Commissioner of Taxation v Jayasinghe

• Jurisdiction: Australia Federal only
• Judge: Kiefel CJ,Keane,Gordon,Edelman JJ.,Gageler J.
• Judgment Date: 09 August 2017
• Neutral Citation: [2017] HCA 26
• Docket Number: S275/2016
• Date: 09 August 2017
• Court: High Court

[2017] HCA 26

HIGH COURT OF AUSTRALIA

Kiefel CJ, Gageler, Keane, Gordon AND Edelman JJ

S275/2016

Commissioner of Taxation

Appellant

and

Kamal Jayasinghe

Respondent

Representation

J O Hmelnitsky SC with T L Phillips for the appellant (instructed by Australian Government Solicitor)

A H Slater QC with L McBride for the respondent (instructed by Balazs Lazanas & Welch LLP)

International Organisations (Privileges and Immunities) Act 1963 (Cth), s 6(1)(d), Fourth Schedule, Pt I.

Taxation Administration Act 1953 (Cth), Sched 1, s 357–60(1).

United Nations (Privileges and Immunities) Regulations 1986 (Cth), reg 10.

Taxation Determination TD 92/153.

Convention on the Privileges and Immunities of the United Nations [1949] ATS 3, Art V, s 18.

Income tax — International Organisations (Privileges and Immunities) Act 1963 (Cth) (“the IOPI Act”), s 6(1)(d)(i) — Whether taxpayer “holds an office in” an international organisation to which the IOPI Act applies — Whether taxpayer entitled to exemption from taxation on salaries and emoluments.

Income tax — Taxation Administration Act 1953 (Cth), Sched 1, s 357—60(1) — Taxation Determination TD 92/153 — Whether Commissioner bound to exempt taxpayer from taxation.

Words and phrases — “expert on mission”, “incidents of the relationship”, “international organisation”, “person who holds an office”, “skills and expertise”, “specialist services”, “terms of engagement”.

1 Kiefel CJ, Keane, Gordon AND Edelman JJ. Section 6(1)(d)(i) of the International Organisations (Privileges and Immunities) Act 1963 (Cth) (“the IOPI Act”) provides for the conferral of particular privileges and immunities upon a person “who holds an office in an international organisation to which [the IOPI Act] applies”. One privilege is “[e]xemption from taxation on salaries and emoluments received from the organisation” 1. The United Nations (“the UN”) is an international organisation to which the IOPI Act applies 2.

2 Under an Individual Contractor Agreement, the respondent, Mr Kamal Jayasinghe, was engaged by the United Nations Office for Project Services (“UNOPS”), an operational arm of the UN, as a “project manager” in the building of a 190 kilometre gravel road in Sudan.

3 Two questions were raised on appeal to this Court. The first is whether, in the income years ended 30 June 2010 and 30 June 2011, Mr Jayasinghe was a person who held an office in an international organisation within the meaning of s 6(1)(d)(i) of the IOPI Act, such that he was entitled to exemption from taxation on the income he received from UNOPS. The second is whether, by reason of s 357–60(1) of Sched 1 to the Taxation Administration Act 1953 (Cth) (“the Administration Act”) and Taxation Determination TD 92/153 3, the appellant, the Commissioner of Taxation, was bound to exempt Mr Jayasinghe from taxation on the income he received from UNOPS. Both of those questions should be answered in the negative. The appeal should be allowed.

4 These reasons will set out the relevant facts, the assessments issued by the Commissioner and the decisions below, consider the applicable legislative framework and the proper construction of s 6(1)(d)(i) of the IOPI Act and then turn to address TD 92/153.

Facts

5 Mr Jayasinghe is a qualified civil engineer. During the relevant income years, he was an Australian resident and, for parts of those years, he was engaged by UNOPS to work in Sudan as a project manager. Mr Jayasinghe worked in Sudan from approximately 13 October 2009 until 31 December 2010 and again from 28 June 2011 until 31 December 2011.

6 Mr Jayasinghe was engaged under an “Individual Contractor Agreement”. The two periods were covered by three Individual Contractor Agreements, which were relevantly in substantively similar terms 4.

7 Each Individual Contractor Agreement was deemed to comprise four documents, in the following order of priority – the Individual Contractor Agreement, the General Terms and Conditions of Individual Contractor Agreements in Annex A, the Terms of Reference in Annex B and the Individual Contractor Agreement Policy 5. Annexes A and B were both an “integral part” of the Individual Contractor Agreement.

8 An Individual Contractor Agreement was used to engage a person in their individual capacity “to perform a specific task or deliver a specific piece of work”; it could not be used to engage a person “[t]o perform regular core functions”. Functions “discharged to implement a project or a portfolio of related projects” were not normally considered core functions.

9 Mr Jayasinghe was engaged by UNOPS as an individual contractor to provide specialist services in Sudan. His functional title was “Project Manager”.

His task was “[c]ompletion of the road … on time and under budget” 6. His supervisor was the Head of Programme. Upon certification that the services had been satisfactorily performed in accordance with the Individual Contractor Agreement, Mr Jayasinghe was to be paid a monthly fee by UNOPS

10 Under the Individual Contractor Agreement, Mr Jayasinghe had the legal status of an independent contractor of UNOPS, serving in his individual capacity. He had no authority or other right to enter into any legal or financial commitments or incur any obligations on behalf of UNOPS and was responsible for paying any tax levied by the Australian Government on his UNOPS earnings.

11 Moreover, Mr Jayasinghe was solely liable for claims by third parties arising from his own negligent acts or omissions in the course of his service under the Individual Contractor Agreement. Under no circumstances was UNOPS liable for such claims by third parties. Accordingly, Mr Jayasinghe was expected to obtain professional liability insurance if providing professional services to UNOPS.

12 Under the Individual Contractor Agreement, he did not have the status of an official of the UN for the purposes of the Convention on the Privileges and Immunities of the United Nations adopted by the General Assembly of the UN on 13 February 1946 7 (“the 1946 UN Convention”).

13 However, under the Individual Contractor Agreement, he was engaged to perform “specialist services” in recognition of his “skills and expertise”. Further, at least from 1 May 2010, he was considered an expert on mission for the UN within the terms of s 22 in Art VI of the 1946 UN Convention and was accorded, by the UN, the privileges and immunities provided for in s 22 in Art VI of the 1946 UN Convention 8.

14 While Mr Jayasinghe was engaged by UNOPS, he held a “UNOPS ID Card”. The back of the card contained a request that “all those

whom it may concern … extend to the bearer the courtesies, facilities, privileges and immunities which pertain to his/her office, and … facilitate, by all suitable means the journeys and missions on which he (or she) is engaged. If found, please return to the UN Security Office”

Assessments and decisions below

15 In September 2013, notices of amended assessment were issued to Mr Jayasinghe for his earnings from UNOPS in the income years ended 30 June 2010 and 30 June 2011. Mr Jayasinghe lodged an objection to those assessments. The Commissioner disallowed the objection.

16 Mr Jayasinghe applied to the Administrative Appeals Tribunal for a review of the Commissioner's decision. The Tribunal set aside the Commissioner's decision 9. The Tribunal concluded that the substance of the relationship between Mr Jayasinghe and UNOPS, and the obligations created and implemented in carrying out the project, were such that he was the holder of an office within the meaning of s 6(1)(d) of the IOPI Act and that Mr Jayasinghe was a person who worked as an employee of UNOPS and was therefore entitled to the benefit of TD 92/153.

17 A majority of the Full Court of the Federal Court of Australia (Pagone and Davies JJ, Allsop CJ dissenting) dismissed an appeal by the Commissioner 10. The majority upheld the Tribunal's construction of s 6(1)(d)(i) of the IOPI Act and held that TD 92/153 applied to exempt Mr Jayasinghe from taxation.

The IOPI Act 11

18 Section 6 of the IOPI Act, titled “Privileges and immunities of certain international organisations and persons connected therewith”, relevantly provides for the conferral, by regulations, of privileges and immunities on entities and persons in the following terms:

• “(1) Subject to this section, the regulations may, either without restriction or to the extent or subject to the conditions prescribed by the regulations:

  • (a) confer upon an international organisation to which this Act applies:

  • …

  • (b) confer:

    • (i) upon a person who holds, or is performing the duties of, an office prescribed by the regulations to be a high office in an international organisation to which this Act applies all or any of the privileges and immunities specified in Part I of the Second Schedule; and

    • (ii) upon a person who has ceased to hold, or perform the duties of, such an office the immunities specified in Part II of the Second Schedule;

  • (c) confer:

    • (i) upon a person who is accredited to, or is in attendance at an international conference convened by, an international organisation to which this Act applies as a representative of:

      • (A) a country other than Australia;

      • (B) another international organisation to which this Act applies; or

      • (C) an overseas organisation to which this Act applies;

      all or any of the privileges and immunities specified in Part I of the Third Schedule; and

    • (ii) upon a person who has ceased to be accredited to such an organisation, or has attended such a conference, as such a representative the immunities specified in Part II of the Third Schedule;

  • (d) confer:

    • (i) upon a person who holds an office in an international organisation to which this Act applies (not being an office prescribed by the regulations to be a high office) all or any of the privileges and...