Toohey v Tax Agents' Board of Victoria

Federal Court of Australia|2010-04-15|Before: Mr J, Mr P, Middleton J

INTRODUCTION 1 On 10 July 2004, the applicant applied to be re-registered as a tax agent under Part VII of the Income Tax Assessment Act 1936 (Cth) ('the Act'). 2 On 12 July 2004, the respondent refused that application. 3 On 29 July 2004, the applicant applied to the Administrative Appeals Tribunal ('the Tribunal') to set aside the respondent's refusal of the applicant's application to be re-registered as a tax agent. 4 On 8 February 2006, the Tribunal affirmed the respondent's decision. The applicant appealed to the Federal Court of Australia. 5 On 21 March 2007, the Court allowed the appeal and remitted the matter to the Tribunal: see Toohey v Tax Agents' Board of Victoria [2007] 67 ATR 522 ('the first appeal'). 6 On 2 April 2008, the Tribunal affirmed the respondent's decision and the applicant again appealed to the Court.

7 On 27 November 2008, the Court allowed the appeal and remitted the matter to the Tribunal: see Toohey v Tax Agents' Board of Victoria (No 2) [2008] FCA 1796 ('the second appeal').

9 This proceeding again concerns the issue of whether or not the Tribunal made an error of law in applying the provisions of ss 251JC(1)(a) and 251BC(1) of the Act.

10 The background to the relevant legislation has already been dealt with by me in earlier proceedings: see Toohey [2007] 67 ATR 522.

11 It again seems to be accepted by the parties that the correct approach to applying the relevant provisions of the Act in determining whether a person is a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters is set out in my earlier judgment in the first appeal at [9] to [13]:

[9] Therefore, the Board is required, in essence, to consider and determine whether the applicant is the prescribed fit and proper person. In determining the matter, the Board is directed by the legislature that a disqualifying factor for a person not being the prescribed fit and proper person is, relevantly, if the person is not of 'good fame, integrity and character': s 251BC(1)(d). This appeal does not require a consideration of the elements of whether or not a person is the prescribed fit and proper person, although the generality of the phrase 'good fame, integrity and character' is not to be limited by reference to whether the applicant has certain disqualifying convictions or is under sentence of imprisonment (see s 251BC(2) of the Act). The enquiry is whether the applicant is the prescribed fit and proper person, and the disqualifying factors set out in s 251BC(1) do not limit the generality of that enquiry (see s 251JC(1)), although it may well inform that inquiry. The fact that a person is not of good fame, integrity and character means that that person cannot be regarded as the prescribed fit and proper person. However, even if this or other disqualifying factors do not apply, the applicant may still not satisfy the Board that he or she is the prescribed fit and proper person. If not satisfied, the Board 'shall refuse' to re-register the applicant: s 251JC(2). … [10] The provisions of s 251BC(3) do not detract from this ultimate issue of whether the applicant is the prescribed fit and proper person, and should not be confused with it. Section 251BC(3) of the Act relevantly provides that: Where: (a) a Board is required, in considering an application for: (i) re-registration as a tax agent; or (ii) re-registration of a nominee of a tax agent; to decide whether the Board is satisfied that a particular person is a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters; (b) the person is not under sentence of imprisonment for a serious taxation offence; and (c) the Board is satisfied that, because of special circumstances: (i) a conviction of the person; (ii) the doing of an act or thing by the person; or (iii) an omission of the person; should be disregarded; the Board may, in making the decision referred to in paragraph (a), disregard the conviction, the doing of the act or thing or omission, as the case requires. [11] Pursuant to s 251BC(3), in the course of deciding the ultimate issue, certain matters may be disregarded because of special circumstances. Once disregarded, those matters are no longer considered in the enquiry, and then a decision as to whether the applicant is the prescribed fit and proper person is made by the Board. If a conviction, act or omission of the applicant is not disregarded, it will need to be assessed, along with other factors, in order to determine whether the applicant is a fit and proper person if that inquiry can still be made where the disqualifying factors do not apply. It may well be that a particular conviction (other than a disqualifying conviction) is to be taken into account and not 'disregarded', but that, for one reason or another, taking into account all the circumstances, the Board may still be satisfied that the applicant is the prescribed fit and proper person. Again, of course, it is clear that if there is a disqualifying factor, there cannot be a finding in favour of the applicant allowing re-registration. [12] The other matter to observe is that the relevant time for the assessment of whether a person is the prescribed fit and proper person, is at the time of the relevant determination. This is made clear by the Act itself, for it is in considering the application that the Board needs to be satisfied that the applicant is the prescribed fit and proper person. I note the Act specifically uses the present tense. There is no express or implied legislative indication which provides for the assessment of the facts at any other particular date. I refer also to A Solicitor v Council of the Law Society (NSW) (2004) 216 CLR 253 at 268. [13] In view of s 43(1) of the AAT 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. 12 Again, the ultimate issue before the Tribunal was whether the applicant was a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters. Again, the real issue before me is whether the Tribunal properly, as a matter of law, applied the relevant provisions of the Act.

Whether the Tribunal failed to Engaged in a Proper Enquiry and Failed to Consider Relevant Considerations 13 The applicant submitted that the Tribunal did not engage in the proper enquiry and failed to consider relevant considerations. 14 The applicant submitted that the Tribunal discussed its reasons in some 11 paragraphs (paragraphs 25 to 35). It was further submitted that of those paragraphs two paragraphs (paragraphs 34 to 35) were concerned with the likelihood of future timely lodgement of tax returns by the applicant and the remainder were concerned with special circumstances for the purposes of s 251BC(3) of the Act. The applicant submitted that the Tribunal fell into the same error that was identified in the second appeal where the Court found that the then Tribunal had referred to various matters which occurred 'many years ago', but made no attempt to put those events in context or to consider those matters in the context of later events and circumstances. 15 It was submitted by the applicant that because of these errors the Tribunal failed to evaluate for itself the applicant's character and reputation and it was further submitted that the Tribunal failed to evaluate the material raised as to 'special circumstances' (see s 251BC(3) of the Act) in the context "of a separate and ultimate enquiry of whether the applicant, at the time of the Tribunal's decision, was the prescribed fit and proper person": see the first appeal at [15] and the second appeal at [16]. 16 The paragraphs of the Tribunal's decision up to and including paragraph 32 deal with the material before the Tribunal and the question of special circumstances. However, in my view, after considering the circumstances addressed in these earlier paragraphs for the purposes of determining whether it was satisfied of 'special circumstances' for the purposes of s 251BC(3) of the Act, the Tribunal then moved on to a distinct step in the decision-making process considering those circumstances and addressing the question of whether the applicant was a fit and proper person to be registered as a tax agent. 17 The Tribunal after disposing of the question of 'special circumstances' introduced this distinct step at [33]: The circumstances cannot be considered in isolation. It must be borne in mind that the public interest in ensuring tax agents are fit and proper people to undertake tax advice on behalf of the public is the underlying consideration. The promotion of the public interest is the primary consideration for the Board and this Tribunal standing in place of the Board. 18 The Tribunal then proceeded to address the applicant's argument to the effect that he was unlikely to fail in his tax obligations again and would not continue to be adversely relevantly affected by various vicissitudes of life in the future and should therefore now be regarded as a fit and proper person. 19 In the course of doing so, the Tribunal made a contextual link between the applicant's recent conduct and circumstances and the applicant's past conduct and circumstances, in particular noting at paragraph 34 and 35: … While it is commendable that the applicant filed the last two tax returns on time the Tribunal must also put those tax returns in context. During those two years, the applicant did not face any of the difficulties listed in paragraph six above. The last difficult circumstance the applicant faced was in 2006, and that adversely affected the timing of his lodgement. … The applicant claims that he is no longer faced with constrictive family obligations and business obligations and that his depression is under control and that he is thus able to concentrate on his own tax returns. However, the applicant's experience with the currently constituted Tribunal does not reflect his argument … Nothing was filed in the time provided. … Despite managing to file his tax returns in 2007 and 2008 tax years on time, the Tribunal is not satisfied that the applicant does not continue to be adversely affected by the various vicissitudes of life … 20 As submitted by the respondent, these findings of no confidence in the applicant's lodgement of his tax returns on time supported the Tribunal's conclusions expressed at [36]. At [36] the Tribunal concluded: While the Tribunal has no doubt that the applicant is an honest man who has always tried to put his clients' interests before his own and has been adversely affected by health issues and other circumstances, the Tribunal is not convinced that he will file his tax returns on time in the future. The applicant asked the Tribunal to disregard his late tax returns. Put simply, the Tribunal cannot do that. As a tax agent, the applicant should hold himself up to a higher standard than the general public. He has an intricate knowledge of tax laws and it is reasonable to assume that he knows the importance of lodging tax returns on time. His clients, as well as the general public, should be able to entrust their taxation affairs to him and have confidence that he is able to lead by example and file his tax returns on time as required by the law. 21 These conclusions and [34], [35] and [36] follow from the way in which the Tribunal framed the issues in [21] to [23]: 21. Part VIIA of the Act provides for the registration of tax agents. Section 251BC(1) excludes people whose circumstances are described in the provision from being registered as tax agents. One of the circumstances, being the one faced by the applicant in this case, is that he is not a person of good fame, integrity and character. 22 There is a public interest in ensuring that tax agents maintain proper standards in the preparation and lodgement of tax returns. Subject to some exceptions not relevant to this case, s 161(1) of the Act provides that the Commissioner of Taxation is to advise in the Government Gazette the time in which every person must lodge an income tax return. Failure to lodge an income tax return on time results in the general interest rate becoming payable in those returns giving rise to an outstanding income tax liability as an additional tax payment. The provisions relating to the lodgement of tax returns within the time permitted apply to tax agents as they do to all other people. It is clearly desirable that tax agents, in particular, should lead by example in having their tax returns lodged within time. 23 A person who is a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers can be registered as a tax agent. Section 251BC(1) of the Act sets out the factors which may lead to persons being denied registration, or re-registration, as a tax agent. These include a person not being of good fame and character and having a conviction for a serious tax offence within the previous five year period. The disqualifying circumstances do not limit the matters which can be considered but, as pointed out in the first Federal Court decision in this matter, they may inform the decision maker. The applicable date to be considered is not that date on which the Board made its decision, but the date on which the Tribunal delivers its decision: Shi v Migration Agents Registration Authority. In this case the time is now five years after the original decision was made. As may be expected the applicant's circumstances have changed over that five year period and the circumstances with which this Tribunal must deal are different, in some respects, from those facing the Board in 2004 and the Tribunal in its two previous decisions. The historically established facts, of course, remain constant, for example, the applicant's conviction for failing to lodge his income tax return for the 1989 tax year and his failure to respond to the respondent's requests that he file outstanding tax returns. What has changed is said to relate to the applicant's physical and mental health, which it is claimed adversely affected the manner in which he conducted his affairs including his professional affairs as a tax agent in the period leading up to 2004 tax year. 22 In my view, the Tribunal did recognise as the critical issue the question of whether the applicant was of good fame integrity and character, and whether the applicant was a prescribed fit and proper person. 23 It seems to me that in the circumstances of this Tribunal decision the relevant events of the past have been put in context and they have been considered in the context of the proper enquiry to be undertaken by the Tribunal. 24 The Tribunal's reasoning and findings at [35] to [36] were directed to whether in the circumstances relied upon by the applicant there could be confidence that he would not revert to his past conduct. I do not think the Tribunal in conducting that step in the decision making process can be said to have ignored the various particular circumstances enumerated by the applicant before me. Those matters were mentioned and identified earlier in the reasons of the Tribunal. It was not incumbent on the Tribunal to rehearse or restate all the circumstances. Where a circumstance or fact already mentioned is specifically not relied upon by the Tribunal in reaching its ultimate conclusion, then I would expect this to be mentioned: see eg [28] of the Tribunal's reasons. 25 It seems to me the Court should hesitate before drawing any conclusion that such circumstances and facts identified were not taken into account merely by reason of the absence of express reference in [33] to [36] to each and every circumstance relied upon by the applicant. In conducting the enquiry in the way I have described, the Tribunal engaged in the proper enquiry and took into account the relevant considerations required by the Act.

Whether the Tribunal Considered Irrelevant Considerations 26 The applicant submitted that the Tribunal relied upon a number of irrelevant considerations namely: (i) the applicant's performance as a litigant in person; (ii) the applicant's failure to adopt a different standard of conduct during the period the respondent's decision was being reviewed by the Tribunal; (iii) the applicant's renewal of his registration 1998 and 2000 after receiving a reminder letter from the respondent; (iv) the respondent Counsel's speculations that the applicant's mental condition between 1989 and 2003 derived from personality traits rather than depressive illness, and that personality traits do not change over time; and (v) findings of fact made by the Tribunal in the case of Re Adamec and Tax Agents' Board of Victoria [2005] AATA 913 to which the respondent was found to have 'appropriately referred'. 27 In my view looking at the first two considerations referred to above, it was relevant for the Tribunal to consider the performance of the applicant as a litigant in person and his conduct during the period the respondent's decision was being reviewed. 28 It seems to me that there is some force in the Tribunal's conclusion at [31] that: … The applicant should have treated the years he was concerned in proceedings before both this Tribunal and the Federal Court as an opportunity to show that he had mended his ways and now considered his own tax returns a priority. 29 The Tribunal did not say this was a sole consideration but just a consideration upon which it relied. I see no error in this approach. It was a consideration relevant to whether the applicant had shown that he had a proper grasp on the priorities in his life. 30 Equally, the third consideration mentioned above goes to a course of conduct of the applicant in relation to his registration as a tax agent. This is a relevant matter, to be weighed in the balance, in the overall factual assessment to be made by the Tribunal. 31 As to the fourth consideration, the Tribunal was entitled to consider the evidence relating to the applicant's mental condition and personality traits. The applicant was specifically cross-examined before the Tribunal on this matter, and had the opportunity to address the issue. There was evidence as to the combination of the applicant's psychological illness and his personality type to support the conclusions of the Tribunal. This evidence included evidence given by Dr Baxter in a report of 29 November 2005, which was before the Tribunal, and the conduct of the applicant himself in handling his own affairs. 32 Again, assuming this was a factor taken into account by the Tribunal, it was just one of many factors. It was a factor relevant to the likelihood of recurrence of the applicant's past conduct. I do not regard it as having been treated by the Tribunal as of prime importance, as other material before the Tribunal could have justified its ultimate conclusion. 33 In relation to the fifth consideration, the reference to Re Adamec [2005] AATA 913 was made just as a citation of the relevant principles in relation to what amounts to 'special circumstances'. There can be no doubt that the principlesapplied in Adamec could apply relevantly to that of the applicant. The Tribunal did not adopt the factual findings in that case and simply apply them to the proceeding before it, which would have been impermissible.

Whether the Tribunal's Decision Unreasonable 34 It was submitted that the Tribunal's decision was so unreasonable that no reasonable person could have come to it; so manifestly unreasonable that the decision should be set aside, reliance being placed upon the principles set out in Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223, 230 and 233-4. 35 In addition, it was submitted that because the decision gave inadequate weight to relevant factors of great importance and gave excessive weight to relevant factors of no great importance, the decision was therefore manifestly unreasonable, relying upon the principles set out in Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24 at 41. 36 The applicant submitted that the Tribunal put too much weight on the fact that the applicant 'did not say that he was now equipped to handle [past factors] should they arise again'. It was submitted that the Tribunal drew the inference that therefore the applicant was in fact not equipped to handle a recurrence. It was submitted that the Tribunal gave great weight to that inference by concluding that the applicant was not the prescribed fit and proper person. It was submitted that in doing this the Tribunal had given excessive weight to a trivial factor failing to consider alternative and reasonable possibilities. For example, that as the applicant was self represented, he did not distinguish between submissions and evidence, or that the applicant viewed the likelihood of recurrence of the factors that had impeded him as too remote to merit discussion. Moreover, it was submitted that the inference was contrary to the following matters: (a) the impossibility of the applicant's father's death or his executorship of his parents' estate recurring; (b) the inherent unlikelihood that the range of physical ailments which had affected the applicant some 20 years ago and had not recurred since would recur within the three or four years remaining until his anticipated retirement; (c) expert opinion that the applicant was not expected to ever revert to his previous disorganised state; (d) evidence as to why the applicant's mental health problems were unlikely to return; (e) the applicant's pre-2003 financial difficulties had been resolved and his position was now sound; (f) the availability of additional professional assistance due to the applicant's recent commitment to staff training and his prospective new partner; and (g) the applicant's plans to retire in three or four years time. 37 I do not accept that the Tribunal acted in a way which would invalidate its decision. Determining whether a person is the prescribed fit and proper person involves an evaluation of character and reputation: see Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 at p 380 per Toohey and Gaudron JJ. The Tribunal must therefore consider and evaluate all the material raised in the context of the enquiry whether the applicant at the time of the Tribunal's decision was the prescribed fit and proper person. 38 In applying the expression fit and proper persons to tax agents in Re Su and Tax Agents' Board of South Australia (1982) 61 FLR 1 at pp 4-5, Davies J stated: 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 their 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. 39 His Honour continued at pp 6-7 to comment on the tax agent's personal failures as follows: The failure to lodge his personal income tax returns and the failure to pay on time the group tax instalments suggest incompetence on Mr. Su's part. … These matters raise serious doubts as to Mr. Su's capacity to handle other people's affairs. Obviously, he did not have the capacity to handle his own affairs in a proper manner and his failure to do so did not occur on one occasion alone but on a number of occasions. It is not necessarily the case that a practitioner who does not look after his personal affairs does not properly attend to the affairs of his clients. But incompetence in relation to one's own affairs more often than not has an effect sooner or later in relation to the affairs of a client. This occurred in relation to the private company of which Mr. Su was an official liquidator. In relation to that company, he failed to carry out the duties which were imposed upon him as official liquidator and, as a result, his registration as a liquidator was cancelled and he was fined. 40 It seems to me that the Tribunal did undertake the proper evaluation process, taking into account the applicant's capacity to handle his own affairs. The applicant needed to show that there would not be a recurrence of his past conduct. This task the applicant was well aware of before the Tribunal. It is clear from the way the case was conducted by the applicant that he was acutely aware of the need to persuade the Tribunal that there was little likelihood of a recurrence of certain past conduct. This particular applicant was also well conversant with the Act, the issues before the Tribunal and its procedures. The applicant did not say that he was equipped to handle certain factors if they should arise. The Tribunal was entitled to treat this as a relevant matter. 41 The real thrust of the Tribunal's conclusion was that the Tribunal was not satisfied that the applicant would file his tax returns on time whilst handling difficulties, which the Tribunal was certain would arise in the future. This led to the conclusion ultimately reached by the Tribunal. In this context, the Tribunal was speaking generally, not by reference to specific instances that arose in the past and which would obviously not arise again (for example, the death of the applicant's father). The Tribunal was entitled to do this analysis in the evaluation task. 42 The Tribunal was then entitled to conclude that in view of the applicant's own behaviour, the public could not be satisfied that the applicant could file tax returns on time and be able to be entrusted with their tax affairs. 43 In my view, the Tribunal was entitled to conclude that the general public should be able to entrust their taxation affairs to a tax agent and have confidence that he or she will lead by example and file his or her own tax returns on time as required by law. 44 Further, a person who allows his own tax affairs to be in disorder, may not be a proper person to be a tax agent - this not just because of his own association with the taxation office, but because it may indicate a course of conduct which may impact on his ability to act as a tax agent for members of the public. As Davies J commented in Re Su (1982) 61 FLR 1, incompetence in relation to one's own affairs more often than not has an effect in relation to the affairs of a client. 45 The Tribunal did consider many aspects in the applicant's favour. It made findings that the applicant was an honest man, had an intricate knowledge of tax laws, always tried to put his clients' interests before his own, had been adversely affected by health issues and other circumstances, and regarded the training of staff is an important aspect in the maintenance of the service offered by his business. All these factors could lead to the conclusion that the applicant was a person of good reputation, had a proper knowledge of taxation laws, was able to prepare income tax returns competently, was of such competence and integrity that others could trust their taxation affairs to his care, and ultimately to the conclusion sought by the applicant. 46 However, even after taking into account these findings, the Tribunal was not convinced as to the future conduct of the applicant. 47 This was the crucial matter before the Tribunal, and it was a question of fact to be determined by the Tribunal after considering all the material before it. As I said in the second appeal at [16]: In determining whether a person is a fit and proper person the enquiry is directed not only to whether improper conduct has occurred, but whether it is likely to occur again, and whether the community will have confidence that it will not occur. 48 The Tribunal focussed on the applicant's ability to manage his own affairs, in the context of already concluding in [35] that the Tribunal was not satisfied that the applicant would not continue to be adversely affected by the various vicissitudes of life. There was nothing 'unreasonable' in this approach taken by the Tribunal.

DISPOSITION 49 In my view, the Tribunal, aware of all the factors listed in its reasons, came to the conclusion it did in [34] to [36] by asking itself the correct question and by taking into account the relevant considerations. The Tribunal did not take into account irrelevant considerations, and its decision was not 'unreasonable' on the basis suggested by the applicant. 50 In view of the above, I propose to order the appeal be dismissed. 51 Submissions were made regarding the position were the appropriate disposition of this proceeding be that the appeal be allowed. 52 The applicant desired that I determine the ultimate issue myself as the applicant so contended in the second appeal. 53 I do not consider that the circumstances have relevantly changed since the time of the second appeal. I do not consider that it would be convenient or appropriate for the Court to finally dispose of the matter in accordance with the power under s 44(4), (5), (7) and (8) of the Administrative Appeals Tribunal Act 1975. I would have ordered in the event that the appeal be allowed that the matter be remitted to the Tribunal. 54 It was submitted by the respondent that even if the appropriate disposition of this proceeding was that the appeal be allowed, and even if I considered it was appropriate to remit the matter to the Tribunal, I had no power to do so. I do not need to consider this submission. It involves the interesting issue of the extent to which the Court may carry out an executive function; in this case the Court was requested to carry out a factual evaluation conferred specifically on the Tribunal by the Act. I certify that the preceding fifty-four (54) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Middleton.

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