Consideration
49 Given the purpose behind requiring registration of a tax agent, even a brief recitation of the respondent's conduct reflects its seriousness.
50 Mr Van Dyke's conduct involved 3,359 contraventions of s 50-5(1) of TASA by preparing and lodging 3,359 tax returns for taxpayers, for a fee, while not registered as a tax agent. As acknowledged by the parties, taking this number at face value, this case represents the largest number of contraventions against s 50-5(1) of the TASA for which the Board has commenced proceedings. This conduct, which was deliberate, and undertaken for financial gain, occurred over nearly four years. It was a business conducted by Mr Van Dyke, from which he obtained a significant financial gain, being $1,658,000.
51 Mr Van Dyke held himself out as a registered tax agent, knowing of the requirement for registration. The contraventions occurred in knowing defiance of the law. In doing so, he exposed many taxpayers to a scenario whereby tax agent services were being provided without the protections offered by a person who is registered under the TASA and subject to regulation by the Board.
52 Despite Mr Van Dyke receiving from the Board a cease-and-desist letter (dated 15 September 2022), he continued to engage in the conduct for many months thereafter. This was in the face of the respondent acknowledging to the Board on 21 September 2022 that he understood the contents of the correspondence and took the matters raised "seriously".
53 Mr Van Dyke concealed the income that he earned from the conduct from the ATO by not disclosing it.
54 The serious nature of the respondent's conduct is self-evident.
55 That said, I do not agree with the applicant's characterisation that the respondent's activities were "sophisticated". Although it can readily be accepted that the respondent conducted a business, there was no sophistication to it. In that regard, I accept the respondent's submission. However, therein lies the problem. The fact that this conduct can so easily be undertaken, and on a large scale, generating significant financial reward, starkly highlights the importance of deterrence.
56 Moreover, the respondent's submission that his clients had not been deprived of the opportunity to choose a tax agent who was subject to regulation by the Board because the clients approached him, entirely misses the point. Those clients approached him in circumstances where the respondent held himself out to be a tax agent. In doing so, he provided services to many taxpayers without the protections offered by a person registered under the TASA.
57 The respondent, while accepting the serious nature of the conduct, submitted it occurred at the time when he was gambling heavily. He gave evidence that he became addicted to gambling at a young age, which had a significant impact on his mental health, personal life, and family.
58 In many respects, the respondent's evidence in cross-examination was unsatisfactory. He sought to minimise his conduct, giving explanations which downplayed the circumstances in which he committed the contraventions. The respondent's counsel sought to advance this as a positive attribute, being evidence that Mr Van Dyke appreciates the seriousness of the position he is in. I do not accept that submission. The answers reflected the respondent's willingness to minimise the serious of his conduct, which in turn impacts on the issue of specific deterrence.
59 The respondent submitted that although his conduct continued beyond the receipt of the cease-and-desist letter, within a short period following its receipt, the conduct sharply decreased. He submitted that therefore the letter did in fact have a significant deterrent effect. I note that there were a further 159 contraventions after Mr Van Dyke's legal representatives emailed the Board confirming receipt of the letter on 21 September 2022. Indeed, the period from 21 September 2022 until 1 January 2023 the contraventions continued relatively unabated. It was thereafter, that the frequency and volume of contraventions appeared to lessen. That said, the conduct continued until 11 July 2023, as later confirmed by the parties. The fact of any contraventions after the cease-and-desist letter aggravates the wrongdoing, although it would have been more so if there had been no change in conduct.
60 The respondent submitted that he has sought assistance for his gambling and mental health issues during moments of significant crisis and has done so more recently with some apparent degree of success. During this time, he experienced significant changes in his career and profession and recently obtained more stable employment. The respondent is currently employed as an accountant. It was submitted that the respondent apologised and gave an undertaking not to undertake such conduct again, which has been in effect for almost 12 months (without breach).
61 The respondent submitted that it is open for the Court to find that his own more recent steps to address his mental health and gambling addiction have also had a positive impact on reducing the likelihood of any further contraventions. Although the respondent's own evidence referred to these matters, no medical evidence was provided in support. There is no evidence of any link with gambling, although there is some evidence he gambled (he had a TAB membership gold status). Mr Van Dyke's affidavit dated 9 June 2024 did not depose to having ceased gambling, but rather to have "almost completely ceased gambling". Despite that, in cross-examination he gave evidence that he did not gamble in June 2024. Although the respondent's counsel submitted that his affidavit was ambiguous on this point and it was cleared up in cross-examination, I do not accept that submission. There is no ambiguity in the affidavit. Rather, given the importance of the issue, one can assume the words were carefully chosen. In cross-examination, he gave evidence inconsistent with that. I note also that the respondent's evidence was that he had several sessions with a clinical psychologist in relation to gambling during the period between June 2023 and September 2023, and completed three sessions of financial counselling, but stopped them last year before commencing his current employment. His evidence was that he had ceased gambling and did not need counselling. That approach is problematic in relation to an addiction, which on his case, has caused this offending. I note that Mr Van Dyke said he had some mental health issues for which he obtained assistance, but again, there is no evidence of any counselling for those issues. Nor is there any evidence in support of his assertion that his efforts in that regard are ongoing.
62 The respondent was declared bankrupt on 16 April 2024. In this regard, it is noted that any penalties imposed would not be provable in the respondent's bankruptcy (see Bankruptcy Act 1966 (Cth), ss 82(3) and 153(1)).
63 The respondent submitted that the Court should tread with caution when considering the submission by the Board that he actively took steps to conceal the income he earned from this conduct, as a factor in assessing the appropriate penalty. He submitted this is because administrative penalties have already been levied in respect of the respondent's non-reporting of his income. It was further submitted that to consider such a matter in fixing the penalties in these proceedings at an amount higher than might otherwise be determined, would extend beyond consideration of the principles of deterrence, and amount to a form of dual sanction given the administrative penalties already imposed. That submission is misconceived. That the respondent concealed his income from the ATO is not an aggravating aspect of the contravening conduct, but rather a matter of fact (among others) as to the circumstances of the contravening. It reflects the respondent's knowledge that he was not permitted to undertake the conduct.
64 The respondent also submitted that the existence of the administrative penalties is relevant in assessing the level of deterrence required in the present case, given the deterrent effect of the administrative penalties already levied, referring to Tax Practitioners Board v Hacker (No 3) [2020] FCA 1814 (Hacker (No 3)) at [67] - [75]. He submitted that it might be a form of double punishment. As the Board correctly submitted, the administrative penalties relate to different conduct (failure to declare income in income tax returns). Hacker (No 3) does not support the respondent's submission. That said, I am mindful that Mr Van Dyke has been required to pay over $2 million dollars in unpaid taxes (relating to income obtained from these contraventions) and administrative penalty.
65 The respondent submitted that his conduct falls within the description of a course of conduct, relying on Caolboy at [64]-[65], also referring to Ordiales at [30]-[31], Tax Practitioners Board v Williams [2023] FCA 63 (Williams) at [78]-[79], and Van Stroe (No 2) at [29].
66 It is important to recall that the rationale for the course of conduct principle is that it avoids double punishment for those parts of the legally distinct contraventions that involve overlap in wrongdoing: Employsure at [81]; Cahill at [39]; Yazaki at [234]. Each case turns on its facts. It is important to address the basis on which it is said there is an overlap.
67 Although the respondent was conducting a business, the conduct the subject of the contraventions involves, with limited exception, the preparation and lodgement of separate tax returns, on separate dates to separate clients for separate fees. The limited exception are 228 contraventions, which the applicant submitted could be grouped together as 178 courses of conduct on the basis that on some occasions, the respondent prepared and lodged tax returns for taxpayers and their spouses at the same time; or prepared and lodged tax returns for taxpayers for multiple years at the same time and received a single payment in return for those multiple services. However, although a single payment was received, it was generally for a greater amount which in most cases reflected a multiple of $500 for each tax return lodged. That said, the filing of the tax returns in relation to each of those circumstances is arguably a separate contravention. The remaining 3,131 contraventions fit the description above, being the preparation and lodgement of separate tax returns, on separate dates for separate clients, for separate fees.
68 Different approaches have been taken to multiple contraventions of the TASA. For example, in Ordiales, Van Stroe (No 2) and Williams, the conduct was referred to as an ongoing course of conduct, while in Hacker (No 3), that submission was rejected. In Van Stroe (No 2) and Williams, the Courts imposed a single penalty, as opposed to specifying a penalty per contravention and then considering the totality principle. The respondent submitted in this case, even if I concluded that it was a course of conduct, the individual contraventions needed to be considered.
69 The respondent primarily submitted that the factual overlap between the contraventions is (if the Court accepted the applicant's submission), that the conduct was part of a sophisticated business. As explained above, I do not accept the descriptor of sophistication. That a person engaged in the conduct regularly such that it could be described as a business, does not necessarily alter that characterisation into one of sophistication. That said, in this case, the applicant submitted that the fact that the contraventions were part of a business operation "designed to make a profit through its activities", was significant in assessing their seriousness. On that basis, I accept there is a factual overlap in the contraventions such that they can be characterised as a course of conduct.
70 The applicant referred to other cases where a penalty has been imposed for contraventions of this provision. The use of such cases is well established: see for example, Hili v The Queen [2010] HCA 45; (2010) 242 CLR 520 at [18], [54]-[55]. The cases here are of limited assistance. As referred to above, the parties acknowledged that this case involves vastly more contraventions than has previously been considered (as compared to 636 contraventions in Ordiales, which involved the next in number). It follows that applying the correct principles to the facts will necessarily give rise to a far greater penalty than previously imposed. The respondent accepted as much.
71 The applicant submitted the penalty should be $1,000 to $1,500 for each contravention (amounting to approximately $3,300,000 to $5,000,000). Those figures per contravention are, except for one case, substantially greater than penalties previously imposed. The exception is Williams, where a total penalty imposed resulted in each individual contravention amounting to about $1,095. That was a case where a single penalty of $80,000 was imposed, but where the applicant extrapolated a penalty per contravention from that total figure. The same approach was adopted in relation to other cases where a total penalty had been imposed. Although the figure mathematically represents the amount a person was penalised per contravention in a particular case, the use of such a figure in future cases as an appropriate penalty range has its limitations. Extrapolating a figure in that manner may well fail to recognise the nature of the course of conduct, the circumstances of the individual case, and considerations of totality and oppression which were considered in imposing the total penalty.
72 I recognise that in the present case, Mr Van Dyke charged a greater fee for his services than in the previous cases referred to and obtained greater financial gain. That said, the amount of the penalty sought seems rather arbitrary. The amounts sought for each contravention must reflect that the applicant has placed significant weight on the number of contraventions, and the fact that the contraventions were part of a business operation. This confirms that the contraventions should be considered as a course of conduct. Care must be taken to avoid double punishment.
73 The respondent accepted that the principles of general and specific deterrence would suggest that in considering an appropriate penalty, the Court would ordinarily consider a penalty for each contravention with a starting range above the sum he had received for any contravening conduct. However, the respondent submitted that given his position as an undischarged bankrupt, the imposition of the administrative penalties already levied, the respondent's cooperation, and the extensive course of conduct, the range which was submitted by the applicant of $1,000 to $1,500 would be so high as to be oppressive. The respondent contended that a starting point above $500 in respect of each contravention, but then subject to the consideration of totality, allowing for the course of conduct, and recognising the particular sting of any penalty given his status as an undischarged bankrupt, would provide more than sufficient deterrence to the respondent personally, and to any other person who became aware of the consequences to the respondent for his conduct that might have otherwise entertained such a course. The respondent submitted it would be open to the Court to consider a total amount that may not exceed the sum said to have been received in respect of the contraventions.
74 The respondent submitted that the amount of any pecuniary penalty is likely to be significant, and any significant penalty payable during the pendency of Mr Van Dyke's bankruptcy will likely have a crushing effect upon him, and his family. It was submitted that the ability to enforce such a penalty during this period is similarly limited given that essentially all of Mr Van Dyke's assets and income above the statutory amount permitted under the Bankruptcy Act have vested, or will vest in his trustee. The respondent submitted that although the consideration of an instalment order would not be relevant to the question of the fixing of an appropriate penalty, the making of an instalment order may enable the Court to ensure a closer supervision on Mr Van Dyke's compliance with the penalty imposed (both prior to and following his discharge from bankruptcy), and increase the prospect of payment of the penalty including following Mr Van Dyke's discharge from bankruptcy. In the alternative, the respondent submitted that the making of an order expressly granting leave to Mr Van Dyke to apply for the variation of the time to pay the penalty imposed, and/or for the making of payments by instalment would enable Mr Van Dyke to consider an appropriate regime, and to supply further evidence in respect of his ability to comply with such a regime, in a subsequent application, if appropriate, to a registrar of this Court (as with Australian Competition and Consumer Commission v Yellow Page Marketing BV (No 2) [2011] FCA 352; (2011) 195 FCR 1). The Board submitted that an instalment order should not be made within the terms of the Court's order, as there are other options which are more capable of tailoring to unknown future circumstances, and there is limited utility.
75 Recently, in Williams, Charlesworth J at [12] observed:
The importance of s 50-5 hardly needs stating. The prohibition against persons providing tax agent services for fee or reward without being registered as a tax agent is the lynch pin in the regime. It is the requirement to hold a license (in the form of registration) that subjects those who provide taxation services to standards of behaviour contained in the Code and enforceable by the Board. That requirement ensures that defined tax services are only provided by persons who are fit and proper to provide them. The conditions of fitness and propriety require not only that the registrant holds the necessary knowledge and qualifications, but also possesses personal characteristics that are not inimical to the statutory purpose. Conduct that contravenes s 50-5(1) is conduct that undermines the efficacy of the whole of the regime.
76 Strong penalties are required to deter others: Hacker (No 3) at [59]. There is a real temptation for unethical and unprofessional people to provide unregistered tax agent services for financial benefit. As reflected by this case, significant profits can be made. The penalties must be imposed at a level which will signal that such conduct will not pay: Hacker (No 3) at [59], recognising though that it must be limited to what is appropriate for the contraventions committed (applying the principles in relation to the imposition of a penalty).
77 I accept the respondent's cooperation with the authorities. He has admitted the contraventions which have, amongst other things, facilitated the course of justice. I also accept the respondent is remorseful, although that is tempered by the fact that in cross-examination, he sought to downplay the seriousness of his conduct. In some respects, given his attempts to justify his conduct (e.g. that he was only helping people he knew who were asking for help and that he was merely engaging in a hobby), Mr Van Dyke's remorse relates to the fact that he now has to face consequences, which have and will continue to impact him and his family. I recognise that the respondent has undertaken some steps to address the issues he said gave rise to this conduct, although the evidence is limited. In his affidavit, the respondent deposed intending to continue to do so. However, as noted above, the evidence was he had ceased counselling in relation to his gambling. Issues of specific deterrence have a clear role to play in any penalty imposed.
78 That said, this was deliberate, repeated, and sustained conduct, which continued (seemingly unabated initially, but later to a lesser degree), even after being warned of legal action in the cease-and-desist letter.
79 To serve the purpose of deterrence, the penalties must be more than the profit made by the respondent. To do otherwise, would undermine the deterrent effect of the penalty, and consequently, the purpose of the TASA and the integrity of the tax system: see for example, Van Stroe (No 2) at [41]. In Van Stroe (No 2), Banks-Smith J observed at [46] that the starting point is that any penalty must exceed the profit in an amount sufficient to have specific and general deterrent value. It needs to be sufficient to dissuade others from seeking to provide such services for benefit and without complying with the regulatory regime, including the requirement of registration: Van Stroe (No 2) at [41]. As explained above, this case illustrates that this conduct can so easily be undertaken, and on a large scale, generating significant financial reward. On the respondent's submission, a total penalty less than the financial amount gained would still be ruinous to him. He submitted a lesser amount would nonetheless provide the relevant deterrence once the circumstances of the respondent were appreciated. The respondent's bankruptcy is because of the respondent's conduct, given his debt to the ATO. I note however, the debt relates to his tax liability in relation to income generated by these contraventions and the associated administrative penalty for failing to declare that income. While his financial circumstances are relevant, the penalty must be sufficient to act as a proper deterrent. A total penalty less than the financial gain, in this case, would not have the necessary sting.
80 It is timely to recall the need for there to be a reasonable balance between deterrence and oppressive severity, in any penalty imposed: Pattinson at [41].
81 As the respondent correctly accepted, the penalty will be significant. Given my conclusion that these contraventions are a course of conduct, a total penalty can be imposed to reflect that conduct: see for example, Van Stroe (No 2) at [48]. It is appropriate to adopt that approach in this case. I have regard to the principle of totality. Taking into account all relevant matters, I assess the appropriate penalty to be $1,800,000. Given the circumstances, that is the minimum that could be imposed, to satisfy the necessary deterrent sting.
82 I do not consider that there is utility in making any instalment order, as there is no information before the Court by which this could be properly assessed. No submission was advanced as to an appropriate instalment order. As the Board correctly submitted, there are other options, including a mechanism whereby a Court (or registrar thereof) can be approached to make such an order in the event of enforcement, and importantly the ability for Mr Van Dyke to negotiate a plan for payment with the Commissioner of Taxation. Those options can be tailored to the unknown future.
83 The applicant seeks declaratory relief in terms it identified. The respondent does not oppose a declaration being made in those terms.
84 The power to grant declaratory relief pursuant to s 21 of Federal Court of Australia Act 1976 (Cth) "is a very wide one" and the court is "limited only by its discretion": Seven Network Ltd v News Ltd [2009] FCAFC 166; (2009) 182 FCR 160 at [1016], citing Forster v Jododex Australia Pty Ltd [1972] HCA 61; (1972) 127 CLR 421 (Forster) at 435. Three requirements need to be satisfied before making declarations: (1) the question must be a real and not a hypothetical or theoretical one; (2) the applicant must have a real interest in raising it; and (3) there must be a proper contradictor: Forster at 437-438. That a party has chosen not to oppose a grant of particular declaratory relief is not an impediment to such relief being granted by the Court: Australian Competition and Consumer Commission v MSY Technology Pty Ltd [2012] FCAFC 56; (2012) 201 FCR 378 at [14], [30]-[33]. Other factors relevant to the exercise of the discretion include: (a) whether the declaration will have any utility; (b) whether the proceeding involves a matter of public interest; and (c) whether the circumstances call for the marking of the Court's disapproval of the contravening conduct: Australian Securities and Investments Commission v Pegasus Leveraged Options Group Pty Ltd [2002] NSWSC 310; (2002) 41 ACSR 561 at 571; Australian Securities and Investments Commission v Monarch FX Group Pty Ltd, Re Monarch FX Group Pty Ltd [2014] FCA 1387; (2014) 103 ACSR 453 at [63]; Australian Securities and Investments Commission v Stone Assets Management Pty Ltd [2012] FCA 630; (2012) 205 FCR 120 at [42].
85 Given the circumstances of this case, I am satisfied that the declaratory relief in the terms sought is appropriate. The declaration within the annexure to the applicant's submissions provides sufficient particulars. The issue is not hypothetical: it relates to the characterisation of conduct that affects a large number of persons identified as having paid money to the respondent for his services: Tax Practitioners Board v Van Stroe [2022] FCA 482 at [60].
86 I also make the injunction in the terms sought, which is by consent.