Case P3

Judges: HP Stevens Ch
JR Harrowell M

BR Pape M

Court:
No. 1 Board of Review

Judgment date: 5 February 1982.

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B.R. Pape (Member)

Unless otherwise stated I have adopted the findings of fact of the Chairman, Mr. H.P. Stevens.

2. In my opinion the crux of the issue is whether there was a retirement from or termination of any office or employment by the taxpayer on 3 March 1978. Section 26(d) of the Assessment Act, so far as is relevant provides as follows:

``The assessable income of a taxpayer shall include five per centum of the capital amount of any allowance, gratuity or compensation where that amount is paid in a lump sum in consequence of retirement from, or the termination of any office or employment, and whether so paid voluntarily, by agreement or by compulsion of law...''

3. The taxpayer's evidence was that from 22 April 1976 he was employed until 3 March 1978 (hereinafter the first period of employment) by a statutory corporation which was established pursuant to a Commonwealth (the Act). Pursuant to this Act the corporation was authorised to ``appoint as officers and engage as employees such persons as it thinks necessary for the purposes of the Act''. This Act also provides that ``the terms and conditions of employment of officers and employees are such as are determined by the corporation with the approval of the Public Service Board ''. Accordingly it would appear that the corporation had a statutory relationship with the Public Service Board.

4. The staff rules which set out the terms and conditions of employment of officers and employees were tendered in evidence. They were not the staff rules of the corporation as such but were the staff rules of another statutory corporation which had been adopted by the corporation.

5. It is clear that both the Act and the Public Service Act 1922 draw a distinction between an officer and an employee. The distinction appears to be that officers are appointed to an office created by the Governor-General vide sec. 29 Public Service Act 1922 whereas employees are persons employed to provide temporary assistance to Departments. Section 7(1) of the Public Service Act defines ``officer'' and ``employee'' as follows:

```Officers'means a person appointed or transferred to the Service, whether before or after the commencement of this Act, but does not include an employee.

`Employee' means a person employed under Division 10 of Part III ss. 82-82B.''

Section 82(1A) provides that a Chief Officer of a Department may employ persons in a temporary capacity in the Department.

Notwithstanding the fact that both the Act and the Public Service Act draw a distinction between an officer and an employee, this distinction goes in my opinion only to the function which each performs and to the terms of tenure. I am of the opinion that the corporation is a servant of the Crown because of the degree of control which the Crown through its Minister can exercise over it: see
Bank voor Handel en Scheepvaart N.V. v. Administrator of Hungarian Property (1954) A.C. 584 per Lord Reid at p. 616. For example the corporation must not acquire or dispose of property in excess of $100,000 or enter into any agreement for the provision of services to the corporation in excess of $100,000, nor enter into a lease of land for a period exceeding ten years without the approval of the Minister. Whilst it is not a public authority for the purposes of the Income Tax Assessment Act , it seems that because of the substantial degree of control exercised by the Minister, it is a servant of the Crown. Accordingly I am of the opinion

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that the corporation's servants are also servants of the Crown. Both are employees in common law of the Public Service Board and the corporation respectively. It would appear that the relationship between the Crown and its civil servants at common law is contractual
Carey v. The Commonwealth (1921-22) 30 C.L.R. 132 per Higgins J. at p.137.

6. In the case of an ``officer'' he is appointed by the corporation to hold an office, whereas an ``employee'' does not hold an office. Buckley L.J. said in
Edwards (Inspector of Taxes) v. Clinch (1980) 3 All E.R.278 at p.281 :

``An `office' in this context is, in my opinion, a post which can be recognised as existing, whether it be occupied for the time being or vacant, and which, if occupied, does not owe its existence in any way to the identity of the incumbent or his appointment to the post. It follows, I think, that the office must owe its existence to some constituent instrument, whether it be a charter, statute, declaration of trust, contract (other than a contract of personal service) or instrument of some other kind. It also follows, in my view, that the office must have a sufficient degree of continuance to admit of its being held by successive incumbents; it need not be capable of permanent or prolonged or indefinite existence, but it cannot be limited to the tenure of one man, for if it were so it would lack that independent existence which to my mind the word `office' imports. It may be that it should in some degree possess a public character, but it is unnecessary to decide that point in this case, for the taxpayer's functions in respect of which the fees were received undoubtedly had such a character.''

There is no evidence before the Board which conclusively shows that the taxpayer held an office during the ``first period of employment'' or for that matter during the ``second period of employment'' which purported to commence on 16 March 1978. In fact the evidence is to the contrary as for the first period of employment the offer of employment specified that he was being engaged as an employee, albeit that his remuneration and status was that of a senior technical officer grade 3. So far as the second period of employment was concerned, it appears from the letter of 14 November 1977 that the offer of re-engagement was as an employee and not an appointment as an officer to an office. In other words, the taxpayer had entered into an executory contract of service with the corporation when he communicated his acceptance of the offer by his letter dated 14 November 1977.

7. At the time when the offer of re-engagement was made to the taxpayer no reference was made to a starting date. In fact the only reference to a starting date appears to have been in February or March 1978. Accordingly it is clear that the taxpayer and the corporation were in agreement that he would continue working on the project until it was completed and thereafter he would move interstate to take up his new position.

8. A test for determining whether there has been a retirement from or the termination of any office or employment was enunciated by Mr. Nimmo (as he then was) in Case C103
(1953) 3 T.B.R.D. 602 . This test has been followed consistently by Boards of Review see Case B19,
70 ATC 88 ; Case N21,
81 ATC 124 . It is that in order to establish for the purposes of sec. 26(d) that there has been a retirement of a taxpayer from an office or employment it is necessary to prove:

• (a) that the taxpayer has in fact relinquished his office or employment, and
• (b) that at the time he relinquished it he had no intention of ever resuming it.

9. I am of the opinion that the taxpayer fails to satisfy this test because at the time the corporation purported to terminate his employment on 3 March 1978 both parties had the explicit intention that it would be resumed again on 16 March 1978. Accordingly I find that there was no termination of employment by the taxpayer on 3 March 1978. Termination in this section means, in my view, termination of all contracts of employment, see Case N11
(1962) 13 T.B.R.D. 33 where at p. 40 Mr. Webb and Mr. Daymond said:

``Neither termination of, nor retirement from, employment in this context means termination of, or retirement from, a particular contractual relationship, but

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termination of, or retirement from, employment in the sense of all contractual employee/employer relationships previously subsisting.''

10. The observation of Gibbs J. (as he then was) in
Reseck v. F.C. of T. 75 ATC 4213 are in my view relevant to this reference. He said at p. 4216:

``The question in the present case is whether the amounts received by the taxpayer were allowances of the kind described in sec. 26(d). This matter was referred to the Supreme Court of Queensland by way of a case stated by a Board of Review and according to the facts so stated the employment of the taxpayer was terminated by his employer on 24th September 1971, he recommenced work for the same employer (although in a different district) on 27th September 1971 and his employment was again terminated on 11th February 1972. In most cases in which a workman ceased his employment on a Friday and commenced employment again with the same employer on the following Monday it would be impossible to say that his employment had ever been terminated. If there were a contract agreement or arrangement whereby the employment of the workman was terminated and recommenced it would no doubt be possible to invoke the provisions of sec. 260 of the Act, but even without the aid of that section in many cases when all the facts had been regarded the proper conclusion to be drawn would be that there had been no termination of the workman's employment at all. I of course do not cast any doubt on the correctness of the finding of the Board of Review in the present case, but I do think it necessary to emphasize that we have before us an unchallenged finding by the Board and that it is not open to us to hold that the services of the taxpayer were not terminated. Accordingly, our decision cannot be regarded as authority for holding in similar circumstances that there was a termination of the employment of the taxpayer.''

The last sentence of the above passage would in my view seem to indicate that the Court may not agree with this finding of fact should a similar case be argued before it.

11. As there was no evidence that the taxpayer held an office from 16 March 1978, it is unnecessary for me to decide whether such an appointment constituted something different than a resumption of the employer/employee relationship. However, I am of the opinion that if the taxpayer had been appointed to an office, a condition of such an appointment is that he be an employee of the corporation. In other words the holding of the office co-exists with the employer/employee relationship. In this respect I may find myself reaching a different conclusion to the one reached by the Board in Case J45
(1958) 9 T.B.R.D. 236 .

12. Accordingly for the above reasons I would uphold the Commissioner's decision and confirm the assessment.

Claim disallowed