Gulland v. Federal Commissioner of Taxation.
Judges:Kennedy J
Court:
Supreme Court of Western Australia
Kennedy J.
The appellant graduated in medicine in 1956. After having been employed in various hospitals and as a District Medical Officer for a period of some years, he was, in August 1962, employed as an assistant by a partnership of three medical practitioners. After six months in that position, he was admitted to the partnership. The constitution of the partnership changed from time to time until eventually the only remaining partners were the appellant and Dr. C.F. Brindal, who carried on the practice for some two to three years before their partnership was itself dissolved. Thereafter, the appellant continued in sole practice on his own account in premises at 54 Eighth Avenue Maylands, which he occupied as a sub-tenant of Dr. Brindal, it would seem, on a weekly basis pursuant to an oral agreement.
In 1977, on advice from Mr. R. Osborne, who had recently been appointed as his accountant, the appellant arranged for the establishment of what is commonly described as a service trust, known as the ``Dr. I. Gulland Family Trust''. This trust was created by a deed of settlement dated the 8th April 1977, the appellant's mother being the settlor, and his former partner, Dr. Brindal, the trustee.
Under the trust, the income may be distributed at the discretion of the trustee to one or more of the general beneficiaries. Upon the determination of the trust, the trust fund and the income thereof is to be held in trust for such of the beneficiaries for such interests and in such proportions and for one to the exclusion of the other or others as the trustee may at his discretion determine. A failure on the part of the trustee to exercise his discretion results in the trust funds being distributed amongst the specified beneficiaries. In the trust deed, the ``Specified Beneficiaries'' are defined as the children and future children of the marriage of the appellant and his wife, and the appellant and his wife are named in the deed as additional members of the class of general beneficiaries. The specified beneficiaries and certain other persons and ``entities'' are also included in the last-mentioned class. During his lifetime, the appellant, as the ``appointor'' under the deed, has the power to remove any trustee and to appoint a new trustee in his place.
The appellant's purpose in establishing this trust, as expressed by him, was in part to ensure that members of his family had an income of their own and also to allow for some splitting of his income. I have some difficulty in accepting the validity of the first of these objectives. No member of the appellant's family, on the face of it, had more than a hope that the trustee would exercise his discretionary powers in his or her favour, and the appellant himself remained a potential beneficiary. He suggested that, up to the time of creation of the trust, he was the sole income earner in his family, but that position remained essentially unchanged, for it was not shown that the trust had any source of income other than the appellant's own practice.
On the 5th April 1977, that is, three days before the date of the deed of settlement, the appellant wrote to ``the Trustee, Dr. I Gulland Family Trust'', purporting to confirm his verbal offer for the trustee to administer the appellant's medical practice as from the 8th April 1977. The services to be provided were the employment of staff, the payment of salaries and payroll tax, attending to the remittance of tax instalment
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deductions, the provision of office supplies, the issue of accounts and the collection and banking of the same, banking, the provision of all necessary drugs and dressings, arranging for pathology tests and attending to the payment of pathology fees and all other management and office services and functions agreed on between the parties from time to time. The offer also contained an ``agreement'' to pay the cost of the provision of these services together with a reasonable charge, which was ``agreed'' at 30 per cent of that cost, for the period from the 8th April 1977 to the 30th June 1977. The charge rate was to be reviewed at that later date.By letter dated the 6th April 1977, signed by Dr. C.F. Brindal as trustee for the Dr. I. Gulland Family Trust, he purported to accept the offer on the terms set out in the appellant's letter of the 5th April 1977.
It appears from the minute book of the Dr. I. Gulland Family Trust that, on the 8th April 1977, certain office plant was purchased from the appellant for the sum of $1,643 and, despite the previous correspondence, a minute purported to indicate that ``the administration'' of the appellant's surgery was accepted on the basis that the administration charge was to be based on ``a 30 per cent mark-up''. This minute is signed both by Dr. Brindal and by the appellant. A separate minute of ``Resolutions of the Trustee'' of the same date, signed by Dr. Brindal alone, sets out the terms upon which the office plant just purchased from the appellant was to be rented back to him. The monthly rental was to be $45.18 which, on an annual basis, amounted to 33 per cent of the purchase price.
Subsequent recorded decisions of Dr. Brindal, as trustee, set out the terms upon which a vaporiser, a Mazda motor vehicle, a copier and an office chair were to be leased by him to the appellant. How these items were acquired is not disclosed. During the same period, it would seem that the appellant himself arranged to lease two typewriters, a copier and certain anaesthetic equipment from finance companies.
Subsequent to the establishment of the service trust, the appellant had some four or five discussions with Mr. Osborne regarding the possible creation of a superannuation fund for his benefit, for the appellant remained concerned about the future financial well-being of his family and of himself. By the beginning of 1979, he was 46 years of age and he had a wife and three children who were then aged 17, 15 and 9. His assets consisted of his home, which was his major asset, a motor vehicle, and what he described as a small amount of equipment used in the practice. In addition, he had inherited certain property from his parents, from which he was receiving rent. He had taken out some life assurance policies some years before and he had life cover to the extent of approximately $60,000 and accidental death cover in an additional amount of $60,000.
The attraction of a superannuation fund was seen to be that it was a form of compulsory saving, allowing for the building up of a fund for the eventuality of the appellant's retirement or death, although it was acknowledged that, under some circumstances, earlier benefits could be obtained. It was an important consideration that contributions to the fund should constitute a taxation deduction. It was also said to be a material consideration that the appellant should have some control over the investment of the fund.
Early in 1979 (although the appellant placed it somewhat earlier) Mr. Osborne suggested the creation of a ``medical unit trust'' which would then employ the appellant himself and establish a superannuation fund for his benefit. The proposal, as it was put to the appellant, was that the practice would continue ``in much the same way'' so far as patients were concerned. Mr. Osborne suggested that the appellant approach a medical colleague to enquire if he would be prepared to join the appellant as a co-trustee of the trust.
After one unsuccessful approach to Dr. Brindal, the appellant asked Dr. N.T. Burke, a family friend who conducted her general practice from surgery premises situated some two to three kilometres away from the appellant's surgery, to act as a co-trustee.
The appellant informed Dr. Burke that her duties, if she accepted the appointment, would be to make decisions with the appellant. In most cases, he said, he expected that she would be happy to go along with his
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own decisions and he suggested that there was little likelihood of disagreement in the conduct of the affairs of the trust. He did not, however, indicate that she would be under any compulsion or any obligation to do things the way he wanted them done. He told her that there would have to be one or two meetings in the early life of the trust, but that thereafter he was not sure how often meetings would be needed. It was made plain to Dr. Burke that the proposal was essentially concerned with securing superannuation for the appellant and that the obtaining by the appellant of the status of an employee was a central feature of it.The appellant was not in a position to give Dr. Burke precise details of any obligations which she might incur if she agreed to accept the appointment, and he advised her to contact Mr. Osborne in this regard. She therefore telephoned Mr. Osborne and sought information from him. As a result of her conversation with him, she was satisfied to accept appointment as a co-trustee and she agreed to do so. Thereafter, steps were taken to implement the proposals made by Mr. Osborne.
By letter dated the 26th February 1979, Mr. Osborne instructed a firm of solicitors to prepare ``the necessary documentation'' for a unit trust, a superannuation fund, a management service agreement and a sale agreement ``for the sale of the medical practice to the Unit Trust''. Remarkably little detail was given to them to enable the solicitors to prepare the documents. It was, however, indicated that it was envisaged that the unit trust would ``commence practice'' from the 1st March 1979.
A deed of trust was later prepared and executed. It is dated the 1st March 1979. Notwithstanding the doubts expressed by Dr. Burke as to the actual date of its execution, I accept that it was executed on or before the 19th March 1979, which is the date upon which it was apparently lodged for the assessment of stamp duty. It is improbable that it was executed on the date it bears. The parties to the deed were Mr. Osborne, as ``founder'', and the appellant and Dr. Burke, as ``trustees''.
The trust thereby created is a unit trust, in which there were and are ten units, all of which have at all times been held by Dr. Brindal ``as trustee of the Gulland Family Trust'' (sic). The unit trust was to be known as ``The Gulland Medical Clinic Unit Trust''.
Subject to the other provisions of the deed, by cl. 16(a), the unit holders are at all times ``presently and absolutely entitled to the Income of the Trust and in the same proportions as they hold Units''.
By cl. 17(1), in addition to all powers and discretions conferred on trustees by law, the trustees are given, inter alia, the following powers and discretions:
``(a) To apply or invest the Fund in any one or more of the following ways:
- (i) in the purchase or other acquisition of real or personal property of any kind and any estate or share or interest in such property whether income producing or not;
- (ii) in carrying on the business of providing medical services or any activity incidental thereto whether alone or in partnership or as agent or otherwise in such circumstances and on such terms and conditions as the Trustees may think fit.''
By cl. 1 of the deed, the term ``investment'' is defined to include ``the assets and goodwill of any profession trade or business vested in and/or carried on by the Trustees''. By cl. 17(1)(m), the trustees are given power to ``employ on such terms and conditions as the Trustees may think fit any medical practitioner or any other employees which the Trustee may from time to time consider necessary''. The previous paragraph confers on the trustees power to enter into, effect or maintain any superannuation fund for the benefit of any employee.
Subclauses (2), (3) and (4) of cl. 17 of the deed provide as follows:
``(2) The Trustees may join with any other person or persons or body corporate or with the Trustees or any one or more of them in their own right or their capacity as the trustee of any other trust in accepting or making or becoming a party to any of the applications or investments of the Fund authorised by this Deed or in exercising any of the powers or discretions contained in this Deed.
(3) The Trustees may exercise or concur in exercising the powers and discretions
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by this Deed or by law given to them notwithstanding that the Trustees or any one or more of them may have a direct or personal interest in the manner or result of exercising such power or discretion.(4) It shall be lawful for a person who is for the time being a Trustee of this Trust to sell property to the Trust, and it shall be lawful for the Trustee to have power to purchase such property on such terms and conditions as the Trustee may in his absolute discretion think fit.''
By cl. 18 it is provided:
``At all such times as there shall be more than one Trustee hereof the Trustees shall except where herein specifically otherwise provided act jointly and any power authority or discretion conferred on the Trustees hereunder may only be exercised pursuant to the unanimous agreement of all the Trustees.''
Strangely, there is no express power to carry on the business of a medical practitioner, although cl. 17(1)(a)(ii) and 19, amongst others, clearly assume the existence of such a power. There can, however, be no question but that the trustees do have this power.
By cl. 23(b) of the deed, no person is entitled to be or to continue in office as a trustee unless he shall be a duly qualified and registered medical practitioner entitled to practise in Western Australia.
The unit holders are given, by cl. 23(d), the power, by unanimous resolution in writing, to remove any trustee. At all material times, as already indicated, the only unit holder has been Dr. Brindal. He himself, of course, under the terms of the service trust deed, could at any time have been removed by the appellant as a trustee of the service trust.
The documentary evidence, on its face, would indicate that a sale agreement, an employment agreement and a service agreement were all executed on the 5th April 1979. Although I am satisfied that, on the morning of that day, the appellant and Dr. Burke met at Dr. Burke's surgery and discussed various matters which are referred to in a set of minutes which had previously been prepared for them by Mr. Osborne, and that they had with them at that time certain draft agreements, the minutes are quite inaccurate and, indeed, misleading. Notwithstanding this, the appellant and Dr. Burke signed those minutes. Furthermore, it is impossible to rely upon the date of any of the documents as being the correct date of its execution.
By an offer, which bears the date the 5th April 1979, and which is addressed to ``The Trustees, the Gulland Medical Clinic Unit Trust'', the appellant, having, as the document described it, ``carried on the business of a professional medical practice at 54 Eighth Avenue, Maylands'', offered to sell to the trustees ``the whole of such medical practice and all my estate, title and interest therein as at the 5th day of April 1979 including the goodwill thereof and the plant, equipment and supplies belonging thereto and utilised therein but excluding all book debts of the practice...''
The price was to be $6,304, payable on demand and apportioned as follows:
$
(a) Goodwill 6,000
(b) Plant and equipment 304
(c) Medical supplies nil
One of the terms of the offer was that the trustees would procure the consent of ``the Lessors of the premises at which the practice is carried on to assignments or sub-leases of the premises...''
So far as the acquisition of the practice was concerned, the minutes of the 5th April 1979 read as follows:
``The Chairman produced and read a Sale Agreement dated 5th April, 1979 made with Dr. Gulland relating to the purchase by the Trust of the medical practice.
It was resolved that the Trust agree to purchase his practice in accordance with the Sale Agreement, a copy of which is attached to these Minutes and initialled by the Chairman for identification purposes.''
There is no document attached to the minutes. The only document relevant to the acquisition of the practice is the offer just described. I am, however, satisfied that, at the meeting held on the 5th April 1979, the appellant and Dr. Burke agreed to purchase from the appellant, for the sum of $6,000, the goodwill of his practice. So far as the
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other terms contained in the offer are concerned, there was no suggestion that they were separately discussed; but I am satisfied that the offer was one of the documents considered on the 5th April 1979, and that it was then accepted.I also accept that the appellant's practice, notwithstanding its personal nature, did have goodwill attached to it, it having been conducted in the same premises for some years. The figure of $6,000 was recommended by Mr. Osborne, based, he said, on the cost of setting up a new practice and accepted by the appellant and by Dr. Burke without any substantial consideration. However, it is to be observed that the sum of $6,000 was not such a figure as would have appeared either to the appellant or to Dr. Burke as being in any way exceptional. The appellant himself had paid $12,000 by way of goodwill when he first became a partner, and he accepted that Mr. Osborne was an accountant dealing with a number of medical practices, some of which must have been bought and sold, and he therefore took the view that Mr. Osborne must have a reasonable idea of how goodwill should be assessed. Dr. Burke gave no detailed consideration to the propriety of the figure; but I accept that she did ``in a general sort of way'' have regard to the amount, and, it being unexceptional, she agreed to it. In this, as in other matters, the appellant and Dr. Burke relied upon Mr. Osborne. That reliance, particularly with respect to matters of detail, may well have been misplaced; but I am satisfied that they genuinely believed in his knowledge and ability.
Although, in relation to the plant and equipment which was purchased for the sum of $304, the appellant suggested that there was a schedule of plant and equipment which showed that they had been depreciated to this low figure, the depreciation schedule attached to the income tax return of the unit trust for the year ended the 30th June 1979 suggests that there was, in fact, only one item of equipment, being a ``pacer'', to which the sum of $304 related.
It would appear that the purchase price for the business has never been paid. It remains in the books of the trust as a loan from the appellant.
So far as the employment agreement is concerned, the minutes of the 5th April 1979 record:
``It was resolved to engage Dr. Gulland as a salaried medical practitioner at a commencing annual salary of $20,000 and otherwise on the terms and conditions of the Employment Agreement with him dated 5th April, 1979.''
At the time of the meeting, there was no written agreement dated the 5th April 1979. The agreement was executed some two to three weeks later, although it bears the earlier date. I am nevertheless satisfied that the appellant and Dr. Burke did, at their meeting on the 5th April, decide that the appellant should be employed thenceforth by the trust at a salary of $20,000. The appellant's ``employment'' was central to the whole arrangement and it was the principal reason for holding the meeting. I return later to the effect of the agreement.
It appears that the initial discussions between the appellant and Mr. Osborne regarding the appellant's employment were based upon an annual salary of $25,000, and the written employment agreement was prepared accordingly. That it was probably prepared some time prior to the 5th April 1979 is suggested by the original reference in it, subsequently amended, to the appellant's having been employed in the practice as from the 1st day of March 1979, which is the date borne by the unit trust deed and the date which was apparently originally contemplated as the commencing date for the arrangements. I accept that Mr. Osborne suggested to the appellant that a salary of $25,000 was a reasonable salary which a doctor being employed in a practice of the nature of that of the appellant could expect to receive. I am not, however, satisfied that such a salary would have been reasonable at that time. Then, subsequently, but prior to the 5th April 1979, Mr. Osborne advised that, in the light of the anticipated available income from the practice, having regard, no doubt, to the funds already being absorbed by the service trust arrangement, the figure was too high, and that it should be reduced by an amount of $5,000.
I am satisfied that there was no discussion between the appellant and Dr. Burke on the 5th April 1979 or at any other time as to what
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would be a reasonable salary to pay the appellant; but I am satisfied that it would never have occurred to either of them, or, indeed, to anyone else, to suggest that $20,000 was too great an amount for them as trustees to agree.In the formal employment agreement, the appellant and Dr. Burke, ``as Trustees of the Gulland Medical Clinic Unit Trust'' are described as ``the Employer'' and the appellant as ``the Doctor''. It is executed by Dr. Burke and by the appellant in their capacity as trustees and by the appellant in his personal capacity.
By cl. 1, the ``Employer'' agrees to ``continue'' to employ ``the Doctor'' until the agreement is terminated in accordance with cl. 7.
Clause 2 provides:
``2. The Employment will pay the Doctor during the continuance of his employment hereunder an annual salary of at least Twenty Five Thousand Dollars ($25,000) payable monthly in arrears or otherwise as agreed between the parties PROVIDED THAT the Doctor may at any time request a review of the salary paid to him and the Employer may after taking into consideration all relevant factors adjust the salary payable in the manner and to the extent that it shall deem fit.''
Clause 4 provides:
``4. During the period of his employment hereunder the Doctor shall:
- (a) faithfully and to the best of his skill serve as a Medical Practitioner in the practice devoting his whole professional medical time and attention thereto and using his utmost endeavours to improve the practice.
- (b) observe the ethics and customs of the medical profession and comply with all laws and regulations governing the practice of medicine in the said State.
- (c) fulfil and obey all lawful directions and orders of the Employer from time to time.
- (d) not carry on or be engaged in any medical practice otherwise than as an employee of the Employer.''
Clause 5 provides:
``5. The Doctor shall be entitled to four weeks annual holiday in each year to be taken at such time or times as agreed with the Employer.''
Clause 7 provides:
``7. This Agreement may be terminated at any time by either party giving three months' notice in writing to the other party or otherwise by mutual agreement.''
Clause 8 provides:
``8. On the termination of this Agreement pursuant to cl. 7 hereof the Doctor hereby covenants that he shall not within six months from the date of such termination be engaged in any medical practice within a radius of two kilometres from the place at which the Employer carries on any medical practice.''
Somewhat strangely, the employment agreement makes no reference to superannuation, which was clearly understood to be one of the principal purposes of the whole arrangement, although it does refer to other additional benefits, such as telephone, car and entertainment expenses.
It was conceded by the appellant that it was never contemplated that the question of whether or not the trustees would employ him would be a question on which an independent decision would be taken. It was part and parcel of the scheme. Nor was it ever really contemplated that the trust would continue after he ceased to be an employee. Certainly, there was little prospect of another medical practitioner being employed on such favourable terms to the trust as those on which the appellant was employed.
As to the service agreement, the minutes of the 5th April 1979 state:
``It was resolved that the Trustees would enter into a Management Service Agreement with Dr. Colin Brindal as trustee for the Dr. I. Gulland Family Trust for the provision of certain services to the Trust and on the other terms and conditions of the Agreement dated 5th April, 1979.''
A minute dated the same date appears in the minute book of the Dr. I. Gulland Family Trust as follows:
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``It was resolved that the Service Agreement between Dr. Gulland and the family trust be terminated.
It was also resolved that the trustee would enter into a Management Service Agreement with Dr. I. Gulland and Dr. N. Burke as trustee for The Gulland Medical Clinic Unit Trust for the provisions of certain services to the Trust and on the terms and conditions of the Agreement dated 5th April, 1979.''
The management services agreement also bears date the 5th April 1979, although I am satisfied that it was executed later in April and not on that date. Under this agreement, the appellant and Dr. Burke engaged Dr. Brindal as ``Trustee of the Gulland Family Trust'' to provide management and administration services as necessary to facilitate and permit the conduct and operation of the medical practice carried on by them at 54 Eighth Avenue, Maylands. In particular, by cl. 2, Dr. Brindal was to be responsible to obtain and provide:
``(a) All staff as required by the Trustee from time to time for the purposes of the practice.
(b) All premises surgeries consulting rooms plant and equipment from time to time required by the Trustee for the purposes of the practice.
(c) All other management and office services and administration functions necessary and required for the efficient conduct and operation of the practice.''
The remuneration was, by cl. 4, to be in such amount as should from time to time be agreed. The agreement was, by cl. 6, terminable by one month's prior written notice by either party to the other.
At no time would it appear that Dr. Brindal, as trustee of the service trust, has himself employed, as employees of the trust, the staff engaged in the conduct of the practice, although the agreement of the 5th April 1979 is somewhat equivocal as to whether this was the intention.
So far as the superannuation fund is concerned, the minutes dated the 5th April 1979 state:
``It was resolved that the Trust establish a Superannuation Fund for its employees and that it be commenced from the 5th April, 1979.
It was resolved that Fund Fidelity Pty. Ltd. be the Trustee of the Fund.
It was resolved that the Trust Deed between Dr. I. Gulland and Dr. N. Burke as trustees for the Gulland Medical Clinic Unit Trust as employers and Fund Fidelity Pty. Ltd. as Trustee for the fund be prepared and that the Deed be adopted and be executed by the trustees as the employers and also by Fund Fidelity Pty. Ltd. as Trustee subject to the approval of the Deputy Commissioner of Taxation.''
The superannuation fund trust deed was, I am satisfied, executed in the latter part of April. In that deed, the commencing date of the fund has not been completed. Various documents in connection with the appellant's application to join the fund are, however, dated the 5th April 1979. They refer to the employers' contribution as being the sum of $5,485. The minutes of that date contain no reference to any amount, although what purport to be subsequent decisions of the appellant and Dr. Burke on the 28th June 1979, the 30th June 1980 and the 23rd June 1981 all provide for contributions of $2,000 only. On the first occasion, the reduced contribution was explained by the appellant on the basis that no further funds were at the time available for this purpose, perhaps due to the fact that he was absent from the practice for some weeks prior to the end of the financial year.
The minutes of the 5th April 1979 also set out a resolution that the appellant ``register the Business name Gulland Medical Clinic on behalf of the Trust''. An application for registration of that business name was signed by the appellant. It is dated the 1st March 1979 and it gives the date of commencement of the business as the 1st March 1979. The appellant is named as the applicant ``as trustee for the Gulland Medical Clinic Unit Trust''. There is no reference to Dr. Burke. The business name was registered in accordance with the application on the 6th April 1979. The only conclusion which any member of the public searching the records could draw would be that the appellant was the sole person carrying on business under the business name, albeit as a trustee.
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So far as this business name is concerned, it should be observed that the name Gulland Medical Clinic seems never to have been used, except in relation to the bank account of the practice, in respect of which deposits were made in that name, and statements were forwarded to ``the Proprietor Gulland Medical Clinic''. The name of the account, however, was Gulland Medical Clinic Unit Trust. Two other names, that is ``Dr. Ian Gulland Medical Clinic Unit Trust'' and ``Gulland Medical Clinic Unit Trust'' have been used in connection with the practice in the manner later described. Although the last-mentioned names have never been registered, I do not think that they were required to be registered, for the evidence does not indicate that the ``business'' was being carried on under either name. The fact was that the practice was being carried on under the name ``Dr. Ian Gulland''.
The minutes also contain a resolution:
``... as an additional condition of the engagement of Dr. I. Gulland that he should be responsible for his own professional indemnity insurance and he informs his insurer of his employment as salaried medical practitioner of the Trust from and including 5th April, 1979.''
It was not apparently seen to be necessary for Dr. Burke to inform her own insurer of the fact that, as a trustee, she would be conducting another medical practice in addition to her own, in relation to which she could incur vicarious liability. At the same time, it would have to be conceded that the possibility of any prospective plaintiffs discovering Dr. Burke's connection with the practice, having regard to the manner in which the scheme was implemented, was remote.
Rubber stamps bearing the wording ``Medical Clinic Unit Trust'' and ``Gulland Medical Clinic'' were obtained on the 29th March and the 9th April 1979 respectively, for use in the practice. The first stamp was, on and after the 5th April, used on account forms, which were then in stock, under the name ``Dr. Ian Gulland'', which was already printed thereon. The words so stamped were, however, much smaller in size than the printed words ``Dr. Ian Gulland'' and that remains the case with the accounts which have subsequently been printed. Receipts have also been printed, bearing the words ``Dr. Ian Gulland Medical Clinic Unit Trust'', in this case, however, in letters of uniform size. Neither the printed letterhead of the practice, nor prescription forms, have at any time carried a reference to the trust. No information has ever been given to patients that they were in any respect dealing with Dr. Burke, or that the appellant had become an employee. There has been no sign or other notification in the surgery to indicate that Dr. Burke has any association with it. The appellant's own name is written on the front windows of the surgery, and it is also displayed on a sign within the waiting room. The only possible indication which patients would have had of any change in the structure of the practice is the reference to the unit trust on the forms of accounts and on the receipts. That would be likely to convey very little to them, quite apart from the fact that they are, presumably, only handed to the patient after the medical service to which they relate has been rendered. The lessors of equipment which was leased to the appellant were not told of the new arrangements, although rental payments have been made by cheques drawn on the trust account. I have been told nothing of any particular notice to Dr. Brindal as the holder of the head lease of the surgery premises, although it may be assumed that he was aware, in his capacity as trustee of the service trust, of what was being done.
The evidence was that the appellant and Dr. Burke have met a couple of times a year and that they have spoken on the telephone, perhaps three to four times a year, in order to deal with the business of the trust; but their discussions appear all to have been concerned with financial matters which have been raised by the accountant. They have never been concerned, as such, with the operation of the practice itself. Although she has seen the financial statements relating to it, Dr. Burke has not sought in any way to interfere with or to take any part in the management of the practice. She is a signatory to the bank account of the trust; but, although there was no instruction to that effect, it was never intended that she would be required to sign cheques drawn on that account, and she has not done so. She acknowledged that she had no particular desire to pry into the appellant's private
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financial affairs any more than was absolutely necessary. There was no evidence that she had even visited the surgery at any time. It has always been expected that she would be happy to go along with what the appellant wanted, although I accept that it was made clear to her at the outset that she was not under any obligation to agree to what he sought and that she understood that she was in a position to disagree with him at any time. She has had no reason to disagree with anything which he has proposed.Dr. Burke knew that it would be necessary for the appellant and herself to act jointly. It may well never have been within her contemplation, when she agreed to her appointment as trustee, that she would be participating in giving him any directions; but I accept entirely her statement that she believed that she had entered into a legal agreement and that she would have to abide by the points within that agreement. She understood that she was under an obligation as a trustee to act in the interests of the trust and of the beneficiaries of the trust and I have no doubt that, had the need arisen, she would have acted accordingly. Whilst it is true that she did not take any positive steps to put herself in a position where she could readily become aware of any such need, she had a great deal of respect for the appellant's care of his patients and she did not think it necessary to take any steps to check on him in regard to his proper treatment of them. In any event, as a fellow practitioner practising in the near vicinity, she may well have become aware of the fact if any problems developed in the practice.
The appellant's stated reason for entering into the foregoing arrangement was to establish a superannuation fund after he had become an employee. He denied that, at the time, he appreciated that the arrangement would result in a reduction in his personal liability for income tax. However, he expected no longer to be liable for the payment of provisional tax, and he anticipated that he would obtain a refund of provisional tax which he had already paid. It was clear that the appellant had in the past been concerned with assessments of provisional tax which he had received. He was familiar with the notion of income splitting; but he said that he regarded it as something which just might occur in the future, for he could see no immediate prospect of any advantage in that direction, there being insufficient income in the unit trust to do more than pay his salary and an amount of superannuation. But this was not an arrangement designed only for one financial year and the naming of the trustee of the discretionary trust as the beneficiary in the unit trust suggests that income splitting was a significant factor. Furthermore, the appellant conceded that there could be a limit to the extent to which the service trust could operate to split his income. He also acknowledged that an important advantage of the arrangement was that a tax deduction would be available to the trustees of the unit trust for their superannuation contribution. I did not find the appellant's evidence as to certain advantages of the superannuation scheme in providing disciplined saving and greater control over investments to be very convincing.
In his personal income tax return for the year ended the 30th June 1979, the appellant returned a taxable income of $19,405. The Deputy Commissioner of Taxation, however, by notice of assessment dated the 30th April 1980, assessed income tax on a taxable income of $16,296. The difference is accounted for by a loss made by the Gulland Medical Clinic Unit Trust, which the Deputy Commissioner treated, in effect, as the loss of the appellant. The assessment was based upon the application of sec. 260 of the Income Tax Assessment Act 1936, to the arrangements entered into by the appellant. The appellant gave notice of objection against the assessment and claimed that the assessment should be varied by excising the loss. The objection was disallowed and the appellant thereupon requested that it be treated as an appeal and forwarded to this Court.
In the course of the hearing, Mr. Gleeson, for the respondent, indicated that the adjustment sheet accompanying the appellant's assessment, subject to two qualifications, should more correctly read:
``$ Taxable income returned 19,405 Less `salary' 5,001 ------ 14,404 Add net income purportedly derived by unit trust 1,892 ------- $16,296 -------
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The figure of $1,892 is calculated as follows:
$ $ Gross fees 12,130 Less deductions claimed 17,239 Less disallowed wages 5,001 Less superannuation 2,000 10,238 ------ ------ $ 1,892 ------''
The two qualifications expressed were that, when the appellant was assessed to tax, it was upon the basis that the income claimed to have been received by the trustees was calculated upon a cash basis, in the same manner as the appellant's earlier personal income had been calculated. Their income, however, was in fact calculated upon an accruals basis. If the cash basis were correct, then, to that extent, the assessment was also incorrect. So far as this qualification is concerned, it appears to me to be clear, and it was not really challenged, that, in the light of
C. of T. (S.A.) v. Executor, Trustee & Agency Co. of South Australia Ltd. (Carden's case) (1938) 63 C.L.R. 108 and
Henderson v. F.C. of T. 70 ATC 4016; (1970) 119 C.L.R. 612, the method of accounting calculated to give a substantially correct reflex of the taxpayer's true income is that based on cash receipts and payments and not on accruals. The second qualification was that, if the appellant were to fail in this appeal for reasons other than the application of sec. 260, the assessment being based upon the application of that section, questions might arise as to certain of the deductions allowed to the trustees. No such questions were, however, identified.
The initial question which arises in this appeal is whether the arrangements between the appellant and Dr. Burke amounted merely to a ``sham'' - ``this popular and pejorative word'' as Diplock L.J. described it in
Snook v. London & West Riding Investments Ltd. (1967) 2 Q.B. 786 at p. 802. Did they represent pretended and not real transactions, constituting a mere facade concealing different arrangements and therefore being inherently worthless?
Certain facts may well be suggestive of a sham. The medical practice, so far as the patients were concerned, was conducted after the arrangements were entered into entirely as it had been before the 5th April 1979, without any reference to the unit trust, other than the fact that its name was added to the account forms and receipts used in the practice. There was nothing to indicate to any member of the public that Dr. Burke was in any respect connected with the practice, and she neither gave nor joined in giving any directions with regard to the day to day running of the practice. If it be that the provision in the contract of employment relating to the giving of directions to the appellant as an employee was ineffective, a matter discussed later, it might be suggested that this throws doubt upon the remainder of the contract and, that contract being central to the arrangements, upon those arrangements. But this seems to me to be relevant essentially to whether the appellant and Dr. Burke achieved their purpose, and not to whether the contract was merely a pretended transaction, provided, of course, that the appellant and Dr. Burke had no belief that the provision was ineffective. I do not consider that they had any such belief. Additionally, as the appellant acknowledged, he still regards himself as a sole practitioner. I would, however, attach little significance to this admission, for, accepting for this purpose the effectiveness of the arrangement, he was one of two trustees charged with the conduct of the practice, and he was the one person who in fact worked in it. This is simply a matter of semantics.
Many of the steps taken to implement the arrangements were artificial and carelessly executed, and obviously it is a matter for concern that the dates of documents are totally unreliable. But these were, I believe, all faults of the advisers who were entrusted by the appellant with the implementation of the agreements. They do not bear on his own intentions or those of Dr. Burke.
In the end, I have reached the firm conclusion that the arrangements were intended to have legal reality and to create rights and obligations. They were not, I consider, merely colourable and never intended to be operative according to their tenor. Whether the appellant and Dr. Burke achieved their purpose is a distinct question; but, in my opinion, they embarked upon the arrangements into which they entered with the genuine intention of creating a trust to carry on the appellant's existing practice and of employing the appellant therein with a view to securing to him certain advantages.
ATC 4363
When Dr. Burke accepted her appointment as trustee, I am satisfied that she accepted that she was undertaking a responsibility as such towards the beneficiaries of the trust. I am satisfied that, had she perceived the need to do so, she would have taken whatever action was available to her to ensure that the practice was properly conducted. This is not to overlook the difficulties which might have faced her in this regard; but I have no reason to doubt that, had the appellant acted improperly, Dr. Burke would have taken steps, if necessary, to secure his replacement as a trustee of the unit trust.Accepting, as I do, that the arrangements did not amount to a sham and that they were intended to have effect according to their tenor, the next question is whether the actions of the appellant and of Dr. Burke produced in law the results they intended - cf.
Bolton v. F.C. of T. (1964) 13 A.T.D. 378 at pp. 381 to 382. On this question, two of the contracts are of particular relevance, the contract for the sale of the goodwill of the practice and the contract of employment.
The contract for the sale of the goodwill was, in my opinion, an effective contract. As I have already indicated, I am satisfied that the written offer of sale was accepted. There can be no objection to it on the ground that it involved a purchase by trustees of the private property of one of them, because this was expressly permitted by cl. 17(4) of the deed of trusts. Furthermore, this contract could raise no problem in relation to the appellant's contracting with himself, for, quite apart from any question of whether a person can contract in a representative capacity with himself as an individual, sec. 52(1) of the Property Law Act 1969 now provides:
``Any covenant, whether express or implied, or agreement entered into by a person with himself and one or more other persons shall be construed and be capable of being enforced in like manner as if the covenant or agreement had been entered into with the other person or persons alone.''
The application of this provision to the contract of sale is not open to the same objections as is its application to the contract of employment. Furthermore, whilst it is true that no steps appear to have been taken to give notice to the lessors of certain equipment used in the practice, whatever consequence that might have had as between lessor and the appellant as lessee, the assignments, as between the appellant and the trustees of the unit trust, were effective - see
Morrison v. Hall (1923) V.L.R. 92;
MacDonald v. Robins (1954) 90 C.L.R. 515 at p. 520 and
Massart v. Blight (1971) 82 C.L.R. 423.
The contract of employment poses some different and more difficult problems. For the present purposes, its importance relates to the question of whether the income from the practice, on and after the 5th April 1979, was derived by the appellant, or whether it constituted income of a trust estate, as to which the appellant was not liable, whether as trustee or otherwise, to pay income tax, any income tax being payable pursuant to the provisions of Div. 6 of Pt. III of the Income Tax Assessment Act, and not otherwise. I am not concerned, as such, with the separate question of whether the appellant, in consequence of the contract, became an employee for the purposes of the provisions of the Act relating to superannuation funds. If, however, the appellant was indeed an employee, then his income consisted simply of his remuneration, whilst the income produced by him in the practice was the income of the trustees, the trustees having the contractual right to his services and to the income which he produced. In this event, the income of the practice, in terms of the Act, would have been derived, not by the appellant in his personal capacity, but by the appellant and Dr. Burke as trustees. This would be so notwithstanding that the income of the trustees was generated by the personal efforts of the appellant and was the product of his personal exertion.
Three questions arise in relation to the contract of employment. The first is whether the appellant could enter into a binding contract with himself and Dr. Burke as trustees. If he could, then the second question which arises is whether the contract can properly be characterised as a contract of employment. If it cannot, then the third question which arises is whether the contract is such that the trustees, and not the appellant in his personal capacity, derived the income from the practice.
The principal authority, which was discussed at some length, in relation to the
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contract of employment isWatchorn v. Comptroller of Stamps (1969) V.R. 128. It is a useful decision, because it canvasses many of the matters which are in issue in this appeal. It concerned a claim for exemption from stamp duty under the Third Schedule to the Stamps Act (Vic.), in order to sustain which, the appellant had to establish that the person concerned was an officer, servant or employee of an employer. Four persons, who were trustees of an estate, executed a deed establishing a superannuation fund in favour of one of their number. The estate was a large one and the person concerned acted as supervising trustee in respect of the administration of the estate in a full-time capacity at a substantial salary. The deed described the four trustees, including the supervising trustee, one Kilgour, as the employers and it described him as the member of the fund. The position was expressed by Little J. at p. 132 as follows:
``The 1961 instrument identifies four persons as the employers. One of those four persons is Kilgour. All four persons are trustees of the estate of Adams and the deed states that Kilgour is `employed by the employers as supervising trustee of the various ramifications, assets, businesses and interests' of the estate. Hence the position is asserted that Kilgour is, in relation to the trust estate, both a trustee and an employee of himself and his co-trustees. Can he, within a fair reading of the language of the exemption, fall within the description `officer, servant or employee of an employer'?''
Little J. accepted that it was the common law relationship of master and servant which was material. He continued, at p. 133:
``The distinctive quality and the test of that relationship is that the employee (servant) is subject to the control or command of the employer not only as to the work he is to do but how or in what manner he is to do it. It is the right of control which is the essential feature of the relationship.
It follows that to assert a relationship of employer and employee as to the trust estate between Kilgour and the trustees is to assert a relationship which is quite incompatible with his position and duty as one of several trustees. As a trustee he is bound to exercise his own independent judgment and discretion in the interests of the trust. As an employee he would, within the range of the employment, be made subject to a right of control by his `employers' and so would abdicate his independence as a trustee. A testator in appointing several trustees places his confidence in all and entrusts the execution of the trusts to all and not a majority of the trustees.''
Little J. then went on to consider whether a person can be employed by himself or by himself and others. He doubted that it was possible, referring to
Ellis v. Joseph Ellis and Co. (1905) 1 K.B. 324, which was not, however, a case concerning a contract between a person acting in one capacity and himself in another. It was a clear case where it was held that a partner could not constitute himself an employee of the partnership for the purposes of the Workers' Compensation Act. He then turned to a consideration of sec. 82(1) of the Property Law Act (Vic.), which is equivalent to sec. 52(1) of the Property Law Act (W.A.). He observed that it saves an agreement by a person with himself and one or more other persons from its common law invalidity. ``It does so,'' he said, ``not by enacting that an agreement between A and A and B is, notwithstanding any rule at common law, a valid agreement, but by requiring that the agreement be construed in like manner as if it had been entered into between A and B alone and by making it enforceable accordingly.'' He cited in support of this point
Stewart v. Hawkins (1960) 60 S.R. (N.S.W.) 104 at p. 107 where Owen and Ferguson JJ. said at the corresponding section in the New South Wales legislation:
``The section validates the agreement that has been entered into, it does not convert it into some other agreement. It provides that the agreement shall be construed and be capable of being enforced, not as an agreement made with the other or others, but in like manner as if the agreement had been made with the other or others, which is a very different thing. The words `shall be construed and be capable of being enforced in like manner' are validating words and we think that the proper interpretation of the section is that a covenant or agreement made by a person
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with himself and another or others shall be as valid as if it had been made with the other or others excluding himself, and may be enforced accordingly.''
Little J. went on to say, at p. 134:
``Assuming in this case, accordingly, that an agreement had been entered into between Kilgour and himself and his co-trustee appointing him as supervising trustee the effects of sec. 82(1) is that the agreement is to be construed and be capable of being enforced in like manner as if it had been entered into between Kilgour and the trustees other than himself. So construed, however, it does not avoid the fact that it would be quite irreconcilable with his position as a co-trustee to conclude that he became by virtue of any agreement an `employee', in trust matters, of his co-trustees. To achieve such a relationship it would be necessary for him to retire from the trust.''
It does not appear to me that the decision in Watchorn's case could have been other than it was, for the trustees were there endeavouring to employ one of their number to perform duties as a trustee. To have upheld such an arrangement as a contract of service would have been, as was pointed out, quite inconsistent with the nature of the relationship between trustees in the performance of their duties. For the same reason, it appears to me that sec. 52(1) of the Property Law Act cannot assist the appellant with respect to the application of cl. 4(c) of the contract of employment, relating to the trustees' giving directions to the appellant. In the case of co-trustees, their office is a joint one, and this is reinforced by the terms of the trust deed itself. It is not permissible, in my view, to use sec. 52, which is essentially a validating provision, to abrogate this requirement, with the consequence that, in respect of this critical area of the continuing operations of the trust, Dr. Burke alone can direct the appellant in the performance of his duties. Section 52(1) is equally inapplicable to other provisions in the contract. However, if the contract is otherwise effective, it does not appear to me that sec. 52(1) has necessarily to be applied, so as to render the contract ineffective. The next question is, therefore, whether the contract of employment is effective apart from sec. 52(1). It can only be effective if it is permissible at common law for two trustees to contract with one of them in his individual capacity.
There appears to be no doubt that, putting on one side the case of a person's acting in two capacities, one person cannot contract with himself, whether alone or jointly with another. For example, in Salmond and Williams on Contract (2nd ed.) at p. 23, the following appears:
``Inasmuch as the conception of obligation is bilateral and all contracts have for their object the creation of obligations, there must be at least two parties to a contract. A man cannot be under an obligation to himself (Gray v. Ellison (1856) 1 Giff. 438), and at common law even a covenant by a man jointly with another or others is void.''
A similar view is to be found expressed by Lord Denning in
Rye v. Rye (1962) A.C. 496 at p. 514. So also in
Ellis v. Kerr (1910) 1 Ch. 529, Warrington J. said, at p. 534:
``The substance of the objection is that a man cannot make a contract with himself. One would have thought it only required to be stated to be self-evident that it makes no difference that he joins in that contract with himself and some other person either as covenantor or covenantee if the obligation on the one side, or, as the case may be, the right to enforce that obligation on the other side, is joint.''
In the last-mentioned situation, if the obligation is several, the contract is not void, because it is possible in such a case for the remaining parties to sue the individual - see, for example,
Ridley v. Lee (1935) Ch. 591 at p. 602.
The current trend of authority, however, does appear to suggest that it makes a difference to the validity of the contract if the contracting party concerned is acting in different capacities. Thus, the rule is stated in 9 Halsbury's Laws of England (4th ed.) para. 204 as follows:
``There must be at least two parties to a contract, a promisor and a promisee... However, where a person has different
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capacities, he may have power to contract in his representative capacity with himself as an individual.''
A footnote provides, as examples of the latter situation, a trustee, executor, administrator or agent. No authority is cited for this view, which is somewhat tentatively put forward, and which is new to the 4th edition of Halsbury. It is the same view as that is put forward in Corbin on Contracts para. 55 footnote 2. It is to be observed that it is contrary to the view expressed in the Restatement of the Law of Contracts para. 15 and in 17 Corpus Juris Secundum, Contracts para. 26, and see also Williston on Contracts (2nd ed.) para. 18. It was, however, adopted by Kilner Brown J. in
Rowley Holmes and Co. v. Barber (1977) 1 All E.R. 801 when delivering the judgment of the Employment Appeal Tribunal in which it was held that a personal representative could contract with himself in his individual capacity so as to become an employee.
There are many cases concerning sales by trustees to themselves, which support the view that a trustee can contract with himself, notwithstanding that any contract so concluded would be voidable. They are not dealt with simply as instances of conveyances, independently of agreements. Even in these cases, however, there are dicta to be found which deny the possibility of such a contract. Thus, in
Williams v. Scott (1900) A.C. 499, Sir Ford North, speaking for the Privy Council, said at p. 503:
``It is clear undisputed law that a trustee for the sale of property cannot himself be the purchaser of it - no person can at the same time fill the two opposite characters of vendor and purchaser.''
And see also,
Denton v. Donner (1856) 23 Beav. 285 and
Farrar v. Farrars Ltd. (1888) 40 Ch.D. 395 at p. 409.
It is commonly asserted that the rule of equity that a trustee may not purchase part of the trust estate rests upon two reasons, first, that a man may not be both vendor and purchaser and, secondly, that there may not be a conflict of duty and interest - see, for example, 16 Halsbury's Laws of England (4th ed.) para. 1457. It is also frequently said to be based on the proposition that a person cannot be at the same time both plaintiff and defendant. But if the first reason be correct, then one may well wonder how it is that a purchase is possible, as it undoubtedly is, where express authority is contained in the trust instrument or where the trustee purchases with authority from the beneficiaries - see
Randall v. Errington (1805) 10 Ves. Jun. 423 and
Downes v. Grazebrook (1817) 3 Mer. 200. If the rule is as expressed in Holder v. Holder (1968) Ch. 353 at pp. 398, 402-403, where it was held that, in an action by beneficiaries to set aside a purchase without authority, the Court has a discretion as to setting it aside, then the position is still more clear. Even those holding the contrary view, that the Court has no discretion in such a case, do not suggest that the contract is absolutely void - see Jacob's Law of Trusts in Australia (4th ed.) pp. 341, 343 and see also
Glennon v. F.C. of T. 72 ATC 4181 at pp. 4184-4185; (1972) 127 C.L.R. 503 at p. 511;
George A. Bond and Co. Ltd. v. Bond (1929) 30 S.R. (N.S.W.) 15; Finn, Fiduciary Obligations p. 185 and Hanbury and Maudsley, Modern Equity (11th ed.) p. 603.
Furthermore, in
Lee v. Lee's Air Farming Ltd. (1961) A.C. 12, it appears that Lord Morris, speaking for the Privy Council, accepted the proposition that a person can contract with himself in another capacity, when he said, at p. 30:
``There appears to be no greater difficulty in holding that a man acting in one capacity can give orders to himself in another capacity than there is in holding that a man acting in one capacity can make a contract with himself in another capacity.''
Although his remarks were clearly obiter, it does not appear that his Lordship was there restricting himself to the factual position in that case, where the contract was made between distinct parties, a company and an individual, with the company acting through that individual. His reference was to a man's making a contract with himself.
It is also of some interest to note that in
Re New Haw Estate Trusts (1912) 107 L.T. 191, it was indicated by Parker J. that a compromise by the Public Trustee, as trustee of one settlement, with himself, as trustee of another settlement, required the sanction of the Court. It was not suggested that the contract was a nullity.
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The second reason for the rule that a trustee cannot purchase trust property, relating to the existence of a conflict of interest and duty, must give way to a specific provision in the trust deed, such as cl. 17(3) of the present deed.
Finally, so far as the procedural reason is concerned, that a person cannot sue himself, this has been removed by sec. 57 of the Trustees Act 1962, to the extent that it permits a trustee of any property to sue and be sued by himself in any other capacity, although subject to the directions of the Court as to the manner in which the opposing interests are to be represented. Apart from this provision, where there are co-trustees, one of whom has entered into a contract with the trustees in his personal capacity, he could be sued as a defendant in both capacities by his co-trustees.
In the light of the foregoing, I am prepared to accept, for the present purposes, that the contract of employment was a valid contract, notwithstanding the dual position of the appellant.
This leads on to the question of whether the contract can properly be characterised as one of employment. The obstacle so to characterising it is the difficulty associated with the appellant's joining with his co-trustee in giving himself directions or in exercising control over himself, control commonly being put forward as the primary test for the existence of the relationship of employer and employee. For the reasons already discussed, namely, that the duties which Kilgour was to perform were duties as a trustee, the decision in Watchorn's case does not require an answer adverse to the appellant.
The right to control, however, no longer occupies the central position which it formerly did in establishing the relationship of employer and employee. All available facts are to be considered - see
Zuijs v. Wirth Brothers Pty. Ltd. (1955) 93 C.L.R. 561 at p. 571. As Stephen J. pointed out in
F.C. of T. v. Barrett 73 ATC 4147 at p. 4149; (1973) 129 C.L.R. 395 at pp. 401-402, Zuijs' case:
``... provides Australian authority for the proposition that in the context of a modern industrial society earlier concepts of relevant control, especially in the case of those employees possessing specialised skills or talents or exercising individual judgment, require modification. In many such cases an employer cannot in fact supervise the mode of performance of work but it will be enough that the employer retains `lawful authority to command so far as there is scope for it', if only in `incidental or collateral matters'...''
In the normal case, of course, an employed medical practitioner will not be subject to regular directions as to how he should perform his work, involving, as it so often does, the exercise of personal judgment. Indeed, it was for this reason that for a considerable period there was a reluctance to impose vicarious liability upon hospitals for the negligence of employed doctors. But the question remains whether it can be said that the appellant and Dr. Burke retained lawful authority to command the appellant in his personal capacity, so far as there was scope for it. At first sight, such an idea appears to be not a little curious, but the present problem is not entirely dissimilar to many problems which arise under modern company law, for example, where a managing director is employed by a company. Whilst it is true that, in such a case, there are two distinct parties to the contract, the problem of control is critical if the company is able, in the particular case, to act only through its managing director. The accepted view here appears to be that the relationship can be one of employer and employee - see Lee v. Lee's Air Farming (supra) and
Boulting v. Association of Cinematograph Television and Allied Technicians (1963) 1 All E.R. 716; (1963) 2 Q.B. 606.
The appellant also endeavoured to face up to this problem when he said:
``I think I could be led or persuaded to be more conscientious by my co-trustee as a trustee and thereby improve my conscientiousness as an employee.''
It may be that this was no spontaneous answer, but it did serve to emphasise the duties which would rest upon the appellant as a trustee, as distinct from his duties as an employee.
There appears to me to be a substantial argument in favour of the view that this
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contract did create the relationship of employers and employee. But even if the contract is not capable of being characterised as one of employment, it still does not follow that the income of the practice was derived by the appellant personally. It appears to me that, on the basis that the contract of employment was valid, even if not constituting the appellant an employee, any contractual rights which the appellant acquired under contracts with patients of the practice, which were, essentially, limited to rights to the payment of fees, were held in trust under the provisions of the unit trust deed. Upon payment being made pursuant to the terms of those contracts, the fees also were held under the terms of the trust. It was not, in my view, simply a matter of the trust's attaching to income of the practice upon its receipt, with the consequence that the appellant derived the income and, upon deriving it, held it in trust. The contract did not, in my view, create a trust of the future income of the appellant, as discussed by Kitto J. inStewart Dawson Holdings Pty. Ltd. v. F.C. of T. (1965) 39 A.L.J.R. 300 at p. 301. It was not a case of a professional man practising on his own account, as discussed in
F.C. of T. v. Everett 80 ATC 4076 at p. 4081; (1980) 143 C.L.R. 440 at p. 450. The practice was being carried on for the beneficiaries of the trust and no contracts were entered into by the appellant beneficially.
Counsel for the respondent then argued that the income from the practice was not relevantly income of a trust estate in terms of sec. 95 of the Income Tax Assessment Act. The meaning of the term ``trust estate'' has been the subject of some discussion. It is an expression which appears frequently in Div. 6 of Pt. III of the Act.
In the present case, the trust was properly constituted. There was property the subject of the trust. If the trustees acquired, as such, the goodwill of the medical practice, they utilised it by conducting that practice. For this purpose, they leased equipment and they employed staff. The benefit of contracts entered into by the appellant with patients of the practice was held in terms of the trust. In my view, the income thereby produced was relevantly income of a trust estate. The fact that the income was primarily generated by the personal exertions of the appellant does not appear to me to require a different answer. There may be found many instances in which income has been generated by persons employed by trustees, and it has not been questioned that the income is relevantly that of a trust estate - see, for example,
F.C. of T. v. Phillips 78 ATC 4361. Furthermore, sec. 102A(3) of the Act appears to recognize that income derived from a business carried on by the trustee of a trust estate will be income of a trust estate.
It is necessary now to turn to the final question, which is whether sec. 260 of the Act applies to avoid the arrangements as against the respondent.
Section 260 of the Act provides:
``Every contract, agreement, or arrangement made or entered into, orally or in writing, whether before or after the commencement of this Act, shall so far as it has or purports to have the purpose or effect of in any way, directly or indirectly -
- (a) altering the incidence of any income tax;
- (b) relieving any person from liability to pay any income tax or make any return;
- (c) defeating, evading, or avoiding any duty or liability imposed on any person by this Act; or
- (d) preventing the operation of this Act in any respect,
be absolutely void, as against the Commissioner, or in regard to any proceeding under this Act, but without prejudice to such validity as it may have in any other respect or for any other purpose.''
The difficulties associated with the application of sec. 260 are well known and require no elaboration. Those difficulties are inherent in the language of the section itself. During the years that it and its predecessors have operated, the ambit of their operation appears clearly to have fluctuated.
The relevant agreements or arrangements have been particularised by the respondent as follows:
- (i) The formation of the Gulland Medical Clinic Unit Trust.
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- (ii) The employment agreement made between the trustees of the Gulland Medical Clinic Unit Trust and the appellant.
- (iii) The management services agreement made between the trustees of the Gulland Medical Clinic Unit Trust and the Gulland Family Trust.
- (iv) The sale agreement made between the appellant as vendor and the trustees of the Gulland Medical Clinic Unit Trust as purchaser for the sale of the appellant's medical practice at 54 Eighth Avenue Maylands.
- (v) The agreement or arrangement whereby the trustees of the Gulland Medical Clinic Unit Trust purported to assume responsibility for the practice premises at 54 Eighth Avenue Maylands.
- (vi) The agreement or arrangement whereby the Gulland Family Trust purported to assume the appellant's responsibility as lessee under leases for office and surgery equipment.
- (vii) The issue of units in the Gulland Medical Clinic Unit Trust to Dr. C.F. Brindal for the Gulland Family Trust.
- (viii) The establishment and operation of a superannuation fund for the purported employees of the Gulland Medical Clinic Unit Trust.
Counsel for the respondent sought to identify two relevant purposes within the meaning of sec. 260. The first was to secure certain superannuation benefits, which would not otherwise be available to the appellant, the key being to secure an income tax deduction in relation to contributions to the fund. The second was that of income splitting, the appellant receiving a reduced income and therefore paying a reduced amount of income tax, so that funds might be made available to the appellant's ``employers'' to enable them to make contributions to a superannuation fund for his benefit, for which, it was anticipated, a deduction would be available to them, with any balance passing to the trustee of the Dr. I. Gulland Family Trust for ultimate distribution to members of the appellant's family and, indeed, possibly to the appellant himself. In these circumstances, even if a deduction were not available to the trustees, the arrangements standing, the income splitting would still secure a reduction in income tax for the appellant.
The argument for the appellant was that the purpose of the arrangements was to obtain an entitlement to superannuation, on the basis that the appellant would be an employee and that there would be brought into existence an employer, who could claim the income tax deductions available under sec. 82AAC of the Act for contributions to the relevant superannuation fund. It was, so it was argued, a matter of choice, the opportunity being created by the Act itself for the arrangement of the taxpayer's affairs on this basis. Reliance was placed upon the line of cases culminating in
Cridland v. F.C. of T. 77 ATC 4538; (1977) 140 C.L.R. 330. In that case, Mason J. referred to the principle underlying the decision in
W.P. Keighery Pty. Ltd. v. F.C. of T. (1957) 100 C.L.R. 66 as proceeding on the footing that the taxpayer is entitled to create a situation by entering into a transaction which will attract tax consequences for which the Act makes specific provision and that the validity of the transaction is not affected by sec. 260 merely because the tax consequences which it attracts are advantageous to the taxpayer and he enters into the transaction deliberately with a view to gaining that advantage - see at ATC p. 4542; C.L.R. p. 339. If those cases stood alone, this would be an attractive argument, but they do not. In my opinion, the present appeal is to be determined, not by those cases, but by
Peate v. F.C. of T. (1964) 111 C.L.R. 443; (1966) 116 C.L.R. 38. It may well be that, since 1977, Peate's case has been left to operate only within a fairly narrow field; but in my view the appellant's arrangements come within that field. It is to be noted that, in the line of authority cited for the appellant, Peate's case was not subjected to any examination or questioned in any respect.
In these circumstances, it is desirable that I should turn at once to Peate's case, which is particularly noteworthy for the fact that each of the eleven members of the High Court and of the Privy Council who heard the matter was of the view that the arrangements there in question were rendered ineffectual by sec. 260. It is unnecessary to consider in detail the facts in the case. It is sufficient to note that a company (Westbank) replaced a partnership
ATC 4370
of doctors. The doctors, who had been partners, became directors of that company, Dr. Peate becoming chairman. The fees earned as a result of their carrying on the practice of medicine were to be paid into that company's account instead of into the partnership account and, after deduction of expenses, including the cost of the employment of other doctors and an amount of $5,000 which was retained for the payment of taxes and dividends, the net proceeds were to be paid to each of the family companies of the doctors as service fees. Each family company would get the same percentage of the net dividend, less $5,000, of Westbank as each doctor had received of the profits of the partnership. Each family company would get the same percentage share of any dividends declared by Westbank out of the $5,000 retained; and each of the eight doctors would get a salary from his family company. Dr. Peate's family company, of which he and his wife were directors, in addition to paying him his salary under the agreement between that company and him, also paid his wife a salary for her services as secretary of the company. Dividends declared by the company went to the trustees of two settlements for the benefit of their children.Menzies J. (1964) 111 C.L.R. at pp. 445-446 made some useful observations of a general character which are presently apposite:
``As the law stands, taxpayers who are in business as employers or employees have found it easier than those who are not to reap advantages from some of the deductions from assessable income that are allowed in the calculation of taxable income upon which tax is assessed. The establishment and maintenance of superannuation schemes is a good instance of this. So is the provision of a wide variety of amenities from which employees obtain non-taxable benefits while the cost is in a large measure deductible from the employer's assessable income. These are often called fringe benefits. Holiday pay is again something which those who do not get it envy those who do. Such benefits, real enough as they are in ordinary circumstances, would, however, obviously be of far greater value if it could be so arranged that they should accrue to taxpayers who would in substance employ themselves in the sense that their salaries, amenities, superannuation payments, etc., would come from their own earnings... So long as the employer and the employee are separate, economically as well as legally, the cost of benefits to employees (such, for instance, as holiday pay and superannuation payments) must, after allowing for the value of tax deductibility, be borne by the employer but if a person were, in effect, to provide himself with such benefits and obtain taxation deductions in his role of a self employer, the resulting tax saving would simply be money in the taxpayer's pocket. A further refinement would, however, bring even greater advantages to a family man who, it is established, cannot achieve taxation immunity by the simple expedient of assigning his earnings to his wife and family.
Parkins v. Warwick (1943) 25 T.C. 419. If, for instance, it were possible for a man to re-arrange his affairs so as to work for his wife and his family as he previously worked for himself with the consequence that the return which his work produced, instead of being his own income and taxable as such, would be divisible between him - as salary - and his wife and family as his employers and that his holiday pay, superannuation payments and other benefits would be tax deductions from the income which his work produced, how much more would be left in the hands of the family group after each of them had paid tax on what came to his or her hands! To achieve such a result where a man has been working in partnership with others and wishes to continue to work with those who were his partners in much the same way except fiscally would, however, necessitate the exercise of some ingenuity, not to say boldness, particularly in the case of men subject both to both professional and statutory controls, e.g. lawyers or doctors.''
Although Menzies J. did concern himself with a difficulty posed for the appellant that, under the Medical Act of New South Wales, only registered persons could sue for fees, he indicated very clearly that his conclusions upon the questions arising under that Act
ATC 4371
were not vital to his decision. At p. 459, he continued:``In view of recent decisions, it is unnecessary for me to re-state the meaning and effect of this section [sec. 260]. Its application depends upon whether there is here an arrangement having the purpose or effect of avoiding a liability for tax that would otherwise fall upon Dr. Peate. The facts stated indicate this purpose and this effect, for despite other reasons that were advanced by Dr. Peate for so much of what was done as consisted in putting Westbank in the place of the partnership, when all that was done is looked at and in particular when the role of Raleigh is examined, there is a strong prima facie case that the purpose and effect of what was done was to obtain increased tax deductions from assessable income and to divide what would otherwise have been Dr. Peate's taxable income between himself, his wife and his children.''
Menzies J. clearly accepted the test laid down by Lord Denning in
Newton v. F.C. of T. (1958) A.C. 450 at p. 466. Having done so, he continued, at pp. 459-461:
``To arrange for the formation of a company in which all the shares would be held in trust for two children and then that Dr. Peate should transfer his professional practice, his books and his instruments to that company and become its servant in the practice of his profession upon the terms of the agreement to which I have already referred is not, to my mind, explicable by reference either to ordinary business or ordinary family dealings even when due weight is given to the circumstance that Dr. Peate, upon his becoming governing director, really had control of the company. There is little similarity between this case and
Purcell's case (1921) 29 C.L.R. 464 where, a man having declared that he held certain property in trust for his wife and daughter, it was held, rightly in the view of the Privy Council, that the declaration was not avoided by sec. 260. Nor do I think that the
War Assets case (1954) 91 C.L.R. 53 shows that what took place here was an ordinary business transaction. Lest, however, it should be thought from my emphasis upon the part played by Raleigh that it is only the interposing of Raleigh between Dr. Peate and Westbank that prevents the arrangement as a whole being regarded as an ordinary business transaction, I should say that this is not my view. It is true that I do regard the incorporation of Raleigh and the seven other doctors' family companies as colouring everything that was done here but, even without this, I would have concluded that it was not an ordinary business transaction for a body of professional men who are entitled to sue for fees for medical services to transfer their practices, their libraries and their instruments to a company which could not sue for fees and to become that company's servants in the conduct of their profession, particularly in the circumstance that, to the extent to which patients paid fees to the company, their expenditure was not deductible under sec. 82F. What, outside a profession, might be regarded as an ordinary business transaction may, within a profession, have an altogether different appearance... It appears to me that in 1956 Dr. Peate and the other doctors did what they did to get out of the way of taxation which was in prospect if they were to carry on their professional practice in partnership as they had theretofore and that this, in the circumstances stated, is sufficient to meet the test propounded by their Lordships [in Newton's case]. I conclude, therefore, that sec. 260 applies.''
On appeal, Kitto J. (with whom McTiernan J. agreed) held that the case plainly fell within the application of sec. 260. In reaching this conclusion, he also applied the test laid down in Newton's case. At p. 469 he said:
``The arrangement in the present case, considered objectively as is thus required, may well seem to be characterized by several purposes and effects, some of them unconnected with taxation, including the protection of individual members of the group against liability for negligence; the making of superannuation provision for employees, including doctors employed to assist the group; the better organization of the group's activities and particularly its methods of accounting; and the making of provision
ATC 4372
for the doctors' families. (All of these purposes, indeed, the appellant swore were actually contemplated in the formation of the plan.) But the question remains, whether the overt acts that were done under the plan are fairly explicable without an inference being drawn that tax-avoidance is a purpose of the arrangement as a whole. Menzies J. thought they were not, and with respect I agree. The arrangement bears ex facie the stamp of tax-avoidance. An understandable purpose of providing for the doctors' families, and doing so quite honestly, is perfectly evident; but what is equally evident is a purpose of doing so by a method which will divert income away from the participating doctors to or for the benefit of their families, to the end that a substantial part of the tax might be avoided which would have been incurred if the income had first been derived by the doctors and then applied by them for the benefit of their families.''
Taylor J. said at p. 475:
``[I]t is clear enough that here there was an arrangement constituted by a predetermined and concerted series of transactions which had the effect, and were calculated to have the effect, of avoiding the liability of the appellant to tax on a specified share of profits earned by him in co-operation with a number of other medical practitioners and yet leaving him free, to all intents and purposes, to make such dispositions of that share for his own benefit and for the benefit of his wife and children. Indeed, in its final analysis, the picture is little different from that which would have appeared if the appellant had assigned his future gross income upon condition that the assignee, after paying the appellant's share of working expenses, should then pay to the appellant such part of the net amount as he should direct and, thereafter, expend the balance in a specified manner for the benefit of the appellant's wife and children.''
Having made reference to the test in Newton's case he continued, at p. 476:
``As to the appellant's first submission it is, I think, not open to doubt that the purpose and effect of the arrangement which is now attacked was to avoid tax. It is true, no doubt, that it had other ends in view such as the making of provision for the appellant's wife and children. But avoidance of tax was the means to those ends and a diminution in the appellant's tax was not merely an incident of what might be regarded as an ordinary family settlement; as I have already indicated avoidance of tax on income produced by the professional activities of the eight medical practitioners in question was at the very heart of the arrangement which was about as far removed as possible from any concept of ordinary business or family dealing. Further, it possessed no other feature to deny its true character, that is an arrangement having the purpose or effect of defeating, evading or avoiding income tax.''
At pp. 477-478 Windeyer J. said:
``It was argued that the arrangement that the taxpayer and his associates made was outside the operation of sec. 260. Doubtless several elements of the total scheme could, for the participants in it, have other advantages than the avoidance of a liability for income tax. And when, with the advice of their advisers, they concerted and entered into the scheme they had some of those advantages in mind. But that does not redeem their arrangement and what was done under it from the provisions of sec. 260. Moreover, in so far as those ulterior advantages do not themselves depend upon the avoidance of taxation they can be enjoyed. Section 260 makes the arrangement void as against the Commissioner of Taxation only: it does not impair whatever be the validity and effect of it and of its subordinate transactions as between the parties.''
At p. 479, he said:
``For a medical practitioner to enter into an agreement to become the paid servant of a company which was to make it its business to hire him out as a servant of another company is surely not an ordinary business dealing.''
It is of some significance that, at p. 481 Windeyer J. agreed with Menzies J. that the arrangement came within sec. 260, not because of some particular element in the
ATC 4373
arrangement or of any of its subordinate transactions, but from a consideration of it as a whole.The members of the Privy Council had no doubt that the arrangement fell within sec. 260. Their primary concern was whether the avoidance of the arrangement left exposed a liability for income tax. As to the application of the section it was said simply by Viscount Dilhorne (1966) 116 C.L.R. at p. 43:
``The first question therefore to be determined is did the contracts, agreements and arrangements made in 1956 or any part of them have one of the purposes or effects stated in this section [sec. 260].
In the opinion of their Lordships the answer is in the affirmative. Before these arrangements were made in 1956 the appellant received 14 per cent of the net profits of the partnership and was assessed accordingly. After they were made, the doctors who had been partners treated patients in the same way as they had before and as a result of these arrangements, their incomes from the practice of their profession were reduced to the salaries received from the `family' companies who received either by way of service fees or dividends the same percentage of the net profits of Westbank as the doctors had been entitled to under the partnership agreement.
In their Lordships' opinion these arrangements have the purpose and effect of avoiding a liability imposed on each doctor by the Income Tax and Social Services Contribution Assessment Act.''
At p. 52 Lord Donovan, dissenting, said:
``There is no doubt, in my opinion, that the conditions precedent prescribed in sec. 260 exist in Dr. Peate's case. The whole arrangement was designed to relieve him of some liability to tax, and it was, in fact successful in doing so in the first year of its existence. One need hardly consider therefore the remaining content of sec. 260, though I should have thought it could also rightly be said that the arrangement had the object of altering the incidence of income tax on what would ordinarily have been the doctor's professional earnings.''
It is to be observed that, in Peate's case, there was no entitlement in the company to sue for fees. Nor were the patients' payments of fees deductible to them under the terms of the Act. In the end, however, these facts played no significant part in the decision and, in my view, they provide an inadequate basis for distinguishing the present case, in which I am satisfied that the trustees were competent to sue for the fees.
Peate's case does not stand in isolation. Earlier decisions of Taylor J. in
Millard v. F.C. of T. (1962) 108 C.L.R. 336 and of the present Chief Justice in
Hollyock v. F.C. of T. 71 ATC 4202; (1971) 125 C.L.R. 647 provide substantial support for the application of sec. 260 in the present case. It is to be noted, of course, that in Millard's case the company which the taxpayer created was not one which could lawfully conduct the business of a bookmaker which had been carried on by the taxpayer. No doubt this played a significant part in the decision. Furthermore, the business was not sold to the company. The company, the shares in which were held by the taxpayer, his wife and children, simply took over the business of the taxpayer who, in fact, carried on the same activities as before but, so it was argued, for and on behalf of the company and as its agent. Taylor J. did not, however, place particular stress upon these factors. His conclusion was shortly expressed at p. 342:
``To my mind it is about as plain as it could be that the whole purpose and effect of the agreement was to split the appellant's income into a number of parts in order to minimize the amount of tax which would become payable. Any other effect of the agreement was entirely subsidiary to this.''
Hollyock's case involved a pharmacy business, owned by the appellant, which could only lawfully be operated by a registered pharmacist. The appellant, who was registered, and his wife, who was not, executed a deed whose provisions, as Gibbs J. commented, were ``not altogether harmonious''. The deed recited an agreement by the appellant with the wife to sell her a half share in the business. It further provided that the appellant was to hold the assets of the business in trust for himself and his wife, but that he was to have the right to carry on
ATC 4374
the business himself. At p. 658 Gibbs J. said that the conclusion appeared to him to be inevitable that one purpose of the arrangement was to divide the income from the appellant's business in order to reduce the amount of tax that would become payable on it. He considered that it was not possible to regard the case as one in which the appellant had simply disposed of income producing property. Whilst it was true that a considerable quantity of trading stock was included in the assets of the business, the income derived by the appellant was derived from carrying on the business, and the trading stock yielded income only because the business was carried on.There are three cases which might, at first sight, be thought to suggest a different conclusion in the present appeal. They are,
Bayly v. F.C. of T. 77 ATC 4045;
Jones v. F.C. of T. 77 ATC 4058 and
Peacock v. F.C. of T. 76 ATC 4375.
So far as Bayly's case is concerned, it is, in my opinion, clearly distinguishable. There, the taxpayer's wife purchased the goodwill and stock of a pharmacy business, and she took a lease of the premises from the former owner. The business had not previously been owned by the taxpayer. Clearly, in such a case, the annihilation of the arrangement, as against the Commissioner, must have been ineffective to make the income that of the taxpayer. Bray C.J. distinguished Peate's case, Hollyock's case and Millard's case on the basis of the divesting in those cases by the taxpayer of his business. Furthermore, tax avoidance was, in his view, an inessential and incidental purpose of the arrangement.
Jones' case differed from Bayly's case in that the taxpayer did divest himself of one of the two pharmacy businesses, the subject of the arrangement, in favour of his wife. Notwithstanding this, Bray C.J. finally reached the conclusion that the avoidance of income tax was not, within the meaning of sec. 260, a purpose of the arrangement. The matter was obviously finely balanced in his Honour's mind, because he considered to be decisive the distinction which he drew between the formulations of Gibbs J. in Hollyock's case and of the Privy Council in
Europa Oil (N.Z.) Ltd. (No. 2) v. Commr. of I.R. (N.Z.) 76 ATC 6001 of the test of the importance of the sec. 260 purpose, in order for the arrangement to fall within sec. 260. The distinction was drawn between the purpose being one of the main purposes of the arrangement and the purpose being not merely an inessential or incidental feature of the arrangement. Furthermore, Bray C.J. reached his conclusion by applying the decision in
Gauci v. F.C. of T. 75 ATC 4257; (1975) 135 C.L.R. 81 in relation to the onus of proof. Had his Honour had available to him the subsequent decisions in
Macmine v. F.C. of T. 79 ATC 4133; (1979) 53 A.L.J.R. 362 and
McCormack v. F.C. of T. 79 ATC 4111; (1979) 143 C.L.R. 284, his decision would probably have been different. Be this as it may, Jones' case turned, eventually, on a factual finding. The facts in the present case are, in my view, such as to require a different conclusion.
Peacock's case was treated by Nettlefold J. as simply being a case of a husband's taking his wife into partnership. This was not regarded by him as being in breach of the Land Surveyors Act (Tas.), although the business of the partnership was surveying and the wife was not registered as a surveyor. On the facts, his Honour regarded the arrangement as being capable of explanation by reference to ordinary business or family dealing without necessarily being labelled as a means to avoid tax, and this notwithstanding the presence of a number of unusual features. What was clear, however, was that purposes other than fiscal purposes were being effected by the arrangement.
The motives of the appellant were fully canvassed before me, although it was acknowledged that it was the character of the acts done and transactions entered into with which sec. 260 is concerned - see, for example, Aickin J. in
Slutzkin v. F.C. of T. 77 ATC 4076 at p. 4085; (1977) 140 C.L.R. 314 at p. 329. The main purpose of the present arrangement was, in my opinion, to avoid income tax. This was to be effected by diverting what would otherwise have been the appellant's income from the practice to the trustees of the unit trust and by his then receiving back a lesser sum by way of salary. It would thus serve an income splitting purpose. It was then apparent that the trustees of the unit trust would seek to obtain a deduction against its assessable income by making a contribution to the superannuation fund for the benefit of the appellant, a deduction not available to the appellant
ATC 4375
whilst he was carrying on his practice on his own account. There was no reason, apart from fiscal considerations, why the appellant should not have made provision for his own superannuation. Any surplus held by the trustees over and above the superannuation contribution and the other expenses of the trustees was available for the family trust, in respect of which each member of the appellant's family, was a potential beneficiary. It may be that, in the first years of income of the trust, there were no surplus funds available for distribution to the family trust, but the arrangement clearly offered scope for future income splitting and no doubt this was appreciated when the family discretionary trust was selected as the beneficiary of the unit trust. The appellant throughout retained a large measure of control as a co-trustee of the unit trust, as the person with the power to replace the trustee of the family discretionary trust, and as the only person in reality conducting the practice.Notwithstanding the arrangement entered into by the appellant, the practice continued on, so far as the patients were concerned, just as before. The appellant's co-trustee, who could, in one sense, be regarded as a competitor, did not actually concern herself in the practice and no patient would have known of her involvement in the practice. Whereas, even in Peate's case, a business purpose could be identified, no such purpose was or could be identified in connection with the present arrangement. It achieved no limitation of liability, and there was no advantage to be gained from the business structure selected by the appellant from the point of view of the conduct of his practice. The very artificial nature of the arrangement provides, in my view, additional support for my conclusion that the avoidance of income tax was its main purpose. It is unnecessary for the disposition of this case to determine whether, for an arrangement to be avoided under sec. 260, its main purpose, or one of its main purposes, must be tax avoidance, or whether some less substantial purpose will suffice.
In my opinion, sec. 260 operates to avoid the present arrangement, as particularised, as against the respondent. The annihilation of the arrangement poses no difficulties such as were posed in Peate's case. That annihilation leaves exposed a position where the appellant was in receipt of the income of the practice, not as a co-trustee of a unit trust, but as an individual.
In my opinion, subject to any question which arises in relation to determining the income earned in the practice on and after the 5th April 1979 on a cash receipts basis, this appeal should be dismissed.
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