Commonwealth Director of Public Prosecutions v Burton [2006] QDC 212

DISTRICT COURT OF QUEENSLAND CITATION: Commonwealth Director of Public Prosecutions v Burton [2006] QDC 212 PARTIES: Commonwealth Director of Public Prosecutions (appellant) v. Danny William Burton (respondent) FILE NO/S: 271/05 DIVISION: Appellate PROCEEDING: Appeal ORIGINATING COURT: Maroochydore DELIVERED ON: 20 th May 2006 DELIVERED AT: Maroochydore HEARING DATE: 26 th April 2006 JUDGE: K.S. Dodds, DCJ ORDER: Appeal allowed CATCHWORDS: APPEAL – Section 222 Justices Act (1886). Appeal against sentence; whether sentence imposed was manifestly inadequate; Respondent convicted of 8 offences against Section 251 L (1) (a) Income Tax Assessment Act (1936). Whether magistrate erred in applying Section 19B of the Crimes Act 1914; whether condition that he not charge a fee for the preparation of tax returns for two years was an invalid exercise of discretion. COUNSEL: Mr Gett for Appellant -- 1 of 12 -- 2 Mr Barclay for the respondent SOLICITORS: [1] This is an appeal against a sentence imposed by a magistrate. [2] On 19 July 2005 in the Magistrate’s Court in Noosa, the respondent pleaded guilty to a complaint made 14 December 2004 of eight offences against Section 251L(1)(a) of the Income Tax Assessment Act 1936 in that not being a registered tax agent, he knowingly demanded a fee for preparing on behalf of a tax payer, a tax return. [3] The taxpayers referred to in the charges were four couples and the offences were committed on or about 25 September 2001, 4 December 2001, 12 December 2001 and 12 April 2002. All offences related to tax returns for the year ended 30 June 2001. [4] The magistrate discharged the respondent under Section 19B of the Crimes Act 1914 without proceeding to conviction, upon the respondent giving security by recognisance in the sum of $2000, conditioned he be of good behaviour for 12 months and further conditioned that he not demand a fee for the preparation of income tax returns for a period of two years. [5] The appellant contended that the magistrate erred in applying Section 19B of the Crimes Act 1914 and further, that the condition that he not charge a fee for the preparation of tax returns was an invalid exercise of discretion. [6] Section 19B(1)(d) of the Crimes Act provides that a court may order the discharge a person without proceeding to conviction upon the person giving security by recognisance that he will be comply with a condition to be of good behaviour for a period the court specifies and with such other conditions (if any) that the court -- 2 of 12 -- 3 thinks fit to specify in the order. The court may do so if it is satisfied the charge/s before it are proven, “but it is of the opinion having regard to: (i) the character, antecedents, cultural background, age, health or mental condition of the person; (ii) the extent (if any) to which the offence is of a trivial nature or; (iii) the extent (if any) to which the offence was committed under extenuating circumstances; that it is inexpedient to inflict any punishment or inflict any punishment other than a nominal punishment.” [7] Section 251L(1) of the Income Tax Assessment Act 1936 is contained in Chapter VII A. The Chapter deals with the registration of tax agents. It provides: “Subject to this section, a person who is not a registered tax agent, must not knowingly or recklessly demand or receive any fee for: (a) preparing or lodging on behalf of a tax payer a return, notice, statement, application or other document about the tax payer’s liabilities under a taxation law---Penalty: 200 penalty units.” 200 penalty units equates to $5000.00. [8] The factual circumstances put before the magistrate were as follows: The defendant had been registered as a tax agent in Victoria on 1 June 1992. His registration was transferred to Queensland on 21 March 1994. Due to his failure to renew his registration, it ceased on 2 June 1998. He had not since been registered as a tax agent anywhere. Investigations by the tax office revealed that the persons -- 3 of 12 -- 4 named in the eight charges had their tax returns for the year ending 30 June 2001 prepared by the respondent and were charged a fee for the preparation and lodgement of those returns. In the case of one couple, the Gabes, the respondent was recommended by a friend. On 25 September 2001, he sent to them, their prepared tax returns and an invoice for $285.00 “for professional services rendered for the period ending 25/9/01.” Part of the charge related to the preparation of the tax returns. The invoice was paid. In the case of another couple, the Lomax’s, the respondent was recommended by a friend. On 4 December 2001, the respondent sent them prepared their tax returns and an invoice for $220 “for professional services rendered for the period ending 4/12/01”. The invoice related solely to the preparation of the returns. The invoice was paid. With respect to another couple, the Hyland’s, they first met the respondent in 1998 when he was employed with an accounting firm. In the year 2000, the respondent told them he had left that firm and asked if they wished to continue using his services to prepare and lodge tax returns. On 20 December 2001, the respondent sent them an invoice for $671.00 for services rendered to 12 December 2001. Part of the invoice related to preparation of the returns. The invoice was paid. In the case of another couple, the Price’s, the respondent was recommended by a friend. On 4 April 2002, the respondent sent them their prepared tax returns. On 12 April 2002, he sent a letter to them enclosing an invoice for $363 “for professional services rendered for period ending 2002”. Part of the invoice related to preparation of the tax returns. The invoice was not paid as the Price’s had discovered the respondent was not a registered tax agent. -- 4 of 12 -- 5 The defendant had been sent a letter dated 19 July 2001 by the Australian Tax Office advising him that an investigation into similar conduct being an unregistered tax agent would not result in prosecution at that time, but that his future conduct would be monitored. The letter followed complaints received by the Australian Tax Office from former clients of the respondent. The conduct the subject of the charges before the magistrate then occurred. The respondent was 48 years of age and had no prior convictions. The prosecution submitted that the respondent had been informed the Australian Tax Office would be monitoring him for the sort of conduct the subject of the charges. He was fully aware that demanding a fee for preparing and lodging tax returns whilst unregistered was prohibited. His offending the subject of the charges was deliberate and repeated. The prosecution had been informed the week before that the matter was before the magistrate that the respondent would be pleading guilty. It asked for a fine of between $500 and $1000 for each charge. It submitted the charges were not trivial, the maximum fine provided indicating the seriousness with which the legislature regarded the offence. Protection of the community from malpractice or incompetence was of paramount importance. [9] Defence counsel told the magistrate the respondent’s financial position was poor and he was bankrupt. He had four children, ranging in age from 27 to 16. Currently, he had a foster child who attended a special school. He received some allowance for this and his wife received a student’s allowance. He undertook intermittent business work which bought in some but not much income. He had almost completed a law degree with one subject to go. He had a Bachelor of -- 5 of 12 -- 6 Commerce degree and had practised as an accountant for 25 years. He allowed his registration as a tax agent to lapse because of bankruptcy. That bankruptcy came to an end in 1999. He did not reapply because he considered the bankruptcy would work against him and he had no real interest in doing tax work. He continued to have his own consultancy business preparing accounts, financial reports, profit and loss statements and reports required by lenders. It was only a small step to preparing tax returns which he had done for fear of losing clients. He was aware of the requirement for registration but considered he had found a way around the legislation by not specifically charging for the preparation of the tax returns. His invoices did not refer to preparation of tax returns. He took the letter from the Tax Office of July 2001 to mean that he was not breaching the Act, that what he was doing had been acquiesced in and was alright. He had made a mistake of law. He was suffering from depression. [10] From a reading of the transcript of proceedings before the magistrate she appears to have come to a view that the letter of July 2001 misled the respondent. She said of it “why didn’t they (the tax office) make it clear. It’s almost like they accepted what Mr Burton was saying ---why don’t they say this is unacceptable behaviour? We won’t process you. We will give you another chance. It’s clear, then, absolutely clear. But what you are doing is wrong, stop it.” [11] In sentencing the respondent, the magistrate noted a decision of Steytler J in the Western Australian Supreme Court, Jones v McDonald, Supreme Court Western Australia, 6 February 1998 which she said seemed to be “on all fours with the position Mr Burton finds himself in.” She went on to say, she found the letter misleading; -- 6 of 12 -- 7 “It is simply not clear that what you are doing is wrong. It appears to be an acceptance of what he was doing that they were going to monitor it in the future to see if any further issues arise which are separate from the issues that had arisen in the past. Given the circumstances arising as a result of the wording of this letter, I am proposing to exercise my discretion under Section 19B --- I do accept that you were under the mistaken belief what you had been doing was correct and given also your previous good character, taking those two issues into account, I am of the view that it would be inexpedient to punish you, other than by a nominal punishment.” [12] I would not interfere with the magistrate’s sentencing discretion unless I was satisfied the magistrate had made some error in exercising her sentencing discretion, for instance, had mistaken the facts or law or taken into account extraneous or irrelevant matters on the sentence. House v R (1936) 55 CLR 499. [13] In this case, I am satisfied I should interfere. The plea of guilty was acceptance of the elements of the offence, one of which was that as an unregistered tax agent, he knowingly demanded a fee for preparation of a tax return. The letter from the ATO which plainly influenced the magistrate was not, in the circumstances as they were outlined to the magistrate, capable of supporting the sort of inference she drew. The respondent was experienced as a tax agent. He knew he was not registered and was charging and receiving a fee for preparation of tax returns. The notion that the prohibition in Section 250L(1) could be circumvented by the expedient of an invoice which did not disclose a charge was made or included for preparation of tax returns, when in truth that was what it was for in whole or in part, cannot be accepted. It involved a deception by deliberate omission. An inference plainly available was that the respondent adopted the expedient to disguise the fact to the -- 7 of 12 -- 8 ATO in particular, that he was preparing tax returns and was charging a fee for doing so. [14] Section 19B required the identification of those matters mentioned therein which applied. The magistrate referred to the respondent having no prior convictions, the depression that he was said to have been suffering (about which there was no professional confirmation or opinion) and the letter from the tax office which she regarded as an extenuating circumstance under which the offences were committed. That letter was not capable of being so regarded. The section then required consideration to be given to the question, whether, it was inexpedient to inflict any punishment or other than a nominal punishment. In answering that question the magistrate was required to consider relevant matters in Section 16A(2) of the Crimes Act. Included was the nature of the offence and the need for personal deterrence. Commission of Taxation v Baffsky (2001) 192 ALR 92; Cobiac v Liddy (1969) 119 CLR 257. [15] The provisions of the Income Tax Assessment Act make clear the prohibition in the section is not to be lightly disregarded. A substantial fine is provided for contravention. It is “a serious taxation offence” as provided for in s251A of the Act. Section 251M provides protection to tax payers if the negligence of a registered tax agent results in a tax payer becoming liable to a fine or a penalty or the general interest charge under a provision of the Act. Both these sections are part of Chapter VII A. [16] In Baffsky, it was made clear that in considering whether it was inexpedient to impose punishment for an offence, the significance of the conduct regulated by the statute was required to be taken into consideration. -- 8 of 12 -- 9 [17] Jones v McDonald was a similar case to this one. It was a crown appeal against sentence. The respondent had pleaded guilty in the magistrate’s court to 11 offences against Section 251L of the Income Tax Assessment Act. The magistrate acting under Section 19B of the Crimes Act discharged the respondent on his own recognisance without proceeding to conviction. Steytler J, who heard the appeal, overturned the magistrate’s order. Regarding the ground of appeal that the sentence was manifestly inadequate, he said; “as to the intention of the legislature, it is enough to say that Section 251L of the Act makes plain that the legislature’s intention that only registered tax agents or persons exempt under that section may demand or receive fees for or in relation to the preparation of any income tax return, that a fine of $2000 has been fixed as the maximum penalty for an offence of that kind and that the legislature’s obvious intention as it appears from this and other sections of the act is that of protecting the community against the prospect of malpractice or incompetence of one kind or another on the part of unregistered persons against whom there may be no adequate redress. As to the aspect of deterrence, it is obvious that there is a need to deter unregistered persons from engaging in practices of the kind referred to in Section 251L(1) and it is self evidently with that in mind that the legislature has specified a maximum penalty of $2000 for each such offence.” [18] The maximum penalty is now $5000. [19] Here, the material before the magistrate disclosed four separate occasions when, the respondent prepared tax returns and charged a fee for the work, knowing he was prohibited from doing so. He adopted the expedient of not disclosing on the -- 9 of 12 -- 10 account he sent, that the amount charged was in whole or in part for that work. The letter from the Australian Tax Office to the respondent which the magistrate focused upon was not capable of supporting the view that it was in some way encouragement by the tax office in what he did, nor, of instigating what he did. [20] When a balancing is done of matters such as the respondent’s character, antecedents,, age, health and mental condition with the respondent’s conduct in committing these offences and the legislative intention reflected in Section 251L and Part VII A of the Income Tax Assessment Act in which it appears, this is not a case in which it could be said that it was inexpedient to inflict any or other than a nominal punishment. [21] In the circumstances, I intend to allow the appeal and re sentence the respondent. [22] As to the additional condition the magistrate attached to the recognisance it seems to me, such a condition will arguably be an inappropriate exercise of the wide discretion which is implicit in Section 19B(1)(d)(III) of the Crimes Act, namely that the court may require compliance with “such other condition (if any) as the court thinks fit to specify in the order”. [23] In Isaacs v McKinnon (1949) 80 CLR 502 at 523, Dixon J said that these words “are very wide but they do not authorise the imposition of conditions which are repugnant to the principles or policy of the law or are foreign to the purpose of the power.” [24] In R v Theodossio & Said (2000) 1 QR 299, the Court of Appeal at 302 said that the power to attach to a recognisance such other condition that the court thinks fit to specify “will be exceeded if the condition: -- 10 of 12 -- 11 • Is not connected with the principles applicable of the sentencing of offenders against federal laws; • Contravenes a provision of a statute or other rule of law; • Is contrary to public policy or the legislative policy of the federal law, breach of which has given rise to the operation of Section 20 ”. [25] Section 251BC(1)(e) of the Act (contained in Chapter VII A) provides that 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 if, inter alia, the person has been convicted of a serious tax offence during the previous 5 years. However, under Section 251BC(3) a Tax agent’s board considering on an application for re- registration as a tax agent, whether the applicant is a fit and proper person to prepare income tax returns and transact business on behalf of tax payers in income tax matters, may because of special circumstances, disregard a conviction for an offence such as an offence against section 251L. The only limiting condition is that the applicant must not be under a sentence of imprisonment (which includes a person released from serving part of a sentence of imprisonment on parole or licence or was released by the court from serving the whole or part of a sentence of imprisonment upon giving a good behaviour security) [26] The condition in question is effectively a disincentive to applying for re-registration as a tax agent, during the two year period the condition is to operate, although a board under the Income Tax Assessment Act when faced with an application, many grant re-registration in special circumstances at any time. [27] However it is not necessary to reach a final conclusion about this aspect of the appeal. -- 11 of 12 -- 12 [28] The appellant submitted that the respondent should be convicted of the offences and in respect of each of them, fined $200. That is a lesser sum than the prosecution submitted to the magistrate as an appropriate fine. Counsel for the appellant explained the submission as taking account of the fact that it was a crown appeal against a sentence. [29] In all the circumstances, the appeal is allowed. The magistrate’s order is set aside. In respect of each offence, the respondent is convicted and fined $200. -- 12 of 12 --