DISTRICT COURT OF NEW SOUTH WALES
PERUSCO v FEDERAL COMMISSIONER OF TAXATION
GEE J
25 November 1981 -
Gee J The matter of the appeal of Guiseppe Perusco and the Commissioner of Taxation;- this is an appeal against the decision of the Magistrate and a fine imposed by the Magistrate for an alleged breach by the appellant of s 251N(1) of the Income Tax Assessment Act, which is a section comprising part of the Division of the Act which relates to tax agents and their registration, their deregistration in certain circumstances, and their supervision generally by the Department of Taxation.
The section provides in brief (and so far as is relevant to this matter) that a registered tax agent shall not allow any person who is not the employee of that agent, or in the case of a partnership which is registered as an agent, a member of the partnership, to do certain things in relation to taxation matters, and in particular the preparation of returns and the conduct on behalf of the registered tax agent of any business relating to any income tax return. It is alleged that the offence consisted in the appellant allowing Mr Albanese to conduct on his behalf some business relating to the taxation return of a Mr Aguiar - Mr Albanese not being an employee of the appellant or one of the other classes of persons who may do this particular work. The Act provides in s 243 for the averments to provide prima facie evidence in certain respects, but the appeal has been conducted as a full appeal with evidence on both sides, so that the matters which might be proved by averments are sought to be proved by evidence.
There is no dispute that the appellant was a registered tax agent, at the relevant time, nor is there any dispute that Mr Albanese, Robert Aldo Albanese, was not an employee of the appellant or a member of any of the classes referred to in the section as being entitled to prepare returns and conduct other business. Counsel for both the appellant and the respondent have made a detailed and very helpful analysis of the evidence and have made a number of submissions as to the proper interpretation of the section and in particular the appropriate meaning to be given to the word "allow" in s 251N(1) of the Act. As I mentioned earlier that section is contained in a part of the Act which deals with the registration of tax agents. There is no doubt in my mind that the word "allow" is capable of a number of different meanings, and the problems is to ascertain what is its appropriate meaning in this section of the Act. It is an ambiguous word, it can mean knowingly permitting, (obviously that is one meaning of the term) but it might also involve the concept of permitting such a delegation of authority that the principal loses the element of control and supervision that may be inherent in his situation, and it may embrace also the concept of negligence, in failing to take all necessary and reasonable steps to ensure that the provisions of s 251N(1) are not breached. The problem is to know what its meaning is in this particular context. Since it is an ambiguous word capable of at least those three meanings it is appropriate in interpreting the word that one should go to the context of the word in the section and in that part of the Act, and indeed to the tenor and intention of the whole Act, but in particular the sections relating to the registration of tax agents. I do not propose to go through this aspect of the matter in detail, but s 251J provides for the registration of tax agents, s 251K provides for the cancellation of the registration of tax agents, and in the second subsection of that section there are set out the matters which may result in cancellation of the registration of a tax agent. They are set out in detail there. There is provision for an appeal against the cancellation of registration in s 251K(5), and in 251L there is a proscription against the charging of fees by unregistered tax agents. In s 251M there is a provision whereby any moneys payable in respect of tax by a tax payer because of some fine or penalty imposed or additional tax imposed on that tax payer may be recovered from the registered tax agents. Then one comes to s 251N, (the relevant section here) on the preparation of returns on behalf of registered tax agents.
It is clear to me that these sections comprise an aggregate of provisions which are designed to enable the Department to exercise very close control and supervision over persons who are entitled to charge a fee for the preparation of tax returns, and the conduct of taxation business generally. The scope of the provisions indicates that the intention of the Legislature is that registered tax agents should be not merely persons of good character but that they should be persons who apply themselves with diligence and precision to their duties, so that tax payers do not suffer from any default or negligence on their part. The provisions are very comprehensive and very wide and give the Department, subject to the right of appeal, strong supervisory and disciplinary powers.
Counsel have cited a number of cases dealing with the meaning of the word "allow". The decisions have differed in the various cases in accordance with the context in which the word appears in the relevant enactment. I am grateful to counsel for having referred me to these cases but I have come to the conclusion that they very much depend on their own context, and in particular the intention of the Act in which they are to be found, and the general structure of the various Acts. For example, Gilbert v Gulliver [1918] VLR at 185, deals with the meaning of the word "allow" in an enactment relating to the care of cattle. That case is indeed helpful since it reviews some of the authorities, but I have turned finally to the context in which the word "allow" appears in this particular Act, and I have come to the following conclusions concerning its interpretation. First of all, it does not involve the concept of "knowingly" allowing. The word "knowingly" does not appear in the section and if it was the intention of the Legislature that breaches of this section should be limited to those persons who knowingly allow or permit the proscribed activities then it would have been very easy for the draftsman to have inserted that word and clarified the matter in that respect. I have come to the conclusion that as far as the question of the delegation of authority by an agent is concerned, the section does seek to prohibit any delegation of authority which results in the registered agent losing effective control and supervision over the activities of his establishment. I have come to the conclusion also that the section aims at preventing the occurrence of any of the proscribed activity arising from negligence or inattention to his obligations on the part of the registered tax agent. This may well fall into the same category as the second matter that I have mentioned, the delegation of authority. It seems to me that the word "allowing" is a very broad concept in the context of this Act, and covers not merely knowingly permitting, but also the sort of delegation of authority to other persons that I have mentioned, and also any act of negligence on the part of the agent which was unreasonable in the circumstances, and which led to persons performing the proscribed activities.
Turning now to the evidence and looking at it quite briefly. Mr Paul Pulvirenti interviewed the appellant and I have evidence of the conversation between them. The appellant told this gentleman that he had discussions with his employees once a year as to how the returns were to be prepared. However when he was asked by Mr Paul Pulvirenti what control he, the appellant, exercised over the preparation of the returns he replied "Basically none". This evidence is challenged, but I have no reason to believe that it is not a substantially correct record of the conversation between those two men. I need not deal with Mr Colman's evidence in any detail except to say that it appears that between July and October of 1980 there were in excess of some five hundred returns lodged from the Warrawong office of the appellant. Mr Albanese is the person who is alleged to have, (to use the words of the section) "conducted on behalf of the registered tax agent business of that agent relating to an income tax return or income tax matter". He said that although he was in the Warrawong office as a travel consultant he did, as he put it on p 17, "help out" in preparing some tax returns. He described the procedure that he would follow if a person came in and asked him to prepare a tax return. He first of all took instructions from that person, and made out a draft which was later typed. That typed copy was then apparently checked by the appellant and sent to the Department. Later on, if these was a tax refund payable, that came to the Post Office box of the Warrawong office. He identified various documents, and said that his recollection was that Mr Aguiar was one of the persons whom he saw in connection with the preparation of a return, and one of the persons with whom he would have conducted business in the manner that he speaks of. He identified his handwritten draft and gave evidence as to the procedure in connection with a refund. Concerning his relationship with the appellant, on p 26, he was asked "During that period did you ever meet the defendant, Mr Guiseppe Perusco?", and he said "On odd occasions yes I have met him". It is noteworthy that he says "on odd occasions". He spoke also of going from time to time to the Wollongong office with taxation material. Later he said "I couldn't say once a week but I did see him on odd occasions, yes". Mr Aguiar in his evidence was greatly troubled by a lack of knowledge of English, and his evidence is so confused that it is very hard to work out what it is all about, but he certainly indicated that on one occasion he has been given a cheque (which apparently was a refund cheque) by Mr Albanese. In any event I do not doubt that Mr Aguiar came into the office and was interviewed by Mr Albanese in the manner that Mr Albanese set out in his evidence. That concluded the prosecution case.
The appellant, Mr Perusco, then gave evidence in which he endeavoured to persuade the court that his understanding was that only Mr Turo Chiodo was concerned with the preparation of returns at the Warrawong office, and that he had no knowledge of any returns being prepared, or any business being conducted in relation to returns by Mr Aguiar. He said that he did not have such knowledge until he was informed virtually at the hearing from which this appeal comes. Without going through his evidence in detail, he was saying that he visited the Warrawong office constantly at least twice a week, and as well, he personally perused and signed all of the taxation returns. He said, on p 36, that he had no knowledge of Mr Albanese doing any taxation work, he had not given him permission to do so, and he had never seen him doing taxation work when he visited the premises. On p 43, he said that he knew Mr Tulio Chiodo was at the Warrawong office but he did not know what it was that Mr Albanese was doing there, certainly not in relation to any taxation matters. He was asked "You have been to the Warrawong office when Mr Albanese was there have you not?", answer "Yes, but I didn't take much notice of him". He said that he did not see him on every occasion when he went to the office. On p 44 he gave details of the degree of supervision that he exercised over the preparation of returns in offices other than the Wollongong office and he claimed that he took, as he put it, the normal steps which were required to make sure that either an employee or some registered tax agent prepared any taxation returns. He said it was his business to know what went on as far as taxation returns were concerned, and that his belief was that if people came into the Warrawong office in the absence of Mr Tulio Chiodo they would be sent away until that gentleman arrived. He said that if there was any problem about any return there would be a full discussion with Mr Tulio Chiodo. That was the evidence of the appellant.
Reviewing the evidence, I have come to certain conclusions about the factual situation, the most important one being that the appellant knew, (and this is not in dispute) that taxation returns or at least the drafts of them, were being prepared at the Warrawong office. He knew that Mr Albanese was not an employee of his, and I am satisfied also that he was aware that Mr Albanese was taking part in the preparation of returns at least to the extent of taking instructions from the taxpayer, obtaining particulars necessary to complete the return, and also completing a draft which would then perhaps be dealt with by other persons. In short I am quite satisfied, and I must add, satisfied beyond any reasonable doubt on the evidence, that the appellant was aware of the activity of Mr Albanese in that respect, and I am not able to accept his evidence that he was only really vaguely aware that Albanese was at the office and that he took very little notice of what he was doing. I think the problem from the appellant's point of view, and the dilemma that faces him, is that if it was a fact that he went to the Warrawong office as often as he claims he did, then it is astonishing indeed (and I find it not acceptable) that he would not have known of the activities of Mr Albanese in respect of the preparation of draft returns. On the other hand if he did not go to the office as often as he said then it seems to me that he rests on the other horn of the dilemma;- he in fact had over-delegated authority to Mr Chiodo in the conduct of the affairs of that office, delegated authority in a manner which went beyond the appellant's responsibilities under this section of the Act. In the result I find that the appellant knowingly allowed Mr Albanese to conduct on his behalf part of the business of the preparation of the income tax return of Mr Aguiar, and indeed that he was also concerned with the handling of a refund cheque to Mr Aguiar. But in any event, as I hold the view that it is not necessary for the Prosecution to prove knowledge, I have come to the conclusion that there was a delegation by the appellant of his control and supervision of the Warrawong office which amounted to allowing Mr Albanese to conduct the business that I have mentioned. I would also find, if it were necessary, that there was an element of neglect on the part of the appellant in the supervision and control of the activities that went on on in the Warrawong office so far as the preparation of returns was concerned. I am quite satisfied that the appellant took no adequate active steps to control and supervise the Warrawong office. In my view therefore the prosecution has established on the evidence, and quite apart from any presumptions that might arise under the Act, that there has been a breach of the relevant section of the Act. The appeal will be dismissed and the conviction confirmed. Do you wish to say anything about penalty Mr Hill?
Mr Hill: No your Honour.
His Honour: This was only one, I gather, of quite a number of matters and the Magistrate imposed a penalty.
Mr Hill: The other matters have not been dealt with your Honour. The magistrate imposed a penalty of five dollars in relation to this …
His Honour: Yes I gathered that. What about the matters of professional costs and so on, do you wish to say anything about those?
Mr Hill: No your Honour.
His Honour: I confirm the fine imposed by the magistrate which was quite a nominal one, and his order for professional costs and witnesses' expenses and investigation costs. The Magistrate allowed a month to pay, I will allow the same time to pay.
Mr West: Might I raise the question of costs on the appeal.
His Honour: Yes, what is your suggestion about that?
Mr West: It is only a suggestion. I made some enquiries at the court office this morning. I should have known this but I understand that there is no system of taxing in criminal as opposed to civil matters and therefore I must ask the court to make an order for costs. I have a list of costs here.
(List of costs shown to Mr Hill)
His Honour: Could I make this suggestion, I have to give another decision. Perhaps while I am doing that you and Mr Hill might have a talk about the question of costs and Mr Hill can decide what his attitude is.
Short Adjournment
Mr West: I have discussed this matter with counsel for Perusco your Honour, I do not want to put your Honour into the position of being a taxing officer but what I would formally ask the court, without necessarily pressing it too far, I would ask the court to make an order for a total amount of one thousand two hundred and seventy one dollars, as itemised in this list. Counsel for Perusco I think takes the view that an amount of only six hundred and eighty nine should be payable and I think the basis, I do not want to bring up what he will say but I think the basis is he takes the view that the first day we were not reached and that therefore that should not count, and he understands that the taxing officer of the District Court here takes the view that the first day not reached is a mutual misfortune for which neither side gets costs. I would not necessarily agree with that view your Honour but I have got nothing to submit either way.
His Honour: Mr Hill your view is that six hundred and eighty nine dollars is the appropriate amount is it?
Mr Hill: Yes your Honour.
His Honour: That seems to be a pretty adequate amount without having seen the itemised list. Perhaps I had better have a look at the itemised list.
(His Honour peruses itemised list) I have looked at those two lists, I take the same view as the appellant's counsel about these items. I think that those items which are conceded are properly conceded and in the circumstances I will make an order for the payment by the appellant of the respondent's costs, that is professional expenses, amounting to six hundred and eighty nine dollars.
Mr Hill: Would your Honour allow two months for payment of those?
His Honour: Yes, allowed two months to pay those professional costs.
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