Re Commissioner of Taxation of the Commonwealth of Australia v Ogilvy and Mather Pty Ltd [1990] FCA 41; 90 Atc 4115 (22 February 1990)

FEDERAL COURT OF AUSTRALIA

Re: THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA
And: OGILVY AND MATHER PTY LTD
No. V G51 of 1989
FED No. 42
Income Tax
[1990] FCA 41; 90 ATC 4115

COURT

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIAN DISTRICT REGISTRY
GENERAL DIVISION
Jenkinson J.(1)

CATCHWORDS

Income Tax - deductions and rebates in calculating taxable income - Losses and outgoings incurred in gaining or producing the assessable income or necessarily incurred in carrying on a business for the purpose of gaining or producing such income - In general - "Incurred" - Time at which outgoing pursuant to contract is incurred - "Losses and outgoings" - Meaning.

Income Tax Assessment Act 1936 - s.51

Dependable Upholstery Ltd. v. Brasted (1932) 1 KB 291

New Zealand Flax Investments Ltd. v. Federal Commissioner of

Taxation [1938] HCA 60; (1938) 61 CLR 179

HEARING

MELBOURNE
22:2:1990

Counsel for the Applicant : Mr. J.I. Fajgenbaum QC and

Mr. C.M. Maxwell

Counsel for the Respondent : Mr. N.H.M. Forsyth QC and
Mr. E.J. Power

Solicitor for the Applicant : Australian Government Solicitor

Solicitor for the Respondent : Minter Ellison

ORDER

The appeal against the decision of the Administrative Appeals Tribunal upon the referral of the applicant's decision of the respondent's objection against the assessment in respect of the year of income ended 31 December 1984 be allowed.

The said decision of the Administrative Appeals Tribunal be set aside and the applicant's said decision be confirmed.

The appeal against the decision of the Administrative Appeals Tribunal upon the referral of the applicant's decision of the respondent's objection against the assessment in respect of the year of income ended 31 December 1985 be allowed.

The decision of the Administrative Appeals Tribunal specified in paragraph 3 of this order be set aside and the decision of the applicant specified in that paragraph be confirmed.

The applicant's costs of the said appeals be paid by the respondent.

Note: Settlement and entry of orders is dealt with by Order 36 of the Federal Court Rules.

DECISION

Appeals from decisions of the Administrative Appeals Tribunal.

2. The respondent has at relevant times carried on the business of an advertising agency. One of the services provided by him who carries on a business of that kind is acting as the agent of clients in the making and performance of contracts for the publication of clients' advertisements in newspapers and cinemas and by radio and television broadcasting. The question between the parties in each appeal is whether s.51 of the Income Tax Assessment Act 1936 authorizes deduction from the respondent's assessable income of the amount of certain liabilities to which the respondent claims that it subjects itself in the course of providing those services.

3. There is, the evidence established, an unincorporated association called Media Council of Australia ("the Media Council"). Most of the persons who control a newspaper, a cinema, a radio station or a television station in this country are either members of the Media Council or members of an unincorporated association which is a member of the Media Council. The Media Council has promulgated rules, in accordance with the provisions of which those controllers deal with those who in course of carrying on the business of an advertising agency arrange the publication of their clients' advertisements. The rules prescribe a scheme of accreditation of advertising agents by a person appointed by the Media Council and designated in the rules the Australian Media Accreditation Authority. The rules provide that only accredited agents shall be eligible to receive commission from the publisher of the advertisement. Publishers' commissions form a substantial part of the income of advertising agents, and accreditation is of great commercial value to those agents. At material times the respondent was such an accredited agent.

4. Rule 18 of the rules, which are entitled "Rules Governing Advertising including Rules of Accreditation of Advertising Agencies", is in these terms:

"18. EACH accredited agent shall accept
responsibility for the payment of his or
its clients' accounts in respect of all
orders received from or through the
accredited agent. Signature to an
advertising order shall be by the
accredited agent and signature 'for and
on behalf of' his client will not be accepted."

Part of Rule 24 reads thus:

"24(a) AN accredited agent will be liable for
payment of all advertising placed by
him or it, and such payment will be
due from him or it for all advertising
published, broadcast or telecast (as
the case may be) in any month not
later than the thirtieth day of the
month following that in which such
advertising is published. If payment
is not made on or before the fifteenth
day of the second month following that
in which the advertising was
published, broadcast or telecast (as
the case may be) no commission shall
be allowed by the Media Proprietor to
the accredited agent."

The expression "Media Proprietor" is defined in terms which comprehend all publishers of newspaper, radio or television advertisements who have agreed to be bound by the rules. Failure to pay an account in compliance with Rule 24(a) is made by Rule 14(a)(iii) a ground of suspension or cancellation of accreditation.

5. The evidence disclosing the relations between an accredited advertising agent's client and the publisher of the client's advertisement was not satisfactory. It appeared, for example, that between such a client and the holder of a commercial television licence a contract in writing would ordinarily be constituted in respect of the transmission of the client's advertisement by that licensee, but there was no clear evidence as to the terms of any such a contract. But, notwithstanding the curious provision which is the second sentence of Rule 18, there was no basis for a finding that there was not constituted a contract, between the licensee and the client, for the transmission of the advertisement, or that terms of such a contract did not include a promise by the client to pay the licensee the agreed price in consideration of the licensee's transmission of the advertisement. It follows therefore that, upon the making of that contract by the accredited advertising agent on behalf of the client, two separate contractual obligations to pay that agreed sum come into existence : one on the agent and the other on the client.

6. The respondent's contract with a client provided that the agreed price payable to the publisher of an advertisement would be paid by the client to the respondent within the month following the month in which that advertisement was published. If that provision were observed by the client, there would be a period of about 15 days after the respondent received the client's payment within which the respondent could in turn make payment of the agreed price to the publisher without incurring the loss of commission contemplated by that part of Rule 24(a) which I have quoted.

7. The evidence was that in the respondent's books of account entries, in respect of an advertisement for the publication of which the respondent had placed an order on behalf of a client, would be made at the end of the month in which publication had occurred. The ledger account of the publisher would be credited with the difference between the price of the advertisement and the commission which was to become payable by the publisher to the respondent in respect of the transaction; and the ledger account of the client would be debited with the price. The commission which was to become payable by the publisher would be debited as income of the respondent. Payment to the publisher would thereafter be made by the respondent of the balance of the price after deduction of the commission, and payment of the price to the respondent would be made by the client. Any balance sheet of the respondent drawn up before those payments were made would disclose as an asset and a liability respectively the price unpaid by the client to the respondent and the balance of the price unpaid by the respondent to the publisher, but the price would form no part of the debit and credit entries by comparison of which the respondent's profit is calculated. Only the commission would appear in the respondent's trading account.

8. The evidence was taken by the respondent to have established that publishers of advertisements with whom the respondent deals contract for the publication of an advertisement upon terms that withdrawal of the order for advertisement within a specified number of days before the agreed date of publication does not relieve from the obligation to pay the price. These periods before publication, some as long as 70 days and some as short as 3 days, during which withdrawal of the order does not affect the obligation to pay the agreed price, were described in evidence as "non-cancellation periods". The price payable for publication of each advertisement, ordered by the respondent on behalf of a client, the publication date of which fell after the end of the year of income (in the respondent's case 31 December) and the non-cancellation period in respect of which commenced before the end of that year of income was claimed by the respondent to be an outgoing incurred by the respondent in that year of income in carrying on its business. In recognition of the circumstance that during the next year of income an amount equal to that outgoing would be received by the respondent from the client, either in reimbursement of the price paid by the respondent to the publisher or in provision, before payment by the respondent, of the amount of the price payable to the publisher, the respondent reduced in each year of income the aggregate of the amounts said to be such outgoings by the aggregate of the amounts said to have been such outgoings in the preceding year, and claimed only the balance as a deduction. Thus the outgoings, as the respondent contended they were, of the years 1982, 1983, 1984 and 1985 -

1982 $ 21,215
1983 $ 771,414
1984 $1,270,467
1985 $1,079,114

- were the subjects of the following claimed deductions:

1983 ($771,414 - $21,215) $750,199
1984 ($1,270,467 - $771,414) $499,053

The respondent included as assessable income of the year ended 31 December 1985 an amount equal to the aggregate of the outgoings claimed to have been incurred in the preceding year, $1,270,467, and claimed to deduct $1,079,114 as outgoings incurred in 1985. The applicant Commissioner disallowed the deductions claimed in respect of the year ended 31 December 1984, aggregating $1,270,467, and deducted from assessable income the amount of $771,414 treated by the respondent as assessable income in its return. He took the same course in respect of the amounts of $1,079,114 and $1,270,467 treated by the respondent as deductible and as income respectively in the return for the year ended 31 December 1985. The respondent's objection in respect of each of those two years was disallowed. Upon reference to the Administrative Appeals Tribunal the Commissioner's decisions were set aside.

9. The Tribunal held that when a non-cancellation period commenced the respondent was subject to an obligation, the source of which was its contract with the publisher with respect to the proposed advertisement, to pay the publisher the price agreed to be paid for publication of the advertisement. The obligation thus imposed was an outgoing incurred at that time, the Tribunal held, notwithstanding that the agreed time of payment lay in the future, on a date falling in the next year of income.

10. It is in my opinion clear that in forming on behalf of its client a contract between client and publisher for publication of an advertisement, an accredited advertising agent forms also a contract between itself and the publisher, if the publisher is, as the accredited advertising agent is, holding itself out as bound by, and observing, the rules of the Media Council to which I have referred. Among the terms of that contract between the accredited advertising agent and the publisher are a promise by the publisher to pay the agent commission at a certain rate on the price paid and a promise by the agent to pay the price. The Administrative Appeals Tribunal stated its conclusion to that effect and continued:

"The question whether, in the circumstances,
the media can also look to the advertiser for
its charges is therefore beside the point.
But the question still remains: has the agency
'incurred' an expenditure on the facts as
found above?
9. I commence my investigation into the law
by adopting the useful summary applied by
Menhennit J. in RACV Insurance Pty. Ltd. v. F.C.
of T. 74 ATC 4169. In that case, the taxpayer,
an insurance company, brought into its
accounts in the one tax year as 'losses
incurred' not only those claims which had been
paid, but claims which arose in the sense of
being claims of which the company had been
merely notified. In finding for the taxpayer
his Honour observed at pp 4179-4180:
'The conclusions I have stated appear to
me to accord with the authorities. What
do and do not constitute losses and
outgoings incurred is dealt with in the
following passage from the judgment of
Dixon C.J., Webb, Fullagar, Kitto and Taylor
JJ. in F.C. of T. v. James Flood Pty. Ltd. [1953] HCA 65; 88
CLR 492 at pp 506 to 508-
"For under our law the facts must
satisfy the expression 'losses and
outgoings incurred'. These words
perhaps are but little more precise
than the word 'established' or the
expression used above 'definitively
committed'. But they do not admit
of the deduction of charges unless,
in the course of gaining or
producing the assessable income or
carrying on the business, the
taxpayer has completely subjected
himself to them. It may be going
too far to say that he must have
come under an immediate obligation
enforceable at law whether payable
presently or at a future time. It
is probably going too far to say
that the obligation must be
indefeasible. But it is certainly
true that it is not a matter
depending upon 'proper commercial
and accountancy practice rather than
jurisprudence'. Commercial and
accountancy practice may assist in
ascertaining the true nature and
incidence of the item as a step
towards determining whether it
answers the test laid down by sec.
51(1) but it cannot be substituted
for the test.
To repeat what has been said before
in relation to an analogous
provision in the Act of 1922-1934:
'To come within that provision there
must be a loss or outgoing actually
incurred. "Incurred" does not mean
only defrayed, discharged, or borne,
but rather it includes encountered,
run into, or fallen upon. It is
unsafe to attempt exhaustive
definitions of a conception intended
to have such a various or
multifarious application. But it
does not include a loss or
expenditure which is no more than
impending, threatened, or
expected.'; New Zealand Flax
Investments Ltd v. F.C. of T. [1938] HCA 60; (1938) 61
CLR 179 at p 207. Nothing that was
decided in W. Nevill & Co Ltd v. F.C.
of T. [1937] HCA 9; (1937) 56 CLR 290 was intended
to imply that a liability to pay an
ascertained sum is never incurred
until the sum becomes due and
payable. ... But whatever be the
rationale of the decision of the
point, clearly enough it is not
based on a view that no outgoing
could be incurred until actual
payment was made. It is one thing,
however, to say that it is not
necessary for the purposes of sec.
51(1), that an actual disbursement
should have taken place. It is
another thing to say that in the
present case the taxpayer had
incurred a loss or outgoing in the
year of income in respect of the pay
of its men during the annual leave
to be taken in the ensuing
accounting period by employees whose
service had not as yet qualified
them for annual leave. In respect
of these employees there is no
debitum in praesenti, solvendum in
futuro. There was not an accrued
obligation, whether absolute or
defeasible. There was at best an
inchoate liability in process of
accrual but subject to a variety of
contingencies."
The decision in that case was that there
was no loss or outgoing incurred in
respect of payment for annual leave
pursuant to an award until the leave
became due. Considerable significance was
placed by the Court upon the provisions of
the award which made it clear that nothing
was payable until twelve months had been
served and it was held that no loss or
outgoing had been incurred in respect of
an incomplete portion of a twelve months
period which arrived at the end of a
financial year. It was in relation to
that situation that the Court said that
there was no debitum in praesenti,
solvendum in futuro and no accrued
obligation whether absolute or indefeasible.'
10. While it is true that the wider
construction given to the term 'accrued
obligation' in Flood's case was questioned by
Barwick C.J. in Nilsen Development Pty Ltd v. F.C.
of T. [1981] HCA 6; 81 ATC 4031, his caveat can have no
bearing on a case - as here - where the
liability 'has come home'. Indeed, in Nilsen,
his Honour (at p 4035) adopted as correct the
language of Sir John Latham in Emu Bay Co Ltd
v. F.C. of T. [1944] HCA 28; (1944) 71 CLR 596 where, at p 606,
he indicated that to satisfy the word
'incurred' in sec.51(1), it is sufficient to
say that the liability must be 'presently
incurred and due though (it may be) not yet
discharged'.
11. I am satisfied that this case is wholly
governed by the reasoning of Menhennit J in
the RACV case which, on this aspect, has
withstood the test of time. Having concluded
that the arrival of the 70 day non-cancellable
period has the effect of creating a present or
current indebtedness which must be paid in the
future, it follows that the loss is 'incurred'
at that point in time."

11. Although the evidence concerning the terms of contracts for publication of advertisements between clients of the respondent and publishers was unsatisfactory, there was in my opinion no evidence to justify a conclusion that a price was payable to the publisher by the client even if the advertisement were not published and no event justifying or excusing the failure to publish the advertisement had occurred. The contracts provided, the evidence indicated, that the price was payable by the client in consideration of publication of the advertisement. The promise to publish the advertisement, qualified though the evidence showed it to be, and the promise to pay the price are dependent promises. Performance of the former is to precede performance of the latter and may accordingly be said to be a condition precedent to the liability of the client to pay the price. The evidence about the contracts showed that in certain events there would be imposed on the client by the contract an obligation to pay the publisher an amount equal to the price notwithstanding that the advertisement was not published. But it would not be known at the time when the "non-cancellation period" commenced whether such an event would occur. One piece of evidence about the terms of such contracts, a printed document called a "rate card" published by the holder of a commercial television licence (exhibit "H" before the Tribunal), includes the following:

"General Advertising Conditions
'These general conditions and this rate card
are not to be taken to constitute an offer on
the part of Austarama Television Pty Limited'
('The Company') or the Station and time is
only sold subject to the terms and conditions
contained in the Company's Air Time Agreement.
An advertiser shall have only one current Air
Time Agreement at any time."

No "Air Time Agreement" was in evidence and the parties treated the document called a "rate card" as disclosing terms of contracts of the kind under present consideration. Beneath the words I have quoted are printed 23 numbered paragraphs, of which two read as follows:

"11. Bookings for spot announcements may be
cancelled by either the Company or the
Agency giving not less than seventy (70)
days written notice to the other party.
Contracts for sponsored sessions are not
subject to termination by the advertiser
prior to the expiry date shown on the
contract, but the Company reserves the
right to cancel a sponsorship at any
time.
..............................................
13. Deadline for material is three (3) clear
days prior to the time appointed for
telecasting. If such material is not
furnished in time, the Company will,
without further reference to the
advertiser, either:-
(a) substitute at its discretion
alternate material that the Company
holds for the client for whom air
time has been booked or
(b) move the commercial announcements to
any available air time within the
same week or
(c) delete the commercial announcement
and charge for the air time booked
in any event."

It could not be doubted, in my opinion, that in most circumstances the terms, implied if not express, of contracts for television advertising would oblige the publisher to comply with the advertiser's request that the advertisement be not published even if that request were made within the "non-cancellation period". It may be assumed for present purposes that on the communication of such a request within the "non-cancellation period", or on the communication of the publisher's election to "charge for the air time booked" in pursuance of a contractual term such as paragraph 13 expresses, an indebtedness of advertiser to publisher in an amount equal to the price payable for publication of the advertisement would arise. But in each case the obligation to pay would not exist until the communication occurred. Nor would any unconditional obligation to pay the price exist at the time the "non-cancellation period" commenced or at any time thereafter until publication of the advertisement. If the advertisement were not published and no other circumstance occurred by reason whereof an obligation arose to pay the publisher an amount equal to the price, no unconditional obligation to pay the price or an amount equal to the price would ever arise, in my opinion.

12. Upon that understanding of the conditional quality of the liability created by the contractual promise of the client to pay the agreed price, and so of the liability created by the respondent's promise to pay that price, Mr. Fajgenbaum QC, who appeared with Mr. Maxwell for the Commissioner, grounded the submission that the requirement of s.51(1) which derives from the word "incurred" was not satisfied by a promise to pay the price if and when the promise to publish the advertisement were performed, or if and when some other contractual provision operated to impose an obligation to pay the price notwithstanding that the advertisement was not published. A loss or outgoing is not incurred, according to the submission, unless the pecuniary liability arising ex contractu which is proposed as attracting the deduction is not subject to any condition precedent.

13. In my opinion the making of a contract consisting of a promise to pay a price in consideration, and upon performance, of the other party's promise to render the first party a service at or by a specified time satisfies the requirement of s.51(1) that an outgoing in the amount of the price should have been incurred. (In this case satisfaction of that requirement was, no doubt rightly, regarded as deferred until the commencement of the "non-cancellation period", because the contracts in question, or many of them, were regarded as including terms which empowered each party to rescind the contract by notice to the other before the commencement of that period.) The taxpayer ought in my opinion to be regarded as having "completely subjected himself" to the outgoing by making such a contract, notwithstanding that his promise will not become legally enforceable against him unless and until the service has been rendered. In New Zealand Flax Investments Ltd. v. Federal Commissioner of Taxation [1938] HCA 60; (1938) 61 CLR 179 at 207 Dixon J. said, in respect of a contractual promise to pay interest to bondholders over a period of four years, that the future liability to pay the interest could properly be treated as having been incurred, for the purposes of s.23(1)(a) of the Income Tax Assessment Act 1922-1934, when the contract was made, notwithstanding that the liability was contingent upon a bondholder's making promised future instalment payments of the price of the bond beyond the income year in which the deduction was claimed. The history of the conception of dependent promises, in terms of which Mr. Fajgenbaum framed his submission, citing Halsbury (4th ed.) paras. 515 et seq., is considered in Greig and Davis : The Law of Contract, Ch 20. I do not think it is a conception apt to provide the discriminatory criterion of the incurring of an outgoing pursuant to a contract for the purposes of s.51(1). In my opinion the more appropriate conception is of a liability "incurred" when the contract is made, albeit a liability contingent upon performance by the other party of his promise to render the service. The appropriateness of that conception is the more apparent in a commercial context, such as is under present consideration, where it is virtually certain that the other party's promise will be performed.

14. So little concerned about payment by the advertiser are those who publish advertisements ordered by an accredited agent, the evidence suggested, that no express provision concerning the time within which payment of the price shall be due by the advertiser is to be found in the tendered documents in which it was said that the usual terms of contracts between advertiser and publisher are to be found. There was evidence that the publisher looks only to the accredited agent for payment of the price. It was not, nor in my opinion could it have been, suggested that the contract between publisher and advertiser did not include a promise by the advertiser to pay the price. It may be that the term as to the time of payment would be an implied term that the advertiser would pay the price within a reasonable time after demand by the publisher made after publication. The accredited agent, on the other hand, was concerned to get in hand from the client an amount equal to the price which the agent was to pay the publisher. A document in evidence which was said to express the usual terms on which the respondent agreed to act in 1988 as an advertiser's agent (exhibit E) included the following clause:

"2.5 At all times the ADVERTISER recognises
the special relationship it shares with
its AGENCY. The AGENCY will not be
treated as a normal supplier of goods
and services but rather the purchaser of
media time, space and materials on
behalf of the ADVERTISER. This
relationship necessitates that payment
be received by the AGENCY strictly
within 30 days of the end of the month
in which advertising appears."
..............................................
"9.0 INVOICING AND PAYMENT
The ADVERTISER will be billed monthly
for media expenditure, sundry charges,
and progressive production costs. Media
and Production invoices are to be
received by the ADVERTISER on the second
working day of the following month while
the monthly statement will be rendered
on or about the 10th working day of the
following month. These charges are to
be paid at the end of that month. That
is to say January expenditure will be
billed early February and is due for
payment by February 28."

Another document of a similar kind, dated April 1984, (exhibit F) includes the following:

"The financial terms provide that the agency
will finance its own services, but not the
advertising of its clients. Therefore, we
look to the client for prompt payment of
monthly accounts in sufficient time to enable
the agency to then pay media and/or suppliers
with the client's money for his services or
supplies. Strict thirty day payments are
required.
..............................................
Two fundamental principles on which our
financial relationship is based are:
a. That the agency will finance its own
services, but not the advertising of its
clients, and
b. That the agency is held by media as
solely liable for payment; indeed, if we
make payment after the due date for any
reason at all, media automatically
withdraw our commission.
Therefore, it is essential that we receive
payment in time to pay media. Queries will
arise from time to time and because we look
upon our relationship as a long-term one,
these queries will be resolved and the
necessary adjustments made to the following
month's account.

15. The evidence did not justify, and the Tribunal did not make, a finding that in any substantial proportion of cases payment of the price by the respondent to the publisher preceded receipt of the price by the respondent from the client. What was declared in the passage last quoted to be "fundamental" and "essential" was what ordinarily happened. Accordingly, at the time when the contract for publication of an advertisement was made, at which time there was made also the contract between publisher and accredited agent under which the agent promised to pay the price, the expectation of the respondent was that when in performance of his promise he should pay the price he would have previously received from his principal payment of that amount. The same statement may be made in respect of the time at which the "non-cancellation period" commenced. While the liability of the agent, like the liability of his client the advertiser, to pay the price may, for the reasons I have stated, be said to have been incurred when the "non-cancellation period" commenced, no loss or outgoing can in my opinion be said to have been by the agent then incurred within the meaning of s.51(1). The expression "losses and outgoings" in that section in my opinion requires that the payment in contemplation should at least involve a diminution, even if only momentarily, of the payer's funds by the payment. The incurring of a liability to make a payment which is expected to involve no such a diminution does not in my opinion satisfy the requirement for deductibility expressed in s.51(1). That the word "outgoings" does not comprehend a payment which involves no expense to the payer was laid down by the Court of Appeal in Dependable Upholstery Ltd. v. Brasted (1932) 1 KB 291. Such a conclusion must be drawn also, in my opinion, about the word "losses". It is not in my opinion a legitimate application of s.51(1) to accept as an allowable deduction the amount of a pecuniary liability to which a taxpayer has subjected himself by reason only of the circumstance that it cannot certainly be known until a later time after the end of the income year that the liability will not result in a loss or outgoing. All that could have been said, if so much, of any of the claimed deductions in this case at the time when the deduction is claimed to have become allowable, or at the end of the income year in respect of which the deduction was claimed, was that it might later appear by reason of events later occurring that the pecuniary liability was within the statutory description. It must have been said of the liability at the end of the income year that it was not probable, and the taxpayer did not expect, that a loss or an outgoing would result from the liability. Nor was there evidence before the Tribunal to justify a finding that any of the amounts constituting the aggregate claimed to be deductible had in the event answered the statutory description "losses and outgoings".

16. For the foregoing reasons I think that the appeals should be allowed.

17. It was submitted on behalf of the Commissioner that a payment of the price by an accredited agent attracts no deduction at the time of payment even if at that time the agent has not been provided with the amount payable by his client. That submission was based on the proposition that payments are not within s.51(1), as losses or outgoings incurred by an agent, which are made by the agent in discharge of his principal's liability and in performance of his contractual duty to his principal, he having the right to immediate reimbursement by his principal. This was so, according to the submission, notwithstanding that the agent's payment discharged a separate and unconditional contractual liability of the agent to make the payment. For the purposes of s.51(1) such a payment as the respondent made to the publisher in the capacity of an agent, in circumstances which gave him a right of immediate reimbursement by his principal, involved no incurring of a loss or outgoing unless and until the principal's indebtedness could be characterised as a bad debt, it was submitted. Still less could it be said, according to the submission, that an agent who in performance of his contract with his principal incurred a separate contractual liability, to pay the publisher what his principal simultaneously contracted to pay the publisher, thereby incurred a loss or outgoing deductible under s.51(1). It is unnecessary that I express an opinion on that submission. I prefer to rest my decision of the appeal on the ground I have stated.

18. I have earlier said that the respondent took the evidence to establish that cancellation of an order for publication of an advertisement within the "non-cancellation period" left the advertiser under an obligation to pay the price notwithstanding that the advertisement was not published. However, one of the submissions in support of the applicant's argument that no unconditional obligation was incurred by the agent to make any payment to the advertiser rested on the contention that cancellation within that period did not result in a continuing obligation on the advertiser to pay the price, but constituted a breach by the advertiser of his contract with the publisher, sounding in unliquidated damages. And it was further contended that, upon the proper construction of the Rules Concerning Advertising including Rules of Accreditation of Advertising Agencies, the obligation imposed on the agent by his contract with the publisher is to pay only the price payable upon publication, not damages for breach of his principal's contract with the publisher.

19. There was evidence as to what in fact happens when an advertiser cancels his advertisement within the "non-cancellation period". But it was not at all clear that what in fact happens is what the contracts made for publication of the advertisement ordain. The evidence of the terms of the advertiser's contract with the publisher being unsatisfactory, and the Tribunal having expressed no conclusion as to the contractual consequences, as between advertiser and publisher, of cancellation by the advertiser within that period, I prefer to express no opinion on that submission on behalf of the applicant.

20. My conclusion is that each appeal should be allowed, the decision of the Administrative Appeals Tribunal of each reference set aside and the decision of the Commissioner in respect of each objection confirmed. The respondent should pay the Commissioner's costs of this proceeding.