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Re Chapman and the Tax Agents' Board of South Australia.

Members:
AN Hall DP

Tribunal:
Administrative Appeals Tribunal

Decision date: Decision given 30 May 1984.

Deputy President A.N. Hall

This is a review of a decision of the Tax Agents' Board of South Australia made on 11 January 1984 to cancel the registration of Robert John Chapman as a tax agent. The Board's power to make this decision is to be found in sec. 251K(2) of the Income Tax Assessment Act 1936 which provides as follows:

``251K(2) A Board may cancel the registration of any tax agent upon being satisfied that -

  • (a) any return which has been prepared by or on behalf of the tax agent is false in any material particular; unless the tax agent establishes to the satisfaction of the Board that he had no knowledge of the falsity or that the falsity was due to his inadvertence;
  • (b) the tax agent-
    • (i) has neglected the business of a principal;
    • (ii) has been guilty of misconduct as a tax agent; or
    • (iii) is not a fit and proper person to remain registered; or
  • (c) in the case of a partnership or company - a nominee of the tax agent is not a fit and proper person to be such a nominee, or that a person who has become a member of the partnership, or a director, or manager or other administrative officer, of the company is under the age of 21 years or is not of good fame, integrity and character.''

2. The Board considered that Mr. Chapman was not a fit and proper person to remain registered as a tax agent (see sec. 251K(2)(b)(iii) by reason of the fact that he had been convicted of a number of offences with respect to failure to lodge taxation returns in respect of companies of which he was a director (twenty-one convictions) or his own personal taxation returns (four convictions) and by reason of his failure to disclose these convictions in the annual notices required to be lodged by him in respect of his annual renewal of his registration as a tax agent.

3. At the date of cancellation of his registration, Mr. Chapman was carrying on business in an accounting and tax agency practice in partnership with Mr. Gerald P. Cobiac under the name ``Cobiac and Chapman''. In addition to each partner being registered in his own right as a tax agent, the partnership was also registered as such pursuant to sec. 251J of the Act. Both partners were registered as nominees of the partnership for the purposes of Pt. VIIA of the Act.

4. By reason of the facts and circumstances which led the Board to conclude that Mr. Chapman was no longer a fit and proper person to remain registered as a tax agent, it also formed the opinion that he was no longer a fit

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and proper person to be a nominee of the partnership. Pursuant to sec. 251J(11)(d) of the Act, the Board accordingly served upon the partnership a notice to that effect, as a consequence of which Mr. Chapman ceased to be a nominee. Section 251J(11) provides, so far as relevant, as follows:

``(11) A person shall cease to be a nominee of a partnership... -

  • (a)...
  • (b)...
  • (c)...
  • (d) if that Board serves upon the partnership... a notice that in its opinion that person is no longer a fit and proper person to be a nominee of the partnership...''

5. Although the registration of the partnership was also reviewed by the Board, a decision was taken on 17 August 1983 not to cancel the partnership registration (see letter to Mr. Cobiac dated 5 September 1983 - Exhibit T28). This decision was taken notwithstanding that, in respect of each of the relevant years, Mr. Cobiac had also failed to disclose the fact of Mr. Chapman's convictions in the annual registration renewal notice lodged by him on behalf of the partnership pursuant to sec. 251JA of the Act. The decision with respect to the partnership as conveyed to Mr. Cobiac by the letter dated 5 September 1983 was, so far as relevant, as follows:

``This matter was given further consideration at the Board meeting on 17 August 1983 when members considered the contents of your letter of 12 July 1983. Members noted that apart from the false declarations on the 1978, 1979, 1981 and 1983 annual renewal forms, there was no other information before the Board which suggested that the registration of the partnership should be cancelled. They also noted that, in handing down his decision in the case of
Re Su and the Tax Agents' Board 82 ATC 4284, Davies J., sitting as the Administration Appeals Tribunal stated, inter alia, that Su's failure to correctly complete three annual renewal notices was, in Davies' view, of itself, probably sufficient to warrant Su's removal from the register of tax agents.

After giving careful consideration to this case, it was resolved that, taking into account the otherwise apparently good record of the partnership as a tax agent and particularly its basically good lodgment performance, the registration of Cobiac & Chapman as a tax agent would not be cancelled on this occasion.

You are advised that the partnership's registration will be kept under review in the future and you are expected to avoid a repetition of the events which led to this most recent review.''

Jurisdiction

6. Mr. Chapman has sought review, firstly, of the decision cancelling his personal registration as a tax agent and secondly, of the decision that he was no longer a fit and proper person to be a nominee of the partnership. There was no dispute that an application may be made to the Tribunal pursuant to sec. 251K(5) of the Act for a review of the cancellation of Mr. Chapman's registration. That subsection provides as follows:

``(5) An application may be made to the Administrative Appeals Tribunal for review of the cancellation under this section of the registration of a tax agent, being a cancellation made after the commencement of this sub-section.''

(Emphasis added.)

The subsection came into effect on 1 July 1976 (see Act No. 55 of 1977, sec. 16). The decision as to cancellation was made under sec. 251K(2). However, Mr. Fairbank, who appeared on behalf of the respondent, submitted that the right of review so conferred was limited to decisions taken pursuant to sec. 251K and that it did not extend to a decision taken by the Board pursuant to sec. 251J(11) that a person was no longer a fit and proper person to be a nominee of a partnership.

7. Mr. Barrett, who appeared on behalf of the applicant, was forced to concede that there did appear to be a hiatus in the legislation and that, technically, if the Tribunal were to conclude, in respect of Mr. Chapman's appeal, that he was a fit and proper person to be registered as a tax agent, the finding of the Tax Board that he was not a fit and proper person to be a nominee of the partnership would still stand.

8. As the only rights of review conferred under Pt. VIIA of the Income Tax Assessment Act are those conferred by sec. 251K(5) and as

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those rights of review are limited to decisions taken pursuant to sec. 251K, I can see no escape from the conclusion that, where the Board forms the opinion, pursuant to sec. 251J(11), that a person is no longer a fit and proper person to be a nominee of a partnership that decision is not reviewable before this Tribunal. It is only if the Board takes action to cancel the registration of a partnership on that ground, pursuant to sec. 251K(2), that there is a power of review conferred upon this Tribunal.

The Relevant Facts

9. Most of the relevant facts in this matter were not in dispute. Mr. Chapman is a public accountant, now aged 56, who qualified in 1954 with a Diploma in Accounting from what was then the South Australian School of Mines. He is a member of the Australian Society of Accountants, a chartered secretary and a registered company auditor. He has been a teacher in Accounting I at the Institute of Technology for 24 years. Although he was first granted registration as a tax agent in 1958, it was not until 1966, following the collapse of a group of companies involved in the meat industry of which he was a shareholder, director, accountant and secretary, that he commenced full-time practice in his own accountancy business. In 1971, he began a professional association with Mr. Cobiac and has been in partnership with him since 1976.

10. Between 1961 and 1966, the group of companies in which Mr. Chapman was involved as his full-time occupation included a wholesale meat company (South Australian Wholesale Meat Company Pty. Limited), an abattoir (Clarenden Meatworks Pty. Limited), a smallgoods company (Swan's Smallgoods Pty. Limited), an interstate outlet (N.T. Enterprises Pty. Limited), a group of retail outlets in South Australia trading together as Coombs Meat Stores (Coombs Meat Service Pty. Limited, The Block Butchers Pty. Limited, and Da Costa Meat Service Pty. Limited) and a sausage skin company (Gainmore Casings Pty. Limited). All the companies were formed in or about 1961 except N.T. Enterprises Pty. Limited (formed approximately 1963) and Gainmore Casings Pty. Limited (formed approximately 1964). The wholesale company went into liquidation in 1965 or 1966 and this brought about the substantial collapse of the whole group of companies. It also signalled the start of the sorry chain of events that has ultimately brought Mr. Chapman before this Tribunal.

11. Mr. Chapman, jointly with certain other persons, was a shareholder and director of each of the companies at the date of winding up of the wholesale company. Because he had personally guaranteed the repayment of a loan of £10,000 to Da Costa Meat Service Pty. Limited he took over that company in 1966 in the hope of trading his way out of financial trouble. It continued trading (albeit at a loss) until 1982, when it went into liquidation. All the other companies in the group ceased trading in 1965 or 1966 except for Gainmore Casings, the shares in which had been sold to a third party (see Exhibit A). In addition, and evidently in the hope of salvaging something from the wreckage, a further company called Sam Pty. Limited was formed in September 1965 in which R.J. Chapman Holdings Pty. Limited held 1,200 of the 4,200 issued shares and in which Mr. Chapman and the other shareholders were directors. Sam Pty. Limited acquired the business of one of the retail companies at Unley, South Australia. In 1970, Mr. Chapman and his wife had borrowed money to take over the shareholdings of their fellow directors. However, the company continued to lose money, forcing it eventually to cease trading in 1975 or 1976. Mr. Chapman said that he had paid out of his personal income a lot of moneys owing by the various companies. He and his wife had invested some $50,000 in Da Costa Meat by the time it went into liquidation.

12. I was told that when the wholesale meat company went into liquidation in 1965 Mr. Keith Garrard had been appointed liquidator. As there were a large number of inter-related financial dealings between the companies in the group, Mr. Chapman handed over the books of account with respect to all the companies to Mr. Garrard. In a letter to the Board dated 12 July 1983 (see Exhibit T24) and in his evidence before the Tribunal Mr. Chapman claimed that Mr. Garrard did not complete the winding up of the wholesale company; that Mr. Garrard was convicted and gaoled for an offence relating to ``a client's money in a mining venture''; and that he (Mr. Chapman) could not find the books of account of the various companies (transcript p. 32). Although Mr. Garrard's conviction had come to the attention of Mr. Chapman in approximately 1972 and although he knew that Mr. Garrard was no longer the liquidator of the

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wholesale company, it was not until approximately 1977 (following a phone call from a source he could not recall) that he had recovered the books of account. He had been told where to collect the seven or eight teachests of papers relating to the group of companies. It had required a great deal of work, he said, to get the books of account in order.

13. Mr. Chapman said that the failure of Mr. Garrard to complete the winding up of the wholesale company and, in particular his failure to return the books of account of the associated companies - especially the books of the retail companies - prevented him from preparing the necessary balance sheet and profit and loss account for Da Costa Meat Service Pty. Limited and The Block Butchers Pty. Limited for the year ended 30 June 1966. This caused consequential difficulties in relation to Da Costa Meat in completing the tax returns for the succeeding years. There were unascertained losses to be carried forward and depreciated values of equipment to be established. It also affected his capacity to prepare and complete the necessary balance sheet and profit and loss statement in respect of the trading operations of Sam Pty. Limited because the depreciated value of the plant and equipment taken over by that company could not be established.

14. As a consequence, default occurred in lodging the 1966 and 1968 income tax returns for The Block Butchers Pty. Limited (even though the company had ceased trading in 1966). In respect of Da Costa Meat Service Pty. Limited defaults occurred in lodging returns for 1966, 1968, 1970, 1972, 1974 and 1976. In respect of Sam Pty. Limited, defaults occurred in lodging returns in respect of the years ended 30 June 1969, 1972, 1974 and 1976. It appears that each of the companies was prosecuted and convicted in respect of these defaults (transcript p. 29).

15. Ultimately, in 1977, after a substantial period of grace, the Commissioner of Taxation launched prosecutions against Mr. Chapman personally as a director of the three companies pursuant to sec. 223 of the Income Tax Assessment Act 1936 in respect of his failure to lodge returns for the years of income referred to. There were two convictions on 27 July 1977 in respect of The Block Butchers Pty. Limited; four convictions on that date in respect of Sam Pty. Limited; and six convictions on 26 October 1977 in respect of Da Costa Meat Service Pty. Limited. There were a further four convictions on 17 March 1978 pursuant to sec. 225 of the Act relating to Sam Pty. Limited in respect of Mr. Chapman's failure to comply with a court order requiring the lodgment of outstanding returns; and five convictions on 17 May 1978 in respect of Da Costa Meat Service Pty. Limited for similar failures to comply with court orders in respect of outstanding taxation returns relating to that company. Fines totalling approximately $3,000 plus costs were imposed upon Mr. Chapman in respect of these defaults. I was told that those fines have since been paid in full.

16. Mr. Chapman said that it was only following the return of the books of account in 1977 that he was able to complete and lodge all the outstanding returns. The returns were lodged progressively during 1977 and 1978. As he had believed would be the case, the returns, when duly completed, showed that the companies had operated at a loss in respect of each of the years of income in question and that no tax was payable in respect of any of those years.

17. The applicant was also convicted of three offences on 11 November 1980 relating to failure to comply with a final notice requiring lodgment of his personal income tax returns for the years ended 30 June 1977, 1978 and 1979. In addition, he was convicted on 30 March 1982 for failing to comply with a final notice requiring lodgment of his personal income tax return for the year ended 30 June 1981. Fines totalling $400 plus costs were imposed in respect of these offences. The evidence before me indicates that the returns the subject of the convictions on 11 November 1980 (in respect of the years 1977 to 1979), were lodged on 10 November 1980, the day before the Court hearing, and that the return the subject of the conviction on 30 March 1982 (for the 1981 year) was lodged on 5 March 1982, some three weeks before the hearing.

18. Mr. Chapman said that his difficulties in lodging his own personal returns for the years 1977 to 1979 had been consequential upon the difficulties that he had experienced in lodging the returns for Da Costa Meat Service Pty. Ltd. and Sam Pty. Limited of which he was a shareholder. He said that he knew that neither he nor the companies would be under a liability to pay tax and that, rightly or wrongly, he had given preference to the preparation of taxation returns on behalf of clients, particularly those

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clients with tax payable. He said that in an effort to build up his practice as a public accountant he had endeavoured to give good service to his clients.

19. Although the applicant's history of lodgment in respect of his own personal taxation returns for the tax years 1977 to 1979 inclusive was not good, his record since then has been significantly better. He was only a matter of days out of time in lodging his 1980 and 1982 returns and the return for 1983 was lodged on time. The 1981 return was some two months late but this was said to be due to the fact that part of the information required for that return was prepared by other accountants who did not furnish the information until some six weeks after the date for lodgment of Mr. Chapman's return had passed.

20. It was common ground that there was no tax payable by the applicant in respect of the years of income for which his personal returns were lodged late and that in respect of three of those years (1977 to 1979), the applicant had been entitled to a refund. Thus, as with the company returns, the late lodgment of the applicant's personal returns did not result in any loss to the revenue. Mr. Chapman was the only person to be financially disadvantaged by reason of his delays.

21. Apart from the financial difficulties that he had encountered, Mr. Chapman had experienced considerable personal anxiety and worries in relation to his wife's health. She had not enjoyed good health since 1975 when she underwent major surgery. He said that she had suffered eight transient strokes in December 1979, that she had been hospitalised again in 1981 for a similar condition and that in 1983 she had suffered a more severe transient stroke. She had also been hospitalised during this period for tension and nerves and for an operation on her wrist.

22. However, despite all these problems he had maintained and developed his private practice and, since joining in partnership with Mr. Cobiac, had continued to develop a practice to the point where it now provided computer services and a wide range of financial advisory services to a growing clientele, presently of the order of 1,000 clients.

23. The partnership is essentially a two-man affair, although currently there are four other full-time employees, on accountant and three secretarial administrative staff. Additional part-time staff are employed during peak workload periods. Each of the partners has, essentially, his own clients, but with some overlap. Whereas Mr. Chapman derives some 75%-80% of his gross fees from tax work, Mr. Cobiac derives only 50% of his fees from that source, a large part of the balance being derived from Council audit work.

24. Mr. Chapman told me that over the whole of his practice there had been no more than half a dozen occasions on which clients had been penalised by the Commissioner for late lodgment of returns due to his default and that in each of those cases he had met the late lodgment penalties out of his own pocket. The last occasion when any such penalty had been imposed upon a client was in 1980.

25. With respect to the affairs of the partnership there was evidence before me that the partnership had failed to achieve a satisfactory lodgment performance for the 1980 tax year and that consideration had been given by the Taxation Department to suspending the partnership's lodgment programme in respect of that year. However, in view of representations made by the partners regarding illness (Mr. Cobiac has also been under pressures due to the severe illness of his son) the lodgment arrangements were allowed to continue. There is no evidence of any unsatisfactory performance by the partnership in respect of any other year and the Tax Agents' Board was obviously content with the partnership's performance in that regard (see para. 5).

26. So far as Mr. Chapman is concerned, there were no allegations against him, nor is there any evidence of any neglect by him of his clients' interests. There is no evidence of any specific cases of returns having been lodged by or on behalf of Mr. Chapman in which false claims have been lodged or false information provided to the Commissioner of Taxation. Finally, there is no evidence of any misconduct on his part other than the convictions earlier referred to and the false statements that he made in the annual returns lodged with the Board in relation to the renewal of his tax agent's registration.

Registration Renewal Notices

27. There were four such returns dated respectively 22 March 1978, 6 April 1979, 27 March 1981 and 16 March 1983. In each case

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(except the 1981 return where the question remained unanswered), Mr. Chapman answered ``No'' to the question ``Have you been convicted during the previous twelve months of any offence against the law of Australia, a State or any other law?'' Similar answers were provided by Mr. Cobiac in the partnership returns for the same years in relation to the question ``Has any member of the partnership been convicted during the previous twelve months of any offence against the law of Australia, a State or any other law?''

28. Both Mr. Chapman and Mr. Cobiac gave evidence that they had not considered the questions in the renewal form to relate to convictions such as those recorded against Mr. Chapman. Mr. Chapman said that he did not understand the question to apply to convictions in his capacity as a director of a company. In any event, he had believed that the Tax Agents' Board would be aware of the result of prosecutions conducted by the Taxation Department. He thought that the question had only related to convictions involving dishonesty. In my view, however, the question as asked in the renewal form is quite clear. It does not exclude offences against the Income Tax Assessment Act. The convictions related to Mr. Chapman's failure to comply with the requirements of the Act in very important respects. He should have realised that they would be relevant to the question whether he was a fit and proper person to remain registered as a tax agent.

29. The default by Mr. Chapman was, in my view, most serious in respect of the renewal form dated 22 March 1978. It was only a week before that date that the four convictions had been recorded against him in respect of his failure to comply with court orders for the lodgment of returns in respect of Sam Pty. Limited for the income years 1969, 1972, 1974 and 1976. Those events must still have been fresh in Mr. Chapman's mind. In addition, during the twelve months preceding that date there had been twelve other convictions relating to failure to lodge company returns. Had the convictions been disclosed so as to bring the matter to the notice of the Board as Mr. Chapman was required to do, the probabilities are that a review would have been conducted of his registration as a tax agent at a much earlier stage than it ultimately was. As it happened, it was not until on or about 14 May 1982, as a result of a routine inquiry to the Deputy Commissioner of Taxation in Adelaide, that the Board first was advised of the convictions recorded against Mr. Chapman.

30. However, it was not until more than a year after Mr. Chapman's convictions came to the notice of the Board that the Board, by letters dated 23 June 1983 addressed respectively to Mr. Chapman and to the ``senior partner'' of Messrs. Cobiac and Chapman, called upon Mr. Chapman and the partnership to show cause why their respective registrations as tax agents should not be cancelled. The delay appears to have been due to the fact that the Deputy Commissioner of Taxation took some ten months to comply with a request from the Board for further information relating to Mr. Chapman's conduct as a tax agent. It must be said, however, that the fact that the Board was prepared to allow Mr. Chapman to continue to practice for more than a year, when it was aware throughout that time of all the facts now relied upon to support the cancellation of Mr. Chapman's registration, tends to weaken the Board's argument that the applicant is not a fit and proper person to continue in practice.

31. As earlier mentioned, Mr. Chapman gave evidence that all outstanding company returns had been cleared up by the end of 1978 and that his own personal returns were now up-to-date. He gave evidence of his present business interests which appear to be well organised and prospering. He said that he was not aware of any complaints that had been made to any of the professional bodies of which he was a member in respect of his professional conduct and that there had been no claims against him by any client for negligence. He said that he had a good working relationship with the Taxation Department. Mr. Chapman claimed that if his registration was not renewed it would change the nature of the partnership from what it had been in the past. He and Mr. Cobiac had their separate clients. The demands of Mr. Cobiac's auditing practice meant that between July and October of each year he was absent from the office for substantial periods conducting audits on behalf of some of his clients. This was an extremely busy time of the year for the tax agency side of the practice. Half of the returns required to be lodged by the practice needed to be lodged within that time. If he ceased to be a registered tax agent and was no longer a nominee of the partnership, his work would be required to be done under the

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supervision of his partner (see sec. 251N(2)) and he could not personally sign the tax agent certification required to be completed on the tax return on behalf of the partnership. Mr. Cobiac's evidence was as to the same effect.

32. Evidence was also given on behalf of the applicant by three of his clients, Mr. J.M. McArthur, Mr. G.W. Jenkins and Mr. P.S. Duffield. Each of these clients gave evidence that they had the highest regard for Mr. Chapman both in terms of his professional competence and his personal integrity. They each said that they had been surprised when they had learned of the events which had caused the Board to cancel Mr. Chapman's registration as a tax agent and expressed the view that notwithstanding those events, their opinions of Mr. Chapman both as a person and as a professional accountant and tax adviser remained unaltered. It is not without significance that each of these clients was also a personal friend of Mr. Chapman and their evidence must be viewed in that light. Nevertheless, they all impressed me as businessmen who would be demanding in their expectations of an accountant and tax adviser. Mr. Duffield, I thought, probably gave a fairly accurate assessment of Mr. Chapman's character when he described him as ``basically a good person''.

33. Having given the applicant an opportunity to show cause in writing and then to appear in person before the Board to give oral evidence on his own behalf, the Board nevertheless concluded that the applicant's registration as a tax agent should be cancelled. In deference to the carefully considered reasons for decision given by the Board, I think it is appropriate to refer to the concluding paragraphs of those reasons in full (see Exhibit T2 at p. 7):

``45. The Board considered that the applicant's series of convictions for failure to comply with final notices requiring lodgment of personal income tax returns and income tax returns of companies of which he was a director and for failure to comply with Court Orders requiring lodgment of income tax returns of companies of which he was a director were of such a nature and magnitude that they could reasonably be expected to have a deleterious effect on the applicant's relationship with the Taxation Office which could in turn be reasonably expected to be reflected in the Taxation Office's handling of his clients' affairs. This was considered to relate also to the applicant's generally poor personal lodgment history.

46. The Board considered that the convictions and poor personal lodgment history referred to in paragraph 45 above reflected on the applicant's competence to control his own taxation affairs which could in turn be reasonably expected to be reflected in the degree of competence displayed in handling his clients' affairs.

47. The Board considered that the false annual renewal notices completed by the applicant and the false renewal notices completed on behalf of the partnership of Cobiac and Chapman indicated that the applicant was not a person of sufficient integrity to hold the privilege of acting on behalf of clients in the preparation and lodgment of their income tax returns. Whilst the Board recognised that the applicant did not personally sign the partnership renewal notices, it considered that he had been obliged to ensure that details of his convictions were disclosed on the notices.

48. The Board resolved that, notwithstanding the submissions and explanations presented by the applicant, the combination of the matters outlined in paragraphs 45-47 was sufficient to suggest that the applicant was not a fit and proper person to remain registered as a tax agent and accordingly it resolved to cancel his registration as a tax agent pursuant to sec. 251J(2)(b)(iii) of the Act and to remove him as a nominee of Cobiac and Chapman pursuant to sec. 251J(11)(d) of the Act.''

34. It will be seen that in essence there were three elements to the Board's decision:

  • (i) the anticipated deleterious effect of the applicant's conduct on his relationship with the Tax Office and the alleged consequential detrimental impact upon his clients' dealings with that Office;
  • (ii) the extent to which the applicant's lack of competence in controlling his own affairs reflected a lack of competence to handle the affairs of his clients; and
  • (iii) the lack of integrity evidenced by his false answers to the questions asked in his annual registration renewal notices.

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35. There is no doubt in my mind that each of these considerations was relevant to the exercise by the Board of its discretion as to whether or not to cancel the applicant's registration. In Re Su and Tax Agents' Board (South Australia) 82 ATC 4284, noted at (1982) 4 ALN N279, the President (Davies J.) said:

``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 his 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.''

His Honour added that:

``A tax agent who allows his own affairs to get into a state of disorder, who has constant problems himself with the Taxation Department, may not be a proper person to handle clients' affairs when there may come a time when dissatisfaction which officers of the Department may have with the tax agent personally may have with the tax agent personally may be reflected in the handling of his clients' affairs. Clients who seek extensions of time should not be embarrassed by the fact that the tax agent acting for them is himself continually late in complying with the time limits imposed by the Act and the regulations.''

(Emphasis added.)

As the President later went on to say, however, ``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''. In other words, each case must depend upon its own facts.

36. In the present case, notwithstanding that one might have expected such a protracted history of default, particularly in respect of the company returns, to have prejudiced the applicant's relationship with the Taxation Department, there is no evidence before me to suggest that such is the case. On the contrary, the only evidence before me is that that relationship has remained ``fairly good''. Notwithstanding the opportunity afforded to the Deputy Commissioner of Taxation in 1981 (see Exhibit T5) and again in 1982 (see Exhibit T8) to furnish comments about Mr. Chapman, no adverse comments were submitted to the Board, nor was any officer of the Taxation Department called to give evidence before me as to any breakdown in relationships between the Department and Mr. Chapman.

37. The history of the defaults in respect of the lodgment of the various company returns and the applicant's personal returns undoubtedly makes sorry reading. I accept that the position was complicated by the liquidation of the wholesale company and the delivery by Mr. Chapman of the books of account in respect of the associated companies to Mr. Garrard. Mr. Chapman has not persuaded me, however, that he acted with due diligence in seeking the return of these books of account. It must have been apparent to him that the liquidation was not progressing satisfactorily and that, in his own interests, he should seek out Mr. Garrard to demand the return of the books of account. By neglecting to take the action that was needed, he failed on more than one occasion and in respect of a series of financial years, to discharge his lawful obligations with respect to lodgment of the necessary company and personal returns.

38. It is important to note, however, that he has been duly fined in respect of these defaults and it is no function of the Board or of this Tribunal to seek to punish Mr. Chapman again in respect of those offences. The considerations relevant for the Board and of this Tribunal are of a different character and I will return to them shortly. I respectfully agree with the views expressed by the President in both
Su and Re Denton and Tax Agents' Board (South Australia) 83 ATC 4009: (1983) 5 ALN N21, that a series of convictions such as Mr. Chapman incurred would not of itself be sufficient to justify cancellation of his registration.

39. Notwithstanding the implications with respect to possible neglect of clients' affairs that might be drawn from the applicant's failure to look after his own affairs satisfactorily, there is no evidence before me of any such neglect by Mr. Chapman. Again, the evidence before me is quite to the contrary (see Exhibit T9, Appendix D). There is no evidence before me on which I

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could properly find that the applicant is otherwise than competent in the handling of the affairs of his clients. I am prepared to accept that, following with the collapse of the meat group and the livelihood that he had derived from those companies, Mr. Chapman devoted himself assiduously to the affairs of his clients in order to ensure that he established a satisfactory practice as a public accountant to enable him to provide an income for himself and his family. It is, I think, to his credit that he has battled through his various financial and personal problems as he has, albeit somewhat tardily.

40. That brings me finally to the applicant's failure to disclose his convictions in his annual renewal notices, particularly the notice lodged on or about 22 March 1978. I should say at the outset that Mr. Chapman did not impress me as a man who would be deliberately dishonest. I accept the favourable opinion of the witnesses who gave character evidence and, in particular, the assessment of Mr. Duffield. Mr. Chapman's apparently good record with the Taxation Department in the proper presentation of his client's financial affairs tends to bear witness to the fact that he is not given to dishonest conduct. On the other hand, I find his explanation for answering the questions as he did less than satisfactory. Whilst his conduct was misguided, I think it is better characterised as foolish rather than deliberately dishonest.

41. I am aware that in both Su and Denton the President regarded very seriously similar failures by each of those agents. In Su, the President said that ``a person who does not complete such a form accurately is not a person of sufficient competence and integrity to hold the privilege of acting for clients in the preparation and lodgment of their income tax returns''. But that statement must be seen in the context of the very different circumstances of the Su decision and should not be read as laying down an absolute proposition of law. Undoubtedly, the making of such false statements may reflect upon the competence and integrity of the tax agent, but those false statements are to be weighed in the balance with all the other circumstances of the case when making a final assessment as to whether or not the tax agent is a fit and proper person to remain registered as such.

42. When considering the exercise of the discretion with respect to cancellation, it is necessary, in my view, to bear closely in mind the purpose for which that power is conferred. It is true that the power of cancellation, once exercised, will necessarily occasion some punishment to the individual affected. But punishment is not the primary object of the exercise of that power [cf.
Re Upton and Secretary, Department of Transport (1978) 1 ALD 150]. The predominant purpose for the exercise of the power of cancellation is to protect the public by ensuring that only those practitioners who are fit and proper persons to be allowed to conduct the taxation affairs of clients are permitted to remain in practice [cf.
Glynn v. Denman and Monk (1978) V.R. 349;
Hoban v. Davey (1972) 1 N.S.W.L.R. 59;
New South Wales Bar Association v. Evatt (1968) 117 C.L.R. 177 at p. 183; and
Re Guild and Re Legal Practitioners Ordinance (1978) 32 A.C.T.R. 13 at pp. 35-36]. Because of the need to protect the public, considerations of personal hardship cannot have overriding effect if maintenance of proper standards of conduct in the profession require that the registration be cancelled (cf.
Re Su and Evatt at p. 183 and Re Taylor and Department of Transport (1978) 1 ALD 312 at pp. 319 et seq).

43. Bearing these considerations in mind, the question is whether Mr. Chapman's conduct has rendered him no longer a fit and proper person to remain registered as a tax agent. In approaching that question it is, I think, necessary to bear in mind the observations of the President in Denton 83 ATC 4009 when he said at p. 4013:

``Normally, professional disciplinary bodies have available to them a range of sanctions ranging from and including the payment of costs, a warning or reprimand, suspension and, finally, cancellation or striking off. The last is a step which is taken by professional bodies in only the gravest of cases. This is because the person affected will usually have trained at a particular profession. Cancellation of his registration will affect his livelihood. The registration of a tax agent may be more than an attribute which is ancillary to an occupation. It may be, as it appears to be in Mr. Denton's case, an essential part of the qualifications pursuant to which the agent earns his living. Registration should not be taken away without very good reason.

ATC 4363

The only sanction which the Tax Agents' Board may impose is a sanction by way of cancellation of registration. For this reason, cancellation of a tax agent's registration may be effected for less cause than would be the case if the alternatives of fine or suspension were available. Nevertheless, there should be strong reasons for cancelling a registration.''

44. In the present case, the applicant is a man of 56 years of age who has been engaged in the practice of the profession of a tax agent for close on twenty years. Despite his personal difficulties he has established and developed a practice, latterly in partnership, which has grown from fairly modest beginnings to the point where, after many years of hard work, he appears poised to reap greater benefits from his efforts. The evidence tends to support his claim that he has favoured the interests of his clients over his own personal interests. By failing to insist at a much earlier stage upon the release to him of the books of account of the companies for which he had a continuing responsibility (The Block Butchers Pty. limited and Da Costa Meat Service Pty. Limited) and the books of account that affected the affairs of Sam Pty. Limited, the applicant has incurred very substantial monetary fines. He has evidently suffered substantial financial losses as a result of his involvement in these companies. His conduct of his own personal affairs has suffered as a consequence. However, in my view, for the reasons I earlier gave (see paragraph 39) it is open to me to find that these personal defaults do not reflect seriously upon the competence of the applicant as a tax agent and that they should be seen as a chapter in his life which is now closed and which is not likely to recur.

45. The false answers in the annual renewal notices lodged with the Board stand in a different light and it is this aspect of the case which has troubled me most. However, in the circumstances of this case, I have concluded that Mr. Chapman's default in this regard, whilst foolish, does not justify a finding that he is no longer a fit and proper person to remain registered as a tax agent. There are, in my view, a number of factors relevant to this conclusion:

  • (i) The convictions that were not disclosed were, as I have said, convictions which do not in themselves justify the conclusion that Mr. Chapman is unfit to practise as a tax agent. There was no loss to Commonwealth revenue as a result of his defaults. Indeed, he was the only person to suffer financially.
  • (ii) It is appropriate, I think, to see his false answers as part of that episode of his life which is now behind him.
  • (iii) Whilst the Board was fully entitled to be concerned over the false answers in the annual renewal notices, I am not satisfied that Mr. Chapman set out deliberately to mislead the Board, not that he is a dishonest person.
  • (iv) The Board itself does not appear to have reacted in the way that one would have expected if Mr. Chapman's failure to disclose his convictions was as serious as the Board now contends it to be.
  • (v) The decision of the Board in respect of the partnership registration and in relation to Mr. Cobiac's default in not disclosing Mr. Chapman's convictions appears to me to be inconsistent with the treatment meted out to Mr. Chapman personally. Mr. Cobiac's false answers were not seen as reflecting upon his fitness to continue as a tax agent. On the contrary, there were no criticisms by the Board of the performance of either partner in the discharge of their responsibilities as tax agents (see paragraph 5).
  • (vi) Most importantly, there is no evidence of any neglect of the affairs of clients or improper dealings with the affairs of clients so far as the Commissioner of Taxation is concerned.
  • (vii) The cancellation of his registration would cause considerable disruption to the partnership business. It would impose hardship upon Mr. Cobiac and may well impose unnecessary inconvenience on Mr. Chapman's clients. On the evidence of the three clients who spoke on Mr. Chapman's behalf, those services are highly valued.

46. In my view, the probabilities are that Mr. Chapman has learned his lesson and that it is unlikely that he will at any time in the future come under the adverse attention of the Board. This matter will have served as a salutary warning to him that any future departures from the standards expected of a registered tax agent will be likely to carry the most serious consequences.

47. Notwithstanding that there are respects in which Mr. Chapman's conduct has fallen short

ATC 4364

of proper standards, I am not persuaded, from a consideration of all the facts and materials in evidence before me, that Mr. Chapman has ceased to be a fit and proper person to remain registered as a tax agent. I do not consider that the public interest requires that he should be denied the right to hold himself out as a fit and proper person to perform those services. I would propose, therefore, to set aside the decision under review. In view of my findings as to Mr. Chapman's fitness to remain registered as a tax agent, the Board may well consider it appropriate to review its decision withdrawing, in effect, Mr. Chapman's approval as a nominee of the partnership.

48. In conclusion, I would recommend that two aspects of Pt. VIIA of the Income Tax Assessment Act 1936 warrant reconsideration:

  • (i) In my view, the powers available to the Board to deal appropriately with tax agents whose conduct falls short of proper standards could well include at least a power of suspension as an alternative to cancellation and, perhaps, a formal power to administer a reprimand or award costs against an agent. Suspension of a licence for a short period may well be an appropriate disciplinary measure in respect of conduct which the Board considers deserving of censure, but which falls short of conduct meriting cancellation (cf. the observations of the President in Re Denton 83 ATC 4009; (1983) 5 ALN N21; cf. also Pt. XI of the Customs Act 1901).
  • (ii) The limited rights of review pursuant to sec. 251K(5) appear to warrant reconsideration. Apart from the curious anomaly shown up in the present case with respect to decisions taken under sec. 251J(11)(d), there is a question whether decisions refusing to grant registration as a tax agent (see sec. 251J(3)) should be reviewable on the merits (cf. the recommendation to that effect by the Administrative Review Council in its 1978 Annual Report, paragraphs 54-56).


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