Case V80

Members:
P Gerber DP

Tribunal:
Administrative Appeals Tribunal

Decision date: 20 May 1988.

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Dr P. Gerber (Deputy President)

The facts in this case are not in dispute. The applicant was at all relevant times a lecturer in law at a college of advanced education (``CAE''). In 1979, he accepted a fixed term appointment for three years, commencing on 20 January 1980. In June 1982 he was offered and accepted a tenured appointment with the same CAE, to commence eo instanti with the termination of his fixed term appointment. In the result, the applicant left his office as a ``fixture'' for the last time on 20 January 1983, to return the next day as a tenured member of staff. All that had changed were the terms and conditions of his employment.

2. The conditions of employment applicable to limited term academic staff appointments provided, inter alia, that ``a gratuity of up to 15% of total salary earned will be payable (in lieu of superannuation and repatriation benefits)... at the completion of the period of contractual agreement...''. The applicant thus received an amount of $9,927 on completion of his fixed term appointment, which the respondent taxed in full pursuant to sec. 25(1); alternatively sec. 26(e). The applicant objected on the ground that the payment constituted a lump sum paid ``in consequence of retirement from, or the termination of, any office or employment'' which, in reliance on the provision of sec. 26(d) (since omitted by Act No. 47 of 1984) was only liable to tax to the extent of 5%. Hence this application.

3. The applicant argued his own case with considerable skill, having assiduously researched the relevant case law. In addition, I was taken carefully through the conditions of employment relating to fixed and tenured appointments, as well as the Industrial Conciliation and Arbitration Act 1961-1983 (Qld) and the Education Act 1961-1983 (Qld). This exercise was undertaken to highlight the variations in the two appointments and the different legal consequences which were said to flow therefrom. It was a tour de force, undertaken on the premise that a law lecturer at a CAE held an ``office'' within the meaning of sec. 26(d), which, in the case of this applicant, was terminated on 20 January 1983, to be succeeded by the appointment to another ``office'' on the following day. On this assumption it was submitted, that the amount in dispute constituted a lump sum paid in consequence of the termination of an office.

4. What constitutes an ``office'' has been the subject of considerable judicial speculation and disagreement. The most recent pronouncement has been by Pincus J. in
F.C. of T. v. Sealy 87 ATC 5076. In that case, the relevant issue turned on the question whether the managing partner of a grazing partnership held an ``office'' for purposes of sec. 26AD of the Tax Act, a matter critical to the outcome of the case since it was common ground that there was no ``employment''. In concluding that the appellant held an ``office'', his Honour stated (at p. 5080):

``Mr Watson (counsel for the Commissioner) said that the post of manager of the business was not an `office' and referred to the decision of the House of Lords in
Edwards v. Clinch (1982) A.C. 845, apparently as supporting the contention that to be an `office' within the meaning of the relevant section, the position must have an existence independently of its holder from time to time. Mr Watson referred to Lord Wilberforce's statement in that case that:

• `... the word must involve a degree of continuance (not necessarily continuity) and of independent existence: it must connote a post to which a person can be appointed, which he can vacate and to which a successor can be appointed (p. 861D).'

Lord Wilberforce also referred to previous authority for the view that the word in English tax legislation referred to a `subsisting, permanent, substantive position'.

I doubt if it is sound to assume that the Australian parliament necessarily intended this definition of `office', established in the construction of the United Kingdom's tax legislation, to be applied in construing sec. 26AD. The word `office' has a range of meanings: see Collins English Dictionary (meaning no. 7), Shorter Oxford English Dictionary (meaning 4),
Great Western Railway v. Bater (1921) 2 K.B. 128 at pp. 136-137. In some contexts, it refers to a position of authority in a governmental or other public organisation. I see no reason so to restrict its meaning here. The intention apparently was to cover the case in which, there being no cessation of an employment,

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ATC 556

a payment of the character mentioned is made in respect of retirement from or termination of an office. It is difficult to think of any reason why the legislature should have intended to confine the concession given by the section to instances in which the terminated position is one of a public character or of any high degree of permanency. Presumably, no one would dispute that the position of managing director of a public company could be regarded as an `office'. I cannot see why that of managing partner of a grazing partnership should not be so regarded.''

A somewhat similar view was adopted in 1958 by Board of Review No. 1 in Case J45, (1958) 9 T.B.R.D. 236, the facts of which bear some resemblance to those presently before the Tribunal. In that case, the taxpayer was a permanent officer of the Commonwealth Public Service who resigned his permanent position on 23 March 1955 and was re-employed in the same grade the following day, albeit in a temporary capacity, performing ``practically'' the same duties at the same salary. As in this case, the lump sum, paid in lieu of leave, was treated by the Commissioner as assessable income. On review, the Board held that the taxpayer had retired from an ``office'' within the meaning of sec. 26(d), so that the amount in issue was received ``in consequence of retirement'', and assessable only to the extent of 5%.

5. Whilst Sealy's case has decided that a managing partner of a grazing partnership holds an ``office'' for purposes of sec. 26AD, it by no means follows that, mutatis mutandis, the case is authority for the proposition that a law lecturer, appointed for a fixed term, must likewise be deemed to be the holder of an ``office''. If a professor of philosophy at the University of Tasmania is a ``servant'' in the classic sense (cf.
Orr v. The University of Tasmania (1957) 100 C.L.R. 526), I can find no persuasive reason for concluding that a law lecturer in Cooktown is the holder of an ``office''. Nor have I been persuaded by the arguments advanced by the applicant that the conditions of employment applicable to limited term academic staff appointments somehow negative a master-servant relationship and support the proposition that such an appointee is the holder of an ``office''. Thus, it was urged upon me in support of the ``office'' argument, that the Queensland Industrial Conciliation and Arbitration Act makes no provision for continuity of employment with respect to long service leave for any service rendered during a fixed term appointment which is succeeded by a tenured employment. This alleged state of affairs was said to negative a master and servant relationship. I am satisfied that the argument has no bearing on this case; in any event, I have concluded that, with respect, it is misconceived and wrong. The relevant section speaks of an entitlement to long service leave ``in respect of [a] continuous service with one and the same employer''; cf. sec. 17(2). Provision is made, for example for an apprentice, whose employment is continued by the same employer at the end of his indenture, to count the period of his apprenticeship in calculating the length of service had by that employee with that employer. No argument was advanced why the section should have the result of severing the continuity of employment - for purposes of long service leave - in the case of a lecturer who is employed for a fixed term, followed by a tenured employment, other than that the employing CAE so interprets the provision. So be it. For present purposes, I am satisfied that there is nothing in the section which would produce the result contended for by the applicant.

6. In the result, I have concluded that the applicant was at all relevant times a servant strictu sensu. All that occurred in January 1983 was that one contract of employment was substituted for another, altering the incidence of the master-servant relationship without terminating it. The applicant did not lose a single day's work, but continued his labours as a lecturer, presumably repeating, in the hollowed tradition of academe, the same lectures de die in diem to succeeding generations of students to the end of time; all that changed were the conditions of employment. In these circumstances, it seems to me to constitute an abuse of language to describe what occurred here as constituting a ``retirement from or termination of an employment''. It should be recalled that the section does not speak of a termination of a contract, but the termination of an employment. I am satisfied that the term ``employment'', where it appears in sec. 26(d), must be interpreted in the wider sense and to exclude mere changes in the contractual relationship

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ATC 557

between master and servant. I would respectfully adopt the words of Gibbs J. (as he then was) in
Reseck v. F.C. of T. 75 ATC 4213 where his Honour observed, albeit by way of dictum, that (at p. 4216):

``In most cases in which a workman ceased his employment on a Friday and commenced employment again with the same employer on the following Monday, it would be impossible to say that his employment had ever been terminated.''

7. Having concluded that the payment in the instant case constitutes a benefit granted in respect of the applicant's three years of service, it follows that the payment is ``caught'' by the provision of sec. 26(e). In the circumstances no concluded decision is required on the alternative submission that the payment constitutes ``income'' according to ordinary concepts, and thus assessable under sec. 25(1).

8. For the reasons given above, the Tribunal affirms the objection decision under review.