McKAY v TAX AGENTS BOARD OF TASMANIA

Members:
P Gerber DP

Tribunal:
Administrative Appeals Tribunal

Decision date: 22 April 1994

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Dr P Gerber (Deputy President)

The applicant - William Slade McKay - aged fifty-five years, qualified as a chartered accountant in 1962, became a chartered secretary in December 1962 and a cost accountant in 1963. He is a Fellow of the Australian Society of Accountants and of the Australian Society of CPAs. He obtained high grades in his exams, coming top in Commercial Law and fifth in Accounting. He was the only Tasmanian candidate (out of 20) who completed his finals in one sitting and was awarded the state prize for auditing, a prize which, as will appear shortly, was destined to come back and haunt him. He entered practice as a chartered accountant on his own account in May 1966.

2. Having established his own practice in 1966, he merged it with a well-established Tasmanian firm of accountants in 1969, becoming the firm's senior tax partner. When he first joined that practice, the firm was lodging some 1600 taxation returns; when Mr McKay left the firm some three years later, the practice prepared some 4½ thousand tax returns each year. Mr McKay lodged returns for large companies, such as Australian Newsprint Mills. He was also Secretary of Tasmanian Pulp and Forest Holdings.

3. The exact nature of what Mr McKay did in the accounting field after 1972 was not explored in evidence. Relevant to the proceedings before me - the decision of the Tax Agents Board Tasmania of 26 June 1992 to refuse his application for re-registration - arose from events which I need to explore in some detail.

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4. Mr McKay was charged with ten offences, viz:

• 1 That between 20 February 1988 and 28 February 1989 he failed to take all reasonable steps to keep such accounting records as correctly recorded and explained the transactions of the company [Equity Builders Tasmania Pty Ltd, of which Mr McKay was a director from the time of its incorporation in 1984 and at all relevant times subsequently], and its financial position, as required by sec 267(1)(d) of the Companies (Tasmania) Code.
• 2 That he failed to take all reasonable steps to ensure that the company's cash payments journal was written up after 24 August 1988, contrary to secs 267(1)(b)(i) and 555 of the Code.
• 3 That he failed to take all reasonable steps to ensure that the company kept accounting records in such a manner as to enable them to be conveniently and properly audited, as required by sec 276(1)(b) of the Code. (Judgment p. 1, ``T1'', p 7)
• 4 & 5 Contrary to ss 269 and 276 of the Code, he failed to (take all reasonable steps to comply with, or) to secure compliance with the obligation to prepare a profit and loss account and balance sheet within 14 days of the company's annual general meeting on 22 December 1988.
• 6 Contrary to ss 269(9) and 276 of the Code he failed to cause to be laid before that annual general meeting a statement of the directors' opinion as to the truth and fairness of annual accounts.
• 7 Contrary to ss 270(1) and 276 of the Code he failed to secure compliance with the obligation created by sec 270 to prepare a directors' report not less than 14 days before the annual general meeting as to the matters referred to in that section.
• 8 Contrary to sec 275(a) of the Code he failed to cause to be laid before the annual general meeting a copy of accounts made out in accordance with sec 269.
• 9 Contrary to sec 275(c) of the Code he failed to cause to be laid before the annual general meeting a copy of the directors' report made in accordance with sec 270(1).
• 10 Contrary to sec 275(f) of the Code he failed to cause to be laid before the annual general meeting a copy of the statement by directors required by sec 269(9). (Judgment p. 10, ``T1'', p 16)

5. The facts are sufficiently set out in the judgment of the learned magistrate, and I will only refer to those aspects of the evidence given at Mr McKay's trial which impinge upon the issue I have to decide. Little evidence relating to the events which led to the convictions was adduced before me.

6. The trial involved in all some fifteen days, concluding on 19 July 1991. On 18 December 1991, the learned magistrate (Mr PJA Wright) handed down a lengthy and carefully researched judgment (52 pages), in which he concluded that all counts had been proven.

7. The case was then adjourned for some weeks to enable both counsel to address on sentencing. His Worship, after considering submissions, concluded on 4 February 1992:

``I am sorry that I am not able to know the attitude of your profession to what I've found and said, but it's my view that, notwithstanding this, in all your circumstances, which include your background, character and antecedents and the amount of money that you have contributed, you ought not to be thought properly prevented from continuing your profession as a tax accountant, in my opinion, because it was the confined nature of that profession which left you less than fully equipped to keep the records which I have found were lacking, and when I come to the precise sentence, which I will do in a moment, I will address that aspect of the matter specifically.

So that it can be seen as a real and, to you, very substantial and therefore a deterrent penalty, I propose on count 1 to proceed to conviction and I will fine you the sum of three thousand dollars, conscious as I do so that in the circumstances of all the money you have lost and spent in connection with this case, that that's a very heavy penalty indeed. On counts 2 and 3, I require you to pay a fine of five hundred dollars on each. On counts 4 to 10 inclusive, I propose to find the counts proved in those matters but I will not proceed to conviction; instead I will proceed under Section 19B of the Crimes Act and discharge you on condition that you not act as the director of any proprietary exempt company unless you have taken such

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course of instruction or examinations as may be required during the period of the next two years by the Institute of Chartered Accountants, and I use that device in order to achieve something which is worthwhile on its merits and to indicate to that Institute my view that you should be permitted to act as a director with that further equipment.''

(Sentence p. 6, ``T1'', p 64)

8. Looking at the judgment, the learned magistrate noted:

``As a matter of evidence it was common ground upon which the prosecution expert witnesses stood that what was required to adequately record the affairs and financial state of a company would depend upon the size and nature of its business, and the dispute between them and the defendant was whether the nature and extent of the business of Equity Builders Tasmania Pty Ltd between 20 February 1988 and 28 February 1989 was such as to require it to keep accounting records comprised in

• (i) a cash receipts journal,
• (ii) a sales journal or debtors' ledger,
• (iii) a creditors' ledger,
• (iv) a general ledger,
• (v) a general journal,
• (vi) stock records,
• (vii) at least monthly bank reconciliation, and
• (viii) a costing system

in order to correctly record and explain the transactions of the company and the financial position of the company or whether that might be done in `statements of position' which the defendant prepared from time to time, `informal' bank reconciliations which he kept `informally' monthly, and formally once per annum, job files, creditors' lists and working papers.''

(Judgment pp 4-5, ``T1'', pp 10-11)

9. The learned magistrate found as a fact that the company was intended to be a vehicle for a co-operative venture between one Ian Walters and a Commonwealth-funded scheme, to provide employment for Vietnamese refugees in building a gymnasium at a disused convent. From humble beginnings, the company began to diversify into a number of other projects involving commercial building activities and residential construction. Thus the learned magistrate noted:

``A number of other companies were set up. E.B.T. Nominees Pty. Ltd. was a company incorporated on 4 October 1984 to pay the wages of the employees working in the Slades division of the company. The defendant was a director of this company. On 12 January 1988 E.Q. Building Services Pty. Ltd. was incorporated to pay the wages of employees working in the commercial building division of the company.

The company executed a mortgage debenture in favour of the Australia and New Zealand Banking Group Limited on 20 May 1985 to secure the company's financial arrangements with that institution.

...

On 28 February 1989 the Australia and New Zealand Banking Group Limited, by a written instrument and in exercising its powers conferred upon it by the mortgage debenture, appointed Timothy Oliver Bayley, a partner in the accounting firm of Price Waterhouse, to be Receiver and Manager of all the mortgaged property of Equity Builders Tasmania Pty. Ltd.''

(Judgment pp. 13-14, ``T1'', pp 19-20)

10. It was established at Mr McKay's trial that at its receivership, the company had secured creditors in the sum of $1,075,919.00, the amount owed to the A.N.Z. Banking Group was $1,586,584.00, and unsecured creditors proved in the sum of $508,394.00. At the time of sentencing, the shortfall ``approached currently two million dollars''. (Sentence, p 3, ``T1'', p 61)

11. The evidence during the trial established that after the company was incorporated, Mr McKay and his colleagues used basically what was described as ``the columnar system'' of accounting, of which much was made by the prosecution. In order to inform me what was involved in this type of accounting, Mr Arendt, of learned counsel for the respondent (who also prosecuted for the Crown in the criminal proceedings) asked Mr McKay in cross- examination to explain it for my benefit. It seems that:

``It effectively was a work sheet that worked from a balance sheet - the prior year balance sheet - and adjusted by cashbook

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entries in a column and various journal entries in a column to end up with a trial balance which then went into the next year's balance sheet and profit and loss statement....

MR ARENDT: So, essentially, you would use a cashbook which would be written up and be relying on financial resource documents to come up with figures that would go into your columns? - Well, you would - yes, to summarise the situation, yes.''

(tr. pp 23-24)

12. Reading the judgment of the learned magistrate, it becomes obvious that the complexity of the corporate structure which was erected around the company would require a well organised accounting system in order to retain any kind of accurate overview of the financial position of the company and its offshoots at any given time. Thus, the learned magistrate found that tradesmen working for the company were paid by E.Q. Building Services, the three project managers were paid by the company, the office staff were employees of McKay's accounting practice and were paid by the company on a pro rata basis for services rendered. Enter Mr and Mrs Walters. Citing from the judgment:

``Mr Ian Walters was the initial proprietor of the company - he followed his father into the building trade as a successful builder - he will be mentioned again.

Mrs Lyn Walters was once the wife of Mr Ian Walters and had looked after the books in his building business. Mr Walters said that the accounting records of that business, which employed an average of six people, were very similar to the accounting records of [the company]: income invoices were allocated to a particular job: a cash book recorded all cheques drawn by the business: job costing was recorded in an outward invoice book and debtors were revealed comparing those invoices with receipts. Mr Walters had discussed his use of that system with the accounting firm Price Waterhouse and he found its use `very straightforward, simple and foolproof'. At the incorporation of [the company], he had taken part in discussions in which it was agreed it would use a similar system.

The relevance of this, at this stage, is to demonstrate that when Mrs Walters joined the defendant in his accountancy practice in 1984, she was secretary, receptionist and bookkeeper for that practice and for the company, and Mr McKay in his evidence described himself as well satisfied with her competence, honesty and reliability. She attended to keep a record of cheques drawn in the cash book and she also looked after wage records and prescribed payments tax records.''

(Judgment pp 16-17, ``T1'', pp 22-23)

13. In July 1988, Mrs Walters left Mr McKay's accounting practice to work at 15 Princess Street, premises from which the company conducted an interior and furniture showroom (``Slades''). The premises had been ``spec'' built by the company, but it was unable to find a suitable tenant on completion. Mrs Walters was replaced by a Mrs Sylvester in the practice. At Mr McKay's trial, this lady was called as a witness and readily accepted that after 24 August 1988, she failed to keep the company's cash book written up, claiming that ``I ran out of time and it got further and further behind. I didn't tell Mr McKay. I think he knew because he told me off for not having it up to date''. (Judgment, p 17, ``T1'', p 23) Mrs Sylvester's bookkeeping was ``assisted'' by a Miss Strafkos, who was also a member of McKay's accounting practice. The learned magistrate found that Miss Strafkos:

``also made entries in that cash payments journal... her main duty was payment of the company's creditors, checking statements before payment. She was also concerned with the payment of wages and the maintenance of their records and she helped Mrs Sylvester with debtors and the compilation of lists of creditors each month. Mrs Walters explained to her in general terms what she had to do whilst at Equity Builders' commercial division at 42 Princes Street, where she remained until 21 July 1988 when she went to Slades, leaving apparently Mrs Sylvester without the help she had up until then provided her with. No doubt her departure was a contributor to Mrs Sylvester's falling behind in her work, or at least in keeping the cash book written up.''

(Judgment p 18, ``T1'', p 24)

14. In about May/June 1988, a young legal practitioner - Mr Kerin - ``much troubled by arthritis'' was appointed as a director of the company at Mr McKay's invitation. Whilst he

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played no role in the bookkeeping of the company, the learned magistrate found that he soon became aware that Mrs Walters was inefficient:

``that she was slow and secretive about bank statements, that the filing system was incomprehensible and generally that she was not capable to perform what was required of her. Within four or six weeks he had told Mr McKay of his opinion of her at some length, with the result that Mr McKay spent some hours with her talking matters over.''

(Judgment p. 19, ``T1'', p 25)

15. The judgment goes on to examine at length the activities of the other dramatis personae who played their part in bringing the company to its knees. Suffice it to say that his findings did nothing to add lustre to Mr McKay's performance as a director.

16. It would appear that both parties in the hearing before me expected me to have recourse to the judgment of the learned magistrate, since little attempt was made to establish any basis which would enable me - apart from the judgment - to form my own views as to any deficiencies in Mr McKay's accounting for the company, or the system of accounting he devised, a system on which a good deal of money appears to have been spent. This is somewhat surprising when it is borne in mind that Mr McKay's accountancy practice was retained by the company to look after its books on a professional basis. I am thus compelled to conclude that there was ample evidence before the court to justify the learned magistrate's finding that had the system of accounting adopted by the company worked, ``[it] would have avoided these proceedings'' (Judgment tr p 29, ``T1'', p 35). No attack on this finding was made before me. At the trial, a number of expert witnesses were called who appeared to have been unanimous in their evidence about the deficits in the company's accounting procedures, and what alternatives, if adopted, would have averted the company's receivership. In particular, the learned magistrate reached:

``the firm and ineluctable conclusion that between 20 February 1988 and 28 February 1989 Equity Builders Tasmania Pty. Ltd. did not keep such accounting records as correctly recorded and explained its transactions and financial position in that:

• (a) an adequate cash receipts journal was not maintained;
• (b) a debtors' ledger was not maintained;
• (c) a cash payments journal was not maintained;
• (d) a general journal was not maintained;
• (e) a general ledger was not maintained; and
• (f) bank reconciliations were not prepared correctly after 30 June 1988.''

(Judgment p. 49, ``T1'', p 55)

17. Sitting administratively, and therefore entitled to inform myself as best as I can, I adopt Magistrate Wright's conclusion to the effect that the company's records were gravely defective and, given Mr McKay's role as a director of the company as well as the person who assumed ultimate responsibility for the keeping of its records, his conviction on that finding was inevitable. His Worship went on to note that:

``The defendant did honestly believe that the company's accounting system did correctly record its transactions and disclose its financial position. I make that finding without hesitation. I make it from my own assessment of him over fifteen days trial at the bar table and in the witness box. Quite apart from my own appreciation of his character and demeanour, it is objectively obvious I suggest that he is a man of intelligence and business nous, who would not have put his money and reputation at risk unless he believed that he was acting safely and properly in accordance with the standards of his profession and of his faith - evidence of which was not proffered to me explicitly but was nonetheless discernible.

But was that belief reasonable? I am afraid that I cannot say so.''

(Judgment pp 50-51, ``T1'', pp 56-57)

18. I now turn to the decision under review.

19. On 18 March 1992 Mr McKay applied for re-registration as a tax agent to the Tax Agents Board Tasmania in the following terms (``T3'', pp 105-106):

``Dear Sir/Madam,

I apologise for the lateness of my application as I had been mistakenly of the

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view that re-registration could be made up until 31st March 1992. I would be obliged if you would kindly grant an extension to allow my re-registration.

You will note from my application for re- registration that in February I was convicted of infringements in relation to the Companies (Tasmania) Code in respect of the affairs of Equity Builders Tasmania Pty Ltd which due to the recession was placed in Receivership. Briefly the circumstances were that the records were not up to date. A computer which was to be utilised for this task was never functional and I was not satisfied that accounts prepared by a colleague were correct. Prime sources of accounting (invoices, cheque butts, bank statements) were acknowledged as adequately maintained, but cash books and formal records were maintained only on an annual basis which was deemed by the court to be inadequate.

I remain of the view that I acted honestly and with integrity in all the circumstances. I enclose a legal opinion from my solicitors which highlights the legal aspects of the conviction as applicable to my tax agent registration. I also enclose a reference from Fr C.B. Kilby who is aware of the Companies Act matters and reiterates his reference of 1983.

My family and I (dependent spouse and teenage daughter) are totally dependent upon my earnings as an accountant, and the major portion of this practice is derived from tax compliance for clients.

I respectfully request approval of my application for re-registration as a tax agent to allow me to continue the work I know, love and fulfil to the best of my ability, honestly and with integrity.

Yours faithfully,''

20. It is claimed on behalf of the respondent Board that it advised Mr McKay by letter on 13 August 1992 of its decision to refuse his application (``T5'', p 124):

``Dear Mr. McKay

At its recent meeting the Board considered your `Application For Re-Registration as a Tax Agent' and found that it could not accept this re-registration on the grounds that you were not considered to be a `fit and proper person' as required by Section 251JC of the Income Tax Assessment Act.

The Board considered that your conviction under the Companies Code implies that you are not of good fame, integrity and character; and your failure to have in place a proper accounting system for a substantial business in relation to which you were in control, implies that you are not a fit and proper person to be registered as a tax agent, because it is inappropriate for you to be entrusted with the collation and preparation of material for/and the preparation and timely lodgment of a wide range of tax returns.

You are advised that under the provisions of section 251QA of the Act you may, subject to the Administrative Appeals Tribunal Act 1975, if dissatisfied with the decision, make application to the Tribunal for a review of the decision.

Yours sincerely

M.R. LENNON

Secretary''

21. Mr McKay claims that he did not receive the above notification and, indeed, was unaware that his application for re-registration had been refused until he received a letter from the respondent Board dated 26 August 1993 (``T6'', p 125) in the following terms:

``Dear Mr McKay

In our letter to you dated 13 August 1992 we advised you that your application for Re- Registration as a Tax Agent was refused. As a result you are no longer registered as a Tax Agent of this Board. I would also like to bring to your attention Section 251L of the Income Tax Assessment Act which provides for a penalty of $2000 for any person, who is not exempted, who receives a fee for or in relation to the preparation of any income tax return or objection, or for or in relation to the transaction of any business on behalf of a taxpayer in income tax matters, unless he is a registered tax agent.

I therefore request that you return your official certificate of registration number TA 14682 to this Board, within 14 days of the service of this notice in accordance with Income Tax Regulation 163. Should this certificate have been lost or destroyed it

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would be appreciated if a Statutory Declaration to that effect could be forwarded. This declaration should include an undertaking to return the certificate should it come into your possession at a later date.

Yours sincerely

Andrew Street

Secretary''

22. I accept that Mr McKay did not receive any notification from the Board until August 1993. Indeed, I entertain the gravest doubt that the earlier letter was ever sent, notwithstanding the Board's continued re-affirmation that its decision of 26 June 1992 had been served on Mr McKay in compliance with Income Tax Regulation 165 (see for example ``T11'' - a subsequent letter from the Board to Mr McKay). Firstly, what purports to be a copy of the initial letter said to have been sent on 13 August 1992, is undated and, unlike all the other copy correspondence from the Board, is not on official letterhead. Secondly, if the Board believed that Mr McKay was neither of good fame, nor a fit and proper person to practise as a tax agent, it is surprising, to say the least, that the Board took nearly seven weeks to advise Mr McKay that his application for re- registration had been refused, and then taking another twelve months before asking him to return his certificate of registration. Furthermore, it seems that the draftsman of the respondent's sec 37 Statement must also have entertained some doubts about the earlier ``notification'' since he refers to ``the decision made on 26 June 1992 and notified to the applicant on 26 August 1993'' (``T2'', p 102).

23. Even if the letter of 13 August 1992 had been sent - which I seriously question - I reject the Board's conclusions that the convictions per se were sufficient to ``imply'' that Mr McKay was ``not of good fame, integrity and character'' and was not a ``fit and proper person'' to be a tax agent. I am reinforced in my view on this aspect when it is borne in mind that the Board has a discretion to disregard ``a conviction of a person'', if satisfied that there were ``special circumstances''; cf sub-s 251BC(3) of the Income Tax Assessment Act 1936 (``the Act''). In fairness to the Board, that argument was abandoned in its amended Statement of Facts and Contentions, albeit only lodged with the Tribunal on the day fixed for hearing.

24. Before dealing with the issue I have to decide, I should add that one of the grounds upon which the applicant chose to fight his battle before the Tribunal was that he had been denied natural justice in that he had not been afforded the opportunity to be heard - audi alteram partem. On that basis, he made an interim application before this Tribunal for an order staying the Board's decision, and on 14 October 1993, Senior Member Blow (as the learned Deputy President then was) ordered that the Board's decision was not to operate until the determination of the application for review or any further order.

25. When the matter came on before me on 17 January 1994, having read the relevant documents, I asked both counsel whether the Tax Agents Board, acting quasi-judicially, could validly exercise its power without first hearing the person who was going to suffer. The matter caused me some anxiety because I was uncertain that if there had indeed been a denial of natural justice, arguably rendering the decision null and void, I had jurisdiction to review a void decision. Thus, I asked counsel whether the applicant had a right to be heard, being mindful that as early as 1723, Ferguson J noted:

``The laws of God and man both give the party an opportunity to make his defence, if he has any. I remember to have heard it observed by a very learned man upon such an occasion that even God himself did not pass sentence upon Adam, before he was called upon to make his defence. Adam, says God, where art thou? Hast thou not eaten of the tree, whereof I commanded thee that thou shouldst not eat? And the same question was put to Eve also.''

(
R v University of Cambridge, Bentley's Case (1723) 1 Str 557, 567; 93 ER 698, 704.

In that case, the University of Cambridge purported to suspend one of its scholars, Mr Bentley ab omni gradu suscepto on a complaint that he had been ``contemptuous'' of the Vice- Chancellor. He was reinstated on a mandamus from the Court of King's Bench on the ground that the suspension was unjustifiable and that, in any case, he should have received notice so that he could make his defence, as required by ``the laws of God and man''. (See also
Ridge v Baldwin [1964] AC 40.)

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26. Not unexpectedly, my question took both counsel by surprise and an adjournment was sought to enable the matter to be researched. In the result, each party returned on the resumed hearing some days later armed with various authorities. Suffice it for present purposes that I am satisfied that
Collector of Customs (NSW) v Brian Lawlor Automotive Pty Ltd (1979) 24 ALR 307 establishes that an invalid administrative decision does not deprive this Tribunal of jurisdiction (see also
Hospital Benefit Fund of Western Australia Inc v Minister for Health, Housing and Community Services (1992) 111 ALR 1) and it is therefore unnecessary for me to decide whether, in the circumstances, the rules of natural justice were displaced, or if not displaced, whether in fact a denial of natural justice did occur. However, Boards might find it helpful in the conduct of their proceedings if I note the observations of Barwick CJ and Mason J (as his Honour then was) in
Twist v The Council of the Municipality of Randwick (1976) 136 CLR 106. At pp 109-111, Barwick CJ said:

``The common law rule that a statutory authority having power to affect the rights of a person is bound to hear him before exercising the power is both fundamental and universal: see
Cooper v. Wandsworth Board of Works (1863) 14 C.B. (N.S.) 180 [143 E.R. 414] and
R. v. Electricity Commissioners; Ex parte London Electricity Joint Committee Co. (1920) Ltd. [1924] 1 K.B. 171, at p. 205. But the legislature may displace the rule and provide for the exercise of such a power without any opportunity being afforded the affected person to oppose its exercise. However, if that is the legislative intention it must be made unambiguously clear. In the event that the legislation does not clearly preclude such a course, the court will, as it were, itself supplement the legislation by insisting that the statutory powers are to be exercised only after an appropriate opportunity has been afforded the subject whose person or property is the subject of the exercise of the statutory power... The court will approach the construction of the statute with a presumption that the legislature does not intend to deny natural justice to the citizen. Where the legislation is silent on the matter, the court may presume that the legislature has left it to the courts to prescribe and enforce the appropriate procedure to ensure natural justice.

...

... it was said that the provision by the legislation of an appeal did not afford natural justice to the owner, it being said on the one hand that to appeal after the order has been made is much less advantageous than an opportunity to advance reasons against the making of the order before it has been made: and on the other hand that the existence of the appeal did not deter the intervention of the court in the circumstances of Ridge v. Baldwin [1964] A.C. 40.

However, each statutory provision must be considered in the light of the principles to which I have referred. There is no rule which can provide in every case an answer by its mechanical application. The mere existence of an appeal may not in some circumstances satisfy the requirements of natural justice.''

Mason J said at pp 113-114, 116:

``Does the existence of the right of appeal, taken in conjunction with the terms of sub-s. (1), satisfy in full the duty of fairness, or does it sufficiently indicate a legislative intention that the duty of fairness has no application to the council when it decides to act under s. 317B(1)? This, according to the appellant, is the question to be decided. It is a question which could be easily disposed of if the appeal were less than a full and comprehensive appeal from council's order. In that event it could scarcely be said that a limited right of appeal on the part of the owner is an adequate safeguard for him or that it constitutes an indication that the duty of fairness is displaced. The owner might find that certain matters were irrevocably decided against him by the council without its having the benefit of representations on his behalf.

However, the appeal is not restricted in any way. It is a full appeal on facts and on law in which the appellant is entitled to call evidence. The appeal extends to such elements of discretion as may enter into the making of the order as well as to the existence or non-existence of the conditions which are to be satisfied before an order can be made. There is nothing in the language of

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the section to preclude the court from considering afresh for itself these discretionary elements.

...

Even so, at first sight it is not easy to see why the appeal provides a clear indication of legislative intention that the council is under no duty to give an opportunity to the owner to present his case. The duty which the law imposes is not displaced by statute in the absence of express words or by necessary implication. There is no mutual inconsistency between the imposition of such a duty on the council and the existence of the appeal. In some cases the existence of an appeal to a court or judge from an administrative decision or order may be an indication that the administrative authority is under a duty to hear a person who will be adversely affected by its decision.''

27. Here, notwithstanding that Part VIIA of the Act, dealing with the registration of tax agents, provides that a decision refusing to re- register a tax agent may be reviewed by this Tribunal (sec 251QA(b)), a review which constitutes a hearing de novo on both fact and law, it is a nice question whether a legislative intent is evidenced to exclude the right of a tax agent to be heard by the Board on the question whether he or she should be allowed to continue to practise his or her profession. Indeed, sub-s 251JC(1) provides that the Board ``shall re- register the applicant as a tax agent if the applicant satisfies the Board that:'' [followed by the various criteria], which, I consider, tends to suggest an intention to require the Board to afford an applicant an opportunity to be heard before deciding not to re-register him or her. In any event, whatever the proper construction, I would be failing in my duty if I were to abstain from noting that had the Board afforded Mr McKay the opportunity to be heard, this hearing might have been avoided. Any statutory authority, seized with the power to take away a person's livelihood, should be loath to exercise that power in the cavalier manner the Tax Agents Board Tasmania did on this occasion.

28. In the result, I have to determine whether, on the evidence, I am satisfied that Mr McKay ``is a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters'' within the terms of sub-s 251JC(1) of the Act.

29. The ``T'' documents contain statements by Mr McKay, and his evidence at the hearing before me was to the effect, that subsequent to his conviction (i) the Australian Securities Commission, after being advised of the convictions, wrote to him suggesting that he might wish to apply voluntarily for cancellation of his registration as an auditor, but the applicant declined the offer and successfully obtained re-registration; (ii) the Institute of Chartered Accountants adopted a somewhat more robust stance: At a hearing which considered his case and read his detailed submissions relating to the offences against the Tasmanian Companies Code, it ordered him to undertake 20 hours of professional study over a two year period and to contribute $500 towards the cost of the hearing (he stated in evidence that he had ``undertaken substantial continuing professional training, as is the obligation'' (tr p 17); (iii) the Institute of Corporate Managers, Secretaries and Administrators also convened a disciplinary hearing and, after perusing Mr McKay's written submissions, decided merely to reprimand him. None of these statements were challenged in cross-examination. Although not strictly relevant to my consideration, it would thus appear that only the Tax Agents Board adopted the ultimate punitive action of deciding to refuse Mr McKay's application for re-registration as a tax agent.

30. A good part of Mr Arendt's cross- examination was devoted to testing Mr McKay as to the extent of his further professional training, followed by a viva which brought back unpleasant memories of my own examination, many decades ago, in a subject compendiously described as ``Bookkeeping and Trust Accounts''. Counsel prefaced this by telling the witness: ``I am trying to find out what you, in fact, were taught about keeping and maintaining of accounting records''. This was followed by hypothetical examples (``I am a client that has come to you as a taxpayer and I want you to assist me in the keeping of records so that returns can be prepared... I am a medium-sized business that has numerous creditors. I am selling things and I might have a turnover of, say, we'll, make it a million dollars a year. What would you tell me to keep?''). As the cross-examination progressed, the questions became more difficult, seeking details of the kind of ledgers and in what form they should be

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kept before proceeding gently into the pros and cons of computerised systems of accounting.

31. I have no hesitation in giving the candidate a ``credit'' for his answers, if only because I would probably have fared far worse.

32. It is fair to say that the thrust of Mr Arendt's questions were shaped around the debacle which caused McKay ``problems'' as a director of the company. I am satisfied on the evidence that, having had his fingers badly burnt by that experience, he has learnt his lesson - as Mr Melick, of learned counsel for the applicant, put it: ``he is obviously a sadder and wiser man because of the experience he has undergone'' - and that his knowledge of bookkeeping and accounting, as well as his acceptance of the need to supervise and check the working records prepared by others, is now adequate to fulfil all the obligations demanded of a practising tax agent.

33. Turning to the law, sec 251BC (so far as relevant) provides:

``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
• (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.''

34. Section 251JC provides (so far as relevant) for the re-registration of Tax Agents. Subsection 251JC(1) provides:

``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; and
  • (ii) the applicant is not an undischarged bankrupt;
• ...
• (d) in all cases - the applicant has not permanently ceased to carry on business as a tax agent.''

35. I am satisfied that the effect of s 251BC, and particularly sub-s 251BC(1), in relation to sub-s 251JC(1) is that I am able to consider a multiplicity of factors (it being, however, unwise to attempt to define the factors which may be taken into account) when deciding

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whether the applicant is ``a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters''; not being bound merely to consider the various factors in sub-s 251BC(1). However, I am bound to consider the criteria in sub-s 251BC(1) for the reason that if any of them are made out (subject to the discretion contained in sub-s 251BC(3)) I am compelled to find that the applicant is not such a fit and proper person. In other words, if I were to find, for example, that the applicant was ``not of good fame, integrity and character'', it must be concluded that the applicant is not ``a fit and proper person [etc]'' for the purposes of sub-s 251JC(1).

36. 1 am satisfied that nothing emerged during evidence-in-chief or in cross- examination to cause me to doubt that Mr McKay (i) has sufficient knowledge and ability to pass the ``fit and proper'' test for which the statute provides, and (ii) is ``of good fame, integrity and character''. Indeed, he impressed in the witness box with his honesty, humility and probity - he forgave a debt of some $270,000 which the company owed him and over which he had priority, as well as making voluntary payments to creditors in some $140,000 out of his own pocket. I also find that the relevant provisions for registration and re- registration recognise the concept of redemption, a view which the respondent Board appears to have rejected.

37. I find the expression ``fit and proper person'' is not a term of art, and must be viewed in each case against the background in which the term appears. In the case of offices and perhaps vocations, one looks to 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.''

(Coke cited with approval in
Hughes and Vale Pty Ltd v The State of New South Wales [No 2] (1955) 93 CLR 127, per Dixon CJ and McTiernan and Webb JJ at 156.)

38. It was submitted that the requirements for registration and re-registration as a tax agent are inserted in the Act for the predominant purpose of protecting both taxpayers and the revenue. Accepting that submission, I will merely add that I have no fears that allowing Mr McKay to continue to practise is likely to compromise either the revenue or those who contribute to it.

39. In the result, I am satisfied that Mr McKay, being both a fit and proper person, and of good fame, integrity and character, has met the statutory requirements for re-registration. The decision of the Board is set aside and in substitution thereof, I determine that his re- registration as a tax agent is effective as from 26 June 1992.