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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H.P. Stevens (Chairman)

The question for decision in this case is whether sec. 26(d) operates in respect of a lump sum ($2,318) received on ``termination'' of employment with the taxpayer's employer - that employer having agreed to his reappointment prior to the date of ``termination''.

2. Evidence was given by both the taxpayer and the business manager of his employer. With one possible exception there is no conflict in their testimony.

3. For many years the taxpayer was employed by an authority and was transferred to the service of a corporation as from 14 January 1971. By ministerial decision of 3 May 1971 he was deemed to be an employee within the meaning of sec. 4 of the Superannuation Act and he elected to contribute at a rate based on a retiring age of 60 years. In 1973, whilst located in State Y, he was selected as senior inspector for a project in another State X - his assignment being ``for the duration of the project'' -

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the corporation to bear full costs of removal to X and return to Y. By letter of 2 October 1974 the taxpayer was advised that the project was ``approaching completion'', that there was no ``other work in hand or envisaged at this time'' and that ``the corporation will not have a need for your service beyond 31 January 1975 and... we will reluctantly have no alternative but to terminate your services''. Formal notice of termination issued on 18 October 1974 and he, in due course, ceased employment and received payment for accrued furlough, etc. - he elected under the Superannuation Act to take a lump sum.

4. Speaking of the practices of the corporation the taxpayer said ``they do not so much take on permanent officers now as term employees, which makes it a lot easier... to send their people all over the place, or... have them there for just limited periods''. He agreed a staff was gathered for each project and that ``the whole organisation is now geared to temporary staffing of projects... there will always be a few key officers of the corporation on site but a very large proportion of the team would be hired for the duration of the project; as I was in X and following the completion of the project we go our separate ways''.

5. After the termination of his services, the taxpayer remained in X and, in due course, found a job with another employer. After about six to seven months in that job he was approached by representatives of the corporation to supervise another project in X. He said it was to be ``strictly for the duration of the job, because at that stage I had no intention of leaving'' X. The idea ``being that in 21 months the economic situation in X should improve considerably and there would be more prospects in X for other employment''. By letter of 6 April 1976 the corporation offered the taxpayer an engagement which was anticipated ``could continue for approximately 21 months'' - if acceptable he was to arrange to have ``medical and X-ray examinations''. The offer was accepted and the taxpayer commenced work on 20 April 1976 - his duties were those of an on-site supervisor and his classification senior technical officer. On 5 October 1976 he was advised that ``as a finite employee for a continuous period of not less than 12 months from 1 July 1976'' he was eligible to contribute for superannuation - he did not apply this time to join. By letter of 15 December 1976 the taxpayer was advised as to the result of the 1976 Annual Staff Review and informed, inter alia, that ``there are many including yourself who are on a fixed salary for their period of engagement and for whom the corporation was unable to make a particular case for a salary increase''.

6. Whilst still employed on the above engagement the taxpayer became aware of an advertised staff vacancy in the Planning-Estimating Branch of the Corporation (located in Y) and applied for the position. If successful he would be -

``going to a completely new field. It was not contract supervision on a specific site; it was into a different field altogether, planning and estimating.''

By letter of 10 November 1977 he was ``following the completion of your present engagement... and subject to satisfactory medical and chest X-ray examination'' offered a further engagement (classification senior technical officer as previously) which was estimated ``could continue for approximately two years and will commence from the date you arrive in Y to take up duty''. The taxpayer replied stating, inter alia, ``the finite term of the offer for only two years is not very desirable'' - as he said ``I wanted a permanent job and... it was based in Y, head office Y''. On 29 November 1977 he was advised that his ``engagement as an employee will be on an indefinite basis - otherwise the offer of engagement is unchanged''. An office note on the copy of this letter states the taxpayer ``is aware that as offer now indefinite super will not be available until 12 months service completed''.

7. By minute of 27 February 1978 the personnel officer was informed that the taxpayer's engagement on the project had been completed and requested that his empoyment ``be terminated at the close of business on Friday 3 March 1978'' and all moneys due be credited to his bank account. By letter of 3 March 1978 the taxpayer was informed as above and also that his re-engagement would commence on 16 March 1978 when he should report to the Personnel Branch ``prior to commencing duty''. The

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taxpayer reported in Y on the stated date whilst his account was credited with $2,318.44 - this represented accrued leave (only five days taken as from 20 April 1976) and 1977 and pro rata 1978 leave bonuses.

8. A claim for reimbursement of certain expenses in relation to taking up the position in Y included a ``Disturbance Allowance''. By letter of 27 April 1978 he was advised, inter alia, that ``as a new appointee you have no entitlement to this allowance''.

9. After commencing duty the taxpayer made personal representations in relation to the basis of reimbursing costs and the conditions of his present term of employment. As a result on 23 May 1978 he was advised, inter alia, as follows:

``... the general conditions of your present employment will remain unchanged except that the date of commencement will be amended to 4 March 1978 in lieu of 16 March 1978. The period 4-15 March 1978 will be considered as leave without pay. The effect of this decision will provide a carry over of sick leave credits accrued during your previous finite term employment in relation to the... Project.''

By letter of 5 July 1978 he was referred to his undertaking ``on commencement of duty''... that should he resign within two years of ``commencement of duty'' he would repay pro rata the cost of removal from X to Y and was informed of the cost thereof.

10. On 16 March 1979 he was advised of his eligibility for superannuation purposes (having been employed for a continuous period of not less than 12 months) and the taxpayer subsequently applied accordingly.

11. The possible exception referred to in para. 2 arises out of the taxpayer accepting employment with another statutory authority and commencing there on 28 February 1980. The History and Leave Statement sent by the corporation to that authority gave the taxpayer's date of appointment to the corporation as 20 April 1976 and of leaving as 27 February 1980 and, inter alia, said ``Previous Service for Long Service Leave Purposes: Nil''. The taxpayer stated the business manager's reference to this ``surprised me'' although it further strengthened his claim ``that there was no continuity''. I do not think the reference means more than that there was no previous service to be carried forward apart from the service that commenced on 20 April 1976.

12. In a very brief argument the taxpayer submitted that the evidence showed conclusively ``that there was no continuation of employment and none of the entitlements that I would have normally been entitled to under continuous employment were paid by the corporation''. In reply he said ``that in all the evidence and all the dealings between me and the corporation, we both knew that the first appointment was a finite term one and the new one was a new appointment''. The office note (para. 6) supported a completely new start as did the need for fresh medical examinations (para. 6), the rejection of the Disturbance Allowance claim (para. 8) and the requirement to repay costs of removal (para. 9). Despite the subsequent dating back (para. 9) there was in reality a cessation followed later by fresh employment in a new field of work. The fact that this resulted from an earlier application should not alter the reality of the situation.

13. On behalf of the Commissioner a number of submissions were made. Firstly it was said ``that there was no retirement from, or termination of employment, by the taxpayer from the corporation in March 1978 as contemplated by sec. 26(d)...''. The taxpayer's employment (at the same status) ``by the corporation was not terminated but was continued on another basis''. Secondly it was claimed -

``that the payee's entitlement arose from his having accrued recreation leave. Payment was made to satisfy the taxpayer's entitlement to accrued recreation leave. It was not paid to satisfy any retirement entitlement. Retirement or termination of the employment (if there was a retirement or termination) was not a condition of the taxpayer's entitlement to the payment.''

Thirdly that the taxpayer did not hold an ``office'' but only ``employment'' - so that a change from finite to permanent employment did not involve a termination of employment. Finally that ``even if the taxpayer's employment was terminated it was terminated only at the expiration of the (accrued leave) period after his last working

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day finished... and not immediately on the cessation of his duties''.

14. In relation to the final submission reference was made to a line of previous decisions the last of which was Case G55,
75 ATC 403 . The statutory provision in that case (and others) made no provision for payment in lieu (so that service only finished on the last day of the accumulated leave period). However here r. 34 makes specific provision for payment ``in lieu of recreation leave'' on resignation or retirement and provides that ``an officer ceases to be an officer on his last day of duty''. Accordingly I cannot accept this submission. Nor can I accept the suggestion that sec. 26(d) was never applicable to accrued recreation leave. It was so regarded for a long period and, without Court authority, I do not think a Board can consider the amendments that have now been made to the section as declaratory of what the law has been all along.

15. With reference to the second submission it is my view that the payment (provided there was a retirement, etc.) properly satisfies the term ``in consequence of''. Until there was a ``retirement'' there was no entitlement to payment ``in lieu of'' in terms of r. 34. He was not paid for recreation leave upon application therefor but rather for a different (albeit same in quantum) entitlement. Such entitlement and payment followed ``as an effect or result of the termination'' per Gibbs J. (as he then was) in
Reseck v. F.C. of T. 75 ATC 4213 at p. 4217 - and the retirement was ``the occasion of, and a condition of, entitlement to the payment'' per Brennan J. in
McIntosh v. F.C. of T. 79 ATC 4325 at p. 4328 .

16. Although I have not relied on it in reaching the above conclusion, it seems to me upon a reading of the Rules that, although an officer is entitled to recreation leave (r. 32(1)), if he does not ``take'' it in the year in which it accrues, ``it shall lapse'' (r. 32(5)). Thus the mere becoming entitled to leave does not automatically result in a payment therefor.

17. In relation to the third submission I accept it in the sense that the evidence before the Board does not allow me to be satisfied that the advertised vacancy involved an ``office''. One could hypothesize that a position having an existence independent of the person who might fill it - see decision of House of Lords in
Edwards v. Clinch (1981) 3 W.L.R. 707 - could be a possibility but, on the evidence, I am unable to translate this into a positive finding.

18. The first, and in my view vital, submission is whether or not there was a ``retirement'' or ``termination'' within the provisions of sec. 26(d)? In this regard Reseck's case (supra) is not irrelevant. In Reseck a case was initially stated by a Board to the Supreme Court of Queensland. That case stated (74 ATC 4325 at pp. 4325-4326) set out, inter alia, that Reseck -

``had been employed by Fluor Australia Pty. Ltd. for two periods, from 25th November, 1969, to 24th September, 1971, and from 27th September, 1971, to 11th February, 1972. Between the two periods, Saturday and Sunday had intervened.

... During the first period of employment, the taxpayer worked in the Hay Point District; his employment was terminated by the employer because work was no longer available in that district for the taxpayer. On the day his employment ceased, that is, on 24th September, 1971, the taxpayer applied in writing to the same employer for work in the Peak Down district and was engaged again so that he began work on 27th September, 1971.''

19. It will be seen that, despite Reseck applying for (and being successful in his application) another position with his existing employer before his current ``employment'' had come to an end, it was found that there had been a ``termination'' of his current employment. That is what, in essence, occurred in the instant case and, without more, it could be said the above finding supports the present taxpayer's claim. However this does not follow for, in the course of his decision, Mr. Justice Gibbs said, inter alia, at p. 4216:

``... 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...

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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.''

20. It was the Commissioner's submission -

``that there must be an actual relinguishment of the office or employment and an intention not to resume that office or employment.... Where before the effectual date of `retirement' there is an arrangement between the employer and the employee that the employee could return to similar duties after a break of a few days there is not... a retirement in the ordinary and accepted meaning of that word (cf. Case C103
(1953) 3 T.B.R.D. 602 ; Case G41
(1956) 7 T.B.R.D. 237 ; Case K46
(1959) 10 T.B.R.D. 249 and Case L89
(1961) 11 T.B.R.D. 529 ).''

Reliance was placed specifically upon the remarks of Mr. Nimmo in Case C103 at pp. 605-606 which had been applied in Case B19,
70 ATC 88 and Case N21
81 ATC 124 . Reference was also made to Case N11
(1962) 13 T.B.R.D. 33 at p. 40.

21. Whilst one Board is not bound by a decision of another Board I am of the previously expressed view that such a decision should not be lightly set aside. Particularly not when the principle enunciated therein has, as it were, stood the test of time and when it can be argued that the above remarks of the present Chief Justice support (or at least do not derogate from) that principle. In the circumstances I accept the submission put forward and, having regard to the facts set out earlier, find that there was not a ``retirement'' or ``termination'' within the provisions of sec. 26(d).

22. For the above reasons I would uphold the Commissioner's decision on the objection and confirm the taxpayer's assessment for the year ended 30 June 1978.