On Wed 9.8.2017, the High Court unanimously held that the taxpayer, Mr Jayasinghe, was not entitled to exemption from taxation in the income years ended 30 June 2010 and 30 June 2011, as he was not a person who held an office in an international organisation within the meaning of s 6(1)(d)(i) of the International Organisations (Privileges and Immunities) Act 1963 (Cth) (“the IOPI Act”), and that the Commissioner of Taxation (“the Commissioner”) was not bound to exempt Mr Jayasinghe from taxation by reason of his public determination: TD 92/153 being binding on him under s357-60(1) of Sched 1 to the Taxation Administration Act 1953 (Cth).
Background to the Case
Mr Jayasinghe was a qualified civil engineer. During the relevant income years, he was engaged by the United Nations Office for Project Services (“UNOPS”), an operational arm of the United Nations (“the UN”), as a “project manager” to build a 190 kilometre gravel road in Sudan. Mr Jayasinghe was engaged under an “Individual Contractor Agreement” to perform “specialist services” in recognition of his “skills and expertise”. Under that agreement, he had the legal status of an independent contractor of UNOPS, had no authority or other right to enter into any legal or financial commitments or incur any obligations on behalf of UNOPS, was responsible for paying any tax levied by the Australian Government on his UNOPS earnings, and 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  ATS 3 (“the 1946 UN Convention”) – see also Treaty Notes. From at least 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.
The Administrative Appeals Tribunal
The Commissioner disallowed an objection lodged by Mr Jayasinghe to notices of amended assessment issued to him for his earnings from UNOPS. The Administrative Appeals Tribunal set aside the Commissioner’s decision, concluding 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 held an office within the meaning of s 6(1)(d)(i) of the International Organisations (Privileges and Immunities) Act 1963 (Cth), and that he was an employee and entitled to the benefit of TD 92/153.
The Full Federal Court
In the case of Commissioner of Taxation v Jayasinghe  FCAFC 79 (9 June 2016), A majority of the Full Court of the Federal Court upheld the Administrative Appeals Tribunal’s findings and dismissed an appeal by the Commissioner. The Court concurred that the engineer, who was an independent contractor engaged by the UNOPS as project manager for the building of a road in Sudan, was exempt both as ‘holding’ an ‘office’ under the International Organisations (Privileges and Immunities) Act 1963 (Cth) and as being an ’employee’ of the United Nations under a 1992 determination by the Commissioner on that topic. It was Chief Justice Alsop’s dissenting judgement that was upheld by the High Court. The majority were Davies and Pagone JJ.
In the High Court
Allowing the Commissioner’s appeal, the plurality held that the phrase “a person who holds an office in an international organisation” in s 6(1)(d)(i) directed attention to the structure of the organisation and the person’s place within it and was concerned with the incidents of the relationship between a person and an international organisation; which incidents depended on the substance of the terms upon which a person was engaged. The incidents of the relationship between Mr Jayasinghe and the UN were such that he did not “hold an office” within the meaning of s 6(1)(d)(i). Further, as Mr Jayasinghe was engaged by UNOPS as an expert, the Court unanimously held that he fell outside the scope of the phrase “person who holds an office” and that the Commissioner was not bound by TD 92/153 to exempt him from taxation.
(FCT v Jayasinghe  HCA 26, High Court, Kiefel CJ, Gageler, Keane, Gordon and Edelman JJ, 9 August 2017.)
[High Court: Summary of Judgement; FJM; LTN 150, 9/8/17]
Extract from High Court Judgement
- GAGELER J. What presents as a specific question about exemption from taxation is also a more general question about entitlement to the range of privileges and immunities specified in the Fourth Schedule to the IOPI Act. The question is whether, by reason of engagement by UNOPS under an Individual Contractor Agreement, a person answers the description of “a person who holds an office” in the UN within the meaning of the UN Regulations, made under the IOPI Act.
- The meaning of “office”, like the meaning of most if not all other words, “turns largely on the context in which it is found”. The context of the word in the UN Regulations includes principally the IOPI Act as well as the two principal international instruments in respect of which the IOPI Act is designed to facilitate performance of Australia’s international obligations: the Convention on the Privileges and Immunities of the United Nations (“the Privileges Convention”) and the Convention on the Privileges and Immunities of the Specialized Agencies (“the Agencies Convention”).
- The language of the description in the UN Regulations is taken from the language of the IOPI Act and therefore has the same meaning as that language has in that Act. Within the IOPI Act, the language is used to describe the second of three categories of persons who have an ongoing connection with an international organisation to which the IOPI Act applies sufficient to be capable of attracting entitlement by regulation to a corresponding range of privileges and immunities specified in diminishing order of coverage in the Second, Fourth and Fifth Schedules to the IOPI Act.
- The three categories are:
. “a person who holds, or is performing the duties of, an office prescribed by the regulations to be a high office in [the] international organisation”;
. “a person who holds an office in [the] international organisation … (not being an office prescribed by the regulations to be a high office)”; and
. “a person who is serving on a committee, or is participating in the work, of [the] international organisation … or is performing, whether alone or jointly with other persons, a mission on behalf of [the] organisation”.
- The contrast in the expression between the references in the first two of those categories to a person holding office “in” the international organisation and the reference in the third to participating in the work “of” the international organisation indicates that an office within the meaning of the IOPI Act is a position which exists within the organisational structure of the international organisation. A person may be participating in the work of the international organisation without holding an office in the organisation, just as a person may be performing a mission on behalf of the organisation without holding an office in the organisation.
- The contrast in the expression within the first category between holding an office and performing the duties of an office indicates two further things about an office within the meaning of the IOPI Act. The first is that an office is a position which exists independently of the person who from time to time might hold it. The second is that an office is a position to which duties attach.
- Those three features of an office within the meaning of the IOPI Act – that it is a position which exists within the organisational structure of the international organisation, that it is a position which exists independently of the person who from time to time might hold it, and that it is a position to which duties attach – align the statutory concept of a person who holds an office to the concept under the Privileges Convention and the Agencies Convention of a person who is an “official” of an international organisation as distinct from an “expert on mission”. Of the category of “experts on mission”, as distinct from “officials”, within the meaning of the Privileges Convention, the International Court of Justice has noted that the category has in international practice been treated as covering persons who have “participated in certain peacekeeping forces, technical assistance work, and a multitude of other activities”, and has stated:
“The experts thus appointed or elected may or may not be remunerated, may or may not have a contract, may be given a task requiring work over a lengthy period or a short time. The essence of the matter lies not in their administrative position but in the nature of their mission.”
- The three features of an office within the meaning of the IOPI Act which I have identified are not adequately captured by the test drawn from Great Western Railway Co v Bater adopted and applied by the Tribunal and approved by the majority in the Full Court of the Federal Court. When those three features are borne in mind, it is apparent not only that the Tribunal applied the wrong test but that the conclusion that his engagement by UNOPS under an Individual Contractor Agreement led Mr Jayasinghe to answer the description of a person who holds an office in the UN within the meaning of the UN Regulations was not open.
- Moreover, as the factual analysis of the plurality demonstrates, Mr Jayasinghe’s engagement was as an expert. The contrary finding of the Tribunal was not open. As an expert, as the legal analysis of the plurality demonstrates, Mr Jayasinghe was excluded from the scope of the relevant public ruling properly construed.
- I agree with the orders proposed by the plurality.