Independent Order of Odd Fellows v. Commissioner of Stamps (S.A.).

Judges: King CJ

Cox J
Olsson J

Court:
Supreme Court of South Australia (Full Court)

Judgment date: Judgment handed down 1 May 1985.

---

Cox J.

I am in general agreement with the reasons for judgment of the Chief Justice. It was agreed by the parties that we are concerned here with a type of life insurance policy, that the policy itself is to be found in the Certificate of Membership (including its folder) read in the light of the appellant's rules, and that the provision in sec. 365(11)(e) of the rules for repayment of the entire contribution, including the management fee, possibly before any bonuses have accrued, gives rise to an ``insurance risk'' within the meaning of the third Exemption. When the member pays his lump sum contribution to the Flexible Assurance Fund the management fee is deducted immediately and only the balance is recorded as ``amount of contribution'' in the Certificate of Membership. It was submitted by the appellant and conceded, as I understand it, by the Commissioner that by far the greater part, at least, of the ``amount of contribution'' is, in fact, received by the appellant ``for investment purposes only and is not for, or in respect of, any insurance risk'' (Exemption 3); the question is whether a small part of the net contribution is to be attributed to the sec. 365(11)(e) premature death risk. I have some difficulty, on general principles, with the assumption that treats the part of the contribution that is made with respect to the basic endowment insurance aspects of this scheme - for that is what on the appellant's own submission they are - as being made merely for investment purposes. However, the Exemption certainly envisages the case of a premium being paid under a life insurance policy with part of the premium being attributable to investment purposes only, and perhaps this is such a case. At any rate, the point was not argued and we are not called upon to express an opinion about it. The Case Stated shows that what the appellant calls the death cover allocation of 0.25% is a deduction that the managers of the Fund make from the investment income of the Fund in order to meet the early death contingency. Such a partial diversion of either the investment income or the actual contribution itself - in my opinion, it matters not which for present purposes - to that non-investment purpose is really implicit in the scheme created by sec. 365, and the Case Stated and the letter of 4 March 1983 from the appellant's Life Assurance Manager to the Commissioner (Transcript, 129-130) make it plain that this is the way the scheme in fact operates and was always intended to operate. It follows that it represents the basis upon which members' contributions are received by the appellant. It is therefore not correct, in my view, to say that the net contribution figure (``amount of contribution'') specified in the policy that is issued by the appellant is received for investment purposes only and is not for or in respect of any insurance risk, and there is no other amount specified in the policy that could be so described. There is no way in which the investment component of the contribution may be ascertained, directly or even indirectly, from the policy. Nor do I think it could be said - and the requirements of Exemption 3 are cumulative - that the separate investment purposes component is so declared in the policy. It follows that the policies in virtue of which the appellant has been taxed are not within the Exemption.

I would answer the first question - Yes.