Case L69

Judges:
HP Stevens Ch
CF Fairleigh QC
JR Harrowell M

Court:
No. 1 Board of Review

Judgment date: Received from the Board 10 December 1979.

H.P. Stevens (Chairman); C.F. Fairleigh Q.C. and J.R. Harrowell (Members): The taxpayer, a supervisory flight engineer, claimed a deduction of $188 in his return of income for the year ended 30 June 1975 as the cost of travelling on 26 occasions in his own motor car from his residence in a suburb to his employer's premises at the capital city airport, and once from his residence to the city, on what may be called non-supervisory days when his purpose was (i) on an estimated 19 occasions to collect sheets setting out amendments to (a) the employer's manual of instructions to flight engineers (b) flight standing orders, and to collect notices of similar import; (ii) on three occasions for his cyclic proficiency tests on a flight simulator; (iii) on three occasions for attendance at briefings where flight engineers and other qualified airline personnel discuss recent developments, safety measures, emergencies and the like; (iv) on one occasion to take in a medical report pertinent to the annual renewal of his licence; (v) on the occasion of travelling from his residence to the city, for attendance at a medical practitioner's rooms for a medical report for the same reason. In each instance the claim includes the return journey.

2. The Commissioner adjusted the return by disallowing that deduction and a notice of assessment issued accordingly. The taxpayer objected thereto, the Commissioner decided to disallow the objection and that decision was referred to a Board for review. As it happens the assessment under review is an amended one (sec. 191).

3. Counsel for the taxpayer sought to exclude the operation of the principle laid down in
Lunney and Hayley v. F.C. of T. (1958) 100 C.L.R. 478; 11 A.T.D. 404 that expenditure by a taxpayer on travelling between his place of residence and his place of work is prima facie a personal or living expense (cf.
Burton v. F.C. of T. 79 ATC 4318 at p. 4321). Therefore it is first necessary to consider what was the work of the taxpayer and what was the place for him to do that work, and this leads to a consideration of his contract of employment and of his evidence as to the manner of performing his duties.

4. The only document before the Board which may amount to a contract of employment is an award or agreement which is stated therein to be ``binding on (the employer) and on the Australasian Airline Flight Engineers' Association and its members and upon all other Flight Engineering Officers who are from time to time employed by (that employer)''. The exhibit edition is current from 27 May 1974 to 26 May 1976. It is a handbook of 156 pages.

5. The significant parts of that award or agreement have been rearranged for present purposes and are summarised with a page reference to the handbook given after each extract -

6. The taxpayer's counsel put other documents into evidence as follows -

7. In the course of the hearing of the reference, counsel for the taxpayer made a comparison so far as regards volumes and mode of bringing them up to date between the manuals used by the taxpayer and the series known as Australian Federal Tax Reporter [CCH]. Counsel stressed the distinction that the substitution of sheets in the taxpayer's manual has at times, if not at all times, an emergency factor which rarely exists for an annotated statute.

8. It is by no means clear that the taxpayer did attend the airport on 19 occasions for the purpose of collecting the amendment sheets. However this estimate was not challenged in cross-examination.

9. It is implicit, although not distinctly stated in evidence, that the taxpayer did not receive and was not entitled to receive from his employer any reimbursement for the expenditure which was incurred on the 27 occasions mentioned in para. 1 hereof.

10. The taxpayer's counsel conceded, solely for the purposes of the hearing of the reference by the Board, that a rate of 10 cents per mile for running the car is appropriate. The Commissioner's representative also accepted that rate. The evidence supports a distance of a return journey of 34 miles on each of 26 occasions and a slightly greater distance for that mentioned in para. 1(v) hereof. Thus, the claim is for $3.40 for each of 26 occasions and approximately $4 for the remaining one.

11. The taxpayer's parol evidence as to his manner of performance of his duties is accepted. The more important passages are here reproduced. His response to a question from his counsel to give a brief outline of his occupation as a flight engineer is first set out and then, in this paragraph, the substantial parts of his answers to other questions in evidence in chief:

``The particular duties of a flight engineer are, as the third operating crew member on an aeroplane we are responsible for virtually the whole of the mechanical operation of the aircraft, in so far as we monitor, maintain, adjust, start and stop the operation of just about every system on the aircraft to enable it to become alive and be operated as an aeroplane. The duties start two hours before take off time when the flight engineer reports to a building at the airport. He picks up necessary amendments or any amendments in his mail slot, reads a number of company documents - flight standing orders, notices to air crew and other briefing matter, familiarises himself with them, is obliged to go to a safety procedures board and refamiliarise himself with particular equipment on the aeroplane. There is a diagram of an aircraft, a plan of an aircraft with particular coloured magnetic pieces of equipment which he places around the board to assure himself that he has recall of where these pieces of equipment are. He then proceeds to a counter where a book is kept with what is called a compliance sheet.... There is a procedure to be read and the flight engineer has to know where to find these procedures, precisely what they are called - and there are probably a couple of hundred of them - so that he can go to the correct part of the book, get them out, and read them as quickly as possible.... emergency procedures like an engine fire, depressurisation, and things like that, normal procedures which may be four or five - up to, say, a dozen items - then to be actioned and they are committed to memory. They are termed emergency procedures and it is my job not only to remember them myself but to ask other people the procedures and convince myself that he knows them, as I have to convince myself that he can do the normal operating procedures as they are written in the book because the (employer) standard is that everybody does

ATC 554

everything the same way.... the manuals are amended very frequently because they are legal documents and they are pertinent to the operation of an aircraft, they are amended for very minor omissions or changes and it is a lengthy and frustrating job to amend them. The procedure (of the employer) is for these amendments to be placed in a mail slot which is allotted to every crew member and one picks them up from there and basically, because of the size of the manuals and the fact that they are accounted as your own, you have them at home, so one proceeds home to amend them. What I do is sit on the floor and put the book in front of me with the new pages opened and take out the old pages, read the amended part which is easily identified by a black line, understand if I can the amendment and, if I have difficulty, then I have to read the whole chapter or paragraph to refamilarise myself with what is being dealt with. Then I sign virtually a certificate affixed in the front of the manual to say the manual has been amended. It is vitally important these manuals are amended regularly, often, and they are kept up to date, particularly in my particular job as a check engineer, because I have to enquire of other people the contents of these manuals and so I must maintain them up to date myself.

... the operations manual has several different sections and the first two or three sections are the pertinent ones which are committed to a memory for instant recall as are the emergency procedures, or indeed the normal operating procedures.

...

...I do not take those particular manuals on flight except for, if the board can see the bottom brown one on the right hand side, which is the pertinent section of the operations manuals, I carry that only for the purposes of study and to refamiliarise myself when I am away. One spends several hours at a time in hotels, so I use that opportunity to do some study, but there is a full set of manuals provided in the aeroplane by the (employer).

Q. How did you go about getting the amendments from the (employer)?

A. I find that the best procedure for me is to go to the airport often, particularly if I have a trip coming up. I like to go a few days beforehand and pick up the amendments, generally familiarise myself... at the time and go home and do the amendments and familiarise myself with the updated information. I feel it is necessary to do that because the amendments sometimes run to one hundred or even more pages. Even though the actual amended portions are readily recognizable, one just has not time before you get on the aeroplane to sit down and read them and study them, given the fact we only report two hours beforehand and sometimes a tour of duty would go for 14 hours. So, it is not desirable to be sitting down for an hour, an hour and a half to be studying these things when you have a very long day or night ahead of you. So, it is important to pick them up at a convenient time.''

12. During cross-examination the taxpayer did not dispute (or rather said that he was not presently in a position to dispute) that in the year in issue he had 25 sessions on the simulator; 19 operating trips; 3 briefing sessions; 6 base training sessions in another State and one on a Pacific Island; one meeting at the base airport; one emergency drill procedure; 3 cyclic checks on the simulator, i.e., when he was the ``pupil''; and 8 days on stand-by. He said that he was located in the training section as a check engineer (basically as a simulator instructor) and he did some flying to maintain his proficiency. He accepted the proposition that being rostered as available for the simulator was a direction from the employer to attend at the simulator at the base airport as ``part and parcel'' of his normal duties; although the simulator periods for which he was rostered were not admitted as being those which were accomplished as variations occur. He said that there is not a ``signing-on book''; there is only the (weekly) roster and if a rostered person is not present as there required, then a telephone call is made to his residence. Telephone calls from the employer to staff at their homes frequently occur. The roster is prepared for the assistance of the ``radio aids people'' who participate in the operation of the simulator. He rejected the suggestion that attendance at the simulator as a pupil was ``part and parcel'' of his employment and said:

ATC 555

``It is certainly required by (the employer) and I do it, but it is not the job I am paid for. I am paid to be involved in a certain kind of work, which I have attempted to establish before the board. The fact that the Department of Transport requires that I do these simulator periods to prove my own proficiency has nothing to do with my job for (the employer) other than the fact that if I do not pass them, I obviously do not work for them.''

13. After the close of cross-examination some questions were put to the taxpayer by the Chairman and by a member of the Board, viz.:

14. There is no authority to support the proposition that the taxpayer's ``home office'' (if such it may be loosely called) was a base for his work. In the appropriate sense his only work base was the employer's said airport premises (ct.
Horton v. Young (H.M. Inspector of Taxes) (1971) 47 T.C. 60;
Pook (H.M. Inspector of Taxes) v. Owen (1967) 45 T.C. 571;
Robertson (H.M. Inspector of Taxes) v. Newson (1952) 33 T.C. 452;
F.C. of T. v. Ballesty 77 ATC 4181;
F.C. of T. v. Collings 76 ATC 4254; Burton (supra)).

15. The documentary and parol evidence leads (as always on taxation references upon the ordinary civil standard of proof) to the conclusion that on each of 19 occasions which are mentioned in para. 1 hereof the taxpayer was required by his contract of employment pursuant to an implied term (q.v.
Caldwell v. Neon Electric Signs Ltd. (1942-1943) 67 C.L.R. 169 at pp. 194-195;
Cardwell Shire Council v. Calabrese and Anor. (1975) 49 A.L.J.R. 164;
L.J. Hooker Ltd. v. W.A. Adams Estates Pty. Ltd. (1977) 51 A.L.J.R. 413;
B.P. Refinery (Westernport) Pty. Ltd. v. Hastings Shire Council (1978) 52 A.L.J.R. 20;
Ansett Transport Industries (Operations) Pty. Ltd. v. The Commonwealth (1978) 52 A.L.J.R. 254) to be present at the employer's airport

ATC 556

premises to attend to the collection, the reading and the understanding of documents as part of his duties as the employee; although he was allowed some latitude in selecting the days and the hour of the day to do so, and although he was not required to spend any considerable period of time at those premises on such days. Therefore in travelling in his car from his residence to those premises on those 19 occasions and later returning to his residence the taxpayer is within the principle of Lunney and Hayley and so that claim fails.

16. On each of the three days for the cyclic proficiency tests so also on each of the three days for briefings which are mentioned in para. I hereof the taxpayer was present at the employer's premises at the airport because that was the express requirement of the employer, albeit that if the taxpayer had disregarded the employer's instructions which were pursuant to the contract of employment the consequence might have been the loss of his licence. Therefore, again, in travelling in his car from his residence to those premises on those six occasions and later returning home the taxpayer is within the principle of Lunney and Hayley and so that claim fails.

17. On the occasion (para. 1(iv) hereof) when the taxpayer used his car to take to the employer's airport premises the medical report, he made a personal choice of the mode of transmitting it to the employer. As Smith J. said in Burton (supra) at p. 4323:

``It is clear from the authorities... that the only necessity which is relevant is an objective necessity arising from the nature of the office itself. Necessity from the personal circumstances or the personal preferences of the taxpayer is not enough... It was a matter of his personal preference that... being a circumstance which was personal to himself it cannot assist his claim to deduct the expense incurred...''

18. A course open to the taxpayer was to take that medical certificate to the employer's said premises when next he attended there for duty purposes whether that might be for a brief period (para. 15 hereof) or longer. If he had done so he could not by reason of Lunney and Hayley have claimed a deduction for travelling from his residence to those premises (and returning to his residence) and the choice which he made does not permit the deduction.

19. The remaining matter is the occasion (para. 1(v) hereof) when the taxpayer travelled in his car from his residence to the city for attendance at a medical practitioner's rooms for his medical report. This was a journey which was necessary by the contract of employment and it was not a journey from home to work and thus it is not within the principle of Lunney and Hayley. As Smith J. said in Burton (supra) at p. 4321 et seq.:

``There are exceptions to this principle but a perusal of the authorities since Lunney's case was decided shows that in respect of an employee the question invariably has been whether the evidence supported the conclusion that the outlay on travelling was incurred expressly or impliedly by reason of or in pursuance of the contract of employment. In
F.C. of T. v. Finn (1961) 106 C.L.R. 60; 12 A.T.D. 348 Dixon C.J. concluded in relation to the facts in that case that the taxpayer `was in fact complying with the desires, in so far as going to South America was concerned, with the actual request of the Government (his employer). His journey abroad and what he did while in Europe as well as in South America... was therefore in a correct sense incidental to his employment and most relevant to it'. In that case Kitto J. said of the taxpayer and his employment: `In my judgment the respondent, in making the investigations and studies which he pursued during his period of leave, was acting within the scope of his office, and therefore in the gaining of his salary'... To my mind determination of this case turns not so much upon the need `to characterise the expense incurred' as Mr. Todd expressed it in his reasons but upon whether on the facts the proper conclusion is that the expense... was an expense incurred expressly or impliedly by reason of or in pursuance of the contract of employment... The question then, in this case is whether... it was an implied term of the contract of employment that he incur the expense involved... It cannot be said, in my view,... that it must have been a term of the appellant's employment, although tacit, that he have his motor vehicle

ATC 557

available for use in the performance of his duties...''

(Emphasis added)

20. Those passages have been set out at length because of a contrary statement made, without reference to Burton, in para. 20, Case L51,
79 ATC 377.

21. Case L49,
79 ATC 339 which deals with an issue broadly similar to the present one was it seems determined without knowledge of the decision in Burton. Nonetheless the emphasis placed by the Chairman, Mr. M.B. Hogan, on the duties of that taxpayer's office or employment indicates, if it may respectfully be so put, a precognition of the principle which is repeatedly stated by Smith J. as in the passages set out in para. 19 hereof.

22. This Board in its quorum decision in Case K29,
78 ATC 281 analysed the decisions which preceded Burton and reached a conclusion which is the same as that contained in the passages which bear the mark of emphasis. So also in its plenum decision in Case L43,
79 ATC 268 this Board applied the same principle.

23. It matters not whether the preferred mode of expression is -

the end product is the express or implied term test, i.e., ``condition of employment''. As to a mode of travelling being personal convenience or by reason of or in pursuance of terms express or implied in a contract of employment cf.
Tan Keng Hong v. New India Assurance Co. (1978) 1 W.L.R. 297.
F.C. of T. v. Kropp 76 ATC 4406 is to be understood as taking its place in that same line of authority. As indicated by Waddell J. Kropp's case breaks new ground (a process beyond the scope of a Board of Review which accepts the principle that an administrative tribunal cannot be innovative, i.e., cannot extend a principle of law or lay down a new principle). The gravamen of Kropp is that a contract of employment although terminated in law was to be regarded as notionally subsisting and incorporating a provision that the (former/prospective) employee should obtain experience overseas as an employee of an associate of the (former/prospective) Australian employee. The genus, condition of employment cases, also includes a species a contract whereby the terms are that employment will be of an itinerant nature (
F.C. of T. v. Wiener 78 ATC 4006). In White, Helsham J. quoted a portion of the evidence where the question put to the employer was whether the accountancy course was ``a condition of... employment'' and later his Honour used the phrase ``part and parcel'' evidently in parallel with the word ``condition''. When White's case was first published there were articles in journals (Australian Tax Review vol. 4 p. 122; Chartered Accountant in Australia vol. 45 p. 17) in which the phrase was taken to mean ``condition''; or if another phrase serves any useful purpose a ``tacit requirement'' of the employer is an implied term of the employment. Idiomatic phrases such as ``part and parcel'', ``bag and baggage'', ``lock, stock and barrel'', have the primary purpose of adding a mark of emphasis; compare the use of ``part and parcel'' in respect of a business by Evatt J. in
Trautwein v. F.C. of T. (1935-1936) 56 C.L.R. 196 at p. 207. The expression means more than ``incidental'' for that may mean ``inessential'' (
Hollyock v. F.C. of T. 71 ATC 4202 at p. 4206; 125 C.L.R. 647 at p. 657;
Bayly v. F.C. of T. 77 ATC 4045 at p. 4056); or something occurring or liable to occur in fortuitous or subordinate conjunction with something else of which it forms no essential part (
State of Victoria v. Commonwealth and Hayden (1975) 134 C.L.R. 338 at p. 414). Perhaps the meaning

ATC 558

here of ``incidental'' is concomitant or subsidiary as distinct from independent or collateral (cf. the use of the word ``incidental'' in
Royal Australasian College of Surgeons v. F.C. of T. (1943) 68 C.L.R. 436 at pp. 443, 447).

24. The remaining issue is reduced to a question whether the expenditure was incurred pursuant to conditions of employment because
F.C. of T. v. Hatchett 71 ATC 4184; (1971) 125 C.L.R. 494 and White demonstrate that there are circumstances where conditions of employment limit the area within which the employee may exercise a choice to incur expenditure which has the quality of sec. 51(1) deductibility; within the area so circumscribed, the merits of the claim have to be proved, and it may fail because of the exceptions in sec. 51(1), e.g., the requirement of the employer may relate to such matters as lifestyle; compare
F.C. of T. v. Forsyth 79 ATC 4505 at p. 4508 as to the cost of purchasing and maintaining clothes. As is shown by the extract from Finn which is set out by Smith J. in Burton nothing is achieved by the words ``incidental and relevant'' without the addition of the phrase ``in a correct sense''. If an employee's claim is to succeed, the correct sense of ``incidental and relevant'' is the express or implied term of the contract of employment as this characterizes the expenditure.

25. If it should be thought that a test is to be found in the phrase ``travelling on his work'' the question whether he is travelling on his work is to be met by the question ``what were the express and implied terms of the contract of employment'', as it is that question which directs the answer to the question whether he was travelling on his work.

26. This subject has been discussed at some length because it is frequently said in the journals that the principle as most recently enunciated in Burton is too narrow, and, curiously, that Finn sets out a wider principle. The only comment which befits an administrative tribunal is that in Burton Smith J. set out and applied the dominant passages in Finn and the test as set out in Burton is the one which current case law demands be used for the employee who seeks a sec. 51(1) deduction.

27. The application of the principle as in Burton results in a decision in favour of the taxpayer for the expenditure referable to the item in para. 1(v) hereof.

28. To the extent mentioned in para. 26 hereof the decision on the objection is held to be in error, and the amended assessment for the year ended 30 June 1975 is to be reduced by the allowance of a deduction of $4.

Claim allowed in part

 

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