Federal Commissioner of Taxation v. Equitable Life and General Insurance Co. Ltd.

Members: Davies J
Pincus J

Gummow J

Tribunal:
Full Federal Court

Decision date: Judgment handed down 13 June 1990.

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Gummow J.

Before the learned primary Judge [reported at 89 ATC 4972], the appellant was unsuccessful in respect of the year of income ended 30 June 1984, but successful in respect of the year of income ended 30 June 1983. Hence the appeal and cross-appeal.

I have had the advantage of reading the reasons for judgment prepared by the other members of the Court. As is apparent from what is said by their Honours, the answers to the questions presented on this appeal are very much a matter of degree, bearing in mind the analysis of the particular facts. For that reason, and unlike the learned primary Judge, I would not derive any particular guidance from the approach taken by Woodward J. when treating

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ATC 4461

the real estate dealings at issue in
CMI Services Pty. Ltd. v. F.C. of T. 89 ATC 4847 .

I also bear in mind that the treatment of
London Australia Investment Co. Ltd. v. F.C. of T. 77 ATC 4398 ; (1976-1977) 138 C.L.R. 106 and
Californian Copper Syndicate v. Harris (1904) 5 T.C. 159 at p. 166 , by the High Court in
F.C. of T. v. Myer Emporium Ltd. 87 ATC 4363 at pp. 4366-4368; (1987) 163 C.L.R. 199 at pp. 210-213 , was made in the course of analysis by the High Court of two propositions -

• (i) whether a receipt may bear an income character even though it arises from an isolated business operation or commercial transaction entered into otherwise than in the ordinary course of the carrying on of the taxpayer's business; and
• (ii) whether a mere realisation or change of investment does not yield income.

These are not the issues on this appeal.

In my view, and contrary to suggestions in the submissions by the appellant, the judgments of the majority in the London Australia case (supra) are not to be understood as revealing any new legal principle. I should add that I agree, in particular, with the comments by Pincus J. as to the treatment in that decision ( supra at ATC p. 4404; C.L.R. pp. 118-119) of
Charles v. F.C. of T. (1954) 90 C.L.R. 598 .

Whilst the remarks of the Lord Justice Clerk in the Californian Copper Case (supra) provide a starting point, they state rather than answer the question as to the revenue character of the profits with which this appeal is concerned. Like Davies J., I adopt the exposition of the facts in the judgment of Pincus J., which differs in some respects from the holdings of the learned primary Judge.

I agree with Davies J., for the reasons he gives, that the profits made by the respondent, which was not a trader in shares and did not carry on a business of dealing or trading in shares, were of a capital nature. It follows that I would allow the cross-appeal in respect of the 1983 year of income, and dismiss the appeal in respect of the 1984 year of income.

But in dismissing the appeal in respect of the latter year, I would nevertheless express my agreement with what is said by Pincus J. in his reasons for judgment as to the proper understanding to be given to the decision in
Commr of Taxation (W.A.) v. Newman (1921) 29 C.L.R. 484 . As is apparent, I would dismiss the appeal in respect of the 1984 year upon grounds which do not depend upon any special doctrine concerning the closing down of a business.

THE COURT ORDERS THAT:

1. The cross-appeal in respect of the 1983 year of income be allowed and that... the matter be remitted to the Commissioner for reconsideration in accordance with the Court's reasons for judgment.

2. The appeal in respect of the 1984 year of income be dismissed.

3. The appellant/cross-respondent pay the costs of these proceedings and the costs of the proceedings below.