Background
In the case of “Kishore v Tax Practitioners Board [2016] AATA 764” Mr Kishore became the registered tax agent on 7th March 2011, at the time of working for his employer, Charltons CJC Pty Ltd. The company provided accounting and tax agent services for the clients. In this case, seven preliminary questions originating from the decisions of the board defined that Mr Kishore considered his behaviour in respect of his departure from Charlton’s as not the kind of behaviour that the board must unease itself with. Under the Code of Professional Conduct specified under Part 3 of the Act, the tax agents are compulsory required to be acting honestly and with integrity.
Following the hearing of preliminary oral submission, the suitable way of approaching resolution relating to the dispute between the parties was for the Tribunal to address a series of threshold questions that was communicated by the parties and accepted by the tribunal as the central issue to the dispute.
According to the “section 2-5 of the Act” it is necessary for the tax agent to make sure that the tax agent services are provided to people which is in compliance with the correct standards of the professional and ethical conduct. This code should be attained by forming a national board for the registration of tax agents, financial tax advisers and BAS agents. The code of professional conduct states that the tax agents are required to act with honesty and with integrity and should comply with the regulations relating to taxation while directing personal affairs. The operation of code requires the tax agent to act lawfully in the best interest of the party. The Act requires the agent to have a relevant arrangement in place to manage the conflict of interest which might originate in respect to the activities, they undertake in capacity of registered tax agent.
The act specially requires the agent to have a legal duty where they should not reveal any information related to the affairs of the third party without the permission of client. In the written submission on the preliminary questions, the taxation board specified that it remains dependent on the totality of the conduct engaged by Mr Kishore as explained and characterised in the five judgement by the New South Wales supreme court.
The submission of the court continued by stating that the findings in relation to the Applicant’s conduct based on which the board and supreme court remain dependent on the situation of conduct that occurred and the characterisation of conduct. Most importantly, the defendants have admitted that the majority of the conduct based on which the plaintiff complained and the dispute among the concerned parties was preliminary directed for obtaining relief. Mr Kishore submits by stating that the board must not be permitted to remain dependent on the matters, factors and situations in detail based on the written submission of the board to the extent that they do not reflect either the statement of notification letter or the facts that was stated by the board in the statement of issues, facts and contentions of the respondents filed to the tribunal.
Preliminary hearing
The decision of the board stated that Mr Kishore had breached the “subsection 30-10 (1)” of the Act by failing to act honestly and with integrity towards his previous employer Chartons CJC Pty Ltd. The submission of Mr Kishore was rejected since it attempted to confine the Board in the notification letter. The judgement of board stated that Mr Kishore breached the contract of employment when he failed to adhere with the lawful restriction of trade clause and failed to comply with the contractual duty of reliability. There was also the breach of fiduciary responsibility of faithfulness with his employer and the conduct of Mr Kishore was characterised by fraudulence, falsification and manoeuvring.
The case evidently points out that Mr Kishore and his co-defendants were indulged in the strategy of deception in relation to the establishment of new business that effectively diverted Chartons of numerous business opportunity. The conduct of Mr Kishore and his co-defendant resulted in considerable loss to Chartons.
The primary submission of Mr Kishore is that “section 30-10 (1) of the Act” is recited in respect of object clause. According “section 2-5” and the definition of tax agent service under “section 90-5”, it requires the registered tax agent to act honestly and with the integrity in relation to provision of tax agent service. When the disputed conduct is not itself the provision of tax agent service, then there cannot be any breach in requirement of acting honestly and with integrity. It can be accepted that the numerous provisions of the act should be interpreted in order to further the objects of “section 2-5” but this does not imply that “section 30-10 (1)” must be read in the way Mr Kishore has submitted.
According to the Act, the code of professional conduct regulates the personal and professional conduct of the registered tax agent, financial advisers and BAS Agent. While interpreting the operative provision of the Act, the guide of “section 30-10” may be considered in determining the purpose or the underlying object of the provision. The guide may be considered in determining the meaning of provision by taking into the consideration the Act and its purpose of object of the provision. In noticing that the code regulates the personal and professional conduct for the registered tax agent, the guide clearly clarifies that the purpose or the object of “section 30-10 (1)” is to broadly uphold the standards in every aspects of the person’s conduct as the registered tax agent.
Code of Professional Conduct
The judgement follows that the extension of “section 30-10 (1)” is not confined in a manner contended by Mr Kishore. Given that it was confined in order to require honesty and integrity only in respect to the provision of the tax agent services, then one may anticipate that the remaining part of subsection of “section 30-10” to be similarly confined. This would have the impact of depriving the “subsection (2)”, by any meaning at all.
The code goes beyond the conduct taken in respect of provision of tax agent services which does not conflicts with the purpose of Act as given under section 2-5. By necessitating appropriate standards in every aspects of the person’s private and professional behaviour as the registered tax agent, the code evidently seeks to make sure that the services of tax agent are provided to the public in compliance with the relevant standards of the professional and ethical conduct.
The case highlights that the knowledge of Mr Kishore relating to tax laws and his competence as the accountant and tax consultant are not the main issue. The central issue is the conduct in which he indulged at the time of his departure from the Chartons, that amounts to failure in acting with honesty and integrity. The conduct in the examination correctly points out that Mr Kishore and his co-defendants were characterised by dishonesty, misrepresentation and intrigue. Mr Kishore and his co-defendants were involved in the strategy of deception in relation to forming a new business.
The counsel for the Application bought forward an argument that findings were the characterisation of conduct. The judgement noticed that Mr Kishore’s obligations under the clause 3.1 of his employment terms were to faithfully serve his employer and use his best endeavours for promoting the interest as well as welfare of his employer. The second judgement also records that in several instances Mr Kishore has admitted to have breached the obligations. As a matter of fact, the court found that Mr Kishore along with his co-defendants had, in the lead of their exit from Charltons rendered accounting services to the persons or entities that were not the current clients of the company. Furthermore, they did not bill those customers or entities on behalf of their employer and this efficiently diverted Chartons from the business opportunity.
Importantly, it was the act of determined and deliberate operation to cultivate the customers that would have else belonged to the Chartons. It is understood that the accountant may perform the work for the clients at no or reduced costs to build relation with the customer as Mr Charlton agreed. However, it is understood for the principal to take such decision for the benefit of his practice and another for the employee to take the steps for the benefit of his employer but for himself which was evidently found in several instances.
Conduct of Mr Kishore and Co-Defendants
The case of “Kishore v Tax Practitioners Board [2017]” held that Mr Kishore has put forward his interest ahead of his employer, despite the fact that he was bound to perform the opposite, not only based on his employment contract but also by his fiduciary responsibility of trustworthiness. The counsel for the Applicant has submitted that the case in supreme court against the Mr Kishore as well as his colleagues was related to the business case with damages awarded relating to breaching the contract obligations. As per the “section 30-15 (2) of the Act” it requires the tax agent to comply with the available sections. In the event of failure, the board or the tribunal upon review might caution the tax agent with the written consent. The act may provide the tax agent with the order under “section 30-20 of the Act” that would require them to complete with the course of education or training in order to restrain the services of tax agent.
In deciding upon the correctness of the sanction placed, the imposition of action is not for the purpose of punishing the agent but to protect the public and to maintain the adequate standard inside the industry regulations. A sanction might serve the purpose of personal deterrence or the general deterrence in order to promote compliance.
The situations that has originated in the case of Mr Kishore is not likely to be repeated again in future. The decision of the board however cannot be said as entirely correct. It should be borne in mind regarding the commercial reality of what has happened is that the principle of plaintiff in this case was approaching an end of his career while defendants were clearly not content with the treatment which they were receiving from Mr Charlton and wanted to start once again. They must not have breached their covenants but one should understand the commercial imperative that resulted in situation that unfolded recently.
Another important point is that none of the clients of Charlton and no client of Intuitive suffered any kind of financial losses based on the consequence of Mr Kishore’s conduct. Mr Kishore has the flawless professional history. Weighing to certain extent against the Mr Kishore, are his attempt in the two letters to the board so that he can downplay his involvement in the overall conduct towards Charltons and to contest the adverse factual findings which was made against him. There is only little to justify that Mr Kishore taking any of the position however, he has explained in his oral evidence that he was under the significant stress not only due to the lawful proceedings that was taken against him but also from the demise of his brother.
Conclusion:
On a conclusive note, it was appropriate for the board to impose sanction but it would have been better if a written caution under “section 30-15 (2) (a)” of the act was given to Mr Kishore. The receipt of such caution would have altogether with the ordeal of having endured the review proceeding would serve as the adequate reminder to Mr Kishore regarding his obligation under the code.
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