REASONS FOR JUDGMENT

1                     The applicant (Mr Pleno) was registered as a tax agent and as a nominee of a tax agent under the Income Tax Assessment Act 1936 (Cth) (the 1936 Act).  The Tax Agents Board of New South Wales (the TAB) (now known as the Tax Practitioners Board) cancelled Mr Pleno’s registration as a tax agent under ss 251K(2)(b)(ii) and 251K(2)(d) of the 1936 Act and cancelled his registration as a nominee of a tax agent pursuant to s 251KE(1) of the 1936 Act.  Appeals against each of those decisions were heard and determined together by the Administrative Appeals Tribunal (the Tribunal).  The Tribunal affirmed each decision (Mario Pleno v Tax Agents Board [2010] AAT 526).

2                     The Tribunal concluded, relevantly to s 251K of the 1936 Act, that Mr Pleno is not a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters and that he engaged in serious misconduct as a tax agent.  In respect of the matter under s 251KE of the 1936 Act concerning Mr Pleno’s registration as a nominee of a tax agent, the Tribunal concluded that Mr Pleno is not of good fame, integrity and character in relation to matters concerning his position as a tax agent and that he is not a fit and proper person to be the nominee of the partnership that was the tax agent, GST BAS & Accounting Professionals.

THe notice of appeal

3                     Mr Pleno appeals against the Tribunal decision pursuant to s 44 of the Administrative Appeals Tribunal Act 1975 (Cth).  Section 44(1) provides that the Court may hear an appeal from the Tribunal on a question of law.

4                     In the notice of appeal various matters are stated to be questions of law.  The grounds set out in support of those asserted questions of law all relate to factual matters as found by the Tribunal, not all of which are relevant to this application. 

5                     The breach by Mr Pleno of an undertaking that he had given in 2000 (the Undertaking) was central to the factual matters raised before the Tribunal and is central to the question of law in this application.  It was and is not in dispute that the Undertaking was breached by Mr Pleno.  It is not in dispute that the Tribunal made no finding that the breach was a “wilful” breach of the undertaking. The only question of law raised by Mr Pleno during the hearing of the application was whether it was incumbent upon the Tribunal to make a finding of a wilful breach of the Undertaking in order to support the findings that Mr Pleno had engaged in professional misconduct and that Mr Pleno was not a fit and proper person to maintain his registration under the 1936 Act. 

The Legislation

6                     At the time of the TAB decisions under review s 251K(2) of the 1936 Act relevantly provided:

A Board may suspend or cancel the registration of any tax agent upon being satisfied that:

…

(b)       the tax agent:

…

            (ii)        has been guilty of misconduct as a tax agent; or

…

(d)       if the tax agent is a natural person—the tax agent is not a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters.

7                     Section 251KE(1) of the 1936 Act relevantly provided:

A Board may cancel the registration of a nominee of a tax agent if the Board is satisfied that the nominee is not a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters.

8                     At the time of both decisions, s 251BC(1) of the 1936 Act relevantly provided:

Without limiting the generality of an expression used in this Part, but subject to this section, a person is not a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters, as at a particular time, if:

…

(d)       the person is not of good fame, integrity and character…

9                     Section 251N(1) of the 1936 Act relevantly provided:

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…

The Tribunal Decision

10                  It is not necessary to set out the whole of the reasons for the Tribunal’s decision. 

11                  The facts before the Tribunal centred around admissions by Mr Pleno that a Mr Sebastian, who was not employed by Mr Pleno, maintained his own office and prepared tax returns in his own time.  Mr Sebastian was not a registered tax agent.  Mr Pleno lodged returns prepared by Mr Sebastian for a fee of $25 per return, not knowing how much Mr Sebastian charged his clients.  Mr Pleno allegedly supervised Mr Sebastian’s work, although he did not work in the same office and did not know Mr Sebastian’s work hours.  Mr Pleno lodged 190 returns in 2007 and 252 returns in 2008 prepared by Mr Sebastian.  The returns were lodged from Mr Pleno’s computer as if prepared by him using his individual agent’s number.  This was a breach of Clause 2 of the Undertaking, which specified:

(a)       I will not operate a branch without written approval from the Tax Agents Board;

(b)       I will not associate myself with [sic] unregistered tax agent.

Those facts are not in dispute. 

The finding that Mr Pleno had engaged in misconduct

12                  The Tribunal concluded that the facts provided ample proof of Mr Pleno associating with an unregistered tax preparer.  The Tribunal found that this constituted misconduct and was in breach of the 1936 Act.  The Tribunal nominated the breach in terms of s 251K of the 1936 Act.  This should have been a reference to s 251N(1) of the 1936 Act.

The finding that Mr Pleno was “not a fit and proper person”

13                  The Tribunal considered the phrase “fit and proper person” and observed that the phrase takes meaning from its context.  The Tribunal said that the concept ‘comprehends matters other than the financial, technical and management capabilities necessary to provide an adequate and comprehensive service’ and that it must extend to any aspect of fitness and propriety that is relevant to the public interest (citing Mason CJ in Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 at 348-349, considering a “fit and proper person” to hold a commercial broadcasting licence).  The Tribunal also referred to Stasos v Tax Agents’ Board (1990) 21 ALD 437, where Hill J noted, inter alia, that a fit and proper person to prepare tax returns and transact business on behalf of clients in tax matters should be a person of good fame, integrity and character and, as a person who will almost invariably have dealings with officers of the Australian Tax Office, must be a person able to carry on those dealings in an atmosphere of mutual trust.  The Tribunal stated at [8]:

The decided cases show a consistent approach that, as well as competence and knowledge, qualities of character and ability to meet obligations of truthfulness and respect for the law are required of a tax agent, given his privileged position.  Serious departures from those standards may be met with sanctions including a refusal to re-register or cancellation of registration.

14                  The Tribunal said at [14] that the integrity and character of Mr Pleno was a central issue in the decision.  Again, the TAB case turned on the relationship between Mr Pleno and Mr Sebastian.  The TAB alleged that Mr Pleno showed his unfitness by his continued association with Mr Sebastian despite clause 2b of the Undertaking.  The allegations were, again, that Mr Pleno and Mr Sebastian operated a scheme where Mr Sebastian prepared returns unsupervised and Mr Pleno, for a fee, lodged those returns as though they were his own work, in breach of the Undertaking.

15                  At [16] the Tribunal observed that Mr Pleno was either ‘dissembling or confused’ about the legislative requirements.  The Tribunal considered Mr Pleno’s explanation that he had thought that if a partnership was registered under the Fair Trading Act 1987 (NSW),then all of its partners should be able to act as tax agents without further approvals.  This, as the Tribunal noted at [18], ‘is manifestly contrary to the [1936] Act and to the clear intention of Parliament in passing that Act’.  The Tribunal considered whether Mr Pleno understood the legislative requirements and was prepared to breach them.  The Tribunal concluded from the facts that Mr Pleno ‘did not understand or perhaps did not care to comply with his personal obligations and the relationship of trust that should exist between himself as tax agent, and the Commissioner of Taxation’ (at [19]).  The Tribunal found no special circumstances to mitigate the seriousness of Mr Pleno’s breaches of his obligations as a tax agent.  At [24] it said ‘Mr Pleno engaged in conduct calculated to subvert the tax agent system, repeated that misconduct, and offered no exculpatory explanation beyond a wish that the law were otherwise’ (at [24].

16                  The conclusion of the Tribunal, as set out at [25] of its reasons, was that Mr Pleno had engaged in serious misconduct as a tax agent and was not a fit and proper person for the purposes of s 251K(2) of the 1936 Act.  The Tribunal also concluded at [26] that Mr Pleno was not a fit and proper person for the purposes of s 251KE(1) of the 1936 Act.  Reading the decision as a whole, it is apparent that the basis for the finding that Mr Pleno was not a fit and proper person to be the nominee of the GST BAS & Accounting Professionals partnership was the same basis on which the Tribunal found that he was not a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters.

WHAT IS THE Relevance of THE Tribunal NOT SETTING out THE tests for misconduct?

17                  The Tribunal did not in its reasons set out the test for a finding of misconduct or for its finding of ‘serious misconduct as a tax agent’.  The TAB points out that misconduct is not defined in the 1936 Act and that Mr Pleno does not appeal from the finding that there was serious misconduct as a tax agent, other than his assertion that a non-wilful breach of an undertaking cannot constitute misconduct.  It submits that:

·                    there was no error in that regard and that the findings of fact clearly come within ‘some act or omission which falls short of what would be proper in the circumstances’;

·                    Mr Pleno’s conduct was linked to his profession; and

·                    Mr Pleno’s conduct does not come within the rules and standards ordinarily required to be followed by a registered tax agent (Roylance v General Medical Council [2000] 1 AC 311 at 331).

18                  Further, the TAB submits that the conduct violates or falls short of, to a substantial degree, the standard of professional conduct observed or approved by members of the profession of good repute and competency (Adamson v Queensland Law Society Incorporated [1990] 1 Qd R 498 at 507).

19                  However, whether at an evidentiary level the TAB established professional misconduct within the tests in Roylance and Adamson does not form a basis of Mr Pleno’s appeal.  In any event, s 251K(2) of the 1936 Act provides that a board may suspend or cancel the registration of any tax agent upon the alternative grounds of misconduct as a tax agent, or that the tax agent is not a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters.  The Tribunal affirmed the TAB’s decision on each of those grounds.  It follows that, even if the Tribunal’s finding of misconduct as a tax agent was erroneous, unless the finding that Mr Pleno was not a fit and proper person could be overturned, the affirmation of the TAB decision under s 251K(2) of the 1936 Act would stand.

Consideration of the question of law advanced by Mr Pleno

20                  Mr Pleno submits that the admitted breach of the Undertaking cannot form the basis either for the finding of misconduct or the finding that Mr Pleno is not a fit and proper person.  He submits that there must be a finding of a wilful breach of the Undertaking, rather than a casual, accidental or unintentional breach.  Mr Pleno was unable to find any authority in support of that proposition.  Rather, he pointed to discussions concerning a finding of contempt (Australian Meat Industry Employees Union v Mudginberri Station Pty Ltd (1986) 161 CLR 98 and Ellendale Pty Ltd v Graham Matthews Pty Ltd (1986) 11 FCR 347).

21                  The TAB submits that the Tribunal’s conclusion that Mr Pleno is not a fit and proper person was clearly open to it on the basis of the findings of fact which it set out, including:

·                    Mr Pleno himself asserted the giving of the Undertaking not to associate with unregistered tax agents.

·                    Mr Pleno’s explanations to the TAB and to the Tribunal constituted admissions of breach of the Undertaking.

·                    Mr Pleno gave evidence which was ‘ample proof of associating with an unregistered preparer’.  Mr Pleno assisted a person, whom he knew to be unregistered, in conducting a business as though he were a tax agent, with at least 190 returns for one year and 252 the next.

·                    Mr Pleno’s evidence that he was assisting the unregistered Mr Sebastian and that he breached the Undertaking was not disputed.

·                    The Tribunal expressly stated that it was satisfied to a Briginshaw v Briginshaw (1938) 60 CLR 336standard of the facts making up the allegations, which the Tribunal considered to be ‘serious and with serious consequences’ at [19].

·                    The Tribunal found that Mr Pleno ‘did not understand or perhaps did not care to comply with his personal obligations and the relationship of trust that should exist between himself as tax agent, and the Commissioner of Taxation’ (at [19]).

·                    The Tribunal found that Mr Pleno ‘engaged in conduct calculated to subvert the tax agent system, repeated that conduct, and offered no exculpatory explanation beyond a wish that the law were otherwise’ (at [24]).

22                  The TAB submits that requiring a breach of an undertaking to have been a wilful breach is not the legal test for misconduct or for fitness.  It submits that the Tribunal correctly looked to the gravity of the conduct and that the relevant lack of fitness could be found either because the conduct was deliberately bad, or so hopeless that the practitioner fell short of the expectations of taxpayers and the Australian Tax Office, a test within the principles discussed in Bond and Stasos.

23                  I accept the TAB’s submissions.  The Tribunal carefully considered Mr Pleno’s conduct and whether it was a result of deliberate action, or confusion about the requirements of his profession, within the context of the 1936 Act.  The relationship between Mr Pleno and Mr Sebastian was not in dispute, nor were Mr Pleno’s actions as found by the Tribunal, nor was the breach of the Undertaking.  The Tribunal found that either because Mr Pleno did not understand his obligations, or because he did not care to comply with them, he acted in breach of those obligations by assisting an unregistered preparer of tax returns to conduct his business.  Although there was no clear finding that the breach of the Undertaking was “wilful”, I do not accept that, as a matter of law, the Tribunal could not make a finding of relevant lack of fitness unless it made a finding of “wilful breach” of the Undertaking.  The Tribunal did find that Mr Pleno breached the Undertaking and that he did it ‘knowingly’.  Put another way, I am not satisfied that the Tribunal applied an incorrect test in its determination or that the finding made by the Tribunal was not open to it on the basis of the evidence before it.

24                  The remaining asserted questions of law and grounds as set out in the notice of appeal were not pressed.  It follows that the application should be dismissed with costs.

Associate:

Dated:         4 November 2010