On 7 November 2018, the Federal Court ordered that a decision of the Tax Practitioners Board (Board), to not investigate Mr Mendonca’s complaint, against the registration of two tax agents, was affected by ‘jurisdictional error’ and ordered that the decision be quashed. The Board conceded this and undertook, to the Court, revisit the complaint and make the decision again.

The background to this is interesting and illuminates what the fight was about.

  • Mr Mendonca had previously sued his employer: Chan & Naylor Parramatta Pty Ltd,  for unpaid bonuses. That court found against Mr Mendonca, but based on evidence, given on oath, which he alleged was deliberately false evidence. This evidence was about the bonus system, at the centre of his suit for unpaid bonuses, and was given by two tax agents: Mr Clive Nelson (a non-executive director) and an employee: Ms Lauren McGinty.
  • Mr Mendonca complained to the Board, that the two tax agents should be deregistered, based on his contention that their evidence, under oath, was deliberately false, and they were not, as required by the Tax Agents Services Act 2009, a ‘fit and proper person’ (s40-5(1)(a)&(b), s20-5(1)(a) & s20-45), given the importance of being honest (s20-15(a), s30-10(1)).
  • The Board advised Mr Mendonca, on 25 July 2017 that it would take no further action on his complaint because: “[it] found that [Mr Mendonca’s] allegations do not constitute tax agent services and therefore are outside the jurisdiction of the Board” (essentially saying that remuneration disputes have nothing to do with an Agent’s dealings with clients). It was this reasoning that the Court went on to hold constituted ‘jurisdictional error’.
  • To compound the Board’s problems, they offered, and gave Mr Mendonca an internal review, confirming, on 15 January 2018, their original decision. Mr Mendonca particularised his allegations for this internal review, and quoting one of them gives a sense of the gravity of the allegations.

That Clive Nelson wilfully gave false and misleading sworn evidence to Judge Balla that he held a client managers meeting in September 2007 to discuss/agree with all client-managers (Gerard Mendonca, Lauren McGinty, Elizabeth Pizzardi, Man Lai and Neetu Shankar) to adopt Bonus Policy of 11 July 2007 and wilfully concealed the truth the he scheduled by e-mail client managers meeting for 8 February 2008 that did NOT discuss about any bonus policy and Firm EBIT.

  • Mr Mendonca sought review of the Board’s decision in the AAT, arguing that it had jurisdiction, under s70-10(ga) of the Act, as a decision not to deregister an agent (the Act obviously contemplating that someone might think that an agent should have been deregistered). The AAT, however, decided that a decision, not to investigate a complaint, that would (if sustained) give grounds for de-registration, was the only the beginning of a possible ‘reregistration’ process, and fell well short of being a decision not to deregister. [2017] AATA 2177
  • I reported the AAT’s decision, pointing out the error in the Board’s reasoning – albeit, not disagreeing with the AAT’s decision on its jurisdiction (see related Tax Technical article). I observed: “It is not true that behaviour must be ‘tax agent services’ before the Board, or the AAT, has jurisdiction. For instance, the very first requirement for registration is that the person be a ‘fit and proper person’ (s20-5(1)(a) TASA). All manner of conduct could be relevant to that. For instance, the Tax Agent may have murdered someone.
  • Mr Mendonca saw this article and successfully brought these ‘judicial review’ proceedings, unrepresented (including a copy of the article in the Court Book).

In short, the Federal Court agreed that the Board’s decision was infected by ‘jurisdictional error’ and was effectively no decision, and so it order that the decision be quashed. Before the proceedings, the Board conceded this [para 16] and agreed to not only the order to quash its 25 July 2017 refusal to investigate, but it agreed to a notation of that order, that it would undertake to reconsider Mr Mendonca’s complaint.

It remains to be seen whether the Board will investigate Mr Mendonca’s complaints, but hopefully it will be on substantive and lawful considerations. As a postscript, Mr Mendonca emailed me, a copy of the Federal Court’s decision, on the day it was handed down, advising that my article on the AAT decision, had been important.

(Mendonca v Tax Practitioners Board [2018] FCA 1686, Federal Court, Farrell J, 7 November 2018.)

FJM 30.11.18

[LTN 220, 14/11/18; Tax Month – November 2018]


CPD questions (answers available)

  1. Was the gist of  Mr Mendonca’s complaint, to the Board, was his allegation that the 2 tax agents that they had given dishonest evidence under oath, which gave reason to address whether they satisfied the ‘fit and proper person’ test, and consider whether this required reregistration?
  2. Did the Board investigate this complaint?
  3. Why?
  4. Did Mr Mendonca seek judicial review of the Board’s decision not to investigate?
  5. Was he successful?
  6. What order did he get?
  7. Why?
  8. On what basis?

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