Case: Caelli Constructions (Vic) Pty Ltd v Commissioner of Taxation [2005] FCA 1467 ; [2005] 147 FCR 449; (2005) 60 ATR 542; (2005) ATC 4938
Outcome: followed
I have referred to four cases in which this interpretation has been applied. These cases are: 1. Essenbourne Pty Ltd v Commissioner of Taxation [2002] FCA 1577 ; (2002) ATC 5201; (2002) 51 ATR 629 (a decision of Kiefel J); 2. Walstern Pty Ltd v Commissioner of Taxation [2003] FCA 1428 ; (2003) 138 FCR 1; (2003) 54 ATR 423 (a decision of Hill J); 3. Spotlight Stores Pty Ltd v Commissioner of Taxation [2004] FCA 650 ; (2004) 55 ATR 745; (2004) ATC 4674 (a decision of Merkel J); and 4. Caelli Constructions (Vic) Pty Ltd v Commissioner of Taxation [2005] FCA 1467 ; [2005] 147 FCR 449; (2005) 60 ATR 542; (2005) ATC 4938 (a decision of Kenny J). 45 In each of the Federal Court decisions Walstern , Spotlight Stores and Caelli Constructions , the learned judge followed and applied the principles decided by Kiefel J in Essenbourne . 48 Finally, in Caelli Constructions Kenny J assumed that Essenbourne correctly stated the law, and applied the principle to the facts of the case (par 61). 49 As I have already noted, in Walstern (at FCA par 87 per Hill J) and Caelli Constructions (at FCA par 61 per Kenny J) their Honours stated their views that the decision of Kiefel J in Essenbourne was correct, and stated the law. Merkel J in Spotlight Stores did not need to discuss the Essenbourne case in great detail, however his Honour observed that he proposed to follow Essenbourne and Walstern as, notwithstanding the submissions of the Commissioner in Spotlight Stores , his Honour was not satisfied that those decisions were clearly wrong (at FCA par 121). Hill J in Walstern had also indicated that, as a matter of comity, he would have followed the decision of Kiefel J in Essenbourne unless he had formed the view either it was distinguishable or that the decision was clearly wrong, neither of which was the case (at par 87). 53 Notwithstanding powerful submissions by the Commissioner, I am not satisfied that the principle articulated by Kiefel J in Essenbourne is clearly wrong. With respect, there is little to add to the reasons provided by Kiefel J in Essenbourne or Hill J in Walstern which have been repeated in this judgment. I agree with the four judges in Essenbourne, Walstern, Spotlight Stores and Caelli Constructions that the identification of particular employees is a requisite element in the application of the definition of 'fringe benefit' under the FBTAA . Like the judges in Walstern , Spotlight Stores and Caelli Constructions I propose to follow the Essenbourne decision and, to the extent it is applicable to the facts of the case before me, apply it. 66 On the other hand, the facts of the case before me may be contrasted with those in Walstern and Caelli Constructions , where the Courts found against the respective applicants. In Walstern , Hill J found that a fringe benefit had been provided to each of two employees at the time allocation was made by the trustee of the contribution made by the employer, in circumstances where: &#8226; the trustee was clearly an 'arranger' within the meaning of par (e) of the definition of 'fringe benefit'; and &#8226; the arrangement in question was one which involved the employer making the contribution on the understanding that all relevant steps would be taken culminating in the trustee ultimately allocating the employer's contribution equally to each of the two employees. 68 In Caelli Constructions , Kenny J found that contributions to a trustee had been made 'in respect of the employment of the employee' for the purposes of the definition of 'fringe benefit' in s 136(1) FBTAA in circumstances where: &#8226; the trust deed required that payments made by the employer and others to the trustee be made in respect of identified employees; &#8226; the quantum of the payment to be made by the employer was specifically fixed by reference to the actual employment of each employee, in the sense that the employer made a weekly contribution for any week in which an employee was entitled to be paid wages in respect of their work, and if an employee ceased work during a relevant period the amount of the employer's payment was correspondingly reduced; &#8226; payments in respect of a particular worker were credited towards the individual worker's Worker's Account maintained by the trustee; and &#8226; when the employee became entitled to a benefit, the trust deed specified that the amount of benefit was calculated directly by reference to the contribution made to the worker's own Worker's Account at the relevant time. 69 Again, it is clear in this case that the nature of the scheme created both by the trust deed and the arrangement in place in Caelli was such that contributions to the trustee were made in respect of the employment of particular employees, to the extent that weekly contributions were made and varied depending on the circumstances of particular employees, and the fund operated accordingly. In no way were similar circumstances replicated in the case before me. 70 In the alternative, the Commissioner has submitted that the trust in favour of the beneficiaries took immediate effect as a vested interest in equal shares. This issue may be quickly dealt with. In my view the trust in favour of the beneficiaries in the case before me did not take immediate effect as a vested interest in equal shares. The beneficiaries are not implied takers in default. This is evident from consideration of clauses in the CSP Deed including: &#8226; clause 1.1 definition of 'Termination Date', namely the earliest to occur of the date a liquidator is appointed to ABC, the date a liquidator is appointed to ABC Public, and the date 80 years from the date of the Deed; read in conjunction with Clause 3.1, which provides that the trustee holds the Trust Fund for the Beneficiaries and must, inter alia, appoint all of the Trust Fund to the Beneficiaries (who must be living at the time of the appointment) on or before the Termination Date; &#8226; clause 2.7, which provides that if the Trust Fund has not been effectively or validly disposed of by a trust declared by the deed, the trustee holds that part of the Trust Fund affected on a resulting trust for the Settlor (ABC Public); &#8226; clause 3.3, which vests the trustee with broad powers to appoint capital; read with clause 3.4 which requires the trustee to act reasonably and have regard to the Selection Criteria for Capital in Schedule 2; &#8226; clause 3.6, which vests the trustee with absolute discretion to exclude any person from benefiting under the deed. The trustee is required to act reasonably and must have regards to the Exclusionary Criteria in Schedule 3; and &#8226; clause 8.7, which provides as follows: 'Every trust, power, authority and discretion of the Trustee: (a) is absolute and uncontrolled; and (b) may be exercised in the same way as the Trustee could exercise it if the Trustee were the absolute and beneficial owner of the Trust Fund.'