Tax Practitioners Board v Dedic

REASONS FOR JUDGMENT 1 In an earlier judgment, the respondent ("Ms Dedic") was found by the Court to have contravened s 50-5(1) of the Tax Agent Services Act 2009 (Cth) ("the Act") on 86 separate occasions by providing a service that she knew, or ought reasonably to have known, was a "tax agent service" for a fee or other reward without being a "registered tax agent": Tax Practitioners Board v Zada Dedic [2014] FCA 307. The "tax agent service" that Ms Dedic provided was the preparation and lodgement of income tax returns for clients of her accounting business between July 2010 and October 2012. Declarations of the contraventions were made and an injunction granted requiring Ms Dedic for a period of three years to comply with certain requirements before providing, or agreeing to provide, specified tax agent services. The Tax Practitioners Board ("the Board") has also sought the imposition of pecuniary penalties, which has been the subject of a separate hearing ("the penalty hearing"). 2 The Board has submitted that the Court should make an order imposing on Ms Dedic a total pecuniary penalty in the range of $40,000 to $50,000 for the 86 contraventions of s 50-5(1) of the Act. The maximum penalty payable in respect of each contravention is 250 penalty units. The amount of a penalty unit applicable to the contraventions is $110: s 90-1 of the Act; s 4AA of the Crimes Act 1914 (Cth) (as in force at the time of the contraventions). Accordingly, the maximum penalty per contravention of s 50-5(1) that may be imposed on Ms Dedic is $27,500. The maximum penalty for all 86 contraventions is $2,365,000. 3 A preliminary question arises as to whether it is permissible for the Board to submit to the Court its view of the appropriate range of penalties. That issue arises by reason of the recent decision in Barbaro v The Queen; Zirilli v The Queen (2014) 88 ALJR 372; [2014] HCA 2 ("Barbaro") where the High Court held, by majority, that it was not the role or duty of the prosecution in criminal matters to make submissions on the available range of sentences for an offence. Recently, in Australian Competition and Consumer Commission v EnergyAustralia Pty Ltd [2014] FCA 336 ("ACCC v EnergyAustralia Pty Ltd"), Middleton J considered whether Barbaro implicitly overruled NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 ("NW Frozen Foods") at 291 per Burchett and Kiefel JJ and Minister for Industry, Tourism and Resources v Mobil Oil Australia Pty Ltd [2004] FCAFC 72 at [36]-[79] per Branson, Sackville and Gyles JJ ("Mobile Oil") which are long standing authority in this Court supporting the practice of regulators in civil penalty proceedings making a submission about the appropriate range of penalties. Middleton J considered that the High Court in Barbaro did not intend to exclude, in the civil context, the making of submissions (joint or otherwise) by the parties as to appropriate orders to make (not just as to penalty but also as to injunctions and disqualification orders). Middleton J reasoned: 140 A regulator bringing a civil penalty proceeding stands in a different position than that of a prosecutor in a criminal proceeding. By its very establishment and functions, such a regulator does not have, and is not expected to have, the independent role and characteristics of the prosecutor. Unlike the prosecutor, the regulator will generally have conducted the investigation which led to the proceedings, dealt with the respondent in relation to those investigations, and instructed its own lawyers and counsel to represent it in the proceedings. The regulator typically has responsibility for all aspects of the regulatory sphere including administering its statutory regime, investigating breaches, enforcing breaches through non-judicial processes (such as enforceable undertakings) and through judicial processes such as obtaining penalties, injunctions, and remediation orders. 141 The separate and distinct role of a prosecutor is clearly illustrated when a regulatory agency refers a brief for criminal prosecution to the Director of Public Prosecutions. It is then that the special independence, role and functions of the prosecutor become engaged. 142 It is the very nature of a civil regulatory proceeding that the regulator contends for a particular outcome (often not confined to civil penalties but including injunctions, disqualification orders, and compensation orders). The very purpose of the proceedings brought by the regulator is to secure a particular regulatory outcome. Accordingly, the very process undertaken by a civil regulator makes it a party with a different interest and different functions from a criminal prosecutor. 143 In fact, the specialist role of a regulator is one of the reasons why the Full Court has supported the practice of submissions being made as to the appropriate penalty amount: see NW Frozen Foods at 298F and Mobile Oil at [51]. 144 As I have already alluded to, there may also be different purposes in imposing a criminal sentence and civil penalty in the context of a particular legislative scheme, particularly in relation to deterrence. 145 A principal object of imposing a pecuniary penalty is deterrence. Broader considerations apply in imposing a criminal custodial sentence. 146 This primary purpose for imposing civil penalties is one of the key reasons why the Full Court of the Federal Court has adopted the approach of encouraging submissions as to agreed penalty amounts. 147 Of course, deterrence is not the only purpose to be served by the imposition of a civil penalty, but it is a primary purpose. 148 As the High Court recently observed in ACCC v TPG Internet Pty Ltd (2013) 88 ALJR 176 per French CJ, Crennan, Bell and Keane JJ at [65]: General and specific deterrence must play a primary role in assessing the appropriate penalty in cases of calculated contravention of legislation where commercial profit is the driver of the contravening conduct. 149 The acceptance of agreed penalty amounts (providing always that the Court undertakes its duty to fix the appropriate penalty) increases the certainty of outcome for regulators and wrongdoers. This increases the predictability of outcomes for regulators and respondents and makes it more likely that proceedings will be resolved by agreement in an appropriate way and under the supervision of the Court. This in turn improves deterrence by encouraging the implementation of corrective measures and freeing up the resources of the regulator. I agree with Middleton J's reasons and conclusion. 4 The principle object of imposing a pecuniary penalty is deterrence: Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 88 ALJR 176; [2013] HCA 54 ("ACCC v TPG") at [65] per French CJ, Crennan, Bell and Keane JJ. Deterrence has two aspects: specific deterrence in respect of the actual contravener; and general deterrence of others who may be disposed to engage in prohibited conduct of a similar kind: ACCC v EnergyAustralia Pty Ltd at [9]. The penalty for contravention: … must be fixed with a view to ensuring that the penalty is not such as to be regarded by [the] offender or others as an acceptable cost of doing business. ... [T]hose engaged in trade and commerce must be deterred from the cynical calculation involved in weighing up the risk of penalty against the profits to be made from contravention. Singtel Optus Pty Ltd v Australian Competition and Consumer Commission (2012) 287 ALR 249; [2012] FCAFC 20 ("Singtel v ACCC") at [62]-[63]. As the High Court stated in ACCC v TPG at [65] general and specific deterrence must play a primary role in assessing the appropriate penalty in cases of calculated contravention of legislation where commercial profit is the driver of the contravening conduct. 5 Ms Dedic admitted that she prepared and lodged the 86 tax returns in question and admitted that she charged a fee for 55 of the 86 tax returns but not for the remaining 31 tax returns. Her claim was not accepted by the Court, which found that she had charged fees for all 86 tax returns. It is manifest from the material that Ms Dedic's contravening conduct was deliberate as she was aware that she required tax agent registration in order to prepare and lodge tax returns for a fee. In respect of the 86 contraventions, the overall financial benefit derived by her was approximately $17,370.00. 6 Although her conduct was deliberate, it is relevant to take into account that there was partial acknowledgment of liability. I also take into account that she had not ignored the need to be registered. She did apply for registration. Her evidence was that she applied twice, though the Board only has a record of one application lodged in June 2012, which the Board refused in December 2012 because it was not satisfied that she met the prescribed relevant experience requirements for registration. It was Ms Dedic's evidence that she had made an earlier application which the Board claimed not to have received. It was also Ms Dedic's evidence that she had understood, based on information then posted on the Tax Practitioners Board website, that she was taken to be registered until she had a response from the Board to her application and that she expected to be registered "without issue". 7 I consider that a pecuniary penalty of $500 for each of the 86 contraventions has an appropriate deterrent value. This equates to a total penalty of $43,000. 8 In fixing that penalty, I take into account that Ms Dedic has only a limited capacity to pay any penalty as she is presently on Centrelink payments and does not have any significant assets. However, her capacity to pay a pecuniary penalty is of lesser importance than the need for a pecuniary penalty of appropriate deterrent value to be imposed: Australian Communications and Media Authority v Clarity1 Pty Ltd (No 2) (2006) 155 FCR 377; [2006] FCA 1399 at [43]; Australian Competition and Consumer Commission v Leahy Petroleum Pty Ltd (No 2) (2005) 215 ALR 281 at [9] and [11] per Merkel J. As Emmett J in Tax Practitioners Board v Campbell [2012] FCA 1153 at [9] stated: The penalty should be such as will demonstrate to the community generally that the consequences of a contravention outweigh the cost of adopting a culture of compliance. The clear legislative purpose for the requirement that a person who provides tax agent services for a fee be registered as a tax agent is to protect the public by ensuring that tax agent services are provided to the public in accordance with appropriate standards of professional and ethical conduct: s 2-5 of the Act. The pecuniary penalty should be sufficiently high to be a general deterrent and reinforce that there are serious consequences for contravention of the legislation. 9 In fixing a pecuniary penalty of $500 for each of the 86 contraventions, I have considered the penalties imposed in other cases where the contravention was of s 50-5 of the Act and those cases support a conclusion that a total penalty of $43,000 is broadly relative. I have also considered that the cumulative total of the penalty is appropriate having regard to the entire contravening conduct involved: Singtel v ACCC at [54] where the Full Court quoted Australian Competition and Consumer Commission v Telstra Corporation Limited [2010] FCA 790 at [250]-[251] per Middleton J. 10 Given Ms Dedic's financial position I am prepared to make an order for the pecuniary penalty to be paid by instalments. I will also include an order giving Ms Dedic liberty to apply to vary the payment dates on good reason (but not as to the total amount of penalty imposed). Ms Dedic should also be ordered to pay the Board's costs of this hearing. I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Davies.