Mourched v Commissioner of Taxation AATA 223
(Judgment by: Prof R Deutsch, Deputy President )
v.Commissioner of Taxation
Application for waiver of disqualified status
Whether exceptional circumstances for delay in filing application
Applicant previously found guilty of publishing a false statement for a financial advantage
Applicant disqualified person under the Act
No evidence of exceptional circumstances
Decision under review affirmed
Crimes Act 1900 (NSW) - The Act
Superannuation Industry (Supervision) Act 1993 (Cth) - The Act
VBS v Commissioner of Taxation -  AATA 1303
Judgment date: 16 April 2014
Prof R Deutsch, Deputy President
THE CENTRAL ISSUE
1. This is an application brought by the Applicant which seeks to reverse the effect of a decision reached by the Respondent on 31 May 2012. On that date, the Respondent disallowed an application made for a waiver of the applicant's disqualified status under subsection 126B(4) of the Superannuation Industry (Supervision) Act 1993 ("SISA"), on the basis that the application was brought outside of the 14 day period prescribed by the Act.
2. Under that provision the Respondent may accept an application for waiver of his disqualified status
"only if the Regulator is satisfied that there are exceptional circumstances that prevented the application from being made within that period".
3. The fundamental question here is whether exceptional circumstances existed so as to allow the application for waiver of that disqualified status to be brought out of time.
THE KEY FACTS
4. The Applicant was a director of a company known as NBR Mechanical Services Pty Ltd (NBR) continuously from 19 January 1985 to 6 August 2010. NBR was the trustee of a superannuation fund known as the NBR Superannuation Fund (the Fund).
5. On 1 January 1999, the Fund elected to be regulated under SISA.
6. On 24 March 2009 the Independent Commission Against Corruption (ICAC) brought proceedings against the applicant alleging that the applicant had published a false statement pursuant to which he sought a financial advantage. This conduct was contrary to the provisions of the Crimes Act 1900 (NSW).
7. In November 2009, the Applicant's barrister accepted an offer from the office of the Director of Public Prosecutions (the DPP) that the Applicant would plead guilty to the charge on the basis that the DPP would not oppose the consideration of a section 10 Order. If a section 10 Order was successfully obtained the Applicant would receive more lenient treatment, in particular, no conviction would be recorded against the Applicant in respect of the charge.
8. Accordingly on 1 December 2009, the Applicant pleaded guilty to the offence of 'Publishing a False Statement for a Financial Advantage', pursuant to section 178BB of the Crimes Act 1900 (NSW) (the Offence).
9. On 23 March 2010 the Applicant was convicted of the Offence by the Chief Magistrate of the Local Court of New South Wales, and sentenced to 15 months imprisonment. The sentence consisted of a minimum period of 12 months and 23 days with an additional period of four months and eight days during which the Applicant was to be released on parole. Some time on or after 4 May 2010 the sentence was altered to be served by way of home detention.
10. As a result of the 23 March 2010 conviction, the Applicant was a disqualified person pursuant to subsection 120(1) of SISA, which would also make NBR a disqualified person pursuant to subsection 120 (2) (a) (ii) of SISA.
11. Pursuant to subsection 126B (3) of SISA, the Applicant had until 6 April 2010 to request a waiver of his disqualified status, after which time the ability to seek such a waiver would have expired.
12. In around July/August 2010, the Applicant lodged an appeal against the severity of the sentence which had been imposed in respect of the Offence, but that appeal was dismissed.
13. On 6 August 2010, the Applicant resigned his directorship of NBR.
14. It was not until 1 May 2012 that the Respondent received an application for a waiver of disqualified status from the Applicant, the application being dated 30 April 2012.
15. On 7 May 2012 the Respondent received court documents in relation to the offence, and on 31 May 2012 the Respondent advised the Applicant that he would not allow a longer period than 14 days to make the application for the waiver, as he was not satisfied that there were exceptional circumstances which prevented the Applicant from making the Application within that period.
16. On 20 June 2012, pursuant to section 344 of SISA, the Respondent received a request for review, of its decision dated 31 May 2012 to refuse an application for waiver brought outside of the 14 day period.
17. On 20 July 2012, the Respondent confirmed the original decision that he would not allow a longer period, as he was not satisfied that there were exceptional circumstances which prevented the Applicant from making the Application within the prescribed 14 day period.
18. On 14 September 2012, the Applicant applied to the Administrative Appeals Tribunal (the AAT) for a review of the Respondent's decision of 20 July 2012..
19. On 7 May 2013, after various directions were made by the AAT, the Applicant (through his representative) filed his statement of facts and contentions as well as certain supporting documents.
20. A conciliation was held on 5 August 2013 but no resolution of the matter was secured. No further evidence was filed by either party and the matter proceeded to a hearing.
WERE THERE EXCEPTIONAL CIRCUMSTANCES THAT PREVENTED THE APPLICATION FROM BEING MADE WITHIN THE REQUISITE 14 DAY PERIOD?
The Applicant's arguments
21. The Applicant has argued that there are a number of grounds to support the existence of exceptional circumstances for the purposes of s 126B(4) of the SISA.
22. First, the Applicant suffered what he describes as "unimaginable stress" as a result of his conviction which occurred after the Applicant had on the advice of his lawyers made a plea offer which was subsequently accepted by the prosecution. It seems that the Applicant had become convinced, rightly or wrongly, that he would not be convicted if he pleaded guilty to the charge in question. As it turned out the presiding judge chose, as he was no doubt entitled to, to ignore the requests made by both sides that no conviction be recorded. The Applicant was as a result, in the immediate aftermath of the decision, in total shock and the resulting penalties caused him "utter disbelief and total anguish".
23. Secondly, he has had serious and on-going medical conditions for which he receives regular medical treatment and he underwent surgery in December 2011.
24. Thirdly, his wife has also been battling various medical issues and the evidence suggests that some of these health issues were intermittent while others were characterised by a long and on-going history.
25. Fourthly, the Applicant was ignorant of the need to apply for a waiver within the requisite 14 day period. In this context it is noted that the Applicant is a mechanical engineer who would not be familiar with the intricacies of the superannuation rules in the same way one might expect of an individual in an alternate occupation, for example an accountant.
26. Fifthly, the Applicant had relied on the professional advice provided to him by the Fund accountant, who at no relevant point advised the Applicant on the 14 day limitation with respect to applying for a waiver.
The Respondent's position
27. In relation to the first point regarding his conviction, the Respondent comments that there is nothing exceptional about being stressed by a conviction. Indeed, it would be usual, rather than exceptional, for a person convicted of an offence to experience stress at the time of conviction.
28. The Respondent points out in relation to the second and third items that, whilst it is recognised that the illnesses of both the Applicant and his wife were difficult issues to deal with, they were long-standing illnesses which did not, on the face of the evidence, bear directly on the two week period in question. Further, during the relevant period and thereafter the Applicant and his wife did carry out a number of important regulatory functions such as lodging tax returns, lodging appeals against convictions and resigning directorships without being unduly impeded by their illnesses.
29. In relation to the fourth and fifth points the Respondent points to the decision in VBS v Commissioner of Taxation  AATA 1303 in support of the view that a lack of knowledge of the entitlement to apply for the waiver in the brief window of opportunity offered by SISA was insufficient to meet the standard of exceptional circumstances.
Other Possible Matters of Relevance
30. Looked at in isolation, each point made by the Respondent in relation to the suggested exceptional circumstances is valid and supported by the state of the existing law.
31. However, in relation to the first point, namely the stress created by the conviction, while it may be true that any conviction would create stress, the way this argument is framed, fails to properly take into account the full position of the Applicant. Not only was he convicted, but he was convicted in circumstances where he appears to have been led to believe, rightly or wrongly, that no such conviction would be recorded as a result of the plea bargain he had entered into on the advice of his legal counsel. The Respondent points out that notwithstanding the fact that the prosecution supported the no conviction position adopted by the defence, the decision is always within the prerogative of the presiding judge. No doubt that is correct, but I can well understand that the judge's ability to override the recommendations of the lawyers acting in agreement may well have been a subtlety in the process which was lost on the Applicant. The Applicant as a layman would, perhaps not unreasonably, have assumed that no conviction would be recorded if the prosecution supported the position adopted by his own representatives.
32. A major problem for the Applicant may be the fact that it took two years before any action was taken to seek the relevant waiver, and this - on any interpretation - is a long time. Interestingly, the Act does not have specific regard to the length of an Applicant's delay in bringing their application beyond the expiration of the initial 14 day period. It simply looks to the fact that the application for waiver is made outside that requisite 14 day period. One might hypothesise as to what might have happened if the application had been made six months rather that 24 months after the expiration of the 14 day period, but it is not clear that that fact should or would have made any difference to the view taken by the Respondent. In my view, the question is not how long after the expiration of the 14 day period was the application made, but whether there were exceptional circumstances that prevented the application form being made inside that 14 day period.
THE TRIBUNAL'S CONCLUSIONS ON EXCEPTIONAL CIRCUMSTANCES
33. As has been pointed out in VBS v Commissioner of Taxation 2005 [AATA] 1303 (at 24) the critical issue is whether there were exceptional circumstances that bore upon the Applicant's failure to comply with the 14 day period prescribed by subsection 126B(3) of SISA, that being the period from 23 March to 6 April 2010. The adjective "exceptional", is used in this context to qualify the type of circumstances required to exist, and sets a very high threshold which cannot be easily satisfied. It is more than unusual or out of the ordinary - it seems to require circumstances that rarely occur and perhaps are "outside reasonable anticipation or expectation" (VBS v Commissioner of Taxation  AATA 1303 at 18).
34. Specifically in relation to that period, and that period alone, there is no evidence that any exceptional circumstances arose during that 14 day period with respect to the management of the Applicant or his spouse's illnesses. . Certainly the illnesses that both he and his spouse suffered seemed to be on-going, but there is nothing conclusive in the evidence that would suggest that those illnesses bore specifically and directly upon the two week period in question.
35. Further, notwithstanding what I have said at paragraph 31 above, while I have no doubt that the Applicant experienced significant stress as a result of a perceived, unexpected conviction, that, in and of itself, is not enough to constitute an exceptional circumstance in the sense contemplated by the legislation. A recorded conviction for the offence in question, while highly stressful, could not realistically be seen to be beyond "reasonable anticipation or expectation" [emphasis added]. It may be possible for this outcome to be characterised as unusual; however, as no evidence was put forward by the Applicant to suggest that it was beyond reasonable anticipation or expectation it cannot be said to be exceptional.
36. Consequently, while I have sympathy for the Applicant's circumstances and the position he finds himself in, I am unable to conclude that the Respondent acted incorrectly in denying his application.