TAX AGENTS' BOARD OF QUEENSLAND v HADDAD

Judges:
Davies J
Spender J
Cooper J

Court:
Full Federal Court

Judgment date: Judgment delivered 9 February 1994

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Davies, Spender and Cooper JJ

This is an appeal from a decision of the Administrative Appeals Tribunal (``the Tribunal'') constituted by the Honourable Justice R.J. Bulley, Senior Member K.L. Beddoe and Senior Member D.W. Muller. The Tribunal reviewed a decision of the Tax Agents' Board of Queensland (``the Board'') by which the Board refused to re- register Mr Charles Haddad as a tax agent with effect from 1 April 1992. The Tribunal set aside that decision and directed the Board to re- register Mr Haddad as from that date.

Relevant provisions of the Income Tax Assessment Act 1936 (Cth), as amended by the Taxation Laws Amendment Act (No. 2) 1988 (Cth) (``the Amendment Act'') read:-

``251JA(1) The Board shall register the applicant as a tax agent if the applicant satisfies the Board that:

• (a) if the applicant is a natural person:
  • (i) the applicant is a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters; and
  • (ii) the applicant is not an undischarged bankrupt;
• ...

251JC(1) The Board shall re-register the applicant as a tax agent if the applicant satisfies the Board that:

• (a) if the applicant is a natural person:
  • (i) the applicant is a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters; an
• ...
• (d) in all cases - the applicant has not permanently ceased to carry on business as a tax agent.

251BC(1) 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:

• (a) the person is not a natural person;
• (b) both of the following conditions are satisfied:
  • (i) the person was not registered as a tax agent, or as a nominee, for the purposes of this Part immediately before the commencement of section 39 of the Taxation Laws Amendment Act (No. 2) 1988;
  • (ii) the person does not hold such qualifications (whether academic, by way of experience or otherwise) as are prescribed;
• (c) the person has not attained the age of 18 years;
• (d) the person is not of good fame, integrity and character;
• (e) the person has been convicted of a serious taxation offence during the previous 5 years; or
• (f) the person is under sentence of imprisonment for a serious taxation offence.

251BC(2) Nothing in paragraph (1)(e) or (f) limits the generality of paragraph (1)(d).

251BC(3) Where:

• (a) a Board is required, in considering an application for:
  • (i) re-registration as a tax agent; or
  • (ii) re-registration of a nominee of a tax agent;
• to decide whether the Board is satisfied that a particular person is a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters;
• (b) the person is not under sentence of imprisonment for a serious taxation offence; and

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• (c) the Board is satisfied that, because of special circumstances:
  • (i) a conviction of the person;
  • (ii) the doing of an act or thing by the person; or
  • (iii) an omission of the person;
• should be disregarded;

the Board may, in making the decision referred to in paragraph (a), disregard the conviction, the doing of the act or thing or the omission, as the case requires.''

Prescribed qualifications for the purposes of s. 251BC(1)(b)(ii) are set out in Regulation 156 of the Income Tax Regulations. Regulation 156 prescribes academic qualifications and also qualifications relating to involvement in practice. Regulation 156(1)(a)(ii) refers to engagement in relevant employment on a full- time basis for not less than a total of 12 months in the preceding 5 years, or employment equivalent to that. Regulation 156(2) defines ``relevant employment'' as involving employment ``in the course of which there has been substantial involvement in income tax matters''.

The reason for the Board's decision was stated by the Chairman of the Board as follows:-

``The reason for the Board's decision was that Mr Haddad does not meet the prescribed employment requirements of Regulation 156(1)(a)(ii) for registration as a tax agent and therefore he failed to satisfy the Board that he is a fit and proper person to prepare returns and transact business on behalf of taxpayers in income tax matters pursuant to subparagraph 251JC(1)(a)(i) of the Act.''

However, s. 251BC(1)(b) specifically distinguishes between a person who was registered as a tax agent before the commencement of s. 39 of the Amendment Act and a person who obtained registration thereafter. Mr Haddad fell into the first category for he was first registered as a tax agent in October 1987. Parliament has expressed its intention that the qualifications as prescribed shall not apply to him.

The case as put for the Board before the Tribunal and in this appeal was that Mr Haddad was not a fit and proper person to prepare income tax returns as the amount of taxation work which he performed did not meet the criteria prescribed in reg. 156 relating to substantial involvement in taxation matters. It was said that Mr Haddad had not had employment or the equivalent of employment on a full-time basis for not less than a total of 12 months in the preceding 5 years. But the point which was disregarded by the Board was that reg. 156 was prescribed for the purposes of s. 251BC(1)(b). The regulation did not apply in Mr Haddad's case.

A submission was put to the Court on behalf of the Board that, as the Board had to determine in each case whether the applicant for registration under s. 251JA or for re-registration under s. 251JC was a fit and proper person to prepare income tax returns and to transact business on behalf of taxpayers in income tax matters, the Board was entitled to adopt a standard of fitness. It was contended that the Board had in its discretion adopted the standard which was prescribed by reg. 156. But this approach is contrary to the legislative intention appearing in the terms of the Act. That legislative intention as expressed is that the matters prescribed for the purposes of s. 251BC(1)(b) shall not apply to a person who was registered as a tax agent immediately prior to the commencement of the Amendment Act.

Moreover, the Act and the regulations now lay down a code. It is inconsistent with that code for the Board itself to adopt standards which are binding though not stated in the Act or the regulations. When s. 251JC(1) requires that the applicant be a fit and proper person to prepare income tax returns and to transact taxation business, it anticipates that a decision will be made having regard to the individual circumstances affecting the applicant and the applicant's practice and not by reference to a standard which the Board itself has chosen to lay down. The Act must be applied according to the words used. They are words which refer to relevant matters concerning the applicant and his or her practice. It is the individual circumstances which count.

Counsel for the Board submitted that, as the Act does not provide for automatic re- registration, the Board must be satisfied that the applicant is a fit and proper person for re- registration. That is so. But if the only point raised as against an applicant for re-registration is that the applicant does not meet prescribed qualifications which do not apply to him, then it

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is inevitable that there will be a finding of fitness and propriety to practise. That is because the mere fact that the applicant is a registered tax agent provides an inference that he or she is a fit and proper person to be a tax agent. As Wigmore's Principles of Judicial Proof states at p. 34:-

``When the existence of an object, condition, quality, or tendency at a given time is in issue, the prior existence of it is in human experience some indication of its probable persistence or continuance at a later period.''

See also Phipson on Evidence, 13th Ed., para 9-16; Archibold on Pleading and Practice, 42nd Ed., para 9-2; Cross on Evidence, 4th Ed., para 1125;
Brown v. Wren (1895) 1 QB 390 at 391;
Axon v. Axon (1937) 59 C.L.R. 395 at 404-406;
Young v. Queensland Trustees Ltd (1956) 99 C.L.R. 560 at 570;
The Commonwealth of Australia v. Mifsud (1965) 114 C.L.R. 505 at 513; cf
Bayford Wholesale Pty Ltd v. FC of T (1984) 2 F.C.R. 427 at 437-438.

When Mr Haddad first applied for registration in 1987, it was a requirement of the Act that the Tax Agents' Board be satisfied that the applicant ``is a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters''. See s. 251J of the Act as it read in 1987. The Board having been satisfied of this at the time and having registered Mr Haddad, there arose an inference or presumption of fact that he continues to be a fit and proper person to be registered, absent information to the contrary. In Mr Haddad's case, there was no material before the Board or the Tribunal to show that he was not a fit and proper person.

The form of the present legislation recognises that such an inference or presumption of fact will operate. The legislation establishes new qualifications for applicants applying for registration after the commencement of the Amendment Act in 1988, but it provides that lack of those qualifications does not disqualify a person who was already registered immediately prior to that date. Accordingly, the Act recognises that the lack of those qualifications will not disqualify a person who was registered when the Amendment Act came into operation. There must be something else to lead to a decision not to re-register a person who had been accepted as a fit and proper person to be a tax agent and was so registered when the Amendment Act commenced.

It follows that the decision of the Tribunal was correct in law. Mr Haddad was not disqualified under s. 251BC and reg. 156. He was a registered tax agent, no allegation was made against his character or integrity and no matter was put before the Tribunal to suggest that he was negligent or incompetent or had failed in any way to attend to the affairs of his clients. There was no complaint made about his work. In these circumstances, the Tribunal understandably found that Mr Haddad was a fit and proper person to prepare income tax returns and to transact taxation business.

The Tribunal referred to the condition specified in s. 251JC(1)(d) that ``the applicant has not permanently ceased to carry on business as a tax agent''. The Tribunal concluded that it accorded with the legislative scheme that a tax agent such as Mr Haddad, who had been registered before the date of the Amendment Act, who had not ceased to carry on business and against whom no complaint was made other than lack of compliance with reg. 156, should be re-registered.

There are one or two comments of the Tribunal which, taken out of context, may be too wide. For example, the Tribunal said:-

``It cannot be the case that notwithstanding paragraph (d) it is open to the Board to decide not to re-register because the turnover of the business does not meet a standard adopted by the Board but not found in the legislation. Neither the volume nor the diversity of a tax agent's business are relevant factors in deciding whether to re- register the applicant as a tax agent. Sub- section 251JC(1) says that the Board shall re-register the applicant if the relevant criteria are satisfied. The provision is not discretionary - either the applicant satisfies the criteria as a matter of fact or he does not. There is no basis in the legislation for the Board to impose additional criteria.''

Read out of context, the second sentence of this paragraph may be too wide. Both the volume and the diversity of a tax agent's business may be relevant factors in the consideration of his fitness to transact taxation matters on behalf of clients. But the context in which this sentence appears is within the first and last sentences of the paragraph. The Tribunal was correct in its view that the Board was not entitled to lay

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down standards or criteria. The standards are laid down by the Act and the regulations.

The Tribunal's decision should be read with the decision in
Re Downes and Tax Agents' Board of Queensland 93 ATC 2168, which was delivered on 30 September 1993, just 7 days after Haddad's case, by a Tribunal in which the Honourable Justice R.J. Bulley presided. It was submitted in this appeal that the decisions in Re Downes and in Mr Haddad's case were inconsistent. But to take that view is to fail to understand that, in Mr Haddad's case, the only point of significance which was put against him was that he did not satisfy reg. 156 and that an inference as to his propriety to conduct taxation business arose from the fact of his registration.

The Tribunal in Re Downes pointed out that a decision as to whether an applicant was a fit and proper person to prepare income tax returns and transact taxation business involved the formation of a value judgment in which the circumstances of the applicant, his knowledge and experience and the width of his involvement in taxation affairs all played a part. At 2173, the Administrative Appeals Tribunal cited the remarks of Dixon C.J., McTiernan and Webb JJ. in
Hughes and Vale Pty Ltd & Anor v. The State of New South Wales & Ors (No. 2) (1955) 93 C.L.R. 127 at 156:-

``The expression `fit and proper person' is of course familiar enough as traditional words when used with reference to offices and perhaps vocations. But their very purpose is to give the widest scope for judgment and indeed for rejection. `Fit' (or `idoneus') with respect to an office is said to involve three things, honesty knowledge and ability: `honesty to execute it truly, without malice affection or partiality; knowledge to know what he ought duly to do; and ability as well in estate as in body, that he may intend and execute his office, when need is, diligently, and not for impotency or poverty neglect it...'''

It follows that, when the Board considers the question of fitness, it considers an issue of wide scope. It is not in dispute that the Administrative Appeals Tribunal was correct in applying these remarks. But whereas in Re Downes the applicant applied for registration under s. 251JA, Mr Haddad applied for re- registration under s. 251JC.

Read in this light, the two decisions are entirely consistent, as one would expect them to be. On its finding of fact that Mr Haddad was a fit and proper person to prepare income tax returns and to transact business on behalf of taxpayers in income tax matters, the Tribunal was correct in setting aside the decision of the Board and in directing that Mr Haddad be re- registered as from 1 April 1992.

For these reasons, the appeal should be dismissed with costs.