FC of T v ROBINSON

Judges:
Ryan J

Court:
Federal Court

Judgment date: Judgment handed down 12 June 1992

---

Ryan J

This is an application by way of appeal by the applicant (``the Commissioner'') from a decision of a Deputy President of the Administrative Appeals Tribunal (``the AAT'').

The facts have not been in dispute before the AAT or this Court. The respondent is a resident of the United States of America. In March and April 1985 he toured Australia as one of seven musicians providing the supporting entertainment on a program which featured Mr Phil Collins, a well-known entertainer and musician from the United Kingdom. The tour involved performances in various State capital cities.

By a contract dated 13 March 1985, Paul Dainty Corporation, an Australian company (``the ACP'') agreed to pay certain amounts to Effectsound Ltd., a British company (``the UKC''), for the services of Mr Collins. In addition, the contract stipulated that the ACP would pay, amongst other things, the internal transport costs, including airfares and the hotel expenses of the entire touring parties. There was also an agreement that the UKC would pay the international airfares of the performers including the respondent.

The respondent was actually employed by the UKC and received a salary of US$8437 for his services on the tour. He also received daily fees,

---

ATC 4426

known as ``per diems'' which amounted in all to US$1213. The total amount of monetary payments which he received was thus US$9650.

The taxation of the income derived by the respondent in this case is governed by the provisions of Article 17 of the Convention Between the Government of Australia and the Government of the United States of America for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income (``the Convention''). The Convention derives force of law from its inclusion as Schedule 2 to the Income Tax (International Agreements) Act 1953.

Sub-section (1) of Article 17 of the Convention is in these terms:

``(1) Notwithstanding the provisions of Articles 14 (Independent Personal Services) and 15 (Dependent Personal Services), income derived by entertainers (such as theatrical, motion picture, radio or television artistes, musicians and athletes) from their personal activities as such may be taxed in the Contracting State in which these activities are exercised, except where the amount of the gross receipts derived by any such entertainer, including expenses reimbursed to him or borne on his behalf, from such activities does not exceed ten thousand United States dollars ($10,000) or its equivalent in Australian dollars for the taxable year or year of income concerned.''

On the basis of this provision, the Commissioner assessed the respondent's income to tax. Central to this assessment has been the Commissioner's view that the international airfares paid by the UKC and the internal airfares and hotel expenses paid by the APC were expenses borne on the respondent's behalf within the meaning of Article 17. The Commissioner could not have issued that assessment without including at least some part of those expenses in the respondent's assessable income thereby bringing the respondent's income above the threshold of US$10,000.

Deputy President Todd in the AAT rejected the Commissioner's interpretation of the words ``borne on his behalf''. He also found that there was no evidence to suggest that the relevant expenses had been ``reimbursed to'' the respondent. In paragraph 9 of his reasons for decision, the learned Deputy President said:

``The question whether the air fares and/or hotel accommodation costs were `borne on (the applicant's) behalf' is more difficult, but not, in my opinion, unduly so. The applicant had an obligation to the UKC to perform at various concerts. For so performing he was entitled to be paid a salary and `per diems'. In order to discharge the obligations that entitled him to be paid salary and per diems he had to be present at the concerts. To do that he had to travel to Australia and within Australia, and to be accommodated in Australia as he travelled around. That accommodation was arranged by the ACP, and so also was the domestic air travel. Likewise, the UKC arranged and paid for the applicant's air fares to and from Australia. The liability of the ACP and of the UKC was to discharge the costs relating to those items, and the sums so paid were paid in that behalf. Those sums were not the responsibility of the applicant. He was not under any obligation to pay them. Neither the public servant, nor even the statutory office holder, can surely be regarded as having had the cost of car transport provided by the Commonwealth to the airport, when he or she goes forth on circuit, paid for on his or her behalf. It is paid by the government, which requires the public servant to serve, and the statutory office holder to perform the duties of his or her office, in some place away from home base. It is paid on behalf of the government. In the same way the employer and the promoter, although for a finite period, undertook the responsibility of covering the travel and accommodation costs of the musician. The payments made in discharge of these responsibilities were their disbursements. They did not pay them because the musicians had failed to do so, but rather because they themselves had agreed to be liable therefor and thus to do so. They paid them on their own behalf.''

After setting out his reasons for rejecting various contentions on behalf of the Commissioner, the learned Deputy President held that the respondent was not caught by the provisions of Article 17 and therefore should not be found to have derived gross receipts exceeding US$10,000 or its equivalent in Australian dollars. Accordingly, the objection decision under review was set aside and the

---

ATC 4427

matter remitted to the Commissioner for reconsideration in accordance with the direction that the objection be allowed in full.

As identified in argument, the question of law raised by this application is what is the proper construction of the phrase ``borne on his behalf'' in Article 17(1) of the Convention. Whether the costs incurred in respect of the respondent's hotel accommodation and air travel within Australia were ``borne on his behalf'' as that phrase is properly construed is a question of fact.

The principles governing the interpretation of an international convention were discussed by the House of Lords in
Fothergill v Monarch Airlines Ltd [1981] AC 251 which concerned the Warsaw Convention as amended at The Hague, 1955, ``for the Unification of certain Rules relating to International Carriage by Air''. Lord Diplock observed, at 281:

``The language of that Convention that has been adopted at the international conference to express the common intention of the majority of the states represented there is meant to be understood in the same sense by the courts of all those states which ratify or accede to the Convention. Their national styles of legislative draftsmanship will vary considerably as between one another. So will the approach of their judiciaries to the interpretation of written laws and to the extent to which recourse may be had to travaux préparatoires, doctrine and jurisprudence as extraneous aids to the interpretation of the legislative text.

The language of an international convention has not been chosen by an English parliamentary draftsman. It is neither couched in the conventional English legislative idiom nor designed to be construed exclusively by English judges. It is addressed to a much wider and more varied judicial audience than is an Act of Parliament that deals with purely domestic law. It should be interpreted, as Lord Wilberforce put it in
James Buchanan & Co. Ltd. v Babco Forwarding & Shipping (U.K.) Ltd. [1978] A.C. 141, 152, `unconstrained by technical rules of English law, or by English legal precedent, but on broad principles of general acceptation'.''

To similar effect, Lord Scarman said, at 293:

``The broad approach of our courts to the interpretation of an international convention incorporated into our law is well settled. The international currency of the convention must be respected, as also its international purpose. The convention should be construed `on broad principles of general acceptation'. The approach was formulated by Lord Macmillan in
Stag Line Ltd. v Foscolo, Mango & Co. Ltd. [1932] A.C. 328, 350; it was adopted by this House in the recent case of James Buchanan & Co. Ltd. v Babco Forwarding & Shipping (U.K.) Ltd. [1978] A.C. 141.''

That approach has been endorsed by Mason J (as he then was) and Wilson J in
Shipping Corporation of India Ltd v Gamlen Chemical Co (A/Asia) Pty Ltd (1980) 147 CLR 142 at 159.

Accordingly, it was submitted by Dr Kenny, who appeared for the Commissioner, that Article 17(1) of the Convention should not be construed literally, but so as to give effect to its purpose. However, it must be remembered that the Convention with which this case is concerned has been concluded between Australia and the United States of America which share English as their sole official language and which have a broadly common tradition of substantive and procedural jurisprudence and legislative drafting techniques. Moreover as the industry of Counsel has not unearthed any internationally recognized ``broad principles of general acceptance'' applicable to the phrase ``borne on his behalf'', I must take the course indicated by Lord Salmon in James Buchanan & Co Ltd v Babco Forwarding and Shipping (U.K.) Ltd [1978] AC 141 at 161. In that passage his Lordship said:

``If a corpus of law had grown up overseas which laid down the meaning of article 23, our courts would no doubt follow it for the sake of the uniformity which it is the object of the Convention to establish. But no such corpus exists.''

His Lordship adverted then to conflicting interpretations given by courts of different member countries, and continued (ibid.):

``Our courts are therefore thrown back on their own resources. We must rely on our own methods of interpretation and the broad principles I have attempted to state: see Stag

---

ATC 4428

Line Ltd v Foscolo, Mango & Co Ltd [1932] A.C. 328, per Lord Macmillan, at p. 350.''

I accept that the phrase ``on behalf of'' can comprehend a relationship between the person paying the expenses and the person for whom they are presumptively paid which is less than, or different from, that of agent and principal in the legal sense. In an analogous context, Latham CJ in
R v Portus; Ex parte Federated Clerks Union of Australia (1949) 79 CLR 428 observed, at 435:

``The words `on behalf of the Crown' therefore should not be so interpreted as to produce what plainly would be the unintended result of including public servants and no others. The expression `on behalf of the Crown' is not an expression which has a strict legal meaning. An agent who acts on behalf of a principal can, within the limits of his authority, bind the principal by employing a person on his behalf so that that person becomes the employee of the principal. But the words `on behalf of the Crown' in the rules of the organization evidently mean something less than `an agent for the Crown' in the legal sense.''

It has been submitted by Dr Kenny that ``on behalf of'' is synonymous with ``for the benefit of'' or ``in the interests of''. Some support for that view is derived from the following observation of Dixon J (as he then was) in R v Portus (supra), at 438:

``As a shareholder, even the sole beneficial shareholder, the Commonwealth has no property legal or equitable in the assets of the company nor is the Commonwealth a principal acting by the company as its agent. But plainly the rule of the Federation when it uses the words `on behalf of' is not contemplating the legal relation of principal and agent. The language as well as the context and subject matter shows that. For the rule speaks of the employees of the person or corporation who employs persons on behalf of the Commonwealth. The person or corporation is the employer, the principal in the contract of service. The employer is not the Crown or Government. The expression `on behalf of' is used in a wider sense. It means for the purposes of, as an instrument of, or for the benefit and in the interest of, the Commonwealth.''

However, in my opinion it is not every benefit, however small, which a person derives from a payment which enables one to say that the payment has been made ``on behalf of'' that person. As was observed in the joint judgment of Stephen, Mason, Murphy and Aickin JJ in
R v Toohey; Ex parte Attorney-General (NT) (1979-1980) 145 CLR 374 at 386:

``The phrase `on behalf of' is, as Latham C.J. observed in R. v Portus; Ex parte Federated Clerks Union of Australia..., `not an expression which has a strict legal meaning', it bears no single and constant significance. Instead it may be used in conjunction with a wide range of relationships, all however in some way concerned with the standing of one person as auxiliary to or representative of another person or thing.

In what is perhaps its least specific use, `on behalf of' may be applied to someone who does no more than express support for persons or for a cause, as with one who speaks on behalf of the poor or on behalf of tolerance. It may be used when speaking of an agency relationship, but also of some quite ephemeral relationships, such as that which exists between a party to litigation and the witness he calls, a witness `on behalf of' the defence. Again, it may, as the Northern Territory here contends, be used where the relationship is that of trustee and cestui que trust. It was of such a use that Lord Cairns L.C. spoke when he said, in Gillespie v City of Glasgow Bank..., that the phrase could describe a relationship of trustee and cestui que trust `if the circumstances of the case are consistent with that interpretation'. Context will always determine to which of the many possible relationships the phrase `on behalf of' is in a particular case being applied; `the context and subject matter' (per Dixon J. in the Federated Clerks' Case...) will be determinative.''

In my view, in the context of article 17(1) the question of whether a payment has been made on behalf of an entertainer is to be resolved by asking whether it has been made substantially in the interest of the entertainer, the maker of the payment, or some other person. That may raise further questions such as whether the payment discharges a contractual or moral obligation of the entertainer, and the extent of the comparative benefit it confers on the entertainer on the one hand, and on the maker

---

ATC 4429

of the payment or other person on the other hand.

I consider that some guidance as to the sense in which the phrase ``expenses borne on his behalf'' is used in article 17(1) is afforded by the fact that such expenses are to be included in " the amount of the gross receipts derived" by the entertainer (emphasis added). Counsel for the Commissioner contended that the notion of ``gross receipts'' in Article 17(1) is a broad one since it includes moneys not actually received by the entertainer. However, it is embodied in an exception to ``income derived by entertainers... from their personal activities as such''. Consequently the reference to ``gross receipts'' in which the subject expenses are included is clearly to ``gross receipts'' of income. That connotes, to my mind, that the expenses must be of a kind that they should be brought to account in the compilation of an account of income and expenditure referable to the entertainer's personal professional activities in Australia.

Accordingly, if the entertainer himself incurred obligations for transport and accommodation necessary to fulfil his engagements, the cost of discharging those obligations would properly be brought to account as expenditure in connection with his professional activities. Correspondingly, if those costs were reimbursed to him, the amount of the reimbursement would be brought to account on the income side of the ledger. However, if the entertainer's contract entitled him to travel and accommodation at another's expense, the amount required to defray those costs would not properly appear as an item of expenditure in his personal income and expenditure account for the tour. Nor would any amount of those expenses be treated as income or receipts ``derived'' by the entertainer.

It is true that whenever a payment is made for transport, accommodation or meals, a ``benefit'' is, in one sense, conferred on the person who undertakes the travel, receives the accommodation or consumes the meal. However if the transport, accommodation and consumption of meals is necessitated by the requirement to be in a given place at a particular time to render services to another, the substantial benefit of the relevant expenditure is derived by that other person. That is so only to the extent that the expenditure does not go beyond what is reasonably necessary for the recipient to render the services in question. Thus if, for example, an entertainer is provided with transport and accommodation for his wife or other companion who makes no contribution to his professional performance, or is allowed to enjoy the accommodation for a significant time before his performances commence or after they have finished, he has substantially derived a benefit, at least pro tanto, from the expenses so incurred. In those circumstances the cost of the transport and accommodation at least to the extent that it exceeds what is reasonably referable to the entertainer's personal activities as an entertainer, may properly be characterized as ``borne on his behalf''.

I do not understand the learned Deputy President to have adopted any different construction of the phrase. It was open to him on what I regard as the proper construction to find as a fact that payments made by the ACP in discharge of its own direct contractual liability to the UKC and, presumably, to the providers of air transport and hotel accommodation within Australia, were not expenses ``borne on behalf'' of the respondent. Accordingly, the application must be dismissed. I shall also make an order reflecting the Commissioner's undertaking to pay the respondent's costs in any event.

THE COURT ORDERS:

1. That the application be dismissed.

2. That the applicant pay the respondent's costs of the application, such costs to be taxed.