Abichandani challenged this decision, asserting that the findings against him were incorrect and that he was, in fact, a fit and proper person to be registered as an SMSF auditor.

The legal issues before the court centered on whether Mr. Abichandani was indeed a fit and proper person to be registered as an SMSF auditor, despite ASIC's findings and submissions. This required the court to examine the specific conduct that ASIC had identified, determine whether such conduct was accurately characterized, and assess its relevance to Mr. Abichandani's suitability for the role. The court needed to balance the evidence of Mr. Abichandani's professional competence and integrity against ASIC's allegations to decide if the disqualifying conduct was isolated or indicative of a broader lack of fitness and propriety.

The court found that while Mr. Abichandani had exhibited some deficiencies in his conduct, these were not sufficient to conclude that he was not a fit and proper person. The court highlighted that the assessment of fitness and propriety must consider various factors, including technical competence, reputation, and conduct, and that not all conduct deserving of disapproval necessarily equates to unfitness. The court also noted that the evidence supporting Mr. Abichandani's professional integrity and competence was unchallengeable, coming from multiple sources including a long-term client, a colleague involved in training seminars, and a managing principal of a legal firm. Given this evidence, the court was satisfied that Mr. Abichandani's conduct did not demonstrate an underlying lack of fitness and propriety, and thus set aside the disqualification decision.

The final orders of the court were to set aside the ASIC reconsideration decision of 30 October 2015, which had maintained Mr. Abichandani's disqualification. The court found that the evidence did not support ASIC's conclusions regarding Mr. Abichandani's conduct and his fitness to be an SMSF auditor.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

The only matters of significance are that (i) the original Iceman audit report was, on my finding, probably completed, and the audit report signed, shortly after 30 April 2012, and (ii) Mr Abichandani did not retain a signed copy of the report. In relation to these two matters, Mr Abichandani’s conduct was deficient in not retaining a signed copy of the report. It was also deficient in that, having held back the signed audit report until outstanding queries had been satisfied, he should have re-dated the report, and given it the date of his actual concluded report opinion and satisfaction. However, those two criticisms, despite being justified, do not warrant a conclusion that Mr Abichandani is not “fit and proper” for registration as an approved SMSF auditor.SUPPORTING EVIDENCE OF FITNESS The evidence Mr Abichandani provided in support of his review application included letters from three people who knew him in his professional role as an SMSF auditor. One of these people had been a client of Mr Abichandani for many years. He declared his belief and satisfaction that Mr Abichandani was “very highly educated, knowledgeable with current superannuation law and a competent adviser.” In the client’s dealing with Mr Abichandani he had found him to be honest, hardworking and a person of both integrity and good character. Another person had been closely involved with Mr Abichandani in promoting and conducting SMSF training seminars. This person spoke of Mr Abichandani having conducted himself with “the utmost integrity and honesty”. The third person was the managing principal of a legal firm. He had been associated with Mr Abichandani for about two years. Their dealings had involved advice to mutual clients, and participation in education and training relating to superannuation matters. This lawyer described Mr Abichandani as having exhibited “the highest professional standards and ethics”. None of these commendations was challenged in the proceedings. CONCLUSION I pointed out earlier that an assessment of fitness and propriety required regard to a range of permissible considerations. Some of those considerations address the person’s technical competence. Some are concerned with the person’s reputation. Some are concerned with the person’s conduct. And where impugned conduct has been identified, an assessment must be made of its underlying relevance and significance. Even if the impugned conduct is potentially relevant and significant, an assessment must be made as to whether it is more properly characterised as an instance (or instances) of aberrant behaviour, or is indicative of an underlying lack of fitness and propriety. As Kitto J said, in a broadly analogous context, but one involving a much more serious episode of personal misconduct than the present, the relevant ends which a professional person must serve in the public interest may properly be described as “lofty indeed”. However, His Honour continued, “but it is with men and not paragons that he is required to pursue them. … it will be generally agreed that there are many kinds of conduct deserving of disapproval, and many kinds of convictions of breaches of the law, which do not spell unfitness … and to draw the dividing line is by no means always an easy task”: see Ziems v The Prothonotary (1957) 97 CLR 279 at 298.

Decision

Reasons for decision

The evidence Mr Abichandani provided in support of his review application included letters from three people who knew him in his professional role as an SMSF auditor. One of these people had been a client of Mr Abichandani for many years. He declared his belief and satisfaction that Mr Abichandani was “very highly educated, knowledgeable with current superannuation law and a competent adviser.” In the client’s dealing with Mr Abichandani he had found him to be honest, hardworking and a person of both integrity and good character. Another person had been closely involved with Mr Abichandani in promoting and conducting SMSF training seminars. This person spoke of Mr Abichandani having conducted himself with “the utmost integrity and honesty”. The third person was the managing principal of a legal firm. He had been associated with Mr Abichandani for about two years. Their dealings had involved advice to mutual clients, and participation in education and training relating to superannuation matters. This lawyer described Mr Abichandani as having exhibited “the highest professional standards and ethics”. None of these commendations was challenged in the proceedings. CONCLUSION I pointed out earlier that an assessment of fitness and propriety required regard to a range of permissible considerations. Some of those considerations address the person’s technical competence. Some are concerned with the person’s reputation. Some are concerned with the person’s conduct. And where impugned conduct has been identified, an assessment must be made of its underlying relevance and significance. Even if the impugned conduct is potentially relevant and significant, an assessment must be made as to whether it is more properly characterised as an instance (or instances) of aberrant behaviour, or is indicative of an underlying lack of fitness and propriety. As Kitto J said, in a broadly analogous context, but one involving a much more serious episode of personal misconduct than the present, the relevant ends which a professional person must serve in the public interest may properly be described as “lofty indeed”. However, His Honour continued, “but it is with men and not paragons that he is required to pursue them. … it will be generally agreed that there are many kinds of conduct deserving of disapproval, and many kinds of convictions of breaches of the law, which do not spell unfitness … and to draw the dividing line is by no means always an easy task”: see Ziems v The Prothonotary (1957) 97 CLR 279 at 298. In the present matter I am firmly of the view that Mr Abichandani made no intentionally false statement to ASIC. I am also of the firm view that neither of his August and September 2015 email statements impugned by ASIC was misleading. Certainly neither statement was intentionally misleading. I do not accept ASIC’s contention that Mr Abichandani made any knowingly false statement - either to the ATO, ASIC or in the course of the present proceedings - about having previously disclosed Mr Vadher’s involvement in the contentious audits. I do not accept the contention that Mr Abichandani made any knowing false statement, or any misleading statement in relation to the Iceman audit report. I do not accept that Mr Abichandani’s conduct in relation to the Iceman audit report (specifically the failure to retain a copy of the signed report and the re-printing of the report in November 2012, without specific disclosure of that fact to the ATO) has any relevant bearing on his status as a person who is fit and proper to be registered as an approved SMSF auditor.

Ratio Decidendi

Legal Principle Established

ASIC maintained the disqualification in its 30 October 2015 reconsideration decision. That decision is the subject of Mr Abichandani’s review application in the present proceedings.THE ASIC RECONSIDERATION DECISION In its 30 October 2015 decision ASIC accepted the probability that Mr Vadher (the person Mr Abichandani named in his August 2015 email) had undertaken the bulk of the audit work for the three ATO referred audits. It also accepted that Mr Abichandani’s role had mainly involved supervision of that work, and the signing of the various formal audit documents. However ASIC also concluded that even such a supervisory and execution role would have required Mr Abichandani to have had a detailed understanding of the audit work and findings. This was because he had personal responsibility for the findings expressed in each of the three audit reports. ASIC’s reconsideration decision reasons then went on to conclude that Mr Abichandani had made two false statements. The two statements identified in the reconsideration decision were:(a)21 August 2015 email:- “I am surprised to find that ASIC ignored the statement in which I clearly mentioned in my letter to the ATO that the audits were done by Mr Sanjay Vadher - ASIC approved SMSF auditor - who was paid for these audits - however my name was used in the income tax returns”.(b)7 September 2015 email:- “The audits which the ATO audited and reported were not done by me, they were done by another ASIC approved SMSF auditor, and however my name was used on the income tax return at that time to which I did not object within a stipulated time. I was a minor partner in that accounting firm which prepared the financial statements of those funds. I have since sold my share in that accounting firm.” As the preceding extracts show, in neither statement did Mr Abichandani dispute the fact that he had signed the audit reports themselves. Notwithstanding that fact, and its acceptance of the reality of both Mr Vadher and Mr Abichandani’s respective roles in the three contentious audits (see paragraph 6 above), ASIC’s reconsideration reasons concluded that Mr Abichandani made each of these statements “for the purpose of causing ASIC to erroneously accept [he] had no understanding of the audit work… and...findings”. ASIC further concluded that Mr Abichandani’s reference to a letter to the ATO disclosing Mr Vadher’s audit involvement was also a “false representation”, and that it was made for the purpose of deterring ASIC from taking steps in relation to Mr Abichandani’s audit registration. ASIC thought the two express statements in his emails could not be taken as an aberration or an isolated incident. Instead they were, in ASIC’s view, a deliberate attempt to mislead it. ASIC thought, after having regard to paragraph 29 of the Regulatory Guide 243 Registration of self-managed superannuation fund auditors, that this finding, involving a deliberate attempt to mislead a regulatory body, precluded satisfaction of Mr Abichandani’s integrity, and consequently precluded satisfaction that he was a fit and proper person to be approved as an SMSF auditor.FIT AND PROPER