Case: Ferguson v Federal Commissioner of Taxation (1979) 26 ALR 307
Outcome: applied
In Evans v Federal Commissioner of Taxation (1989) 20 ATR 922 at 939 Hill J commented: "The question of whether a particular activity constitutes a business is often a difficult one involving as it does questions of fact and degree. Although both parties referred me to comments made in decided cases, each of the cases depends upon its own facts and in the ultimate is unhelpful in the resolution of some other and different fact situation. There is no one factor that is decisive of whether a particular activity constitutes a business. As Jessel MR said in the famous dictum in Ericsen v Last (1881) 8 QBD 414 at p 416: 'There is not, I think, any principle of law which lays down what carrying on trade is. There are a multitude of things which together make up the carrying on of trade.' Profit motive (but see cf Inland Revenue Commissioners v Incorporated Council of Law Reporting (1888) 22 QBD 279), scale of activity, whether ordinary commercial principles are applied characteristic of the line of business in which the venture is carried on ( Inland Revenue Commissioners v Livingston (1927) 11 TC 538), repetition and a permanent character, continuity ( Hope v Bathurst City Council [1980] HCA 16 ; (1980) 144 CLR 1 at 9; Ferguson v Federal Commissioner of Taxation (1979) 79 ATC 4261, 4264), and system ( Newton v Pyke (1908) 25 TLR 127) are all indicia to be considered as a whole, although the absence of any one will not necessarily result in the conclusion that no business is carried on." 172 MMLIC was acting primarily for its own benefit. There was nothing fiduciary in the powers it was exercising. It was not acting as Chapel Road's agent: cf Ferguson v Federal Commissioner of Taxation (1979) 26 ALR 307 at 319; see also Federal Commissioner of Taxation v Walker (1984) 2 FCR 283. It was not providing services to Chapel Road: National Bank of Australia v Sproule , above, at 510. If MMLIC's primary purpose in carrying on the business was, in all probability, to preserve the value of the property pending its sale, it nonetheless was conferring an incidental benefit on Chapel Road. It did not have a free hand in dealing with the rents received by its agent. It was constrained by the mortgage itself and by its position as mortgagee in possession. In reality its position differed little, in my view, from that of a receiver under the Conveyancing Act at least in respect of the application of the rents received. The rental income had to be accounted for to Chapel Road. What this meant in practical terms was, first, that it was to be applied in payment of outgoings. The net income was then to be applied "on account of some liability under the mortgage": cf Visbord v Federal Commissioner of Taxation at 370; and in the circumstances this was Chapel Road's monthly rental liability: see Fisher and Lightwood's Law of Mortgage , at 19.33, 39.24 ff; In re Morley's Estate; Hollenden v Morley [1937] Ch 491 at 496. The rental income never being in surplus over what was required for interest, MMLIC was never, and never likely to be, in the position of having to elect whether to apply it in reduction of the principal sum as such or to hand it over to Chapel Road because it did not wish the capital to be repaid by "driblets": Nelson v Booth (1858) 3 De G &amp; J 119 at 122. Put shortly, though MMLIC received the rents, the manner of their application was preordained by the mortgage and its legal consequences.