Wyborn and Tax Agents' Board of New South Wales
[2007] AATA 1492
•29 June 2007
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2007] AATA 1492
ADMINISTRATIVE APPEALS TRIBUNAL )
) No N 200600565
GENERAL ADMINISTRATIVE DIVISION ) Re JOHN JEREMY WILLIAM WYBORN Applicant
And
TAX AGENTS' BOARD OF NEW SOUTH WALES
Respondent
DECISION
Tribunal Deputy President P E Hack SC Date29 June 2007
PlaceBrisbane (heard in Sydney)
Decision The Tribunal
(a) sets aside the decision of the respondent made on 20 April 2006;
(b) remits the matter to the respondent for consideration of the application for re-registration on the basis that the applicant satisfies s 251JC(1)(a)(i) of the Income Tax Assessment Act 1936.
..............Signed................
Deputy President
CATCHWORDS
TAX AGENTS – cancellation of registration – application for re-registration – whether applicant a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters – whether applicant of good fame, integrity and character – whether applicant neglected business of principals – applicant neglected business of 2 principals – applicant a fit and proper person – decision set aside and remitted to the respondent for consideration of the application for re-registration on the basis that applicant satisfies s 251JC(1)(a)(i) of the ITAA 1936
Income Tax Assessment Act 1936 – ss 251BC(1)(d), 251C, 251J, 251JA, 251JC(1) (a) (i), (4), 251K(2)(b)(i), (2)(d), (3)(c), 251L, 251N(1)(b)
Taxation Administration Act 1953 – s8C(1)(a)
Migration Act 1958 - s292
VBY and Tax Agents’ Board (2006) ATC 2044
Toohey v Tax Agents’ Board of Victoria (2007) 94 ALD 521
Re Su and Tax Agents’ Board, South Australia (1982) 61 FLR 1
Shi v Migration Agents’ Registration Authority [2007] FCAFC 59
Stasos v Tax Agents’ Board (1990) 21 ATR 974
Hughes and Vale Pty Ltd v The State of New South Wales (No 2) (1955) 93 CLR 127
Bar Association (NSW) v Cummins (2001) 52 NSWLR 279
REASONS FOR DECISION
29 June 2007 Deputy President P E Hack SC Introduction
1.This is an application by Mr John Wyborn (formerly Dorrington[1]) by which Mr Wyborn seeks a review of the decision of the respondent, the Tax Agents’ Board of New South Wales, to cancel his registration as a tax agent. At the time of the decision, and at the time of the events relevant to these proceedings, Mr Wyborn was known and described by his previous name, Dorrington. In these reasons I shall describe Mr Wyborn by the name Dorrington, acknowledging however that he gave his evidence as, and is now known as, Wyborn.
[1]Mr Wyborn changed his name in accordance with the procedures in the Births, Deaths and Marriages Act 1995 (NSW) in January 2005.
2.That decision, made on 20 April 2006, was taken because the Board took the view that Mr Dorrington was not a person “of good fame, integrity and character” and that he had “neglected the business of a principal”.
3.Implementation of the Board’s decision has been stayed pending the hearing and determination of this application.
4.In the reasons that follow I propose to detail first some uncontroversial facts by way of background. Then I shall examine the legislation that governs this application before considering the basis on which it is said that Mr Dorrington was not a fit and proper person and had neglected the business of a principal, making findings on matters of controversy in doing so before determining, on the basis of those findings, the preferable decision.
Background
5.Mr Dorrington was first registered as a tax agent in June 2001 after some years in the employ of another registered agent, Ms Michelle Vassallo, who traded in Port Macquarie under the style and title of MVA Accountants and Tax Agents. In early 2001 Ms Vassallo advised Mr Dorrington of an intention to retire from practice. Mr Dorrington made arrangements to acquire the practice, including the trading name and much of the goodwill[2] of the practice. In April 2001, he says, he “took over the operation and control of the business”.
[2] Ms Vassallo retained a number of clients.
6.The conduct of the practice appears to have been unremarkable in the next year or so however during 2002 and 2003 Mr Dorrington was involved in an acrimonious breakdown of his marriage.
7.Mr Dorrington’s difficulties with the Board can be traced back to his appearance in the Port Macquarie Local Court on 26 August 2002 when he was convicted of the offence of driving at a time when his driver’s licence was suspended, apparently as a consequence of a failure to pay an earlier fine imposed for speeding. On this occasion he was disqualified from holding or obtaining a driver’s licence for a period of 12 months from 26 August 2002.
8.Despite that disqualification, Mr Dorrington continued to drive a motor vehicle. He has been convicted of a number of offences of driving whilst disqualified. There appears to be a variation between the records of the New South Wales Police Force in relation to those convictions and those of the District Court of New South Wales. Given that the latter is a certificate of appeal under the seal of the Court I will act upon the detail set out in that certificate. It shows that Mr Dorrington appeared in the Port Macquarie Local Court on 11 August 2003 and was convicted of the offences of driving whilst disqualified on 20 April 2003, 23 April 2003 and 27 July 2003. He was sentenced by that Court to imprisonment for 2 years with a non-parole period of 9 months.
9.Mr Dorrington had been apprehended in relation to the third of these offences on 27 July 2003. He remained in custody thereafter until 4 September 2003. On that day he succeeded in an appeal to the District Court against the severity of his sentence. The head sentence of 2 years was confirmed but the balance of the sentence was suspended and he was released from prison on that day.
10.Mr Dorrington’s arrest on 27 July 2003 and subsequent imprisonment left his practice in disarray. At that time he was in a de facto relationship with Ms Heidi Taylor (who is now his wife[3]). Ms Taylor was employed within the practice of MVA Accountants in performing clerical tasks including receptionist duties, typing, secretarial and general assistant tasks.
[3]Again, I shall continue to describe Mrs Wyborn by the name she had at the time of relevant events.
11.At the time of his imprisonment Mr Dorrington executed a power of attorney in favour of Ms Taylor to enable her to keep the business operating. With the benefit of that power Ms Taylor attempted to bring some order to the practice in the absence of Mr Dorrington. She made contact with Ms Vassallo who suggested that a man named Goodall might be able to help. He was, she was told, a solicitor and tax accountant. Ms Taylor arranged for Mr Dorrington’s solicitor to attend the premises of MVA Accountants for the purposes of interviewing Mr Goodall to work in the practice. After that interview she engaged Mr Goodall to work in the practice. He worked with the other professional employee, Mr Chris Munday, who was being trained to become a tax agent in his own right.
12.It transpired that Mr Goodall was not what Ms Taylor had believed him to be. He was not qualified as either a solicitor or tax agent. After a short period of time, and having created a variety of problems in the practice, he left one day and did not return. Mr Munday left at the same time.
13.After the departure of Mr Goodall and Mr Munday Ms Taylor telephoned Mr Rodney Fox, an accountant and tax agent in Coffs Harbour. Mr Fox says that that conversation took place on 15 August 2003 and there is no reason to doubt that.
14.Ms Taylor sought the assistance of Mr Fox. He came to Port Macquarie the following Monday, 18 August 2003. On that day Mr Fox agreed to accept appointment as the “administrator” of the practice of MVA Accountants. That agreement was ultimately reflected in a home-drawn document, said to have been executed on 25 August 2003 by Ms Taylor as attorney for Mr Dorrington and Mr Fox. That agreement was expressed to terminate at the time of execution of an agreement between Mr Dorrington and Mr James Child.
15.Mr Child was a registered tax agent who, at the time, practised in Coffs Harbour as James A. Child and Associates. In that capacity Mr Child had, from time to time, employed Mr Fox. Mr Fox asked Mr Child to become involved in the “administration” of the practice of MVA Accountants. That involvement was recorded in another home-drawn agreement, also executed on 25 August 2003, between Ms Taylor as attorney for Mr Dorrington and Mr Child. The agreement was expressed to run for a minimum of 6 months.
16.Mr Dorrington was released from gaol on Thursday 4 September 2003. He returned to Port Macquarie the following day and attended the practice of MVA Accountants where he met Mr Fox. From that point onwards, he says, he worked in the practice full-time.
17.The relationship between Mr Dorrington, Mr Fox and Mr Child was never amicable and seems to have been a source of continual friction. It finally broke down around mid-December 2003.
18.To complete the background picture it is necessary to refer to Avarin Pty Ltd. Mr Dorrington was the only member of this company at all material times and was its sole director from September 2001 to July 2003 when Ms Taylor was appointed a director. From 1 January 2002 Avarin carried on the business of MVA Accountants. In early 2004 Mr Dorrington ceased using the name MVA Accountants. The trading name, Accounting Services Tailor Made, was first registered on 1 December 2003. Mr Dorrington was registered as the person carrying on business under that name from 1 December 2003 to 1 March 2004. Avarin carried on business under that name from 1 March 2004 to 26 April 2004 and thereafter Mr Dorrington and Ms Taylor carried on business as Accounting Services Tailor Made.
19.On 29 May 2004 Mr Dorrington applied for re-registration as a tax agent. On 2 December 2004 the Board sought comments from Mr Dorrington on matters of complaint made to it by the Tax Agent Integrity Unit (part of the Australian Taxation Office). Mr Dorrington responded to those matters in May 2005. Then, in December 2005, Mr Dorrington was asked to show cause why the Board should not cancel his registration as a tax agent. He sought to do so by a letter from his solicitor dated 3 February 2006. The Board was not persuaded by the matters put forward in that letter and at a meeting held on 20 April 2006 resolved to cancel Mr Dorrington’s registration as a tax agent.
The Statutory Framework
20.Part VII A of the Income Tax Assessment Act 1936 (ITAA 1936) deals with the registration of tax agents. A person desiring to be registered as a tax agent may make application to the Tax Agents’ Board[4]. Provided the Board is satisfied that the statutory criteria[5] are made out, the Board is required to register the applicant for registration as a tax agent. Registration of a tax agent, unless terminated, suspended or surrendered, continues in force for a period of 3 years. Registration must then be renewed.
[4] Section 251J, ITAA 1936. By virtue of s 251C of ITAA 1936 there is a Board in each State.
[5] Section 251JA, ITAA 1936.
21.Mr Dorrington’s original registration was due to expire on or about 1 June 2004.
22.When application is made for re-registration, the Board, if satisfied of the matters set out in s 251JC of ITAA 1936, is required to re-register the tax agent. One of the matters that the Board must be satisfied of is that the applicant for re-registration is a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters. For simplicity hereafter I will use the expression “fit and proper person” rather than the entire phrase. Section 251BC of ITAA 1936 sets out some particular circumstances where a person is not a fit and proper person. Those circumstances include, relevantly, not being of good fame, integrity and character. Unless the Board is satisfied of the matters in s 251JC(1) of ITAA 1936 it shall refuse to re-register the applicant for re-registration. Where the Board makes such a decision and serves notice of that decision on the applicant for re-registration after the expiry of the original registration, the applicant for re-registration is, by operation of s 251JC(4) of ITAA 1936, taken to have been registered as a tax agent up until service of the refusal notice.
23.The Board also has a power to cancel or suspend the registration of a tax agent. It is sufficient for present purposes to note that that power, contained in s 251K(2) of ITAA 1936, may be exercised where the Board is satisfied:
·that the tax agent has neglected the business of a principal – s 251K(2)(b)(1) of ITAA 1936;
·that the tax agent, if a natural person, is not a fit and proper person – s 251K(2)(d) of ITAA 1936.
A tax agent is not a fit and proper person if, relevantly, the agent “is not of good fame, integrity and character”[6].
[6] Section 251BC(1) of ITAA 36.
24.In the present case, and despite some confusion in the Board’s original notice to Mr Dorrington’s solicitor[7], the Board’s decision was to cancel Mr Dorrington’s registration rather than a decision to refuse to re-register him. It is not clear to me what registration was then in force and able to be cancelled. His original registration had expired on or about 1 June 2004 and Ms Collins, counsel for the Board, was unable to refer me to any provision, equivalent to s 251JC(4) of ITAA 1936, extending the expired registration to the cancellation date.
[7] 27 April 2006; pages 161-164 of Exhibit 3.
25.In my view, the Board, having made the factual determinations that it did, ought to have given effect to them by refusing re-registration rather than cancelling an already expired registration. There was, in my view, no registration to cancel, the original registration having expired on 1 June 2004. It will be necessary, whatever the merits of the present application, to correct this error.
The Board’s Case
26.The case for the Board is set out in its Amended Statement of Facts and Contentions filed in the course of the hearing. That document includes some allegations raised by amendment whilst Mr Dorrington was being cross-examined. Moreover, the case presented in the Board’s final submissions includes allegations not contained in the Amended Statement of Facts and Contentions.
27.The case for the Board is that Mr Dorrington has neglected the business of his principals and is not a fit and proper person. These conclusions, which are put cumulatively or alternatively, are said to follows from five areas of evidence:
·the tax affairs of Mr Dorrington and Avarin;
·the conduct of the practice of MVA Accountants whilst Mr Dorrington was in gaol;
·the conduct of the practice of MVA Accountants otherwise;
·misrepresentations by Mr Dorrington of his qualifications; and
·a lack of candour by Mr Dorrington in his dealings with the Board.
The tax affairs of the applicant and Avarin
28.Uncontroversial evidence was given by Ms Tsiavos, an officer in the employ of the Australian Taxation Office. It establishes the following:
(a)Mr Dorrington’s 2003 income tax return was lodged in May 2005, some 52 weeks late;
(b)Mr Dorrington’s 2004 income tax return was lodged in May 2005, some 6 weeks late;
(c)Mr Dorrington’s 2005 income tax return was lodged in July 2006, some 6 weeks late, thereby incurring an administrative penalty of $220;
(d)Mr Dorrington has unpaid income tax debts of:
(i)$5,378.61 (comprising his 2003 and 2004 income tax liabilities and general interest charge) as at the date of the decision;
(ii)$7,860.10 (now including the 2005 income tax debt and further GIC) as at the date of hearing;
(e)Mr Dorrington’s 2006 return is still not lodged;
(f)the taxation returns for Avarin for 2002 and 2003 were lodged late, by 126 weeks and 79 weeks respectively, thereby incurring administrative penalties (which remain unpaid) of $1,100;
(g)on 22 April 2004 Avarin was convicted of an offence under s 8C(1)(a) of the Taxation Administration Act 1953 constituted by its failure to provide information required under the Superannuation Guarantee (Administration) Act 1992;
(k)on 22 January 2006 Mr Dorrington lodged his June 2005 quarter and September 2005 quarter Business Activity Statements (BAS), respectively 5 months and 2 months beyond already extended lodgement dates;
(i)Mr Dorrington has unpaid BAS liabilities of:
(i)$6,129.75 as at the date of the decision;
(ii)$9,628.05 as at the date of hearing;
(j)Avarin lodged its December 2004 quarter BAS, due on 28 February 2005, on 26 April 2005, 2 months late; and
(k)Avarin has an unpaid BAS liability of:
(i) $6,146.25 as at the date of the decision;
(ii) $7,055.44 as at the date of hearing.
29.Some defaults in personal tax affairs by tax agents, for example, conviction of a serious taxation offence, have mandatory consequences in the process of an agent’s registration or re-registration. But short of these matters it has long been the case that an agent’s personal taxation failings may be relevant to the overall question of whether the person is a fit and proper person. Recently in VBY and Tax Agents’ Board[8] Senior Member Handley summarised the Tribunal and Federal Court decisions on the issue. The matter was put in this way by Davies J, sitting as the President of the Tribunal, in ReSu and Tax Agents’ Board, South Australia[9], where his Honour spoke of the need for an agent to be a person of such reputation and ability that officers of the Taxation Department might proceed on the footing that returns lodged by the agent had been prepared honestly and competently. His Honour continued:
“A tax agent who allows his own tax affairs to get into a state of disorder, who has constant problems himself with the Taxation Department, may not be a proper person to handle clients’ affairs for there may come a time when dissatisfaction which officers of the department may have with the tax agent personally may be reflected in their handling of his clients’ affairs. Clients who seek extensions of time should not be embarrassed by the fact that the tax agent acting for them is himself continually late in complying with the time limits imposed by the Act and the regulation. Undoubtedly, even minor offences, if sufficient in number, can so interfere with a tax agent’s standing that he is rendered not a fit and proper person to be registered as a tax agent.”
[8](2006) ATC 2044 at par [40]-[46]. See now Toohey v Tax Agents’ Board of Victoria (2007) 94 ALD 521 where the decision of the Tribunal was set aside.
[9] (1982) 61 FLR 1 at p 5.
30.A question arises however as to the timing of some of the matters relied upon by the Board under this heading. Some of them are matters that arose after the date of the Board’s decision but before the hearing. Shi v Migration Agents’ Registration Authority[10] is very recent authority for the proposition that in considering a decision to cancel the registration of a migration agent the Tribunal is not entitled to take into account evidence of events occurring after the date of the Authority’s decision except to the extent that that evidence might have cast light upon the decision as at that date. In Toohey v Tax Agents’ Board of Victoria[11], decided before Shi, Middleton J said this:
“In view of s 43(1) of the [Administrative Appeals Tribunal Act], where the matter comes before the Tribunal, the Tribunal must be satisfied that the applicant is the prescribed fit and proper person at the time of the Tribunal’s determination. In reaching its decision, the Tribunal should consider for itself, as though it was performing the function of the relevant decision-maker, whether the applicant has satisfied the Tribunal he or she was the prescribed fit and proper person.”
[10] [2007] FCAFC 59.
[11] (2007) 94 ALD 521.
31.The Board in the present case submits that the decision in Shi is distinguishable on the basis that the legislation in issue here does not contain an equivalent to s 292 of the Migration Act 1958. That section prevents the registration of a migration agent whose registration had been cancelled within five years after the date of cancellation. I do not accept that that is a basis for distinguishing the case and consider that I am bound by the majority decision in Shi, notwithstanding the persuasive dissent of Downes J in that case and the decision of Middleton J in Toohey. But given the uncertainty of the matter I propose to consider the position at both times; that is, at the time of the Boards’ decision and at the present time.
32.Ultimately, I consider the distinction between the points of temporal focus to be factually meaningless. It seems to me not to matter whether the debts owed by Mr Dorrington and Avarin have increased a little with the passage of time; if they have an importance it is in the fact that the debts remain. Equally it seems not to matter that following the decision by the Board Mr Dorrington’s 2003 and 2004 income tax returns were lodged. All that did was to quantify the extent of the default in lodgement that had existed in relation to those returns at the time of the decision.
33.I will, however, leave for subsequent discussion the effect on the ultimate questions of the demonstrated defaults by Mr Dorrington and his corporate alter ego.
The conduct of the practice during the applicant’s incarceration
34.The case for the Board, as articulated in its Amended Statement of Facts and Contentions[12], was that Mr Dorrington gave Ms Taylor a power of attorney “to run his tax agent’s practice” and that she “managed the … tax agent’s practice”.
[12] At pars. [21] – [23].
35.The relevant statutory prohibition is contained in s 251N(1) of ITAA 1936. It is in these terms:
“(1) A registered tax agent or a person exempted under section 251L shall not allow any person, not being his employee, a registered tax agent or, in the case of a partnership which is registered as a tax agent, a member of that partnership:
(a) to prepare on his behalf, either directly or indirectly, his own or any other income tax return or objection; or
(b) to conduct on his behalf, either directly or indirectly, any business of himself or any other person relating to any income tax return or income tax matter.
Penalty: $1,000.”
36.The argument advanced was that Mr Dorrington, by permitting Ms Taylor to operate the business during his absence, had breached the prohibition in s 251N(1)(b). I do not accept that argument. No authority is cited for the Board’s contention. I would be surprised if there were authority for a proposition of such width.
37.The term “business” in s 251N(1) is not used in isolation; it is used in conjunction with the expression “relating to any income tax return or income tax matter”. The section does not operate to prevent Ms Taylor from managing the business constituted by the accountancy practice; it operates to prevent her conducting business relating to income tax returns and matters.
38.Ms Taylor used the power of attorney to conduct the overall business of the practice. That did not involve her in conducting business in relation to income tax returns or matters. In relation to those matters she recognized that a qualified and appropriately registered person was required. Ms Taylor attempted, initially unsuccessfully, to obtain such a person but her initial lack of success when she engaged Mr Goodall does not lead to a conclusion that Mr Dorrington breached s 251N(1)(b).
39.The Board advances an alternative case under this head which is that Mr Dorrington’s failure to put in place appropriate mechanisms for the supervision and control of his practice resulted in persons who were not registered tax agents breaching s 251L of ITAA 1936; that being the section that prohibits unregistered persons from demanding or receiving a fee for tax work. I am unable to accept this argument either.
40.It never emerged from the Board what the “appropriate mechanisms” were that ought to have been, but were not, in place. In my view as much as Mr Dorrington could do, given his confinement, was to arm Ms Taylor with the means whereby she could seek to ensure that the statute was complied with. The fact that, with the best of intentions, she was for the initial period unsuccessful, does not detract from that conclusion.
41.I do not regard any part of the conduct of the practice during Mr Dorrington’s incarceration as reflecting adversely upon the question of whether he was a fit and proper person or upon the question of whether he neglected the business of his principals.
The conduct of the practice generally
42.The Board’s case was that since June 2001 Mr Dorrington had neglected the business of one or more of his principals in the following respect:
“(a)the trust account maintained by MVA could not be balanced in August 2003 and a new trust account needed to be established;
(b)the Applicant did not diligently prepare and lodge the income tax returns and other documentation of his principals, leading in some instances to those principals incurring late lodgement fees imposed by the ATO and by ASIC;
(c)the Applicant failed to diligently conduct his affairs as a tax agent by failing to forward refund cheques provided by the ATO to his principals for extended periods of time;
(d) the Applicant failed to diligently attend to the other taxation affairs of his principals.”
43.By and large these allegations have as their source evidence given by Mr Fox and Mr Child.
44.The allegation regarding the unbalanced trust account comes from Mr Fox. I am prepared to assume, for the purpose of this discussion, that it is true but even so it does not take the matter anywhere. There are, at least, two reasons for that. First, and somewhat narrowly, between Mr Dorrington’s imprisonment and the arrival of Mr Fox, the management of the trust account had been outside the control of Mr Dorrington. But beyond that it is not enough that Mr Dorrington be shown not to be a good bookkeeper, if that be what an unreconciled trust account reveals. What also must be shown is some detriment to his principals as a consequence of that default. Detriment in this context would be, for example, a client not receiving a tax refund, either at all or in a timely way. No evidence of detriment of this, or any other, type was put before me.
45.It is true that Mr Fox makes reference to observing
“tax refund cheques and other important tax-related documents … left piled on desks and in drawers.”
But that observation relates to the position in August 2005. I have no way of knowing the vintage of any cheques observed by Mr Fox. Mr Child’s affidavit[13] suggested that when he arrived in the practice on 25 August he
“found approximately 50 tax refund cheques that were at least six months old.”
[13] Exhibit 14 at par. [8].
However in cross-examination Mr Child said that that allegation was not true and that, in fact, he had found only 5 to 6 cheques. He spoke of Mr Fox having found 50 tax refund cheques but that all cheques, whether found by him or Mr Fox, had been cancelled.
46.I found the evidence of both Mr Fox and Mr Child on this aspect to be most unsatisfactory. I am unable to place any reliance upon what they say on the subject of locating cheques, particularly when it appears that any cheques were no longer negotiable.
47.The next allegation is also founded in Mr Fox’s affidavit[14] which said,
“I noticed that a number of clients were receiving fines from the Australian Securities and Investments Commission … because documents and cheques had not been sent to ASIC.”
[14] Exhibit 15 at par. [19].
The Board’s allegation assumes, wrongly in my view, that any “fines” imposed by the Commission were attributable to the act or omission of Mr Dorrington. There is simply no evidence that would support that connection. There was no evidence that it had been the responsibility of Mr Dorrington to maintain statutory records for any corporation or that any corporation had been penalised for failing to lodge documents in a timely way. It is no answer to the complete absence of evidence to say, as does the Board in its final submissions, that Mr Dorrington admitted in cross-examination that he had not undertaken a comprehensive review of his 2003 client files “in order to establish once and for all whether there was any truth to the allegations” or that Mr Dorrington had failed to respond properly to a notice to produce.
48.The next allegation of failing to forward refund cheques has already been dealt with. It is not made out.
49.There is, finally, the unparticularised allegation in paragraph (d) of the Board’s submissions. There is some evidence in relation to the affairs of Mr and Mrs Hiam where that allegation might be made out.
50.Mr and Mrs Hiam attended the practice in October 2003 for the first time and saw Mr Dorrington. Information required for the lodgement of their tax returns was provided together with some other documents. There was a question of Mrs Hiam’s entitlement to a baby bonus. Mr Dorrington asked Mrs Hiam to bring him some documents which included her previous year’s notice of assessment. This was done a few days later.
51.Thereafter, and on a regular basis up to early February 2004, Mrs Hiam telephoned the practice in an attempt to speak to Mr Dorrington but was never able to do so. She left messages on each occasion but her calls, about six she estimates, were never returned.
52.I am satisfied that Mr Dorrington neglected the business of his principals, Mr and Mr Hiam, by persistently failing to return Mrs Hiam’s telephone calls. Either he received the calls and wilfully failed to return them or the office systems he employed were so woefully inadequate that he never became aware of the messages. While I regard the former as more likely the latter has the same result; a neglect of the business of his clients.
53.The Board also advanced its case of neglect on the basis of a failure to lodge the tax returns for Mr and Mrs Hiam. Before considering that aspect I should note that general arrangements that existed in the practice of MVA Accountants after Mr Dorrington’s release from prison. The evidence of Mr Fox, Mr Child and Mr Dorrington was that, during that period, tax returns were prepared at the offices of MVA Accountants but lodged through Mr Child’s office in Coffs Harbour.
54.Had the matter been determined on the basis of the evidence of Mrs Hiam solely I might have been prepared to conclude that the delay in lodging her return and that of her husband was attributable to Mr Dorrington. However the evidence of Mr Fox, in particular relating to Exhibit 16, leaves me far from satisfied that the delay in lodging the Hiam’s returns should be attributed to Mr Dorrington. The messages that comprise Exhibit 16, and Mr Fox’s evidence regarding them, lead me to conclude that there were instances evidenced by the messages in Exhibit 16 where the delay was a delay in lodgement at Mr Child’s office not a delay in preparation. In these circumstances I am not prepared to attribute the delay to any act or omission of Mr Dorrington.
55.Of course, had Mr Dorrington returned Mrs Hiam’s calls the delay in lodgement would have become evident much earlier. Mr Dorrington is, in that sense, responsible. Moreover, responsibility for losing Mrs Hiam’s documents and causing her inconvenience must be attributed to Mr Dorrington. In these respects, that is, failing to answer numerous telephone messages and losing documents, Mr Dorrington neglected the business of the Hiams.
56.I cannot, however, be satisfied that there were other occasions where the conduct of the practice of MVA Accountants was such as to amount to neglect of the business of Mr Dorrington’s clients. In that regard it is of some significance that no other client complaints were put before me.
57.In supplementary submissions the Board referred me to a passage in the judgement of Davies J in Su[15] where his Honour commented upon the evidence in that case of the absence of other complaints and the absence of evidence of competence from other practitioners. The passage on which the Board relies does not establish any matter of legal principle; rather it represents the way in which that judge dealt with the evidence in that case.
[15] (1982) 61 FLR at 6.
58.The Board contends that Mr Dorrington failed to diligently attend to the other taxation affairs of his principals. It has elicited evidence in support of that allegation from one of those principals. I regard the absence of evidence from other principals as impacting upon the question of whether the allegation by the Board is made out to any greater extent. As against that I have various testimonials from clients and the opinion of a fellow practitioner, Mr Siepen, that Mr Dorrington “appears to be conducting an efficient Tax Agency practice” although in the circumstances I give little weight to these views.
59.In closing submissions Ms Collins, counsel for the Board, put the Board’s case under this heading on a somewhat wider basis than had been articulated in its Statement of Facts and Contentions. It is said that Mr Dorrington received cash payments for the preparation of tax returns and kept those sums rather than remitting them to the practice and, it was said, his denial of receipt of monies that Mr Fox says that he was paid was false.
60.I propose to comment in more detail below upon what I regard as the necessary legal discipline in presenting a case for the Board however I do not regard these allegations as being made out. Moreover, the case for the Board never made clear how these allegations, even if true, impacted upon the issues I have to decide.
61.There can be no doubt that Mr Dorrington, on occasions, received payment in cash from clients for services. But the evidence of Mr Fox on this aspect cannot be accepted without qualification. He spoke of “four tax invoices” that evidenced cash payments made directly to Mr Dorrington. Even a cursory examination of the documents exhibited in support of that allegation shows that there are, in fact, two invoices and duplicates thereof. In that respect it seems to me to be plain that the evidence of Mr Fox in this respect was reckless.
62.But, even assuming it to be the case that Mr Dorrington received payments in cash and was paid the other amounts said by Mr Fox to have been paid to him, the submissions of the Board did not suggest how those matters might advance the Board’s case or detract from that of Mr Dorrington.
63.I accept the position that Mr Dorrington, on the one hand, and Mr Fox and Mr Child on the other, found themselves in was unusual and it lead to difficulties arising between them. There was, at the time and in all likelihood still is, animus between them. It is neither necessary nor possible for me to make any determination about the rights and wrongs of disputes between these parties. My task is to determine whether the evidence demonstrates that Mr Dorrington was a fit and proper person or that he neglected the business of his clients.
64.The evidence of Mr Fox and Mr Child does not provide me with any foundation for reaching any conclusions on those issues adverse to Mr Dorrington.
Misrepresentations of qualifications
65.Mr Dorrington had been a member of the National Institute of Accountants (NIA) and the Association of Taxation and Management Accountants (ATMA). Mr Dorrington’s membership of those organisations lapsed some time in 2004 however the website for Accounting Services Tailor Made continued to claim membership of the two bodies until August 2005. The matter was brought to Mr Dorrington’s attention by the Board. In May 2005 his solicitors advised the Board that he was, at that time, re-applying for membership of both bodies. He did not do so.
Lack of candour
66.These allegations were first raised by the Board in the course of the hearing and I gave leave to the Board to amend its Statement of Facts and Contentions to incorporate allegations:
·that Mr Dorrington failed to disclose to the Board in his application for re-registration the nature and extent of his convictions in the previous five years, that he had been “struck off” as a member of NIA in December 2003 and that Avarin had been convicted in April 2004[16];
·that he failed to disclose the same matter to the Board in May 2005; and
·that he had informed the Board some time prior to May 2004 that he had been convicted of three driving offences which was not correct.
[16] See para. 28(g) above.
67.In my view there is nothing in any of these allegations.
68.I accept that an applicant for registration or re-registration has a duty to disclose to the Board all matters that might reasonably be regarded as relevant to the determination of whether the applicant is a fit and proper person. In that regard an applicant must, in my view, make disclosure even if the information is not directly sought if it could reasonably be regarded as relevant although the form of application will generally convey what the Board regards as being relevant.
69.The first matter relied upon relates to the re-registration application dated 28 May 2004. Question 10 of the application form required an applicant to disclose whether that applicant has been convicted of any offence against the laws of Australia, a State, Territory or other country during the preceding 5 years and if so “full details” were to be attached. Mr Dorrington gave an affirmative answer to question 10 but he did not provide “full details”.
70.At the time of Mr Dorrington’s application he was, and he was aware that he was, the subject of investigation by the Tax Agents’ Integrity Unit (the Integrity Unit). He had been interviewed by officials from the Integrity Unit in relation to the allegation that he had allowed an unqualified person (Mr Goodall) to prepare and lodge tax returns. The officials within the Integrity Unit were aware that Mr Dorrington had been incarcerated between 27 July 2003 and 4 September 2003 and had obtained a certificate of conviction from the District Court of New South Wales.
71.When Mr Dorrington lodged his application for re-registration it was accompanied by the typescript record of interview of Mr Dorrington conducted on 5 March 2004 by officials from the Integrity Unit and a letter from Mr Dorrington which explained that the attachments had been enclosed “because of questions 8 and 10 in the application form.” The letter continued:
“I just want to add to the report you will be receiving from the Integrity Unit, that I at no time would have allowed any person or persons to use my [Tax Agents Number] while I was in jail. It was my understanding at the time of Mr Kevin Goodall approaching my practice that he was a registered Tax Agent, as he showed by [sic] partner and power of attorney the same certificates that I have hanging from my wall re memberships and Tax Agents forms.”
72.It is plain that Mr Dorrington was anticipating that the Integrity Unit would be reporting to the Board. The enquiry by the Integrity Unit had been prompted by Mr Dorrington’s gaol sentence. Mr Dorrington made explicit reference to the fact of his having been in gaol and the Integrity Unit was in possession of a certificate from the District Court of New South Wales setting out details of the three convictions that lead to his imprisonment.
73.Despite the exhortation to provide “full details” I consider that Mr Dorrington provided adequate information about what was material – his gaoling for a period of time. Details of additional and earlier traffic convictions added nothing to the matters that he had disclosed or anticipated that the Integrity Unit would disclose.
74.Whilst the expression “struck off” is the expression used by the NIA in its correspondence with the Board it is not an expression that would ordinarily be used to describe termination of membership for non-payment of dues, the basis given here for the termination of Mr Dorrington’s membership. It is an expression ordinarily used to describe the response of a professional body to proven allegations of disgraceful or infamous conduct. Had Mr Dorrington’s membership been terminated for a reason of this nature it might have been a matter warranting disclosure to the Board. But there is no basis upon which it could be suggested that Mr Dorrington breached a duty of candour owed to the Board by not informing the Board that his membership of the NIA had been terminated for non-payment of dues. Indeed I find it surprising that the Board could put this forward as a serious allegation.
75.The final matter relied upon as demonstrating a lack of candour was the failure to disclosure the conviction of Avarin some 4 to 5 weeks earlier. Ms Collins submitted that question 15 of the application form – “Is there any other matter of which you are aware which may have an effect on whether the Board can approve this application?” – ought to have elicited a response regarding Avarin’s conviction. Mr Dorrington in fact answered in the affirmative to this question but I infer that it was the material regarding the Integrity Unit’s investigation that prompted that response.
76.On balance, I consider that the conviction of Avarin ought to have been disclosed. Mr Dorrington was the controlling mind of Avarin. The conviction was for failing to comply with a statutory obligation arising under a taxation law to provide information to the Commissioner. In that regard, the failure of Mr Dorrington, as Avarin’s controller, to comply with a statutory obligation is germane to the Board’s consideration of his suitability for re-registration as a tax agent.
77.The Board renews much of this attack but at a later point in time. The letter from Mr Dorrington’s solicitors to the Board of 12 May 2005 is relied upon. Two matters are put forward – the solicitors’ reference to Mr Dorrington’s traffic history and to the position regarding membership of NIA and ATMA.
78.As to the first matter the letter said:
“4. Mr Dorrington was remanded in custody in July 2003 subsequent to being arrested and convicted pursuant to a charge of driving whilst disqualified.
5. Mr Dorrington’s initial conviction related to driving with a suspended licence. The licence had been cancelled by the State Debt Recovery Office as a result of an unpaid fine.”
79.Again I find the Board’s approach puzzling. The letter of 12 May 2005 was a response to the Board’s letter of 2 December 2004 which enclosed, for a response from Mr Dorrington, the report from the Integrity Unit sent to the Board under cover of the letter dated 14 September 2004. That report made it abundantly clear that the Integrity Unit, and necessarily the Board, was aware of the three offences dealt with on 27 July 2003. A fair reading of the report indicates that it is not the driving history that prompted the Integrity Unit’s concern; rather it was the question of whether breaches of ITAA 1936 had occurred whilst Mr Dorrington was in gaol.
80.Moreover I regard the solicitors’ letter as being entirely accurate. He had not been asked to make “full disclosure of all his convictions.”
81.The other aspect relied upon as “misleading” the Board arises from the solicitors saying in the letter:
“Mr Dorrington is currently reapplying for membership with both the NIA and ATMA.”
The evidence of Mr Dorrington, in cross-examination, was that he had spoken to both bodies about re-applying for membership but had been advised to await the outcome of the Board’s investigation before doing so.
82.Prima facie there is discordance between those two pieces of information, however that is abated by the context in which the information was supplied.
83.The Integrity Unit’s report made only passing reference to the membership issue. It was not the focus of the enquiry and was not even mentioned in the Summary at the outset of the report. It hardly seems surprising that it was dealt with somewhat casually by the solicitors. Moreover the allegation, now put, that it was misleading was not part of the Board’s case as articulated in the Statement of Facts and Contentions filed in the course of the Tribunal’s pre-hearing processes. The purpose of such a Statement is to set out, for the information of the other party and the Tribunal, the facts relied upon by a party to sustain its contentions. Mr Dorrington was not on notice that the matter of membership was in issue and was not given the opportunity, for example, to confirm the instructions given to his solicitors when responding in May 2005.
84.In the result I do not regard the matter as reflecting upon Mr Dorrington’s fitness; at best it demonstrates that in responding to the Board via his solicitors he did not appreciate the seriousness that the Board would subsequently give to the issue.
85.The final allegation concerns the allegation that Mr Dorrington informed the Board, at some time prior to May 2004, that he had been convicted of “three driving offences, which was not correct.” It is not at all clear to me that Mr Dorrington informed the Board in those terms but even if he had it could hardly be regarded as material. As the report of the Integrity Unit makes plain the focus of the enquiry was on the fact of Mr Dorrington’s gaoling, not the precise detail of his traffic history.
Further allegations by the Board
86.The Board, in its closing submissions, expanded its case even further.
87.It is now said that Mr Dorrington’s history of traffic convictions demonstrate that he “has a tendency to disregard the law” which, it is said, is inconsistent with fitness for practice as a tax agent. Given that the convictions are not disputed and that Mr Dorrington had an opportunity to respond to the submission I propose to allow the Board to rely upon it. I will consider it below.
88.Then it is said that Mr Dorrington made a number of allegations on oath of disgraceful conduct against Mr Fox and Mr Child. These allegations were withdrawn at the outset of the evidence of Mr Dorrington. There is no doubt that the allegations ought not to have been made. Had they been true they went solely to the credit of the witnesses and amounted, in my view, to an impermissible breach of the finality rule on collateral issues. The Tribunal is no more willing than the traditional courts to undertake an investigation of collateral matters that go only to credit. That position is not altered because the matters are relied on in evidence in anticipation of a denial of the collateral issue. But the question is, what should I make of the fact that the allegations were made.
89.The difficulty with dealing with allegations made for the first time in closing submissions is that the factual substratum has not been explored in the course of the hearing. Did Mr Dorrington, for example, genuinely but mistakenly believe the allegations to be true? That aspect was not explored at the hearing. It seems likely that he did because his lawyers, I assume, would not permit such grave allegations unless satisfied that there existed a proper basis for doing so. But even if there had been no basis and the allegation had been entirely gratuitous I have difficulty in seeing how that bears upon the issues I have to decide beyond demonstrating that Mr Dorrington was reckless in swearing his affidavits and that there was animosity between Mr Dorrington and Mr Fox and Mr Child.
90.That recklessness may suggest that Mr Dorrington’s evidence on contested issues ought be treated with caution, however for reasons that I will explain I propose to treat his evidence that way in any event.
91.The next matter raised by the Board in final submissions is described as a “lack of contrition” on the part of Mr Dorrington. It is said that,
“his affidavit evidence does not adequately deal with, for instance, his failure to meet his and Avarin’s taxation liabilities, and the unfortunate experience of the Hiams.”
92.I reject that submission. Mr Dorrington’s affidavit was prepared by his solicitor. The solicitor was engaged to exercise a professional judgement about the matters that needed to be dealt with in the affidavit and that judgement was informed by the Board’s case, as articulated in its Statement of Facts and Contentions.
93.But, in any event, staged expressions of contrition are, in my experience, of no weight. It is preferable to consider whether an applicant in the position of Mr Dorrington has understood the error of his ways or will continue making the same errors[17].
[17] Cf Stasos v Tax Agents’ Board (1990) 21 ATR 974 at 983.
94.Then the Board’s submissions in paragraph 48 and following turn to an attack upon Mr Dorrington’s credit on the basis of variations in his accounts of his dealings with Mr and Mrs Hiam, his treatment of the evidence of Mr Fox and Mr Child, and an asserted “willingness to blame others.”
95.There is some force in the general criticism of Mr Dorrington’s evidence. There was a degree of recklessness in his affidavit that I have already remarked upon. In addition, I gained the distinct impression that at times in cross-examination some of his answers were not the product of true recall but of reconstruction. His evidence regarding Mr and Mrs Hiam is one example but there were others. I do not, however, think that Mr Dorrington was being consciously and deliberately untruthful; rather I consider that he had persuaded himself, with hindsight and reconstruction, about a version of events and when that account had a gap he simply filled in the gap on the basis of what he regarded “must have happened.” I stress that those are not his words, merely my appreciation, from his performance in the witness box of his mental processes.
96.The Board is also critical, and rightly so, of Mr Dorrington’s approach to the Notice to Produce Documents served on his solicitors by the solicitors for the Board. Mr Dorrington effectively ignored it – he did not comply with it nor did he seek to set it aside. That does not reflect well upon the way in which he viewed these proceedings.
97.I should add, as well, that I found Mr Fox and Mr Child equally unimpressive. There are demonstrated instances where their evidence was put in a way that reflected badly upon Mr Dorrington yet on closer examination either the evidence or the imputation conveyed did not stand up to scrutiny. For example, in the case of Mr Fox there was his evidence of the “four” tax invoices and in the case of Mr Child there was his evidence of the tax refund cheques not properly dealt with.
98.Matters of this nature in the evidence of both of these witnesses left me with the distinct impression that their evidence was generally unreliable.
99.Finally, criticism by the Board was directed to Mr Dorrington’s evidence, provided to the Integrity Unit in March 2004, that he checked “about every third return” prepared by employees. It is suggested that this was contradicted by his affidavit where he said:
“At all times prior to my arrest I directly supervised the employees that performed tasks within my office. I reserved for myself the responsibility of signing off each and every application submitted. No person was permitted to submit a tax return without formally conferring with me. I was responsible for these actions, I took responsibility for these actions and no one in my office was entitled to submit matters without having me endorse and approve such actions.”
I am simply unable to see the conflict pointed to. In March 2004 Mr Dorrington was commenting upon the practice he adopted in verifying the correctness of the preparation of returns; in his affidavit he was commenting upon that adopted in the lodging of returns. I did not regard his evidence in cross-examination as amounting to a retraction of the account given in his affidavit.
The Power to Suspend or Cancel
100.By virtue of s 251K(2) of ITAA 1936 the Board’s power to suspend or cancel registration is enlivened where the Board is satisfied that, inter alia, the tax agent has neglected the business of a principal or that the tax agent is not a fit and proper person.
101.Where the Board is considering an application for re-registration the effect of s 251JC of ITAA 1936 is that the Board is required to refuse re-registration unless satisfied, in the case of a natural person, that the applicant is a fit and proper person and that the applicant is not an undischarged bankrupt. There is no suggestion in the present case that Mr Dorrington answered the latter description.
102.Where, as here, the Board considered the matter as one of cancellation rather than re-registration it seems to me that it has, in essence, posed the correct question but in the wrong setting. While I consider that the Board ought to have treated the decision as one refusing re-registration I propose to consider the matter as one of both cancellation and refusal to re-registration, as the same question needs to be addressed in each case. In the case of cancellation there is the additional question of whether the tax agent has neglected the affairs of the principal.
Neglect of affairs
103.If, contrary to the view I take, the Board had jurisdiction to consider cancellation of registration, a finding that Mr Dorrington had neglected the affairs of his principals would enliven the discretion to cancel Mr Dorrington’s registration. Here, for the reasons I have dealt with in paragraphs 49 to 55, I have concluded that Mr Dorrington neglected the affairs of Mr and Mrs Hiam by failing to return telephone messages (or failing to have a system to bring the messages to his attention) and by losing their documents.
104.I do not regard those matters, standing alone, as warranting either suspension or cancellation. They do however fall to be considered under the fit and proper person head.
A Fit and Proper Person
105.Because of the uncertainty about the question of timing I propose to give effect to my view that I am bound by the majority decision in Shi; that is, I will take into account evidence that existed at the time of the Board’s decision or evidence that casts light on the facts present at the time of the decision. But, against the possibility that this approach may subsequently be held to be erroneous, I will consider the evidence, having regard to the approach of Downes J (in dissent) in Shi, by reference to the facts established before me.
106.The question posed is whether Mr Dorrington is a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters. It seems not to matter whether the question is asked in the affirmative (as in a re-registration decision) or in the negative (as in a cancellation decision) but to avoid doubt I will consider whether I am satisfied that Mr Dorrington answers the description.
107.A person is not a fit and proper person in the various ways set out in s 251BC(1) of ITAA 1936. None of the matters in paragraphs (a), (b), (c) (e) or (f) are in issue. What is in issue is paragraph (d). A person is not a fit and proper person if the person is not of good fame, integrity and character.
108.The scheme of s 251JC(1)(a)(i) (or s 251K(2)(d) in the case of a cancellation decision) and s 251BC(1) of ITAA 1936 is that the latter defines some matters where a person is taken not to be a fit and proper person. However, s 251BC(1) does not define exhaustively the matters that may determine whether a person is a fit and proper person. Thus the question is Mr Dorrington a fit and proper person is to be determined by reference to the matters in s 251BC(1) (and in this case it is only the “good fame, integrity and character” test in paragraph (d) that is said to be in issue) and then by reference more generally to the question.
109.On the facts as I have found them the matters that need to be taken into account when considering these questions are:
·the tax matters;
·the conduct in relation to the Hiams;
·the failure to disclose the Avarin conviction to the Board;
·the traffic history; and
·Mr Dorrington’s approach to giving evidence.
A fit and proper person - good fame, integrity and character
110.The question here is whether, having regard to the factual findings, it would be concluded that Mr Dorrington was not of good fame, integrity and character.
111.I do not regard any of the tax matters, the conduct in relation to the Hiams or the failure to disclose the Avarin conviction, individually or collectively, as leading to the conclusion that Mr Dorrington was not of good fame, integrity and character. The other two matters arguably touch upon the question.
112.Mr Dorrington has an appalling traffic history but, on balance, demonstrates a lack of insight and commonsense rather that an absence of integrity or good character. Mr Dorrington’s explanation for this conduct is not an excuse but does not lead me to conclude that it affects his integrity although I accept that in some circumstances a consistent pattern of offending may reveal an underlying lack of integrity. But this is not such a case.
113.I have earlier concluded that Mr Dorrington’s approach to giving evidence was, in some instances, reckless and, in other instances, unreliable. My conclusions were reached, not on the basis of a finding of deliberate untruthfulness, but that Mr Dorrington had persuaded himself of the correctness of his accounts on the basis of hindsight and reconstruction. Thus I do not consider that my views, adverse to his reliability, lead to a conclusion he is not a person of good fame, integrity and character.
114.In the result I am of the view that none of the matters that are demonstrated on the evidence lead me to conclude that Mr Dorrington was not of good fame, integrity and character, whether that matter be viewed at the time of the decision or at the time of hearing.
A fit and proper person - generally
115.It is to be remembered that in considering the issue of a fit and proper person it is unwise to attempt to define the matters that may legitimately be considered and that every case must depend upon its own circumstances[18]. As Hill J observed in Stasos v Tax Agents’ Board (NSW)[19], the content of what is necessary to constitute a person a fit and proper person to occupy a particular office may vary having regard to the office or vocation under consideration.
[18] Hughes and Vale Pty Ltd v The State of New South Wales (No 2) (1955) 93 CLR 127, 157.
[19] (1990) 21 ATR 974, 985.
116.I have already set out the frequently quoted observations of Davies J in Su. To that I would add these further observations from the same case where his Honour said[20]
“the function of a tax agent is to prepare and lodge income tax returns for other persons. A person is a fit and proper person to handle the affairs of a client if he is a person of good reputation, has a proper knowledge of taxation laws, is able to prepare income tax returns competently and is able to deal competently with any queries which may be raised by officers of the Taxation Department. He should be a person of such competence and integrity that others may entrust their taxation affairs to his care. He should be a person of such reputation and ability that officers of the Taxation Department may proceed upon the footing that the taxation returns lodged by the agent have been prepared by him honestly and competently.”
[20] (1982) 61 FLR 1 at pp 4-5.
117.In Stasos[21] Hill J qualified those remarks by observing that Davies J had,
“stated too narrowly the functions of a tax agent by limiting these to the preparation of returns.”
[21] (1990) 21 ATR 974 at 985.
118.Guided by these observations I turn to a consideration of whether Mr Dorrington was a fit and proper person at the time of the Board’s decision in April 2006.
119.It may assist if, at the outset, I set out this extract from the Board’s submissions:
“This is not a case such as Su or Cummins[22] where one particular aspect of the conduct of a practitioner alone is so serious as to require his removal from practice. It is a case where the cumulative effect of a number of aspects of the practitioner’s conduct over many years, in combination with the inference that can be drawn about his fitness for practice based on his evidence in these proceedings, warrants such a step being taken.”
[22] Bar Association (NSW) v Cummins (2001) 52 NSWLR 279.
As will appear, I do not agree.
120.The tax issues may be divided into two categories – failures to lodge and failures to pay. Those categories warrant separate consideration. Failures to lodge have frequently been regarded by members of this Tribunal as demonstrating that an agent is not a fit and proper person. But I am not aware of any case, and none was cited to me by the Board, where failure to pay assessed tax liabilities has been regarded as being relevant to the question of whether an applicant was a fit and proper person.
121.I do not suggest that it could never be the case that failure to pay tax could not be regarded as warranting a conclusion that the defaulter was not a fit and proper person. Mr Cummins, whose circumstances are discussed below, provides an extreme example. But it is to be borne in mind that the Deputy Commissioner has recourse to a range of remedies including, ultimately, seeking a sequestration order against a tax agent who has failed to pay tax or taxation liabilities. Were a sequestration order to be made the Board would be required to cancel a tax agent’s registration[23]. But in the present case the defaults in payment were not numerous and were relatively minor. Mr Dorrington owed $5,378 by way of income tax and had BAS liabilities of $6,129. Avarin had an income tax liability of $1,100 (comprised entirely of penalties) and BAS liabilities of $6,146. These liabilities continue to attract general interest charges. While there was no evidence of his precise financial circumstances it is the case that his practice was substantially disrupted by his imprisonment and its aftermath and he has undoubtedly incurred significant legal expenses in connection with those events. I am prepared to infer that Mr Dorrington has undergone a period of financial difficulty as a result of the imprisonment.
[23] See s 251K(3)(c), ITAA 1936.
122.So far as defaults in lodgement are concerned Mr Dorrington’s 2003, 2004 and 2005 returns were, as at April, either lodged late or outstanding and on two occasions he was late in lodging his BAS return. Avarin was late in lodging its 2002 and 2003 income tax return although it is of significance that no tax was apparently payable in those years. Avarin’s BAS statements were late on two occasions and it has been convicted in April 2004 of the offence constituted by a failure to provide superannuation information.
123.Whilst these defaults do not reflect well on Mr Dorrington I do not consider that they could be said to render him not a fit and proper person.
124.I next turn to the Board’s submissions regarding the effect of the decision in Bar Association (NSW) v Cummins[24]. That case was an extreme example of extraordinary disregard for the revenue laws. Cummins was a barrister and, for some of the time in question, a member of the senior bar. For the entire period of his career at the Bar of some 38 years he failed to lodge income tax returns. Spigelman CJ (with whom Mason P and Handley J A agreed) considered the question of “professional misconduct” and, in particular, whether it extended to acts not occurring directly in the course of professional practice. His Honour concluded[25]:
“There is authority in favour of extending the terminology ‘professional misconduct’ to acts not occurring directly in the course of professional practice. That is not to say that any form of personal conduct may be regarded as professional misconduct. The authorities appear to me to suggest two kinds of relationships that justify applying the terminology in this broader way. First, acts may be sufficiently closely connected with actual practice, albeit not occurring in the course of such practice. Secondly, conduct outside the course of practice may manifest the presence or absence of qualities which are incompatible with, or essential for, the conduct of practice. In this second case, the terminology of ‘professional misconduct’ overlaps with and, usually it is not necessary to distinguish it from, the terminology of ‘good fame and character’ or ‘fit and proper person’”.
[24] Supra fn 25.
[25] (2001) 52 NSWLR 279 at 289, [56]
125.Because Mr Dorrington is a tax agent it is not necessary to use any extended terminology to regard his defaults in lodging as reflecting on his fitness to practice. But the Board relies upon this passage from the judgement of the Chief Justice:
“The preparation and filing of tax returns is closely related to the earning of income, including professional income. The link is ‘sufficiently close’ to justify a finding of professional misconduct on the basis of Mr Cummins’ failure to lodge returns for thirty-eight years.
Similarly, and alternatively, the extent of Mr Cummins’ failure to observe his legal obligations and civic responsibilities by such a systematic course of improper conduct over such a long period of time is of such gravity as to constitute professional misconduct, for the reasons I have mentioned above in relation to fitness.”
126.Whatever may be said of Mr Dorrington, whether in relation to his tax affairs or in relation to his driving history or collectively, these issues are not such as would warrant the conclusion that they are of such gravity as to constitute Mr Dorrington not a fit and proper person. There is, in reality, no comparison between him and Mr Cummins.
127.Of course it would be wrong to merely consider the demonstrated individual faults of Mr Dorrington in isolation. It is, as the Board submits, the accumulation of faults that informs the ultimate decision. In my view, having regard to the faults collectively and not without some hesitation, I regard Mr Dorrington as a fit and proper person.
128.On the evidence before me Mr Dorrington’s difficulties originally arose out of a difficult marriage break up. Matters associated with that relationship lead him to repeatedly ignore an order of the Local Court, disqualifying him from driving to the point where, understandably, the Local Court lost patience with him and sentenced him to gaol.
129.Mr Dorrington’s time in gaol became a major source of disruption to his practice which was exacerbated by difficulties caused by the persons originally engaged to provide assistance or difficulties with their replacements. In that context Mr Dorrington is shown to have performed below an acceptable standard in relation to the affairs of Mr and Mrs Hiam and also let his own tax affairs deteriorate to a very poor standard. He ought to have, but did not, disclose to the Board the fact of Avarin’s conviction in April 2004 but I do not regard that non-disclosure as a deliberate and intentional withholding of information; rather, I consider that Mr Dorrington did not appreciate the importance of its disclosure.
130.In favour of Mr Dorrington is the fact that he obtained his qualification in difficult circumstances and showed commendable resolve in so doing. My impression of him is that he is a hard worker. He will need to be because he must get his and Avarin’s tax affairs in order and keep them in order. I consider, as well, that he has learned considerable lessons from this experience.
131.These conclusions are drawn on the basis of the approach in Shi however no different conclusion would result were I to have considered the matter as at the hearing date.
The Board’s Decision
132.As I have said, I consider that the Board was wrong to consider the matter on the basis of cancellation; it ought to have considered the matter on the basis of re-registration. Because of the view I have reached on the substance of the decision I would set aside the Board’s decision under review but I do not regard it open to the Tribunal to make a decision to re-register Mr Dorrington.
133.The passage of time has, in any event, brought its own procedural difficulties. Mr Dorrington’s original registration expired on 1 June 2004. Had it been renewed it would again have expired on 1 June 2007, and presumably around the time of the publication of these reasons the Board would have been considering an application for re-registration.
134.In my view the appropriate way to deal with the matter is to remit the matter to the Board for the purpose of the Board considering Mr Dorrington’s May 2004 application for re-registration. In so doing the Board should proceed upon the basis that Mr Dorrington satisfies s 251JC(1)(a)(i) of ITAA 1936.
135.Once the Board re-registers Mr Dorrington it will then be necessary for Mr Dorrington to apply for re-registration from June 2007 onwards. The Board will then need to consider that application. That consideration may be assisted by, but is not bound by, these reasons. It will be for the Board, at that time, to discharge its statutory function on the basis of the information then available to it.
136.I wish to conclude by making some observations about what seems to me to be desirable practice in cases such as this; cases where a regulator has reached a conclusion that a person does not satisfy a standard of “a fit and proper person”. That conclusion will almost invariably be drawn, or be sought to be drawn, on the basis of allegations of primary fact.
137.This Tribunal does not use pleadings of the type used in the courts; rather, the Tribunal’s General Practice Direction[26] requires the parties to expose their respective cases in a Statement of Facts, Issues and Contentions. The hearing and determination of cases such as the present is greatly assisted by requiring a regulator to set out in a Statement of Facts, Issues and Contentions the allegations of fact relied upon to support the conclusion that the applicant does not meet the statutory standard. A regulator is not, of course, limited to the matters that informed its original decision and can seek to sustain it on a different basis as has occurred in the present case. But what I think is critically important is that, well before the hearing, the regulator identify the allegations of fact intended to be relied upon.
[26]Available on the Tribunal’s website – the applicant should respond to those allegations, indicating those that are admitted, those that are in issue, and why they are in issue. In this way the parties and the Tribunal member hearing the matter can have a clear idea at the outset of the hearing what facts are in issue and thus need to be found.
139.It may be necessary for the allegations to be added to or amended. Such matters can be dealt with in the ordinary way. But the Tribunal, whilst obliged to conduct proceedings with as little formality and technicality as circumstances permit, is also obliged to ensure both parties are afforded procedural fairness. It is not possible to give a precise content to what constitutes procedural fairness but it is certainly possible to say that in cases such as the present it involves putting an applicant on notice, in advance of the hearing, of the allegations of fact relied upon to sustain the overarching allegation that an applicant is not a fit and proper person. That requirement is more acute in a Tribunal that does not have the power to award costs in cases where adjournments are necessitated by late changes to a party’s case.
140.I should add that these remarks are not prompted solely by the present case; they represent views that have been formulated from hearing similar cases in recent times. The present case merely presented an appropriate vehicle in which to articulate them with a view to future cases.
141.In the result the formal decisions I would make would be to set aside the decision of the respondent made on 20 April 2006 and remit the matter to the respondent for consideration of the application for re-registration on the basis that the applicant satisfies s 251JC(1)(a)(i) of the Income Tax Assessment Act 1936.
I certify that the 141 preceding paragraphs are a true copy of the reasons for the decision herein of Deputy President P E Hack SC
Signed: ..................Signed...................................................
Eleanor O’Gorman, AssociateDates of Hearing 23, 24, 25 May 2007
Date of Decision 29 June 2007
Solicitors for the Applicant GWM Lawyers & Conveyancers
Counsel for the Respondent Ms Elizabeth Collins
Solicitors for the Respondent Australian Government Solicitor
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