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- Unreported Judgment
Pope v Bar Association of Queensland  QCAT 311
Marshall Earl Pope
Bar Association of Queensland
Occupational regulation matter
15 June 2016
23 August 2016
IT IS THE DECISION OF THE TRIBUNAL THAT:
PROFESSIONS AND TRADES – LAWYERS – PRACTISING CERTIFICATES – REFUSAL TO ISSUE – where the applicant sought review of a decision of the Bar Association to refuse to grant him a practising certificate – where the reasons for refusal included the applicant’s failure to fulfil his taxation obligations while he was bankrupt – where the applicant allegedly prioritised other payments above his taxation obligations – comparison to like cases – whether the decision of the Bar Association to refuse to grant the applicant a practising certificate was correct – whether the applicant is a fit and proper person to hold a practising certificate
Legal Profession Act 2007 (Qld) ss 9, 21, 24, 27, 30, 31, 33, 45, 46, 49, 51, 52, 60, 69, 420
Queensland Civil and Administrative Tribunal Act 2009 (Qld) ss 18, 19, 20, 24
Re a Practitioner (1984) 36 SASR 590
Re B (a solicitor)  VR 695
Davison v Council of New South Wales Bar Association (2007) 69 ATR 402
Doolan v Legal Practitioners Admissions Board  QCAT 98
Incorporated Law Institute of New South Wales v Meagher (1909) 9 CLR 655
Johns v Law Society of New South Wales  2 NSWLR 1
Re Joseph Sleiman and Australian Securities Investments Commission  AATA 1383
Legal Practitioner Complaints Committee v Pillay (2006) 46 SR (WA) 39
Legal Services Commissioner v Lee  QCAT 447
Legal Services Commissioner v Stirling  VCAT 347
Legal Services Commissioner v Testart  VCAT 2234
New South Wales Bar Association v Cummins (2001) 52 NSWLR 279
New South Wales Bar Association v Hammann (1999) 217 ALR 553
New South Wales Bar Association v Murphy (2002) 55 NSWLR 23
New South Wales Bar Association v Somosi (2001) NSWCA 285
New South Wales Bar Association v Stevens (2003) NSWCA 261
New South Wales Bar Association v Young (2003) 54 ATR 22
Re: Read  SASC 35
Wardell v New South Wales Bar Association  NSWSC 548
Re Wolstonecroft and Companies Auditors and Liquidators Disciplinary Board (1998) 54 ALD 773
Ziems v Prothonotary of the Supreme Court of New South Wales (1957) 97 CLR 279
APPEARANCES and REPRESENTATION (if any):
Mr D A Savage QC on behalf of the applicant
Mr P J McCafferty of Counsel on behalf of the Bar Association of Queensland
REASONS FOR DECISION
- This is a statutory review of a decision by the Bar Association of Queensland (the Association) to cancel and not renew the local practising certificate of a career barrister for unfitness under s 69(1)(b) of the Legal Profession Act 2007 (Qld) (LPA) (the decision).
- On 5 August 2015 the tribunal made an order staying the operation and effect of the decision until after the review. This has the practical effect of allowing the applicant to continue in practice until the matter is finally resolved by agreement or tribunal order.
Legal practice rules
- The LPA regulates the practice of law in Queensland – as do its counterparts in the other states and territories – under uniform legislation, for the stated purposes of the proper administration of justice and the protection of consumers of legal services and the public generally.
- A barrister deserving of the right to practice must be demonstrably worthy of public confidence and trust at all times.
“… involves at least two (other) considerations. The first is a public interest in ensuring that the person does in fact follow the appropriate course of action in the future. The second is the public interest in ensuring confidence, so far as is reasonably possible, that the person can properly be entrusted to undertake the tasks that attach to the licensed activity or office involved.”
- Thus, in deciding whether a barrister is – or is no longer – a fit and proper person to hold a local practising certificate the Association takes into account, to the extent appropriate, the suitability matters in s 9(1) and other considerations mentioned in s 46(2) LPA.
- The “fit and proper” criterion is aimed at assessing a person’s estimated quality by reference to previous behaviour and its causes as predictors of likely future risks. As Brooking J pointed out in Re B (a solicitor), the focus of a question of fitness is on “the position in which the practitioner finds himself” and whether, in light of that situation, he is now and in the predictable future, suitable to practice law (e.g. as a bankrupt) in the sense of being able to satisfactorily carry out all its inherent requirements, meet exacting, if not exemplary, standards of conduct in professional services and personal affairs, and most of all, have due regard and respect for society, the authority of the law, the judiciary and social institutions.
- The applicant is 68 years old. He was admitted to practice as a barrister in 1980 and has been in private practice continuously since then. He has no other professional qualifications or experience and has never been the subject of a misconduct allegation or other disciplinary action. He was, however, bankrupted by unpaid creditors (including the Australian Taxation Office (ATO)) in 2006.
- On 5 November 2014, he notified the Association of the filing of a bankruptcy petition (a show cause event) and later gave an explanatory statement pursuant to s 68 LPA attributing the bankruptcy to a failure to meet the ongoing obligations of a repayment arrangement with the ATO to reduce a $221,467 tax debt and related obligations due to a significant drop in income (an estimated $500,000 in the medium-term) after work from two major briefing sources had dried up.
- Additional information requested by the Association was eventually provided between 29 January 2015 and 20 April 2015.
- The Association’s chief executive wrote to the applicant on 1 June 2015, advising him that cancellation of his practising certificate was being considered on the basis that the material he had provided up to that point in time was “…capable of suggesting that you have shown a reckless disregard to obligations to pay your taxation so as to amount to an intention to avoid them or alternatively indifference to the discharge of your taxation obligations”.
- The applicant was invited to make final submissions before 14 June 2015. On 15 June 2015, his local practising certificate for 2014/15 was cancelled and not renewed for the current year because – for reasons related to the circumstances of his insolvency – the Association did not believe he had shown himself to be a fit and proper person to continue in practice. The weightiest adverse considerations were identified as (a) he had been bankrupted twice for not having paid tax debts; (b) most recently in circumstances where he had the capacity to do so, but instead chose to spend the money elsewhere; and (c) a finding of fitness would undermine public confidence in the profession. The Association confirmed its decision on 20 July 2015 after reconsiderations of the applicant’s additional submissions.
- The review material consists of a filed statement of agreed facts and statements of evidence filed by the applicant and a witness.
The rival positions
- Mr Savage QC submits for the applicant that if the Association had properly considered all the relevant circumstances, it would (or should) have concluded that he is still a fit and proper person for practising as a barrister in Queensland, because:
“ The Applicant was not indifferent to his tax obligations. His failing however in that regard: i.e. in becoming insolvent was not in the probity required of a legal practitioner but in the ability properly to order his affairs and cope with the taxation consequences of an entirely unexpected fluctuation in his income which was now some time ago. And no doubt the applicant spent money other than on tax in support of his wife and children.
 The requisite determination is of fitness to hold a practicing certificate at the time of determination of this proceeding. It is respectfully submitted that whatever view is taken on the agreed or uncontradicted evidence of the applicant’s failings it simply does not reflect adversely on his ability to act in the affairs of his clients so that protection of the public warrants cancellation of his practicing certificate. That being, it is submitted, the relevant test.”
- In its non-adversarial role of assisting the tribunal to reach the correct and preferable decision, the Association, represented by Mr McCafferty of Counsel, suggests a different test, premised not as much on public protection, as on maintaining the public’s confidence in the profession.
“…where a person holds a local practicing certificate repeatedly fails to satisfy their obligations to creditors (especially the Australian Tax Office) that person is not fit … to hold … a practicing certificate.”
The options under s 24 QCAT Act
- It is open to the tribunal to confirm the reviewable decision as the Association seeks it to do. Alternatively, it may set aside the decision and substitute its own or return the matter to the original decision-maker for reconsideration, with any directions the tribunal considers appropriate.
- The circumstances may, for instance, justify allowing the applicant to remain in practice, with or without conditions.
- However, there is a practical problem with the tribunal imposing conditions here because the 2015/16 certificate has already expired and (as all barristers are) the applicant has to apply for a new one for 2016/17. This exigency aside, and assuming the tribunal is against its primary position, the Association submits that the tribunal might consider conditions requiring that:
- the applicant is to advise the Chief Executive of the Association of the identity and a contact person of his accountant by a stated date;
- for a specified period from the date of the order:
- (i)On a quarterly basis, the applicant’s accountant provide written notification to the Chief Executive of the Association whether the applicant has or has not met his quarterly Business Activity Statement lodgement and payment obligations and any other taxation obligations that arise;
- (ii)The applicant be required to report to the Chief Executive of the Association any incident of non-compliance in lodgement of each Business Activity Statement and the steps the applicant has taken to rectify any breach; and
- He submits that any additional or more restrictive conditions are neither necessary nor justified.
The unfitness case
- The best it can do is draw inferences from disclosed primary facts but it was hindered in this process by some unanswered questions about the nature of the practitioner’s discretionary spending and extent of his disposable income. The Association is totally reliant on the practitioner for the accuracy and completeness of the information provided.
- Nonetheless, doing the best it could on the information provided, the Association made the following forensic findings:
- the 2006 bankruptcy happened because the applicant did not made adequate provision to pay a $325,287 tax debt when it fell due and chose instead to take the unacceptable risk that his tax liability could be met out of his future income;
- under a 2012 payment plan with the ATO the applicant was required to make back tax instalment payments on time and keep up to date with all other tax obligations. However, despite a reported net income in the same period of $700,000 ($1.727m - $671,000 tax credits and $300,000 in business costs), his account had risen from nil to $177,000 (Business Activity Statement) (BAS) and nil to $304,000 (ICP) in the two year period to September 2014;
- on his own figures, the applicant spent $150,000 (the Association says it was closer to $300,000) servicing loans on the family home and investments owned by his wife during the same period and otherwise disposed of the income found to be “excess” to requirements” apparently on “mainly purely discretionary expenditure”;
- he was not forthright in disclosing that the two unencumbered household Mercedes Benzes were traded in on a new one in mid-2014 (when the tax debt was $168,000) under a lease but initially misrepresented the transaction as a way to “assist cash flow and to ensure that my tax obligations were paid”;
- his complaint about having cash flow problems in the 2013 and 2014 financial years is at odds with a declared taxable income of $543,305 and $504,664 respectively in that period;
- there are significant unexplained credit card purchases in 2013 and AMEX was a major unsecured creditor in the 2014 bankruptcy;
- the ATO proved a tax debt of $545,000 in the 2014 bankruptcy; that is, $155,000 less than the total net income earned in the previous two financial years, which is suggestive of a “reckless disregard for… obligation to pay… taxation so as to amount to an intention to avoid tax or alternatively indifference as to (their) discharge”.
- Thus, in the Association’s eyes, the applicant’s relevant fault was, at worst, implied tax avoidance and, at best, putting self-interest ahead of his conflicting civic duty.
The applicant’s answer
- The applicant says in reply that:
- like most other married couples, his family income was pooled to meet household expenses, including substantial and investment loans;
- as explained in a letter to the Association dated 20 April 2013, the tax and mortgage liabilities were charged to the AMEX card and pointed out that there is nothing sinister in the car sales. He never said that all the proceeds of the sale of the cars in mid-2014 to pay his tax bill. They were used for that purpose only to the extent that they reduced the AMEX debt;
- the NAB loans were a legitimate household liability even though he did not have any equity in the mortgaged properties;
- the default was not triggered by a failure to lodge or deliberate deferent or avoidance strategy;
- the tax problem stems from delayed or non-payment of professional fees and the inability to comply from late 2014 was not due to recklessness but “rather to circumstances related to (loss of work) and the consequent reduction in income”;
- it is misleading for the Association to suggest that the running debit balance of his ATO integrated client amount did not steadily rise unabated from nil in 2012 to a total of $480,000 at the bankruptcy date because it had actually decreased overall (with interest and adjustments) from $358,400 to $304,860 between 2012 – 2014;
- the income tax debt was reduced by $65,706 between the end of August 2012 and 21 July 2013 before later rising in the same month to approximately $205,000 due to tax assessments ($20,000 GST + $185,000 PAY). From the end of July 2013 and 1 September 2014, GST of $170,300 was incurred and $74,490 was paid;
- the proximate cause of the 2014 bankruptcy was the “severe” income damage due to the “disgraceful behaviour” of a former briefing solicitor in ceasing to give him work in 2014 after 16 years of being a mainstay. But for this unexpected, unpredictable and uncontrollable eventuality, “the ATO would have been paid in full”;
- paying tax liabilities from likely future income based on historical work and income levels and sources was an acceptable commercial risk, not a character flaw;
- when it became evident that the 2012 repayment arrangement with the ATO could not be abided by and the ATO rejected the Part X proposal, bankruptcy was the only lawful option;
- the catalyst for the 2006 bankruptcy – now more than ten years ago – was the arbitrated property division after his first divorce which left him with 37.5% of a $1.6m pool consisting of work in progress and superannuation but without any realisable assets and no collateral for securing to borrow against to pay his $325,000 tax debt; and
- the material is not reasonably capable of supporting an inference of reckless disregard, intentional avoidance or indifference to tax obligations being faithfully met under payment plan resulting in a reduction of $670,940.
Insolvency and professional standards
- Insolvency is no doubt capable of being a disciplinary breach and, in more serious cases, professional misconduct. It is fair to say that conviction of a tax offence of itself will often suffice to establish a barrister’s unfitness to practice.
- Thus, it is, prima facie, inappropriate, in most, if not all cases, for an undischarged bankrupt to hold an unconditional practising certificate, even when there is no dishonesty or misconduct involved, but not every bankruptcy (including more than one) during a long professional career necessarily (or even commonly) justifies exclusion on a temporary or permanent basis from earning a living in a chosen profession.
- The question as to whether and to what extent tax avoidance, evasion or non-compliance impacts upon a lawyer’s fitness to practise and warrants cancellation or suspension of a practising certificate all depends on whether the events surrounding the bankruptcy “place a cloud over a lawyer’s honesty or integrity” and must be evaluated in the context of the reasons for, as well as the nature and gravity of, the transgression.
- Isaacs J described a suitability inquiry as being entirely protective and prospective in Incorporated Law Institute of New South Wales v Meagher. His Honour said it required satisfaction that the person was “worthy of public confidence” and was able to demonstrate their “reliability for the future”.
- The key factors identified by the Victorian Civil and Administrative Tribunal (VCAT) in Legal Services Commissioner v Stirling (Stirling) bearing directly upon the professional consequences of tax-related misconduct can be summarised as:
- (a)the public’s right to expect a high level of integrity from legal practitioners;
- (b)the unacceptable double standard in purporting to practice in and uphold the law, while at the same time breaching taxation laws; while taking advantage of the full range of public services made available by taxation, not least in funding the court system itself, while defying the civic responsibility to pay a fair share of tax, is the height of hypocrisy;
- (c)effectively shifting the taxation burden onto fellow citizens while earning a high income is unquestionably unbecoming of a barrister fit to practise law;
- (d)persistent understating of taxable income is no less serious than defrauding a client outright;
- (e)significant and prolonged dishonesty for personal gain in tax matters is a serious character flaw beyond mere shoddiness or laxity;
- (f)trustworthiness is a necessary attribute of a lawyer worthy of the title. Moral failure not directly connected to legal work but closely related to earning income (such as not filing annual tax returns) is suggestive of an inability to self-regulate and do the right thing when there is no one there but yourself to get you do to do it and may point to unsuitable professional and personal attributes or deficiencies manifestly incompatible with fitness to practice law;
- (g)failure to lodge tax returns for many years that would have disclosed high professional earnings is more serious than not paying tax when assessed and is an excusable pattern of professional misconduct likely to bring the legal system into disrepute and weaken community confidence in the profession’s ability to play a central role in administering justice according to law;
- (h)a systemic and prolonged course of non-compliant conduct is particularly egregious because it conceals the practitioner’s existence and collectable income from the tax authorities;
- (i)hiding ongoing taxation defaults is a sign of moral failure;
- (k)personal and emotional upheaval or poor health are relevant mitigations, but will not displace an inference of intentional avoidance where the level of non-compliance was high and the duration long.
- (l)addiction, depression, personal circumstances, efforts to maximise reduction of tax debt and any adverse effect of cancelling or substantially suspending the practising certificate on creditors, family, staff, is a necessary consequence of an appropriate sanction.
- Thus, a tax-related bankruptcy goes to professional character and integrity because it usually involves a deliberate or reckless disregard of legal and civic obligations, dishonesty, hypocrisy, lack of commitment or discipline in tax affairs, un-cooperation, wastage, broken promises, squandered earnings, disregard of creditors rights and irregularity or illegality.
- Personal circumstances which give rise to an intermittent inability to meet taxation obligations are unlikely to fully mitigate a prolonged period of not lodging tax returns. However, if the failure to pay tax can be attributed to an event largely beyond the control of the legal practitioner, such as being found liable for huge and wholly unforeseeable debt to some third party or illness or catastrophic loss of earnings, liability can be extenuated to a significant degree.
- An intention to evade tax is less likely to be inferred where a barrister has not enjoyed an excessive lifestyle, has used the money to support his children, demonstrated an inability to properly manage his affairs and has breached his tax obligations for a relatively short period.
- On the other hand, high income combined with insignificant realisable assets, extravagant living and corresponding growth in accumulated taxation liabilities will require very exceptional circumstances to avoid loss of practicing rights for a substantial period, if not permanently.
- Although a barrister who repeatedly fails to meet the obligations specifically over a long period or in a significant amount will often not be fit to hold a practising certificate there are always exceptions.
- A series of tribunal and appellate decisions in other jurisdictions (especially New South Wales) provide some helpful examples of how these principles apply in practice.
- In Stirling itself a barrister’s practising certificate was suspended for three years for admitted professional misconduct justifying a finding of unfitness comprising conviction of a tax offence failure to lodge tax returns for eight years, BAS for five or pay tax for nine. There were no extenuating circumstances, a lavish lifestyle, squandered earnings on gambling and speculation leading to bankruptcy, failure to cooperate with the regulatory body, no explanation of non-complying conduct, substantial reduction of original tax debt of $713,000 but ongoing tax problems.
- The respondent in Stirling, while having adequate resources to meet them, avoidance of his tax obligations was held to show that he was not a fit and proper person for legal practice while he engaged in that conduct but VCAT’s focus was on his fitness at the date of hearing rather than at the time of the past misconduct.
- In Legal Practitioner Complaints Committee v Pillay (Pillay), a barrister admitted that his failure to lodge income tax returns for 6 years and to pay income tax for about 8 years was unprofessional conduct. In determining penalty, the tribunal accepted that the barrister had suffered, at least initially, from chronic post-traumatic stress following the death of his child soon after birth. While this provided a partial explanation for the initial default had occurred, it did not excuse his continuing default. He had, however, complied with his tax obligations for an extended period before the death of his son; had not led a lavish lifestyle; and had not deliberately set out to avoid his taxation obligations.
- Nevertheless, the barrister’s practising certificate was suspended for one year to reinforce the need to meet professional standards and to protect the public.
- In Re: Read (Read), a solicitor’s bankruptcy due to a failure to pay $162,000 in tax for ten years was complicated by a range of personal stressors including a divorce, medical and work problems, her husband’s long term drug addiction, a car accident, a miscarriage and her son’s social and learning difficulties. She lacked the skills needed to cope with the financial and administrative demands of practice. Also, she agreed to pay off substantial debts incurred by her first husband as part of the property settlement in 1994. The South Australian Supreme Court allowed the solicitor to continue to practice on conditions.
- In New South Wales Bar Association v Young (Young), a highly-regarded practitioner was struck off for demonstrated lack of integrity in failing to lodge tax returns for 16 years and pay tax for 20 years, despite a record of altruism and generosity to others, a personal life marred by two failed marriages and the tragic death of a child, no sign of a lavish lifestyle or accumulated wealth and impressive testimonials.
- In Legal Services Commissioner v Testart (Testart), a lawyer was found guilty of “misconduct” under the old Victorian legal profession legislation for having deliberately paid $90,000+ to his de facto partner while bankrupt even though he had no hope of meeting his financial commitments to the ATO in any event and it was a “one off” situation where his partner needed urgent financial assistance.
- Although not directly connected with practice, his actions were held to be “…likely to jeopardise the reputation and standing of the legal profession” and “…would be reasonably regarded as disgraceful or dishonourable by members of the profession who are of good repute and competency” so as to “justify a finding that he is not of good character or is otherwise unsuited to engage in legal practice”.
- In Wardell, the Court considered the situation of a barrister who had become bankrupt on his own petition following rejection by his creditors (the largest of which was the ATO) of a proposal to enter a scheme, being unable to pay his tax over approximately 11 years although he had regularly lodged tax returns, but often late. He had not committed any offence in relation to the lodgment of tax returns. It was also accepted that he was otherwise a highly respected, successful and competent barrister. Cripps AJ characterised the barrister as:
“...a person who was able to pay his debts but who elected instead to spend money, over a long period of time, on what has been described as ‘discretionary lifestyle pursuits instead of paying tax’.”
- There was no evidence that the practitioner had made a conscious decision to never pay tax but he was found to have shown a reckless disregard for his taxation obligation by spending money, knowing that if he did so he would not be able to meet his obligations, so as to amount to an intention to avoid them. The barrister’s practising certificate was cancelled.
- Moffitt P was also concerned with when past misconduct was capable of demonstrating current unfitness to practice in Johns v Law Society of New South Wales. His Honour explained that the substance of the question is whether it appears that there is material before the court to lead it to conclude that the past proved unfitness has been changed to fitness. The ultimate onus is on the Law Society, but where there is admitted professional misconduct and a claim of rehabilitation or of fitness replacing unfitness, the court will look to what evidence there is to establish this change and will expect the practitioner to point to the evidence of improvement.
- In New South Wales Bar Association v Murphy, (Murphy) a barrister’s practising certificate was cancelled by the Bar Association because, for more than ten years, he had spent his money on himself instead of paying all his tax and then gone bankrupt. The barrister had an accumulated unpaid tax debt of $195,500 as at December 1998, and owed the ATO $315,000 when he filed a creditor’s petition in 2000. He had two children in private boarding schools, paid $5,000 a month to his former wife for maintenance of his daughter, lived in rented accommodation in modest circumstances, did not have any assets and still drove the same 1988 motor vehicle. He admitted spending his disposable income on activities he chose instead of paying tax. He owned a kindergarten business that “traded marginally” and had to mortgage the land it was on when he divorced in the mid-1980s. Acting on bad tax advice, he delayed filing tax returns from 1990 to postpone tax assessments, but was found to have honestly (but mistakenly) believed that he could trade out of his difficulties. By mid-1995, however, his only hope of paying the accrued tax liability was from the sale of the kindergarten and legal practice, which he did in 1998, for a total of $260,000 – which went entirely on sale expenses and bank liabilities and had no capacity to reduce his tax debt.
- The statutory test was – as here – whether his bankruptcy was due to circumstances showing a lack of fitness.
- Giles JA (with whom Spigelman CJ and Ipp AJA agreed) pointed out that the Association had to be positively persuaded that the circumstances showed unfitness. An even balance means they do not “show what must be shown”.
- His Honour noted that the outcome turns on the facts and that fitness is assessed against the high standards required because of the trust-based relationship between lawyers, the court, their clients and other lawyers, as well as the need for public confidence that practitioners will properly perform the functions involved in the administration of justice.
- Notably, in considering whether the circumstances of Murphy’s bankruptcy demonstrated unfitness, Giles JA said:
- The appellant (Bar Association) submitted that over a period of many years the respondent had “failed to address in any significant way” his taxation obligations. It submitted that the taxation obligations were of a special kind, in that as a self-employed person the respondent received income out of which he had to pay tax and so was particularly required to ensure timely payment of tax. Taxation obligations are effectively imposed, not voluntarily undertaken. Many other financial obligations, though not all, are in reality imposed, as a necessity of modern life. Although the payment of tax in obedience to the taxation laws involves both legal and civic duties, see New South Wales Bar Association v Cummins, so also a good citizen meets other financial obligations, those voluntarily undertaken as well as those in reality imposed. I do not see why taxation obligations should be given special significance, and to do so would be likely to lead to an uncertain hierarchy (are rates on a par with tax, is a gambling debt less significant than the rent?). A legal practitioner who spends all his or her money on self-indulgent high living, in disregard of ordinary commercial obligations, may be just as much (or as little) deserving of criticism as a legal practitioner who prefers ordinary commercial obligations over taxation obligations. But criticism is really not the point. The point is what the conduct shows of the legal practitioner's fitness to hold a practising certificate.
- The respondent did not meet his taxation obligations. But it is necessary to ask why he did not meet them, and what was done and could have been done about addressing them.
- The appellant's submissions came down to failure to address taxation obligations in three respects. First, the respondent had failed properly to manage his finances to provide for payment of tax, and provisional tax, ahead of the assessments in the early 1990’s. Secondly, the respondent had failed to pay more after the assessments were made. Thirdly, and perhaps inconsistently, the respondent had failed to go bankrupt in 1993 when his position became hopeless. All this, in the appellant's submission, was while the respondent had paid other creditors and discharged other debts (for example the debt to the bank).
- The respondent consciously delayed lodgement of his 1990 tax return. There may be some sophistry in the respondent's explanation that keeping himself out of a potential problem was not a positive benefit, but it was found that he did so because he was badly advised. There was in a sense disregard of taxation obligations, in that it was known that the tax return should be filed and, albeit in reliance on the bad advice, it was thought that the financial consequences would be less of a problem than if the return was filed when it should be filed.
- There was further delay in filing the 1989, 1990 and 1991 tax returns because of the accountant's default. Although not expressly, it was found that the respondent had endeavoured to have his accountant act more promptly.
- There were no specific findings on failure to put aside money from the higher income of the 1990 taxation year to meet anticipated tax and provisional tax by reason of that higher income. However, the findings were not consistent with use of the money beyond ordinary living expenses, including the payments in respect of the respondent's children. Implicit in the findings was that the respondent simply failed in foresight.
- The determination is of fitness to hold a practising certificate at the time of the determination — s 38FC(1)(b) refers to circumstances that show that the applicant or holder is not a fit and proper person to hold a practising certificate. McClellan J accepted as genuine the respondent's acknowledgment that he was wrong to delay lodgement of his taxation returns and that he should have addressed his problems at an earlier time. If the respondent were to be judged unfit to hold a practising certificate, it would be because his failings so reflected upon his ability to act in the affairs of his clients that protection of the public warranted cancellation of his practising certificate.
- I do not think that they do. In my judgment the circumstances as found do not reveal such deficiency in character or competence as a legal practitioner that the respondent is not fit to practise as a barrister. On the facts of this case, plainly very different from those of cases such as New South Wales Bar Association v Cummins and New South Wales Bar Association v Somosi, the statutory test has not been fulfilled.
- In this jurisdiction, a barrister with 30 years’ experience was found guilty of professional misconduct for 12 tax offences over 19 years in Legal Services Commissioner v Lee (Lee). His non-compliance with his tax obligations was due to a number of factors including the onset of the global financial crisis, family, business and health problems, involvement in public and charitable activities and receiving bad service from an accountant. However, these were not regarded as “satisfactory exculpatory explanation” for the:
“…hypocrisy of lawyers putting themselves in a position, as legal practitioners, in which they advocated that other people should perform their legal obligations while systematically failing to perform their own.”
- In light of his historical failures to file returns, the tribunal also rejected as “disingenuous” his attempts to:
“…blame others for what is, ultimately, an important personal and civic obligation for which a legal practitioner must assume a high level of personal responsibility.”
- The practitioner was publicly reprimanded, required to pay costs and a pecuniary penalty of $5,000, and the burden of existing conditions were imposed on his practising certificate was extended for another three years. Although the indiscretions in Lee were much more serious than the applicant’s, there was surprisingly very little discussion about his rights to a practising certificate being removed.
Does the applicant meet the “fit and proper” test?
- Despite some deficiencies and doubts about its reliability and candour, the picture that emerges from the available information is sufficiently clear for me to decide the application.
- The applicant has been in continuous practice as a barrister untarnished by any disciplinary blot for more than 30 years. His local practising certificate was renewed by the Association every year without condition since the inception of the “fit and proper” based regulatory scheme in 2001, including after the 2006 bankruptcy.
- It is to his credit that the fairly onerous demands of the 2012 ATO payment arrangement to pay off $221,500 tax debt by regular instalments as well as keeping abreast of ongoing tax liabilities were satisfactorily honoured until late 2014 and that, overall, the evidence suggests that it would probably (although not certainly) have continued to be but for the unexpected and drastic loss of work.
- The position in which the applicant finds himself is not due to any deliberate tax avoidance intent or strategy but a combination of poor financial management practices, muddled priorities, competing demands, a temporary moral lapse, a lack of judgment and personal discipline, the assumption of risks based on past income levels projected overly optimistically into an uncertain future and an unexpected but perhaps foreseeable downturn in fees due to the loss of a regular and longstanding source of briefs.
- Though arguably reasonably capable of being interpreted as reckless disregard of the obligations, I think that overall the applicant has shown cause why a less jaundiced view of his conduct and the circumstances of his bankruptcy is warranted. The totality of the available evidence does not support an irresistible inference that the applicant intentionally shirked his taxation obligations but certainly did not give them the attention or ranking he should have.
- Admittedly, there is more than a little hypocrisy in the applicant’s predicament and he has a tendency to blame external events for his own shortcomings but I do not think these failures warrant the applicant’s exclusion from the only profession he has ever practiced when there is no proven misconduct or act of dishonesty.
- The applicant plainly preferred to spend money from professional earnings on maintaining household living standards instead of adjusting them to cater for changed circumstances and fully meet taxation liabilities as a matter of priority. He was also slow and not completely candid in responding to the Association’s legitimate requests reflecting for relevant information and put a more favourable spin on some circumstances (such as the sale of the two Mercedes Benzes) than they could genuinely bear.
- The applicant may not have acted disreputably but to describe his actions as disgraceful or dishonourable would, in my view, be an exaggeration.
- Other factors I have weighed in the balance in assessing the applicant’s current fitness:
- the size of the tax debt, which was a substantial one that could and should have been avoided by better financial management and discipline;
- the unsuitable adverse effect of the bankruptcy on institutional public creditors;
- neither dishonesty, nor prolonged lack of probity, nor flagrant disregard is demonstrated;
- no demonstrated (as distinct from suspected) extravagance or self-indulgence but clear evidence of putting self-interest ahead of competing public and professional duties.
- While Wardell is the most comparable of the decided cases, it does not compel discretionary cancellation of the applicant’s practising certificate. The default in that case was over 11 years and his expenditures out of money he should have used to pay tax were of an entirely different character to the applicant’s.
- As Giles JA pointed out in Murphy, the most important consideration when a barrister fails to fully discharge taxation liabilities is why they did not do so and what was (and what would have been) done about addressing them but wasn’t. Here, as there, the applicant failed to put aside enough money from higher earnings to meet accumulated and anticipated tax obligations but it cannot be inferred that the evidence he used was surplus beyond ordinary family living expenses, including mortgage payments.
- Overall, the applicant’s failings do not reflect on his character or competence as a barrister to the substantial degree required to find him unfit for practice and the protection of the public and maintenance of community confidence in the profession do not demand cancellation of his practising certificate.
- Like all humanity, barristers are imperfect creatures and prone to error. They are, however, usually after much more to society than the worst thing they have ever done. There is no reason to think that the applicant will let down his clients, the profession, the system or the community if he is given another chance to show his true character and value.
- What indications there are point more towards, rather than any way from, probable compliance with future tax obligations than default because the catalysts for the applicant’s past bankruptcies are not likely to conspire against him again in the same way and that he can be trusted to properly carry out the inherent requirements of legal practice and satisfactorily meet the standards of probity and integrity the system, the profession and the community are entitled to expect of him as a senior barrister.
- To put it more positively, I am reasonably satisfied that the applicant is fit and proper, or suitable, to continue to hold a local practising certificate into the predictable future despite his tax history, and that the Association is ordered to grant him one for the current year on condition that the applicant:
- direct his trustee in bankruptcy to report on his financial affairs to the Chief Executive of the Association within three months of the grant of his practising certificate and then on an annual basis until the applicant’s bankruptcy is discharged.
- direct his firm of accountants to advise the Chief Executive Officer of the Queensland Bar Association if it is of the opinion that the applicant may not be able to comply with all his taxation obligations and the reasons for that opinion; and
- complete five hours of continuing professional development focused on tax accounting and management in addition to his minimum annual continuing professional development obligations.
 Legal Profession Act 2007 (Qld) (LPA) ss 69(3)(b), 33(2); Queensland Civil and Administrative Tribunal Act 2009 (Qld) (QCAT Act) s 18.
 QCAT Act s 20.
 Ibid s 19(b).
 LPA s 3(a).
 Ibid s 21(a).
 Ibid ss 24(1),30,31.
 Ibid s 27(1).
 Ibid s 24(1).
 Ibid ss 45, 49(1), 52.
 Ibid ss 51(5),60.
 Ibid s 31(1).
 Ibid s 9(1)(a).
 Re Joseph Sleiman and Australian Securities Investments Commission  AATA 1383 , citing Re Wolstonecroft and Companies Auditors and Liquidators Disciplinary Board (1998) 54 ALD 773, 785 -.
 Doolan v Legal Practitioners Admissions Board  QCAT 98 .
  VR 695.
 Ibid, 702.
 LPA s 9(1)(a).
 Cf LPA s 9(1)(m); which may be taken as encompassing probity, honesty, moral integrity, consistency, candour, dedication to duty, diligence, prudence, trustworthiness, sound judgement, practical wisdom and self-discipline – see Doolan v Legal Practitioners Admissions Board  QCAT 98.
 (1957) 97 CLR 279.
  NSWSC 548.
  NSWCA 284.
 QCAT Act s 24.
 LPA s 420(1)(d).
 (1909) 9 CLR 655, 681.
  VCAT 347 .
 New South Wales Bar Association v Hammann (1999) 217 ALR 553  (Mason P).
 Re: a Practitioner (1984) 36 SASR 590  (King CJ).
 Ibid .
 New South Wales Bar Association v Cummins (2001) 52 NSWLR 279.
 Stirling .
 New South Wales Bar Association v Somosi (2001) NSWCA 285.
 New South Wales Bar Association v Stevens (2003) NSWCA 261 .
 Stirling .
 New South Wales Bar Association v Somosi (2001) NSWCA 285 -.
 (2006) 46 SR (WA) 39.
  SASC 35.
 (2003) 54 ATR 22.
 cf Davison v Council of New South Wales Bar Association (2007) 69 ATR 402, where a barrister failed to lodge and pay tax for 16 years as part of a deliberate strategy, lived extravagantly, suffered mental problems, business failure and his son’s suicide.
  VCAT 2234.
 at .
 at .
 at .
 at .
 Citing Mason P in New South Wales Bar Association v Hammann (1999) 217 ALR 553.
 at .
  NSWSC 548.
  2 NSWLR 1.
 (2002) 55 NSWLR 23.
 at .
 at .
  QCAT 447.
 at .
 at  citing New South Wales Bar Association v Somosi (2001) NSWCA 285 (Spigelman CJ).
 at .
 Murphy at .
- Published Case Name:
Pope v Bar Association of Queensland
- Shortened Case Name:
Pope v Bar Association of Queensland
 QCAT 311
23 Aug 2016