ACP Publishing Pty Limited (ABN 18 054 605 640) v Commissioner of Taxation

THE FACTS 7 The facts are not in dispute. ACP Publishing Pty Limited ("ACP Publishing"), the appellants to the present appeal, is a member of the Australian Consolidated Press Group of companies ("the ACP Group".) ACP Publishing, together with ACP Magazines Pty Limited ("ACP Magazines") and other companies in the ACP Group are members of a GST group under Div 48 of the GST Act. ACP Publishing is the representative member of the group. As such, the companies in the group are to be treated as a single entity and relevantly, if a member of the group makes a creditable acquisition, the representative member becomes entitled to the input tax credit on that acquisition. 8 Immediately prior to 6 August 1980, Australian Consolidated Press Ltd ("ACP"), the parent company of ACP Publishing and ACP Magazines, was entitled to all of the goodwill, trademarks, business names and other rights which related to the magazine titles "TV Times" and "TV Guide". These are here referred to as the "ACP Rights". News Limited ("News") and/or Southdown Publications Pty Ltd ("Southdown One") were entitled to all of the goodwill, trademarks, business names and other rights which related to the magazine "TV Week" ("the News Rights"). On 6 August 1980, News/Southdown One and ACP entered into a deed ("the 1980 Deed"), pursuant to which ACP sold the ACP Rights to News/Southdown One. News/Southdown One was thereafter to publish, edit, produce and distribute the magazine "TV Week" or cause this to be done but under the title of "TV Week incorporating TV Times and TV Guide". In this deed, the ACP Rights and the News Rights are collectively referred to as "the Rights". News/Southdown One was to pay half of the net profits of the merged operation to ACP and ACP was to bear half of any net loss. News/Southdown One was to have full control and the sole and exclusive management as against ACP of the merged operation. 9 Clause 7 of the 1980 Deed provided as follows: "Savoy Clause 7.1 Either News or ACP (hereinafter called 'the offeror party') may at any time after the date six months from the date of this Deed offer in writing to sell or procure the sale to the other party (hereinafter called "the offeree party") the offeror party's interest under this Deed for the sum of money specified by the offeror party in the said offer. If the offeree party shall not have accepted the offer by giving notice in writing within fourteen (14) days after the making of the offer the offeror party shall thereupon be deemed to have notified the offeree party that the offeror party will purchase from the offeree party all of the offeree party's interest under this Deed for the sum specified in the offeror party's original offer and the offeree party shall in that case be bound to sell to the offeror party. Completion of any sale or purchase pursuant to this Clause 7 shall take place within twenty-one (21) days after acceptance of the offer by the offeree party or the deemed notice by the offeror party as the case may be, and this Deed shall subject to Clause 7.3 cease to operate. 7.2 In this Clause 7 any reference to the interest of any party under this Deed shall mean in the case of ACP the right to receive the share of the net profits of the Business as provided in Clause 3.1 and shall mean in the case of News the right title and interest of News in and to the Rights including (but without limiting the generality of the foregoing) in respect of the new title and of each of the separate titles "TV Week", "TV Times" and "TV Guide" and of the goodwill attached to any or all of those titles. 7.3 If pursuant to an exercise of the Savoy Clause the purchaser is ACP and ACP shall continue publication of the magazine then for a period of one (1) year from completion (or such lesser period as publication continues) Downlands or News or a related corporation of News (as News may nominate prior to completion and from time to time) shall be engaged by ACP to print and bind the magazine for a price that is no more than that which would otherwise be generally available to ACP from other printers for the printing and binding of a similar magazine in similar quantities." 10 In February 1992, certain novation deeds were executed ("the novation deeds"). The detail is not important. As a result, ACP Magazines acquired the rights and assumed the obligations of ACP under the 1980 Deed and another Southdown company, then called Southdown Publications Pty Ltd ("Southdown"), acquired the rights and assumed the obligations of News/Southdown One. Reference, hereafter, to the 1980 Deed are to be read as reference to that deed as effected by the novation deeds. 11 On 19 June 2002, ACP Magazines offered, pursuant to cl 7 of the 1980 Deed, to sell to Southdown its interest under the 1980 Deed (see cl 7.2 above) for the sum of $60 million. The offer was not accepted. Pursuant to the clause (see cl 7.2 above), ACP Magazines was thus deemed to have offered to purchase the interest of Southdown for the sum of $60 million and Southdown was bound to sell its interest accordingly. 12 On 24 July 2002, five deeds were executed to give effect to the sale contemplated by the operation of cl 7. Pursuant to the first of these deeds, Southdown assigned to ACP Magazines "all of its right, title and interest in and to the Rights including (but without limiting the generality of the foregoing) in respect of each of the titles 'TV Week', 'TV Guide' and 'TV Times' and of the goodwill attaching to any or all of those titles." The deed stipulated that the assignment was pursuant to cl 7 of the 1980 Deed. The remaining deeds dealt with assignments of copyright and trade marks. No argument was directed to the operation of these other deeds and they may be put to one side for present purposes. 13 There followed correspondence between ACP Magazines and Southdown as to whether the supplies made by the five deeds (or perhaps only by the first of them) were subject to GST and for the issue of a tax invoice. The solicitors for ACP Magazines also applied to the respondent Commissioner of Taxation ("the Commissioner") for a private ruling as to whether its acquisition was a creditable acquisition so as to entitle that company to an input tax credit. The ruling was unfavourable. The Commissioner was of the view that the supply to ACP Magazines was GST free as a result of the application of s 13 of the Transition Act. 14 ACP Publishing, in its business activity statement for the month of August 2002, claimed to be entitled to an input tax credit in relation to the supply to ACP Magazines by Southdown. The claim for credit had the consequence of reducing the net amount of GST payable by ACP Publishing in respect of the period to $332,689. The Commissioner in due course issued an assessment of the net amount of GST for the period covered by the statement which disallowed the credit claimed by ACP Publishing. The assessment had the consequence that there was an amount of $5,454,545 owing to the Commissioner by ACP Publishing in addition to the amount of $332,689 which had been paid. ACP Publishing then objected to the assessment. The objection having been disallowed, ACP Publishing appealed to the Court. Its appeal was dismissed and the objection decision was affirmed.

THE SCHEME OF THE GST ACT AND EXTRINSIC MATERIAL 15 The question whether ACP Publishing has, as a result of the assignments made by the deeds dated 24 July 2002, made a creditable acquisition entitling it to an input tax credit turns initially upon s 11-1 of the GST Act. Relevantly, ACP Publishing will have made a creditable acquisition of the rights assigned to ACP Magazines by Southdown (ie the News Rights as defined in cl 7.2) if ACP Magazines acquired them from Southdown for a creditable purpose as a result of a taxable supply made by Southdown for which ACP Magazines provided or was liable to provide consideration. The conditions of s 11-1 will on the present facts have been satisfied so long as the supply by Southdown was a taxable supply. By force of s 9-5 of the GST Act the supply by Southdown will not be a taxable supply if and to the extent that it is GST free. As already noted, if s 13 of the Transition Act has application, the supply by Southdown will be GST free. Hence the issue for determination on the appeal is whether s 13 of the Transition Act does apply in the present circumstances. 16 Section 13 of the Transition Act was originally cl 12 of the A New Tax System (Goods and Services Tax Transition) Bill 1998 when that Bill was first introduced to Parliament. It was renumbered later to become s 13 by amendments not relevant here. Both in its original and in its amended form the section required consideration to be given to whether there was a review opportunity to be found in an agreement entered into prior to the GST legislation. The Explanatory Memorandum circulated with the 1998 Bill contains little of assistance to the present question. It said: "Agreements entered into either prior to 2 December 1998 or Royal Assent of the Transition Bill, but under which supplies will be made after 1 July 2000, may contain provisions such that the agreed consideration does not include GST and the consideration cannot be reviewed to take it into account. Such agreements are often called non-reviewable contracts. Unless the Transition Bill has provisions to relieve this GST may be payable on supplies made under the agreement, but the supplier would be unable to pass on the tax. If you have an opportunity to review an agreement or otherwise build any GST into the agreed price, you would normally be expected to do so." 17 Some hint as to the legislative policy is, however, to be found in the Explanatory Memorandum to the A New Tax System (Indirect Tax and Consequential Amendments) Bill 1999 which, inter alia, made some amendments of a minor kind to s 13. One of those amendments was to the definition of the expression "review opportunity" and was made to ensure that a review which does not allow indirect tax changes to be reflected in contract payments, either directly or indirectly, would not be a review opportunity. The following comment is to be found in the Explanatory Memorandum immediately following reference to the proposed amendment: "This restores the original policy intent that GST should apply to existing contracts only if the supplier can alter the consideration to pass on GST."

THE JUDGMENT APPEALED FROM 18 The learned primary judge considered what were, in essence, two submissions made to him by ACP Publishing. The first was that the assignments ultimately made to ACP Magazines were not supplies made "pursuant to" or "under" the 1980 Deed and that it was implicit in s 13 that they must be. Reliance was apparently placed upon decisions such as Elmslie v Commissioner of Taxation (1993) 46 FCR 576 and Commissioner of Taxation v Sara Lee Household & Body Care (Australia) Pty Ltd (2000) 201 CLR 520 dealing with the taxation of capital gains in support of this argument. Those cases were concerned with the statutory question whether certain assets were acquired "under" a contract. His Honour held that s 13(1) did not in terms require that the supply be pursuant to an obligation imposed by the relevant pre GST agreement, with the consequence that the capital gains tax cases were of no assistance. The second was that the 1980 Deed did not identify the consideration in money or a way of working out the consideration in money. It had been submitted that because the matter of price was left to be determined by one of the contracting parties, the agreement did not identify a relevant way of working out the consideration. His Honour dealt only briefly with the argument, saying that such a mechanism as was provided by cl 7 of the 1980 Deed was accurately described as a way of working out the consideration in money.

THE ISSUES ON THE APPEAL 19 The appellant, in written submissions, identified there to be four issues on the appeal. These issues were said to be as follows: 1. Whether s 13(1)(a) of the Transition Act when read in light of the object of the legislation was to be construed so that for the relevant supply to fall within the subsection the written agreement made before 8 July 1999 must legally oblige the supplier to make the supply. 2. If the answer to the first question is in the affirmative, whether the supply of the rights by Southdown to ACP Magazines was made pursuant to a legal obligation to make a supply. 3. Whether the 1980 Deed identified "the consideration in money or a way of working out the consideration in money" for the supply of the rights by Southdown to ACP Magazines. 4. Whether, in the circumstances, a "review opportunity" arose within s 13(5) of the Transition Act. 20 The fourth issue was one not argued before the learned primary judge and by consent the Court granted leave to argue it on the basis that it involved no factual issue. 21 The first issue raised was that dealt with first by the primary judge. Before us it was submitted that the learned primary judge erred in concluding that the source of the contractual rights and obligations of Southdown and ACP Magazines was the 1980 Deed. The second issue is closely related to the first, in that a positive answer to the first issue will inevitably result in a positive answer to the second. The third issue raised was the second matter dealt with by the primary judge. As noted, the fourth issue raised before us was not raised before the primary judge. 22 At the heart of the submissions of the respondent Commissioner was said to be the need not to adopt a "literal" interpretation of s 13, but rather to approach the interpretation of the section by reference to the policy underlying it and to give effect to that policy. It was submitted that his Honour had erred in the way he approached the question of construction and that his Honour had adopted a literal and narrow interpretation of s 13. 23 It should be noted that, except for a timing differential, there is no loss of revenue from the point of the Commissioner whatever the outcome of the present appeal. If s 13 of the Transition Act does apply so that the supply to ACP Magazines is GST free then there will be no output tax payable by Southdown and correspondingly no input tax credit allowed to ACP Publishing. If, on the other hand, s 13 of the Transition Act has no application then there will be output tax payable by Southdown but correspondingly the Commissioner will be required to give to ACP Publishing an input tax credit of an equal amount. The impact of the present appeal is thus one that affects only the parties to the supply. If the supply to ACP Magazines is a taxable supply, Southdown will be obliged to pay GST upon it and there will thus be reduced, to the extent of one-eleventh of the nominated consideration, the amount it will receive as consideration for the sale of its share of the Rights. Conversely, if the supply to ACP Magazines is a taxable supply, ACP Magazines will effectively receive back from the Commissioner one eleventh of the nominated consideration and thus pay one-eleventh of the consideration less for the acquisition of the Southdown share of the Rights. If the supply to ACP Magazines is a GST free supply, then ACP Magazines will pay, and Southdown will receive, the whole of the nominated consideration. 24 It can be accepted that in interpreting all legislation, regard must be had to the parliamentary policy underlying that legislation and the legislation will be interpreted in a way that will give effect to that legislative policy: s 15AB of the Acts Interpretation Act 1901 (Cth). It can also readily be accepted that s 13(1)(a) of the Transition Act should be construed in the context in which it appears and that s 13 should be read as a whole, including s 13(5). The leading discussion of the significance of "context" in interpretation where the word "context" is used in its widest sense is to be found in CIC Insurance Ltd v Bankstown Football Club Limited (1995) 187 CLR 384 at 408. Since what the High Court (Brennan CJ, Dawson, Toohey and Gummow JJ) said there is important, it is worthwhile to set the passage out in full: "…the modern approach to statutory interpretation (a) insists that the context be considered in the first instance, not merely at some later stage when ambiguity might be thought to arise, and (b) uses 'context' in its widest sense to include such things as the existing state of the law and the mischief which, by legitimate means such as those just mentioned, one may discern the statute was intended to remedy….if the apparently plain words of a provision are read in the light of the mischief which the statute was designed to overcome and of the objects of the legislation, they may wear a very different appearance. Further, inconvenience or improbability of result may assist the court in preferring to the literal meaning an alternative construction which, by the steps identified above, is reasonably open and more closely conforms to the legislative intent". 25 However, nothing in the above passage means that the ordinary meaning of the words which Parliament has used will necessarily be ignored in the process of interpretation. No doubt, where there is ambiguity, whenever that ambiguity is revealed, the language used may, as the above passage says, take on "a very different appearance". However, it must also be said that the task of interpretation is to discern the meaning of the words which Parliament has seen fit to use and that, in so doing, their ordinary meaning will have significance. 26 It was submitted by the appellant that s 13 was only intended to give relief from GST to a supply made on and from 1 July 2000 where the supplier was locked in to make a supply at an agreed price under a pre 8 July 1999 written agreement and in circumstances where there was no opportunity to review the price so as to take account of the imposition of GST. It was said that s 13 was never intended to have application to a case where the supplier could adjust the price paid so as to take account of the GST. The submission may, in general terms, be accepted. However, the submission does not lead to a conclusion favourable to the appellant on the facts of the present case. In the present case the supplier is Southdown. On the appellant's case, Southdown became liable to GST on the supply it made. There was no possibility for Southdown to adjust in any way the consideration it was to receive for the supply which, as a result of the 1980 Deed, it became obliged to make. True, Southdown had the opportunity to accept the ACP Magazines offer and thus acquire the ACP Rights, but this does not mean that Southdown had any ability to change the consideration which on non acceptance of the ACP Magazines' offer it was forced to assign the News Rights for. Hence, the existence of the policy as stated tells nothing at all as to the result which Parliament would have intended in the present case. 27 It is important to note also that the GST legislation was intended to apply broadly throughout the community and over a wide range of supplies, whether of goods, services or other things. Section 13 was intended to regulate supplies made to give effect to agreements entered into between parties where the agreement was entered into prior to the GST legislation being enacted. It might be thought that Parliament would, therefore, use language which the parties to agreements spanning the introduction of the GST would understand - particularly where the legislation uses the normal language of discourse and purports, by its use of the ubiquitous "you", to be directed at the persons who are liable to pay the tax or are entitled to credits as the case may be. This may be thought to support an argument that the normal meaning of the language of s 13(1) was intended to be given effect to. 28 Finally, regard must be had to the structure of s 13 of the Transition Act so far as the structure reflects the underlying policy implicit in the section. In essence, a supply will be GST free if two separate requirements are satisfied. First, there is the need for the written agreement to which s 13 refers to identify the relevant supply and the consideration for it. Second, there must be no review opportunity, that is to say, no opportunity for the supplier to act so as to ensure that the consideration reflects the GST otherwise payable. The first of these matters is not concerned with the necessity of ensuring that the supplier has no opportunity to set a price or vary an existing price so as to include GST. That is the concern of s 13(5). Its concern is to identify the supply so as to ensure that it arises under the pre GST agreement. 29 I turn now to deal with the arguments raised by the appellant.

WHETHER THE 1980 DEED IS THE AGREEMENT UNDER WHICH THE SUPPLY ACTUALLY TAKES PLACE 30 In answering the question it may be asked rhetorically whether, if the 1980 Deed is not the agreement under which the supply actually took place, what other agreement would there be under which it did take place? Never did the appellant really address this question and for good reason. 31 Clause 7 of the 1980 Deed in essence contains four separate but conditional agreements. These are: 1. An agreement by ACP to purchase the News interests if Southdown offers these interests for sale to ACP and that offer was accepted. 2. An agreement by Southdown to purchase the ACP interests if Southdown offers the News interests for sale and that offer is not accepted by ACP. 3. An agreement by ACP to purchase the News interests if ACP offers the ACP interests for sale and that offer is not accepted by Southdown. 4. An agreement by Southdown to purchase the ACP interests if ACP should offer those interests for sale to Southdown and that offer is accepted. 32 Each of the four agreements may properly be described as conditional agreements. Subject to the fulfilment of the relevant conditions, one party is bound to sell, and the other bound to purchase, the relevant interest. It is important here also to notice that the obligation to purchase contained in examples 2 and 3 is not an obligation to purchase what the other party initially offers to sell. Thus if Southdown makes an offer to sell, the subject matter of that offer will be the News Rights as defined in cl 7.2 of the 1980 Deed. However, if ACP does not accept this offer then what Southdown will be obliged to purchase will be the ACP Rights under the 1980 Deed. Likewise, if as in the present case, ACP makes an offer to sell, the subject matter of the offer will be the ACP Rights as defined in cl 7.2 of the 1980 Deed. The offer not having been accepted, what ACP will be obliged to purchase will be the News Rights as defined in cl 7.2 of the 1980 Deed. 33 In my opinion, once the agreements are analysed as conditional agreements, it follows that the supply made by Southdown in the present case was a supply made under the 1980 Deed. The conditions having been fulfilled, Southdown was required by the 1980 Deed, to assign the News Rights. There was no new contract entered into between the parties in July 2002, as is asserted by the appellant, or on any other date. There is no need, in reaching this conclusion, to have regard to s 13(5) and the references there to "under the agreement" in construing s 13(1). I would agree, however, that the supply referred to in s 13(1) must be one that is under the written agreement to which reference is made in s 13(5) as submitted by the appellant. The short answer to the related second issue is that the supply by Southdown was a supply made under the 1980 Deed.

DID THE 1980 DEED IDENTIFY A SUPPLY AND A WAY OF WORKING OUT THE CONSIDERATION 34 For s 13 to apply, it is necessary that there be an agreement in writing that "specifically identifies a supply" and also that the agreement "identifies the consideration in money, or a way of working out the consideration in money, for the supply". It is submitted on behalf of the appellant that the 1980 Deed does neither. It is said to not "specifically" identify any supply (although it is conceded that it identifies four potential supplies) and it is said it neither identifies consideration in money for the present supply, nor a way of working out that consideration. 35 As to the first of these arguments, it would seem in my view to be sufficient compliance with s 13(1)(a) that the 1980 Deed identify the supply that was in fact made by Southdown, even if it also identifies other potential supplies which, in the events which happened, did not take place. The second requirement of identification of consideration or a way of working that consideration out involves greater difficulty. 36 Under s 9-70 of the GST Act, GST is payable on taxable supplies at the rate of 10 per cent of the value of the taxable supply. That value is determined under s 9-75. That determination depends upon whether the consideration for the supply is consideration "expressed as an amount of money" (where the value of the supply is that amount of money) or whether the consideration for the supply is not expressed as an amount of money (where the value of the supply will be the GST inclusive market value of the consideration). It would seem that the reference to the identification of the consideration as being "consideration in money" in s 13 of the Transition Act is a reference to s 9-75. "Money" has a defined meaning in the Dictionary: s 195-1 where it includes whatever is supplied as payment inter alia by way of crediting or debiting an account or creating a debt as well as currency. 37 The reference in s 13 to "a way of working out the consideration in money" would seem to refer to a class of case where although a monetary amount is not identified in the agreement, there is a mechanism in the agreement whereby the monetary amount can be ascertained or "worked out". There is no policy reason which requires the adoption of a narrow construction to these words. A narrow construction might require that the words "working out" relate to there being set out in the agreement, a method of calculation. For example, the adoption of a formula. That narrow construction would exclude a case (it might be thought to be a typical case for the operation of s 13) where rental for a further term of a commercial lease was to be determined by some expert such as the President of the Real Estate Institute. There would, in such a case, be no formula applied to calculate the consideration, but the rental consideration would have been worked out by a way of working it out identified in the agreement. 38 No reason in policy can be advanced for excluding the expert rental calculation example from the operation of s 13. The lessor will have been bound by the pre GST agreement to make a supply and there would be no review opportunity. 39 Once it is accepted that the narrow view of the words "working out", if anything, works against the policy effected in s 13, it is hard to draw a significant distinction between the use of an expert to determine the consideration and the case where the consideration is set by an act of the acquirer, namely the offer of the acquirer's interest for sale at a nominated price. 40 Because the relevant supply under consideration must be one made on or after the commencement of GST, it seems to me that the question whether the provisions of s 13 are satisfied is one that must be determined, at the latest, at the time the relevant supply takes place. Prior to the making of the supply it will be irrelevant whether the supply is a taxable supply or a supply that is GST free. If that is correct it follows that the mechanism for working out the consideration must, a fortiori, have produced a monetary figure at a time no later than the time when the relevant supply is made. It did so in the present case. 41 There is no doubt that by the time Southdown came to make the supply to ACP Magazines there had been established a consideration and that consideration was a consideration in money as contemplated by s 9-75 of the GST Act. That may be sufficient compliance with s 13(1) of the Act. However, with respect to the views of Gyles J, which I have read in draft form, there is nothing in the policy of the Transition Act, whether appearing on its face or in the references in the Explanatory Memorandum which I have already set out, which suggests that any policy underlying the legislation is infringed by allowing the acquirer to set the price. There are two reasons for this. The evident policy is that if the person setting the consideration for the supply is the person liable to pay the tax, that is to say, the supplier, and the supplier can fix or vary the consideration so as to take into account the GST that that person is liable to pay, then the provisions of s 13 should not apply to treat the supply as GST free. In such a case there will be a review opportunity even if the consideration is expressed in money. But that is not the case here. The consideration that is set is a consideration set by the acquirer, not the supplier. Further, the consideration set is not, when it is nominated, the consideration payable for the supply that is ultimately made, but rather the consideration for a supply of different rights and a supply that on the events which happened, did not take place. 42 I therefore can see no reason why any policy consideration should operate to displace what are the clear words of s 13 in the present case. A way of working out the consideration, a consideration that will become a monetary consideration, is set in the 1980 Deed. It requires in the present case notice being given by ACP Magazines and rejection of the offer to sell the ACP Rights by Southdown. That way of working out the consideration is stipulated in the written agreement and identifiable from the terms of it. 43 It may be true that if, in the events which did not happen, ACP Magazines had offered to sell the ACP Rights to Southdown and that offer had been accepted, the provisions of s 13 would not have applied to treat that supply as being GST free. But that would not be because the provisions of s 13(1) were not satisfied. It would be because it was the supplier which had a review opportunity and which was able to set the consideration and thereby to take into account the GST which would become payable. If a different result would follow in such a case to the result in the present case, then so be it. Any anomaly would result from giving effect to the policy inherent in the terms of s 13 itself and the language of the section. In such a case the supplier liable to pay GST will be free to set the consideration so as to take account of the GST.

WAS THERE A REVIEW OPPORTUNITY? 44 As I understand the argument, it is said that Southdown would be mindful that if it declined the offer of ACP Magazines to sell to Southdown the ACP profit entitlement (ACP Rights) it would become liable to GST on the supply it would make and that this then gave Southdown the opportunity of factoring in the GST liability. With respect, the argument is somewhat confused. First, as pointed out, what is offered to Southdown and must be considered by it for purchase, is the sale by ACP Magazines of the ACP Rights. What Southdown will supply if it rejects ACP Magazines' offer is something different, namely the News Rights. In my view, the case is not one which reveals a review opportunity as defined. For there to be a review opportunity there must be an opportunity arising under the agreement for the supplier, here Southdown, to change the consideration, whether directly or indirectly. No such opportunity exists. Alternatively there must be an opportunity arising under the agreement for the supplier to conduct a general review. There is none. Finally, there was no scope for the provisions of s 13(5) to have operation before 1 July 2000. 45 The argument that there was a review opportunity has no merit.

CONCLUSION. 46 In my view the appeal must be dismissed and the appellant pay the Commissioner's costs of the appeal. I certify that the preceding forty-six (46) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Hill.

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN: ACP PUBLISHING PTY LIMITED (ABN 18 054 605 640)

AND: COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA

REASONS FOR JUDGMENT FINN J 47 I agree with the orders proposed by Hill J but wish to state shortly my own reasons for so doing. The factual setting of this matter is sufficiently stated by Hill J and need not be repeated for present purposes. 48 It is common ground on this appeal that, unless saved by the provisions of s 13 of A New Tax System (Goods and Services Tax Transition) Act 1999 (Cth)("the Transition Act") as the primary judge found, the supply in question was not GST free. That supply was made at the time of the five deeds of assignment on 24 July 2002: see s 6(5) of the Transition Act; though it was made in consequence of a deemed acquisition under the provisions of cl 7.1 of the novated 1980 Deed. 49 Section 13 of the Transition Act, insofar as presently relevant, provides: "13 Existing agreements: no opportunity to review (1) This section applies if: (a) a written agreement specifically identifies a supply and identifies the consideration in money, or a way of working out the consideration in money, for the supply; and (b) the agreement was made before the day on which this Act received the Royal Assent. (2) The supply is GST-free to the extent that it is made before the earlier of the following: (a) 1 July 2005; (b) if a review opportunity arises on or after the day of Royal Assent - when that opportunity arises. … (5) In this section: review opportunity, for an agreement to which this section applies, means an opportunity that arises under the agreement: (a) for the supplier under the agreement (acting either alone or with the agreement of one or more of the other parties to the agreement) to change the consideration directly or indirectly because of the imposition of GST; or (b) for the supplier under the agreement (acting either alone or with the agreement of one or more of the other parties to the agreement) to conduct, on or after 1 July 2000, a general review, renegotiation or alteration of the consideration; or (c) for the supplier under the agreement (acting either alone or with the agreement of one or more of the other parties to the agreement) to conduct, before 1 July 2000, a general review, renegotiation or alteration of the consideration that takes account of the imposition of the GST." 50 This provision is located in Part 3 of the Transition Act which deals with "Agreements spanning 1 July 2000". As is obvious both from the terms of s 13 and from the Explanatory Memorandum to what I will call the Transition Bill, the Part created GST exemptions in respect of supplies of "some agreements": EM par 2.31; entered into prior to 1 July 2000 and which involved supplies made (inter alia) after 1 July 2000. There is a certain arbitrariness in the selectivity so engaged in and one such instance is evident in the terms of s 13(1) itself. A "taxable supply" may be for either a monetary or a non-monetary consideration: see A New Tax System (Goods and Services Tax) Act 1999 (Cth) ("GST Act"), s 9-5, s 9-15; and in either case is to be valued for GST purposes: GST Act s 9-75. Yet for the purposes of s 13(1) of the Transition Act the only relevant supply is one in which the relevant agreement "identifies the consideration in money, or a way of working out the consideration in money, for the supply". Where the identified supply is for a non-monetary consideration it will not fall within s 13(1)(a) unless the relevant agreement identifies a way of ascribing a monetary value for the supply to be rendered. 51 The preoccupation with an identified monetary consideration or way of working out the consideration in money is again reflected in s 13(5). The obvious premise of this subsection is that if the supplier had an opportunity arising under an agreement made before the Transition Act received the Royal Assent (i.e. 8 July 1999), to review the consideration then specified, the supplier would normally be expected to build GST into the agreed price: cf EM par 2.36. 52 Clause 7 of the novated 1980 Deed, insofar as presently relevant, provides: "7. Savoy Clause 7.1 Either News or ACP (hereinafter called 'the offeror party') may at any time after the date six months from the date of this Deed offer in writing to sell or procure the sale to the other party (hereinafter called 'the offeree party') the offeror party's interest under this Deed for the sum of money specified by the offeror party in the said offer. If the offeree party shall not have accepted the offer by giving notice in writing within fourteen (14) days after the making of the offer the offeror party shall thereupon be deemed to have notified the offeree party that the offeror party will purchase from the offeree party all of the offeree party's interest under this Deed for the sum specified in the offeror party's original offer and the offeree party shall in that case be bound to sell to the offeror party. Completion of any sale or purchase pursuant to this Clause 7 shall take place within twenty-one (21) days after acceptance of the offer by the offeree party or the deemed notice by the offeror party as the case may be, and this Deed shall subject to Clause 7.3 cease to operate. 7.2 In this Clause 7 any reference to the interest of any party under this Deed shall mean in the case of ACP the right to receive the share of the net profits of the Business as provided in Clause 3.1 and shall mean in the case of News the right title and interest of News in and to the Rights including (but without limiting the generality of the foregoing) in respect of the new title and of each of the separate titles 'TV Week', 'TV Times' and 'TV Guide' and of the goodwill attached to any or all of those titles." 53 The following should be noted about these provisions. First, it is clear from cl 7.2 that the respective rights of each of the parties which may be acquired by the other party, are different in character. The significance of this becomes apparent when one has regard to how the deeming provision of cl 7.1 operates. 54 On its face cl 7.1 identifies four possible circumstances in which a supply may occur. Two of those circumstances are where (writing requirements apart) either of the parties offers to sell its own rights for a specified sum of money to the other and the other party accepts that offer. Either contingency would give rise to a voluntary contract and the supply made in consequence of it would attract GST if that contract was made after 8 July 1999: see s 13(1)(b) of the Transition Act. Further, to state the obvious, though cl 7.1 imposes formal requirements for either supply it does not identify the consideration for either. 55 Quite distinct from the above are the two possible circumstances in which (writing requirements apart) either of the parties offers to sell its interest for a specified sum of money to the other and the offer is not accepted within fourteen days of its making. In this situation the deeming provisions of cl 7.1 come into play. The offeror party is deemed to have notified the offeree that it will purchase the offeree's interest for the sum specified in the original offer and the offeree is obliged by the provision to sell its interest to the offeror at that price. The sale and purchase is made under cl 7.1 in consequence of the deemed notice and must be completed within twenty-one days of that notice. 56 Though the monetary consideration for such a purchase is itself identified in cl 7 - it is the sum of money specified in the offeror's original offer to sell - it obviously is a consideration which the offeror would set having regard to the possibility that it might have to buy the offeree's interest for that sum under the deeming provision if the offer is not accepted within the time specified. While the offeree in receipt of such an offer has an election to make in its own interests - i.e. to accept the offer or to sell its own interest at the original offer price - it does not for s 13(5) purposes have any opportunity to review the price at which it must sell if it does not accept the original offer. That price is designated in cl 7.1 and it is the price at which the offeree must make its supply. 57 All four of the possible supplies I have identified are conditional in that they require either (in the case of the two possible supplies under voluntary contracts) an offer and an acceptance, or (in the case of the two possible supplies under the deeming provision) an offer and its non-acceptance. The fact that the possible supplies are conditional does not mean that they are not identified in cl 7.1. It merely indicates that if any one of the four possible supplies is to be made, the required conditions for that supply must occur. 58 Turning to the novated 1980 Deed in light of s 13, it is again clear that the supply which was in fact effected in the 24 July 2002 deeds of assignment was a supply not only identified in cl 7 but also, in the events which happened, was required to be made by that clause. 59 I have already indicated that s 13 of the Transition Act has a particular focus which is that the relevant agreement identifies the consideration for the supply in money or else a means for rendering it in money. As such it excludes a range of taxable supplies from its purview (i.e. those for which the consideration is not monetary and for which no means of rendering it in monetary terms is identified in the s 13 agreement). 60 In that context and having that monetary focus, it does seem to me that it properly can be said that cl 7.1 "identifie[d] the consideration in money" for the present supply, that identification being by reference to a description which required the consideration in the deemed notice to purchase to be the monetary sum specified in the original offer. The actual sum in question would not be known until the deeming provision was triggered by the fulfilment of the required conditions for that supply. But the effect of the deeming provision was that at the time of the deemed notice to purchase, the consideration was for a fixed and pre-ordained monetary sum which the party making the supply was obliged to accept. In my view, it properly can be said that, in respect of the supply that took place on 24 July 2002, the novated 1980 Deed identified in cl 7.1 the consideration in money for that supply. 61 The amplitude of such a construction of the first limb might be thought to provide reason for giving a somewhat more selective meaning to the second limb of s 13, and one which accentuates the idea of a process to be followed in the formula "a way of working out". One of the meanings given the words "work out" in the Oxford English Dictionary ("the OED") (2nd ed, 1989) vol 20 at 545, for example, is: "To go through a process of calculation or consideration so as to arrive at the solution of (a problem or question), to solve; also, to reckon out, calculate." If such were the proper meaning to be given the formula used in s 13, it is arguable that the cl 7.1 deeming provisions would not satisfy the requirements of that formula. The clause does not identify any process of calculation, consideration or reckoning. Rather it indicates when and how the monetary consideration is to be ascertained but only by reference to the occurrence of events and their deemed consequence. 62 The above OED meaning is but one of a number of possible meanings that could be given the formula in this context. A meaning of "work out" given in the Shorter Oxford English Dictionary (5th ed, 2002) vol 2 at 3671 is: "Give or produce a definite result, have or issue in a particular or specified result." If the formula in s 13 was to be construed correspondingly, cl 7.1 would in my view satisfy it. It prescribes how a definite result, i.e. the ascertainment of the actual sum of the consideration, is to be produced. 63 Given the end sought in s 13 (i.e. the identification of the consideration in money for a supply) I can see no reason for adopting a narrow construction of the way of working out formula unless compelled to do so by the purpose or object of the Transition Act itself. The ameliorative purpose of the Act does not require this. And when one has regard (i) to the myriad possible means and formula to which parties may have resort, and (ii) to the range of contingencies and conditions they may employ, in prescribing what is to be the actual consideration in money for a supply, I can see no reason for not giving the "way of working out" formula the full amplitude of meaning it can bear in this setting. Put in shorthand form, I would construe the formula as meaning "a way to ascertain the consideration in money". Clause 7.1 provides this in respect of the present supply. Accordingly I agree with the primary judge's conclusion. 64 I appreciate that, on the view I take of s 13(1)(a), the provisions of cl 7.1 satisfy the requirements of both of that subsection's limbs. I consider there is no anomaly in this given the breadth of meaning of the terms used in the subsection. 65 I have already indicated that I do not consider that the novated 1980 Deed provided the supplier, in this case Southdown Publications, with a review opportunity. 66 I agree with Dowsett J's conclusions and would dismiss the appeal with costs. I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finn.

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN: ACP PUBLISHING PTY LIMITED (ABN 18 054 605 640)

AND: COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA

GYLES J 67 The context in which the issues on appeal arise is explained by Hill J in his reasons which I have had the advantage of reading in draft. The introduction of a comprehensive goods and services tax operative from 1 July 2000 by the A New Tax System (Goods and Services Tax) Act 1999 (Cth) (the GST Act) was probably the most far reaching fiscal legislation in Australia since at least the Second World War. There are many consequences and complications. One of the complications concerns transactions which span the date of commencement of operation of the tax. That topic is dealt with in Pt 3 of the A New Tax System (Goods and Services Tax Transition) Act 1999 (Cth) (the Transition Act). Section 12 deals with progressive or periodic supplies, s 13 with existing agreements with no opportunity to review, s 14 with rights granted for life and s 15 with funeral arrangements. The critical provision here is s 13 which, so far as is relevant, is as follows: '(1) This section applies if:

(a) a written agreement specifically identifies a supply and identifies the consideration in money, or a way of working out the consideration in money, for the supply; and

(b) the agreement was made before the day on which this Act received the Royal Assent.

(2) The supply is GST-free to the extent that it is made before the earlier of the following:

(b) if a review opportunity arises on or after the day of Royal Assent - when that opportunity arises. …

review opportunity, for an agreement to which this section applies, means an opportunity that arises under the agreement:

(a) for the supplier under the agreement (acting either alone or with the agreement of one or more of the other parties to the agreement) to change the consideration directly or indirectly because of the imposition of GST; or

(b) for the supplier under the agreement (acting either alone or with the agreement of one or more of the other parties to the agreement) to conduct, on or after 1 July 2000, a general review, renegotiation or alteration of the consideration; or

(c) for the supplier under the agreement (acting either alone or with the agreement of one or more of the other parties to the agreement) to conduct, before 1 July 2000, a general review, renegotiation or alteration of the consideration that takes account of the imposition of the GST.' 68 The starting point for consideration of the effect of the Transition Act is that, according to the substantive taxing statute (the GST Act), the taxable event is a 'supply'. 69 In the present case, it is the five deeds of 24 July 2002 (the 2002 Deeds) that constitute the relevant supply of the intangible property. For that supply to be GST free pursuant to s 13(2) of the Transition Act it is necessary that the supply fall within s 13(1)(a). 70 Whilst an exemption provision should not be construed restrictively or pedantically, it must be recognised that in this case the legislature did not simply provide that any supply pursuant to a pre-existing agreement is exempt, but rather laid down criteria to be met. It is not appropriate to strain the language of the provision to favour a result one way or the other. There is a question of equity between taxpayers and those who are exempt. Furthermore, the legislation has a direct effect upon each of the parties to the supply. The exemption only applies to a written agreement. That is satisfied here. With Hill J, I shall describe the relevant agreement as the 1980 Deed notwithstanding the novation. The critical provision is cl 7 that is reproduced in the reasons of Hill J. The first issue is whether the 1980 Deed specifically identifies the relevant supply. 71 In my opinion it is clear enough that it is assumed in s 13(1)(a) that the supply is made pursuant to the written agreement. The reference to the written agreement can be taken to refer to a binding agreement. If the supply was not pursuant to the written agreement then it follows that it was not identified in the written agreement. Where a supply takes place as a result of the exercise of an option or a related transaction, there is a question as to whether that supply is pursuant to the option or to the contract formed by exercise of the option. There are many situations in which that type of contract comes into existence. In addition to the simple case of a bare contract granting an option, partnership agreements, joint venture agreements, shareholders' agreements, wills, trust deeds and deeds of family arrangement often contain clauses dealing with the acquisition of interests in the future. Examples include put and call options, rights of first refusal, rights of first offer, rights of first and last offer, rights of pre-emption and, as in the present case, a Savoy or Russian Roulette clause as cl 7 is variously known. 72 There is an unsettled issue as to whether an option is a conditional contract (Ballas v Theophilos (No 2) (1957) 98 CLR 193 per Williams J at 207; Braham v Walker (1961) 104 CLR 366 at 376 per Dixon CJ; Westminster Estates Pty Ltd v Calleja [1970] 1 NSWR 526 at 530-531; Laybutt v Amoco Australia Pty Ltd (1974) 132 CLR 57 per Gibbs J at 71-76; Barba v Gas & Fuel Corporation (Vic) (1976) 136 CLR 120 at 137; United Scientific Holdings Ltd v Burnley Borough Council [1978] AC 904; Spiro v Glencrown Properties Ltd [1991] Ch 537 (Spiro); Fairey Australasia v Commissioner of Stamp Duties (SA) (1998) 72 SASR 1 (Fairey Australasia) at 5). 73 Hoffman J (as Lord Hoffman then was) said in Spiro at 544: 'An option is not strictly speaking either an offer or a conditional contract. It does not have all the incidents of the standard form of either of these concepts. To that extent it is a relationship sui generis. But there are ways in which it resembles each of them. Each analogy is in the proper context a valid way of characterising the situation created by an option. The question in this case is not whether one analogy is true and the other false, but which is appropriate to be used in the construction of section 2 of the Law of Property (Miscellaneous Provisions) Act 1989.' That is pertinent here, substituting s 13 of the Transition Act for the statute in question in that case. The approach of Lander J in Fairey Australasia was similar. 74 The conventional example of a conditional contract is where the contract is conditional upon some objective external event, eg, the obtaining of planning approval or Minister's consent to transfer. An option to purchase is different in character. It only becomes binding if and when a unilateral and subjective decision is made to exercise it. Even if an option can be described as a conditional contract for some purposes, it is questionable whether it can be described as an agreement for the purposes of s 13. In the event of failure to supply pursuant to an option, if the property requires a particular form of contract then the relief may be to specifically perform the agreement constituted by the exercise of option by entering into an appropriate form of contract (Niesmann v Collingridge (1921) 29 CLR 177). The difference between an option and a synallagmatic contract is referred to by Lindgren J in Sydney Futures Exchange Ltd v Australian Stock Exchange (1995) 56 FCR 236 at 299. The reasoning of Gummow J in that case concerning a commodity agreement at 270-274 provides support for the appellant's position. 75 Whatever the position may be in relation to a bare contract granting an option to purchase, the present case is quite different. Clause 7 of the 1980 Deed has no operation until one or other party elects to make the offer in writing and even then the interest to be supplied is not known until the recipient responds or 14 days expires. There is much to be said for the submission that the supply effected by the 2002 Deeds in the present case was made pursuant to an agreement which came into effect upon the expiry of 14 days after the making of the offer by ACP Publishing Pty Limited (ACP) and not pursuant to the 1980 Deed as such. There is also much to be said for the argument that, even if the supply was made pursuant to the 1980 Deed, it cannot be said that the 1980 Deed identified the particular supply that occurred. It might well be held that the identification of more than one possible 'supply', each of which is an alternative to the other and none of which may occur, does not identify any one of them. As I have a clear view about the next issue it is not necessary to come to a final view on these questions. 76 The second issue is whether cl 7 of the 1980 Deed identifies a way of working out the consideration in money for the 'supply'. In my opinion it does not. With respect, the reasoning of the primary judge on this issue is directed to certainty of contract rather than to the statutory issue relevant to this case. Counsel for the appellant is correct in submitting that s 13(1)(a) does not envisage a situation where the consideration cannot be known or calculated from the written agreement itself (together with objective circumstances) but rather depends upon the unilateral decision of one or more of the parties at or about the time the clause comes into effect. Clause 7.1 provides that the offeror's interest is for sale 'for the sum of money specified by the offeror party in the said offer'. Such a clause may be valid and certain as a matter of contract law but such a method of specification of a sum of money is not a way of 'working out' the consideration within the meaning of s 13(1)(a). 'Working out' the consideration is not the same as the later unilateral nomination of the consideration. Finkelstein J said (in Korda, in the matter of Stockford Limited (Subject to Deed of Company Arrangement) [2004] FCA 1682 at [24]): '…Thus, remuneration will be "fixed" if it is stated as a money sum, or is based on a formula which is capable of being applied according to some objective standard so the sum "can be calculated or ascertained definitely": Fraser Henleins v Cody (1945) 70 CLR 100, 128. In the case of a formula all the objective elements must be identified…' 77 That conclusion is strengthened by considering the whole of s 13, particularly s 13(5). That subsection underlines the assumption that the consideration has already been fixed so that it is capable of change or alteration 'under the agreement'. That concept is foreign to the scheme of cl 7. The evident purpose of s 13 is to alleviate the position of a supplier who is locked into a particular supply at a fixed consideration prior to the Transition Act receiving the Royal Assent, that is, in a pre-GST world. By contrast the price fixed in this case was fixed in a GST world. The party or parties fixing the price would take that into account. Neither party was locked in by the 1980 Deed in the relevant sense. 78 Substituting s 13 for s 12, the rationale for the section is set out in the Explanatory Memorandum to the A New Tax System (Goods and Services Tax Transition) Bill 1998 as follows: 'Review opportunities

2.32 In order to understand the treatment of contracts under section 12, you will first need to distinguish between an agreement that has an opportunity for review and one that does not. 2.33 Under subsection 12(5) an agreement is considered to have no opportunity for review if: · the agreement specifically identifies a supply; and

· the agreement specifically identifies the consideration in money, or a way of working out the consideration in money (for example, by reference to a formula) for that supply; and(emphasis added)

· no opportunity has arisen under the agreement after the date of Royal Assent to the Transition Bill or 2 December 1998, as appropriate, but before the supply is made, to vary the consideration or the method for calculating the consideration, or to alter the consideration for the supply in any other way. Examples of opportunities to review 1. Company A has an agreement to supply steel. The consideration is calculated by a formula that allows for adjustments to reflect exchange rates. This of itself would not cause the agreement to be treated as having a review opportunity.

2. Company B has a similar contract to company A, but Company B's agreement provides a date upon which both parties could negotiate a change in the consideration which, is broad enough to allow for the GST to be taken into account, or in the quantity to be provided for the same consideration. This agreement would be considered to have an opportunity for review.' 79 It is contended that if the appellant is correct, then common form rent review clauses would not be exempt. Reasoning from analogy is apt to mislead and is fallacious in the present case. It involves two propositions: the first is that cl 7 cannot be distinguished from a rent review clause; the second is that rent review clauses are self-evidently exempt. The first proposition cannot be established. Clause 7 depends entirely upon a subjective decision of a party to make an offer, a subjective decision of that party as to the amount of the offer and a subjective decision of the other party whether to accept or reject that offer. I am not familiar with any rent review clause that is even remotely similar. Neither can the second proposition be established. Much would depend upon the particular rent review clause. For example, the particular clause on its proper construction might contemplate adjustment to take account of a change in taxes (eg in a different context, BHP Billiton Petroleum (Bass Strait) Pty Ltd v Commissioner of Taxation (2003) 126 FCR 119) whether or not the clause is based upon a formula whereby the integers can be independently determined from objective data or upon the determination of an independent third party. 80 It is suggested that as the mechanism for working out the consideration produced a monetary figure by the time that the relevant supply was made, that is all that is required as a result would be achieved. In my respectful opinion, that approach is rather like the reasoning of the primary judge - relevant to contractual rights but not to the issue arising under s 13(1)(a). Indeed, that reasoning would virtually empty the statutory criterion of content. The effect would be that any supply for a money amount pursuant to an antecedent contract would be exempt as the fact that a money amount was ultimately known illustrates that the consideration could be 'worked out'. The crucial question as to whether a price nominated later by a party is a relevant 'way of working out the consideration in money' would be begged. 81 In the present case the parties, in considering whether to make an offer in writing to sell, in specifying a sum of money in the offer and in deciding whether to accept the offer could take GST consequences into account in a post-GST world and so would be expected to do so. It would be contrary to the purpose of s 13 and anomalous to permit that to occur and yet for the supply to be GST free. The primary judge was in error in finding that the 1980 Deed identified a way of working out the consideration in money for the supply. 82 For the sake of completeness it should be noted that it is not open to find that the 1980 Deed identified 'the consideration in money for the supply'. The primary judge made no such finding, but, rather, found the alternative, namely, that the 1980 Deed identified 'a way of working out the consideration in money for the supply'. There is no indication that such an argument was advanced at the primary hearing. No notice of such a contention was given by the respondent as required by O 52 r 22(3). No such argument was advanced by the respondent in submissions. 83 In any event, in my opinion, such an argument would be unsound. For this purpose the written agreement simply does not identify the consideration in money for any supply. It is impermissible to satisfy the statutory criteria by looking backwards, knowing what occurred by virtue of subsequent conduct years after the written agreement. 84 Further, the appeal (and presumably the primary hearing) proceeded upon the footing that s 13(1)(a) contained true alternatives - the identification of either the consideration in money for the supply or a way of working out the consideration in money for the supply. That is the ordinary meaning of the language of the provision and no basis was suggested in submissions for departure from the ordinary meaning. In my opinion, there is no proper basis for departing from the ordinary meaning of s 13(1)(a). Even if there were, it is too late to give effect to such a view now. 85 I agree that no review opportunity arose. The key to s 13(5) lies in the ability to alter the consideration to take account of the GST. Here, there never was any consideration to alter. As I have endeavoured to point out, that circumstance makes clear that the criteria in s 13(1) have not been satisfied in the present case. 86 I would allow the appeal; set aside the orders of the primary judge; and, in lieu, order that the appellant's appeal be allowed; the objection decision set aside; the matter be remitted to the Commissioner for assessment accordingly; and that the respondent pay the appellant's costs of this appeal and of the primary hearing. I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gyles.

Counsel for the Appellant: R F Edmonds SC and Mr J Momsen

Solicitor for the Appellant: McCullough Robertson as agents for Gilbert + Tobin

Counsel for the Respondent: G T Pagone QC and Mr M Moshinsky

Solicitor for the Respondent: Australian Government Solicitor