Commissioner of Taxation v Glencore Investment Pty Ltd [2020] FCAFC 187 | Case summary

Federal Court of Australia (Full Court)|2020-11-06|Before: Thawley JJ

INTRODUCTION 241 On 2 February 2007, Cobar Management Pty Ltd (CMPL) and Glencore International AG (GIAG) altered the terms of their agreement for the supply of copper concentrate in two ways critical to the arguments put on appeal: (1) First, the parties would no longer rely on benchmark and spot market charges for treatment and refining charges (TCRCs). TCRCs, when calculated by reference to benchmark and spot market prices, continuously moved according to the market. In place of this "market-related" basis for calculating the amount GIAG would pay, the relevant TCRCs were fixed at 23% of the relevant copper price for three years. This was referred to as "price sharing". These alterations were effected by amendments to cl 8 of the agreement. (2) Secondly, the parties amended cl 9 of the relevant agreement to give GIAG greater choice in selecting the quotational period. Clause 9 gave GIAG what was referred to as "quotational period optionality with back pricing". 242 These changes were significant, involving the introduction of a new methodology for pricing. In particular, the alterations effected significant changes to the respective risks of the parties by introducing a new way of managing or mitigating risk. The reasonable expectation was that CMPL would receive less for its copper concentrate over the forthcoming three years as a result of the changes, but that risks would also be reduced. 243 The primary judge held that neither Div 13 nor Subdiv 815-A authorised the Commissioner to ascertain the consideration that might reasonably be expected to have been received by reference to a transaction or pricing formula that did not include "price sharing" or "quotational period optionality with back pricing". The primary judge's reason for that conclusion was that Div 13 and Subdiv 815-A both required the determination of the arm's length consideration "for the actual transaction": Glencore Investment Pty Ltd v Commissioner of Taxation (2019) 272 FCR 30 at [324] (hereafter referred to as "J"). 244 The primary judge understood Allsop CJ's reasons in Chevron Australia Holdings Pty Ltd v Federal Commissioner of Taxation (2017) 251 FCR 40 to confirm, at least in respect of Subdiv 815-A, that the arm's length price must be "based on the actual transaction as structured by the parties, save in the case of the two exceptional circumstances identified in the 1995 [OECD Transfer Pricing] Guidelines": J[40]. Her Honour considered the same conclusion obtained under Div 13 such that, under both Div 13 and Subdiv 815-A, the arm's length consideration had to be determined on the basis of the terms of the actual transaction unless one of the two exceptional circumstances identified in the Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations published by the OECD in 1995 (1995 Guidelines) applied: J[312] to [319], in particular at [317]. 245 For the reasons given below, I do not consider that Div 13 and Subdiv 815-A only permit departure from the terms of the actual transaction in the limited circumstances identified by the primary judge, namely where one of the two exceptions in the 1995 Guidelines applies. 246 The primary judge also addressed the matter on the basis that she was wrong in her conclusion that it was impermissible to depart from the terms of the actual transaction and that it was necessary for the taxpayer to establish that arm's length parties might have entered into a transaction in the form of the transaction in fact entered into. Her Honour concluded that: (1) first, the form or structure of the relevant international agreement was one which might reasonably be expected between independent parties in the position of CMPL and GIAG dealing at arm's length: J[320] to [322], [342], [344], [385] to [398]; and (2) secondly, the consideration for the supply of copper concentrate under the international agreement so structured was one which might reasonably be expected between independent parties dealing with each other at arm's length: J[346] to [370], [383], [398]. 247 For reasons equivalent to those given by Middleton and Steward JJ the primary judge's conclusions in this respect should not be disturbed on appeal. The Commissioner has also not shown that, on the correct operation of Div 13 and Subdiv 815-A applied to these findings, the taxpayer failed to discharge its onus of establishing that the assessments were excessive because: (a) the consideration paid by GIAG was an arm's length consideration for the supply of property under the international agreement (Div 13); and (b) there were not profits which, but for the conditions mentioned in Art 9 of the Agreement between Australia and Switzerland for the Avoidance of Double Taxation with Respect to Taxes on Income, and Protocol [1981] ATS 5 (Swiss Treaty), might have been expected to accrue to the taxpayer, but which, by reason of those conditions, did not so accrue (Subdiv 815-A). 248 I address Div 13 and Subdiv 815-A separately in light of the significant differences in the statutory language and structure.

DIVISION 13 249 Section 136AD(1) provided: 136AD Arm's length consideration deemed to be received or given (1) Where: (a) a taxpayer has supplied property under an international agreement; (b) the Commissioner, having regard to any connection between any 2 or more of the parties to the agreement or to any other relevant circumstances, is satisfied that the parties to the agreement, or any 2 or more of those parties, were not dealing at arm's length with each other in relation to the supply; (c) consideration was received or receivable by the taxpayer in respect of the supply but the amount of that consideration was less than the arm's length consideration in respect of the supply; and (d) the Commissioner determines that this subsection should apply in relation to the taxpayer in relation to the supply; then, for all purposes of the application of this Act in relation to the taxpayer, consideration equal to the arm's length consideration in respect of the supply shall be deemed to be the consideration received or receivable by the taxpayer in respect of the supply. 250 Central to the operation of this provision is the identification of the three matters in para (a) of s 136AD(1). First, there must be an "agreement" as defined by s 136AA(1) which is an "international agreement" as defined by s 136AC. Section 136AA(1) defined "agreement" (unless the contrary intention appears) in the following way: (1) In this Division, unless the contrary intention appears: … agreement means any agreement, arrangement, transaction, understanding or scheme, whether formal or informal, whether express or implied and whether or not enforceable, or intended to be enforceable, by legal proceedings. 251 Section 136AC defined "international agreement": 136AC International agreements For the purposes of this Division, an agreement is an international agreement if: (a) a non-resident supplied or acquired property under the agreement otherwise than in connection with a business carried on in Australia by the non-resident at or through a permanent establishment of the non-resident in Australia; or (b) a resident carrying on a business outside Australia supplied or acquired property under the agreement, being property supplied or acquired in connection with that business; or (c) a taxpayer: (i) supplied or acquired property under the agreement in connection with a business; and (ii) carries on that business in an area covered by an international tax sharing treaty. 252 It was common ground that the relevant "international agreement" was the agreement between CMPL and GIAG as amended on 2 February 2007. 253 The second and third matters critical to the operation of s 136AD(1) are the "supply" of "property" under the international agreement. Relevantly to these two matters, s 136AA included: (1) In this Division, unless the contrary intention appears: … property includes: (a) a chose in action; (b) any estate, interest, right or power, whether at law or in equity, in or over property; (c) any right to receive income; and (d) services. … supply includes: (a) supply by way of sale, exchange, lease, hire or hire-purchase; and (b) provide, grant or confer. … (3) In this Division, unless the contrary intention appears: (a) a reference to the supply or acquisition of property includes a reference to agreeing to supply or acquire property … … (e) a reference to the supply or acquisition of property under an agreement includes a reference to the supply or acquisition of property in connection with an agreement. 254 There was no dispute that there was a "supply" of "property" under the international agreement. CMPL supplied copper concentrate to GIAG under the agreement between CMPL and GIAG as amended on 2 February 2007. It follows that it was common ground that para (a) of s 136AD(1) was satisfied. 255 There was also no dispute that: (1) para (b) of s 136AD(1) was satisfied: the Commissioner was satisfied, having regard to the lack of independence between them, that CMPL and GIAG were not dealing with each other at arm's length in relation to the supply; and (2) para (d) of s 136AD(1) was satisfied: the Commissioner lawfully made a determination that s 136AD(1) should apply. (The Commissioner also made determinations under s 136AD(4): J[11].) 256 The principal dispute was whether para (c) of s 136AD(1) was satisfied: whether the consideration received by CMPL in respect of the supply of copper concentrate "was less than the arm's length consideration in respect of the supply". 257 The definition of "arm's length consideration" was contained in s 136AA(3), relevantly: (3) In this Division, unless the contrary intention appears: … (b) a reference to consideration includes a reference to property supplied or acquired as consideration and a reference to the amount of any such consideration is a reference to the value of the property; (c) a reference to the arm's length consideration in respect of the supply of property is a reference to the consideration that might reasonably be expected to have been received or receivable as consideration in respect of the supply if the property had been supplied under an agreement between independent parties dealing at arm's length with each other in relation to the supply … 258 The evident object of s 136AD(1)(c), read with the definition of "arm's length consideration" in s 136AA(3)(c), is to require that the consideration for a supply of property under the "international agreement" which enlivens the potential operation of Div 13 is determined objectively by reference to "an agreement" between independent parties dealing with each other at arm's length, namely "an agreement" which is not the product of a non-arm's length dealing between related parties. The provisions require an answer to a hypothetical question: what "consideration … might reasonably be expected to have been received or receivable as consideration in respect of the supply if the property had been supplied under an agreement between independent parties dealing at arm's length with each other in relation to the supply"? 259 If independent parties, in the position of the parties to the international agreement, would not have agreed to supply the property with the terms affecting price on which that property was in fact supplied, then a reasonable expectation that the supplier would have received the consideration in fact received might not be established, at least on the terms of the international agreement which enlivened the potential operation of Div 13. The language of Div 13 does not indicate that it was intended to permit a taxpayer to dictate the consideration for a supply of property by implementing a transaction which included terms affecting price which might not reasonably be expected in an agreement between independent parties dealing with each other at arm's length. Whilst related parties might be expected to enter into agreements which might not be found between independent parties dealing at arm's length, Div 13 does not furnish parties carte blanche to structure transactions in a way which dictates uncommercial or non-arm's length prices. As Allsop CJ stated in Chevron at [55] of the approach of interpreting Div 13 to require determining the consideration strictly in accordance with the form of the international agreement as in fact entered into: That approach, however, almost dooms to failure the application of Div 13 if its task is to substitute commercial reality based on independence, for intra-group reality based on group control. All one would have to do would be to constrain internally the transaction to give the highest price and include or omit terms of the agreement that would never be included or omitted in an arm's length transaction and which are not driven or dictated by commercial or operational imperatives, as the foundation for assessing an hypothesised arm's length consideration. Such unrealistic inflexibility would undermine the sensible operation of the Division by a rigid construction of the hypothesis in a shape and form controlled by the taxpayer. The difficulty is not alleviated by giving s 136AD(4) a role to play in such circumstances. 260 If the hypothetical agreement replicates all the terms of the "international agreement", including terms which materially affect price but which might not reasonably be expected to have been agreed between independent parties dealing at arm's length, it would be difficult to conclude that the resulting consideration might reasonably be expected to have been received for the supply of the property under "an agreement between independent parties dealing at arm's length with each other in relation to the supply". That is not to confuse the reasonable expectation about consideration with what might be expected to be the terms of the hypothetical agreement. It is to recognise that a reasonable expectation about consideration might not be able to be formed on the basis of an agreement which could not reasonably be expected to exist between independent parties dealing at arm's length. Thus s 136AD(1)(c), read with the definition of "arm's length consideration" contained in s 136AA(3)(c), permits, and even requires in certain circumstances, the consideration to be determined by reference to "an agreement" with terms which depart from those of the "international agreement". 261 However, nor does Div 13 enable the Commissioner to determine reliably the arm's length consideration by arbitrarily re-writing the relevant international agreement or by ignoring terms in the international agreement which might reasonably be expected to have been agreed between independent parties dealing at arm's length in relation to the supply. It is the "international agreement" which enlivens the potential operation of Div 13. It is the supply of property under that particular international agreement which is the underlying subject matter of the relevant pricing exercise. Division 13 requires that a hypothetical agreement be posited in order to determine whether the consideration for the supply of property under the "international agreement" was one which "might reasonably be expected to have been received or receivable as consideration in respect of the supply if the property had been supplied under an agreement between independent parties dealing at arm's length with each other in relation to the supply" (emphasis added). 262 The more the hypothetical agreement required to be posited by s 136AA(3)(c) ("an agreement") departs from the terms of the international agreement under which the supply of property occurred, the less the hypothetical agreement is apt to reveal "the consideration that might reasonably be expected to have been received or receivable as consideration in respect of the supply if the property had been supplied under an agreement between independent parties dealing at arm's length with each other in relation to the supply". Whilst the Commissioner can, as a matter of law, "substitute" terms or undertake the statutory task by reference to "an agreement" which is different from the "international agreement", the greater the substitution of terms or the more different the hypothetical agreement is from the international agreement, the less likely it is that the hypothetical agreement is probative of the arm's length consideration for the supply of the property under the international agreement which engaged Div 13. It is one thing to determine the arm's length consideration by reference to "an agreement" which substitutes terms which would not be found in an international agreement between independent parties dealing with each other at arm's length (or to add terms - such as security and covenants - which would have existed if the international agreement had been between independent parties dealing at arm's length as in Chevron); it is another to determine the arm's length consideration by reference to "an agreement" which ignores terms in the international agreement which are terms to which independent parties dealing at arm's length would have agreed (this case). 263 A taxpayer might discharge the onus of establishing that the consideration for the supply of property might reasonably have been expected under an agreement between independent parties dealing with each other at arm's length, by demonstrating that: (a) the terms of the agreement in fact entered into might reasonably have been expected between independent parties in the position of the parties to the international agreement dealing with each other at arm's length in relation to the supply; and (b) the consideration payable in respect of the supply of the property on those terms might reasonably have been expected. That is not the only way to discharge the onus, but it is an available way. 264 In its application to the present case, if the taxpayer established that the form of the "international agreement" was one which might reasonably have been expected between independent parties dealing at arm's length, containing both "price sharing" and "quotational period optionality with back pricing", then it could succeed in discharging its onus if it also established that the consideration for the supply of copper concentrate on those terms was one which might reasonably have been expected between independent parties dealing at arm's length. On the facts as found by the primary judge, the taxpayer established those matters. 265 If the conclusion had been reached that independent parties dealing at arm's length might not reasonably have been expected to have "an agreement" (s 136AA(3)(c)) with "price sharing" or "quotational period optionality with back pricing" or those two terms in combination, then the arm's length consideration for the supply of the copper concentrate would have needed to have been determined by reference to an agreement without those terms being one which might reasonably be expected between independent parties dealing at arm's length in relation to the supply of the copper concentrate. As a matter of substance, that is what was decided in Chevron: the loan which was the "international agreement" would not have been made between independent parties dealing at arm's length unless it included security and operational and financial covenants; accordingly, the consideration which might reasonably be expected could not be established by reference to "an agreement" without security and covenants. 266 Middleton and Steward JJ at [154] conclude that it is permissible, in the sense of the Commissioner having legal capacity, to substitute a different formula or methodology to that found in the international agreement being one which he considers will result in the ascertainment of the arm's length consideration. Their Honours' conclusion rests on the fact that those terms "define the price" in the international agreement, or are part of the formula or methodology for determining consideration, and that such clauses are to be distinguished from other clauses which affect consideration: at [155]. The former may be "substituted", the latter may not. 267 I agree that it is permissible, in the sense of the Commissioner having legal capacity, to "substitute" a different formula or methodology to that found in the international agreement being one which he considers will result in the ascertainment of the arm's length consideration. In my view, that conclusion rests on the fact that those clauses affect consideration, not on a potentially "unsatisfactory" classification of those terms as ones which "define price". As explained above, Div 13 permits the arm's length consideration to be determined by reference to terms affecting consideration which are not found in the international agreement or which are different to those terms. As noted at [259] above, it not consistent with the statutory language or object for Div 13 to be construed as allowing for parties to the international agreement to control what would be determined to be the arm's length consideration by structuring their agreement such that non-arm's length terms affecting consideration cannot be said to define price or are to be distinguished from clauses which are part of the methodology for determining consideration. 268 I agree with Middleton and Steward JJ that the "price sharing" and "quotational period optionality with back pricing" terms were part of the methodology for determining price, being included in cl 8 and cl 9 of the 2 February 2007 Agreement which directly defined and affected price. Clause 8 defined price and cl 9 was incorporated into cl 8 by reference. I agree that it is legally permissible for the Commissioner to undertake the statutory task under Div 13 by ignoring those terms. It is difficult to see why the Commissioner would adopt such a course if the terms were ones which might reasonably be expected between independent parties dealing at arm's length. The explanation in the present case lies in the Commissioner disputing that those terms were ones to which independent parties dealing at arm's length would have agreed. The primary judge accepted, however, that the terms were arm's length ones, with the result that the Commissioner determined the consideration by reference to "an agreement" which substituted or ignored arm's length terms affecting price and thus determined the consideration for the supply under "an agreement" which differed substantially from the "international agreement" which engaged Div 13 and which did not supply the answer to the questioned posed by s 136AD(1)(c) because the terms which had been substituted or ignored were ones which might reasonably be expected between independent parties dealing at arm's length. The resulting assessments were excessive. 269 Most terms of an agreement affect price and many may properly be characterised as part of the consideration, whether or not the terms are found in a contractual clause specifically directed at, or defining, price - cf: Chevron at [46]. In the context of a loan for example, the provision of security directly affects price even though it is not expressed as part of the methodology for determining price. The provision of security also affects risk and cost to the lender. A customer who provides a first mortgage for a home loan might borrow from a bank at an interest rate of 5%. The same bank might only be prepared to lend to the same customer at 10% if security were more limited. If the bank would not have lent to the customer at all unless security were provided, what might reasonably be expected to be the consideration would not generally be able to be determined by reference to "an agreement" without security. At the risk of oversimplification, that is what Chevron decided: a reasonable expectation that the consideration is an arm's length one is not proved by establishing the consideration which would be received under an agreement to which independent parties dealing at arm's length would never have agreed. Chevron is not authority for the proposition that the arm's length consideration for the purposes of Div 13 may reliably be determined by ignoring or substituting arm's length terms. An assessment would likely be excessive if it were issued on the basis of "an agreement" which departs from terms in the "international agreement" which both affect consideration and might reasonably be expected between independent parties dealing with each other at arm's length in relation to the supply. If the arm's length consideration is determined by reference to such "an agreement", then the issue raised by s 136AD(1)(c) would not have been reliably answered because the ignored terms of the "international agreement" which engaged the operation of Div 13 might reasonably have been expected in "an agreement" between independent parties dealing at arm's length. 270 Each case turns on its own facts. However, generally: (1) If a taxpayer establishes that the terms in the "international agreement" which affect consideration were terms which might reasonably have been expected in "an agreement" between independent parties dealing at arm's length, then the consideration which might reasonably be expected for the supply of property should be determined by reference to "an agreement" with those terms. That is so whether or not the arm's length terms are characterised as defining price. (2) On the other hand, if terms in the "international agreement" affecting price were not ones which might reasonably have been expected between independent parties dealing at arm's length, then the consideration for the supply might be established by reference to "an agreement" of sufficient similarity or probative value to that in fact entered into as to permit the statutory question to be answered, being an agreement which might reasonably be expected between independent parties in the position of the relevant parties dealing with each other at arm's length in relation to the supply. 271 In the present case, Glencore Investment Pty Ltd (GIPL) discharged its onus of establishing that the consideration received by CMPL was one which might reasonably be expected to have been received as consideration on the assumption that the supply of copper concentrate under the international agreement had been made under an agreement between independent parties dealing at arm's length with each other in relation to the supply. GIPL discharged its onus by showing that: (1) first, the terms of the "international agreement" were ones which might reasonably be expected between independent parties, in the position of CMPL and GIAG, dealing with each other at arm's length; and (2) secondly, the consideration for the supply of copper concentrate under "an agreement" with those terms was within an arm's length range. 272 The Commissioner approached the principal issue in this case on the basis that independent parties, in the position of CMPL and GIAG, dealing with each other at arm's length, would not reasonably be expected to have agreed to a consideration for the supply of copper concentrate on the basis in fact agreed on 2 February 2007, because independent parties dealing at arm's length would not have altered their existing agreement. Whilst facts relevant to this argument might also be relevant to the issues under Div 13, this did not correctly frame the issue under Div 13. The argument hints at a case under Pt IVA of the ITAA 1936, but no such case was made. Whilst Pt IVA and Div 13 were introduced at a similar time, Div 13 does not require an investigation or consideration of purpose or motive: W R Carpenter Holdings Pty Ltd v Commissioner of Taxation (2008) 237 CLR 198 at [38]. The real question under Div 13 is whether the consideration received by CMPL under the "international agreement" as it stood on 2 February 2007 was an arm's length consideration within the meaning of Div 13. On the basis that, as the evidence established, the international agreement was in terms which might be expected between independent parties in the position of CMPL and GIAG, dealing with each other at arm's length, the real issue thrown up by the facts was the arm's length consideration for the supply of property under that agreement. This devolved into the question of whether TCRCs fixed at 23% of the copper price was arm's length consideration. By reason of the amendments to the agreement, CMPL reduced its risk but would likely receive less consideration. The primary judge concluded, after a detailed examination of all of the evidence, that this reflected what might reasonably have been expected between independent parties in the position of CMPL and GIAG dealing with each other at arm's length. Her Honour also concluded that the consideration was arm's length. The reasons of Middleton and Steward JJ show why her Honour did not err in so concluding.

THE 1995 GUIDELINES 273 As to the 1995 Guidelines, I make the following observations. First, the expression "arm's length consideration" in Div 13 is resolved by reference to its terms read in context. No serious attempt was made to show how the 1995 Guidelines could be regarded as throwing significant light on the correct interpretation of Div 13. The 1995 Guidelines were a revision of the OECD Report, Transfer Pricing and Multinational Enterprises, adopted by the Committee on Fiscal Affairs (the main tax policy body of the OECD) in January 1979 and approved for publication by the OECD Council on 16 May 1979 (1979 Report). At [15], the 1979 Report stated: CHAPTER 1 SUMMARY OF PROBLEMS THE ARM'S LENGTH PRINCIPLE … Minor adjustments and substitution of methods 15. The starting point for scrutinising transfer prices would frequently be the appearance of a discrepancy between the profits returned by an associated enterprise and those which might be expected to be made by comparable enterprises in the uncontrolled situation. Since the assessment of an arm's length price depends very often on careful judgement and the resolution of many, perhaps conflicting, considerations by negotiation between the tax authorities and the enterprise concerned, it follows that if the prices actually paid can be substantiated by acceptable evidence as being arm's length prices there would be no justification for seeking to make merely minor or marginal adjustments to them for tax purposes. Similar[l]y a tax authority should hesitate to disturb without good reason a pricing arrangement reasonably and consistently operated between associated enterprises if it is also reasonably and consistently operated in comparable dealings with independent parties. Moreover, as a general principle, tax authorities should base their search for an arm's length price on actual transactions and should not substitute hypothetical transactions for them, thus seeming to substitute their own commercial judgement for that of the enterprise at the time when the transactions were concluded (though there may be some circumstances where the form of transaction has effectively to be ignored - see paragraphs 23 and 24). 274 At [23] and [24], the Report stated: Recognition of actual payments and transactions 23. In general, the approach which is adopted in this report to the adjustment of transfer prices for tax purposes is to recognise the actual transactions as the starting point for the tax assessment and not, in other than exceptional cases, to disregard them or substitute other transactions for them. The aim in short is, for tax purposes, to adjust the price for the actual transaction to an arm's length price. Similarly, it is considered that transactions between associated enterprises should not be treated differently for tax purposes from similar transactions between independent parties simply because the parties to the transaction are related. The report does, however, recognise that it may be important in considering, for example, what is ostensibly interest on a loan to decide whether it is an interest payment or, in reality, a dividend or other distribution of profit. Intra-group contracts and arrangements 24. Associated enterprises are, however, able to make a much greater variety of contracts and arrangements than can unrelated enterprises because the normal conflict of interest which would exist between independent parties is often absent. Associated enterprises may and frequently do conclude arrangements of a specific nature that are not or are very rarely encountered between unrelated parties (cost contribution arrangements for research and development expenditure as discussed in Chapter III of the report would be one example). This may be done for various economic, legal or fiscal reasons dependent on the circumstances in a particular case. Moreover, contracts within an MNE could be quite easily altered, suspended, extended or terminated according to the overall strategies of the MNE as a whole and such alterations may even be made retroactively. In such instances tax authorities would have to determine what is the underlying reality behind an arrangement in considering what the appropriate arm's length price would be. 275 Division 13 was introduced in 1982. 276 The 1995 Guidelines were approved for publication some thirteen years later, in 1995. The 1995 Guidelines set out a position reached after considering various OECD reports and competing and perhaps conflicting positions of member states and delegates. Included in the reports considered were OECD reports issued to promote acceptance of common interpretations of the various Articles in bilateral treaties, including Art 9 of the Swiss Treaty, recognising that such interpretations differed. As indicated by its full title, the 1995 Guidelines were "intended to help tax administrations (of both OECD Member countries and non-Member countries) and MNEs by indicating ways to find mutually satisfactory solutions to transfer pricing cases": Preface at [15]. They were also intended "to govern the resolution of transfer pricing cases in mutual agreement proceedings between OECD Member countries and, where appropriate, arbitration proceedings": Preface at [17]. The 1995 Guidelines were issued in a looseleaf format because the 1995 Guidelines focussed on the main issues of principle, work was continuing and regular reviews of the experiences of OECD Member and selected non-Member countries was anticipated: Preface at [19]. The 1995 Guidelines were not intended to guide legislators in enacting domestic laws. The 1995 Guidelines were supplemented on numerous occasions and, in 2010, a new revision of the 1979 Report was approved, namely the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (2010 Guidelines). The 2010 Guidelines continue to be supplemented, reviewed and revised. 277 The text of [C.1.36] to [C.1.38], appearing in the 1995 Guidelines, are not a sure way to understanding the correct operation of Div 13 according to its terms. 278 Secondly, contrary to the primary judge, I do not read the reasons of Allsop CJ in Chevron as stating or implying that the identification of the arm's length consideration must be "based on the actual transaction as structured by the parties, save in the case of the two exceptional circumstances identified in the 1995 Guidelines": J[40]; J[312] to [319]. 279 Allsop CJ's decision so far as it concerned Div 13 was based on the text of Div 13 and, more specifically, what might reasonably be expected if the consideration had been received under an agreement between independent parties dealing with each other at arm's length in relation to the supply. His Honour concluded, in substance, that it would not reasonably be expected that the loan would have been made without security or a parent guarantee and, accordingly, the arm's length consideration could not be reliably established by reference to "an agreement" which did not contain those features. 280 The Chief Justice's reference to the two exceptions in the 1995 Guidelines was in the context of considering the application of Subdiv 815-A. However, his Honour was not applying the exceptions referred to in the 1995 Guidelines. There was no suggestion that the first exception applied. No conclusion was expressed that the second exception applied and nor did his Honour make findings which would have been required to engage the second exception, namely that the agreement reached: (a) differed from one "which would have been adopted by independent enterprises behaving in a commercially rational manner"; and (b) "practically impede[d] the tax administration from determining an appropriate transfer price". Rather, the Chief Justice's reference to the two exceptions was merely to support the conclusion otherwise reached by his Honour from the text of Subdiv 815-A that the inquiry under s 815-15(1)(c) was one which required a "comparative analysis that gives weight, but not irredeemable inflexibility, to the form of the transaction actually entered between the associated enterprises": Chevron at [90]. 281 Thirdly, notwithstanding that I differ from the primary judge in my understanding of Allsop CJ's reasoning in Chevron, I would observe that, if the relevant agreement is one which "differ[ed] from [that] which would have been adopted by independent enterprises behaving in a commercially rational manner" ([C.1.37] of the 1995 Guidelines), then: (1) for the purposes of Div 13: the consideration which might reasonably be expected to have been received for the supply of property under the "international agreement" is unlikely to be reliably established by reference to "an agreement" in the same commercially irrational form; (2) for the purposes of Subdiv 815-A: the commercially irrational agreement might constitute a "condition" operating, or tend to indicate that "conditions operate", "between the two enterprises in their commercial or financial relations which differ from those which might be expected to operate between independent enterprises dealing wholly independently with one another" such that the question arises under s 815-15(1)(c) whether "an amount of profits which, but for the conditions … might have been expected to accrue to the entity, has, by reason of those conditions, not so accrued".

DIVISION 815-A 282 The object of Subdiv 815-A so far as presently relevant is set out in s 815-5(a) of the ITAA 1997: 815-5 Object The object of this Subdivision is to ensure the following amounts are appropriately brought to tax in Australia, consistent with the arm's length principle: (a) profits which would have accrued to an Australian entity if it had been dealing at *arm's length, but, by reason of non-arm's length conditions operating between the entity and its foreign associated entities, have not so accrued; ... 283 Section 815-10 provides for two matters which must be established in order for the Commissioner to make a determination under s 815-30(1): 815-10 Transfer pricing benefit may be negated (1) The Commissioner may make a determination mentioned in subsection 815-30(1), in writing, for the purpose of negating a *transfer pricing benefit an entity gets. Treaty requirement (2) However, this section only applies to an entity if: (a) the entity gets the *transfer pricing benefit under subsection 815-15(1) at a time when an *international tax agreement containing an *associated enterprises article applies to the entity; or (b) the entity gets the transfer pricing benefit under subsection 815-15(2) at a time when an international tax agreement containing a *business profits article applies to the entity. 284 Relevantly to s 815-10(1), s 815-15 sets out when a taxpayer "gets a transfer pricing benefit": 815-15 When an entity gets a transfer pricing benefit Transfer pricing benefit - associated enterprises (1) An entity gets a transfer pricing benefit if: (a) the entity is an Australian resident; and (b) the requirements in the *associated enterprises article for the application of that article to the entity are met; and (c) an amount of profits which, but for the conditions mentioned in the article, might have been expected to accrue to the entity, has, by reason of those conditions, not so accrued; and (d) had that amount of profits so accrued to the entity: (i) the amount of the taxable income of the entity for an income year would be greater than its actual amount; or (ii) the amount of a tax loss of the entity for an income year would be less than its actual amount; or (iii) the amount of a *net capital loss of the entity for an income year would be less than its actual amount. The amount of the transfer pricing benefit is the difference between the amounts mentioned in subparagraph (d)(i), (ii) or (iii) (as the case requires). 285 Relevantly to s 815-10(2), the "treaty requirement" in the present case was Art 9 of the Swiss Treaty. Article 9 provided: Where - (a) an enterprise of one of the Contracting States participates directly or indirectly in the management, control or capital of an enterprise of the other Contracting State; or (b) the same persons participate directly or indirectly in the management, control or capital of an enterprise of one of the Contracting States and an enterprise of the other Contracting State, and in either case conditions operate between the two enterprises in their commercial or financial relations which differ from those which might be expected to operate between independent enterprises dealing wholly independently with one another, then any profits which, but for those conditions, might have been expected to accrue to one of the enterprises, but, by reason of those conditions, have not so accrued, may be included in the profits of that enterprise and taxed accordingly. 286 Section 815-20 provides: 815-20 Cross-border transfer pricing guidance (1) For the purpose of determining the effect this Subdivision has in relation to an entity: (a) work out whether an entity gets a *transfer pricing benefit consistently with the documents covered by this section, to the extent the documents are relevant; and (b) interpret a provision of an *international tax agreement consistently with those documents, to the extent they are relevant. (2) The documents covered by this section are as follows: (a) the Model Tax Convention on Income and on Capital, and its Commentaries, as adopted by the Council of the Organisation for Economic Cooperation and Development and last amended on 22 July 2010; (b) the Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations, as approved by that Council and last amended on 22 July 2010; (c) a document, or part of a document, prescribed by the regulations for the purposes of this paragraph. (3) However, a document, or a part of a document, mentioned in paragraph (2)(a) or (b) is not covered by this section if the regulations so prescribe. (4) Regulations made for the purposes of paragraph (2)(c) or subsection (3) may prescribe different documents or parts of documents for different circumstances. 287 It was common ground that the 1995 Guidelines were "covered by" s 815-20, having regard to relevant transitional provisions. 288 The real issue in dispute between the parties was the application of paras (b) and (c) of s 815-15(1), namely whether "an amount of profits which, but for the conditions mentioned in [Art 9], might have been expected to accrue to the entity, has, by reason of those conditions, not so accrued". 289 The first step, required by para (b), is to identify the "conditions" in Art 9, namely what "conditions operate between the two enterprises in their commercial or financial relations which differ from those which might be expected to operate between independent enterprises dealing wholly independently with one another". 290 The second step, required by para (c), is to identify whether "but for the conditions" in Art 9 an amount of profits might have been expected to, but did not, accrue to the entity. 291 The focus of the inquiry is on whether conditions operated between enterprises in their commercial or financial relations and, if so, what effect those conditions had. As mentioned above, the primary judge approached the task under Subdiv 815-A on the basis that it was not permissible to determine consideration otherwise than by reference to the agreement in fact entered into unless one of the exceptions in the 1995 Guidelines applied. In my view, this fails to give effect to s 815-15(1)(b) and (c) which focus on whether conditions operating between the entities affected the profits which accrued. 292 Unlike the position with respect to Div 13, the 1995 Guidelines are expressly made relevant by the terms of Subdiv 815-A. If one of the exceptions in [C.1.37] of the 1995 Guidelines applied, it would be consistent with the 1995 Guidelines to determine that the effect of Subdiv 815-A in relation to the entity was that it got a transfer pricing benefit under s 815-15 which could be negated under s 815-10. However, for the reasons which follow, I would not take the step taken by the primary judge and conclude that, in all cases where the two exceptions did not apply strictly according to the terms of those exceptions as identified in the 1995 Guidelines, the relevant transaction must always be taken exactly as found. 293 Firstly, Subdiv 815-A must be applied according to its terms and one could not give effect to the 1995 Guidelines if to do so would be inconsistent with the terms of the subdivision or would fail to allow its operation according to its terms. Section 815-15(1)(c) is engaged where "an amount of profits which, but for the conditions mentioned in the article, might have been expected to accrue to the entity, has, by reason of those conditions, not so accrued". If the conclusion were reached that the provision applied, that conclusion should be given effect even if the facts did not strictly fit within one of the two exceptions contained in [C.1.37] of the 1995 Guidelines. 294 Secondly, in any event, I do not read the 1995 Guidelines as specifying that the two situations identified are the only situations which might be regarded as "exceptional". As noted above, I do not read the decision of the Full Court in Chevron, or the reasons of Allsop CJ specifically, as authority for such a proposition. 295 The primary judge concluded that the terms of the international agreement (and its form or structure) were ones which might reasonably be expected between independent parties, in the position of CMPL and GIAG, dealing with each other at arm's length and that the consideration for the supply of copper concentrate under an agreement so structured was arm's length. The application of Subdiv 815-A to those facts required the conclusion that no transfer pricing benefit was obtained. The terms under which the copper concentrate was supplied, being conditions operating between CMPL and GIAG in their commercial or financial relations, were shown not to differ from those which might be expected to operate between independent enterprises dealing wholly independently with one another. GIPL discharged its onus of establishing that independent parties in the position of CMPL and GIAG might have been expected to agree to supply the copper concentrate on the terms it was supplied. It was consistent with the 1995 Guidelines to conclude that the effect of Subdiv 815-A was that no transfer pricing was obtained: s 815-20. 296 In the first sentence of [156], Middleton and Steward JJ state that their conclusions with respect to the operation of Div 13 concerning the "substitution" of a different formula or methodology for ascertaining the arm's length consideration apply equally to Subdiv 815-A. Their Honours' conclusions in relation to Div 13 were, in summary, that the Commissioner may substitute clauses which define price, but not those which do not. In my view: (1) If the terms in the agreement which "define price" are arm's length terms, it would ordinarily be unlikely that those terms could be said to be "conditions" operating "between the two enterprises in their commercial or financial relations which differ from those which might be expected to operate between independent enterprises dealing wholly independently with one another". In those circumstances, it is difficult to see how they could rationally be substituted. (2) If the agreement contains terms which do not define price, and which would not be found in the agreement if it had been between independent enterprises dealing wholly independently with one another, it is difficult to see why those terms could not be substituted under Subdiv 815-A. Such terms may well amount to "conditions" operating "between the two enterprises in their commercial or financial relations which differ from those which might be expected to operate between independent enterprises dealing wholly independently with one another". If such terms affect the consideration payable or receivable, or profits, it is difficult to see why they should not be "substituted". 297 In my view, the language of Subdiv 815-A does not contemplate or require a distinction between terms which define price (which Middleton and Steward JJ consider can be substituted) and those which do not (which their Honours consider may not be substituted). In this respect, I note that their Honours' observation at [155] that "the term 'consideration' [in Div 13] necessarily directs one to identify those clauses in an international agreement which define the price" does not apply to the language of Subdiv 815-A. 298 That is not to say that it is irrelevant to look at the extent to which a particular clause affects consideration or profit. That is plainly and directly relevant. The point of difference is simply that what may or may not be "substituted" for the purpose of applying Subdiv 815-A does not turn on a potentially "unsatisfactory" categorisation of contractual clauses as ones which do or do not define price - see [155] of Middleton and Steward JJ's reasons for judgment. Subdiv 815-A, in its application to the present case, turns on the question of whether conditions operated "between the two enterprises in their commercial or financial relations which differ from those which might be expected to operate between independent enterprises dealing wholly independently with one another" - see s 815-10(2); Art 9. 299 As to the final sentence of [156], this implicitly acknowledges the possibility that conditions which do not define price may be substituted, a conclusion with which I agree.

CONCLUSION 300 I agree with the orders proposed by Middleton and Steward JJ. I certify that the preceding sixty-one (61) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Thawley.

ioner of Taxation (2019) 272 F.C.R. 30 Jadwan Pty Ltd v. Rae & Partners (A Firm) [2020] FCAFC 62; (2020) 378 A.L.R. 193 Minister for Immigration and Border Protection v. SZVFW (2018) 264 C.L.R. 541 SNF (Australia) Pty Ltd v. Federal Commissioner of Taxation [2010] FCA 635; (2010) 79 A.T.R. 193 State Rail Authority of New South Wales v. Earthline Constructions Pty Ltd (in liq) [1999] HCA 3; (1999) 73 A.L.J.R. 306 W.R. Carpenter Holdings Pty Ltd v. Federal Commissioner of Taxation (2007) 161 F.C.R. 1

Legislation and Swiss Treaty 2 It is necessary to set out the applicable provisions of Div. 13 of the 1936 Act and Subdiv. 815-A of the 1997 Act. Div. 13 has been repealed, but relevantly continues to apply to the 2007 to 2009 years. 3 Here, in applying Div. 13, the Commissioner made determinations pursuant to both ss. 136AD(1) and (4) for the 2007 to 2009 years. Sections 136AD(1) and (4) provided: Arm's length consideration deemed to be received or given (1) Where: (a) a taxpayer has supplied property under an international agreement; (b) the Commissioner, having regard to any connection between any 2 or more of the parties to the agreement or to any other relevant circumstances, is satisfied that the parties to the agreement, or any 2 or more of those parties, were not dealing at arm's length with each other in relation to the supply; (c) consideration was received or receivable by the taxpayer in respect of the supply but the amount of that consideration was less than the arm's length consideration in respect of the supply; and (d) the Commissioner determines that this subsection should apply in relation to the taxpayer in relation to the supply; then, for all purposes of the application of this Act in relation to the taxpayer, consideration equal to the arm's length consideration in respect of the supply shall be deemed to be the consideration received or receivable by the taxpayer in respect of the supply. ... (4) For the purposes of this section, where, for any reason (including an insufficiency of information available to the Commissioner), it is not possible or not practicable for the Commissioner to ascertain the arm's length consideration in respect of the supply or acquisition of property, the arm's length consideration in respect of the supply or acquisition shall be deemed to be such amount as the Commissioner determines. 4 It was accepted that the C.M.P.L.-G.I.A.G. agreement was an "international agreement" for the purposes of Div. 13. The taxpayer did not otherwise dispute that G.I.A.G. and C.M.P.L. did not relevantly deal with each other at arm's length (although it claims that C.M.P.L. was nonetheless paid arm's length consideration). It also did not dispute that the Commissioner had been lawfully satisfied that C.M.P.L. and G.I.A.G. were not relevantly dealing with each other at arm's length. Nor did the taxpayer challenge the legal efficacy of the determinations the Commissioner had made. 5 Section 136AA(3) of the 1936 Act provided as follows in respect of the definition of arm's length consideration and related matters: Interpretation … (3) In this Division, unless the contrary intention appears: … (b) a reference to consideration includes a reference to property supplied or acquired as consideration and a reference to the amount of any such consideration is a reference to the value of the property; (c) a reference to the arm's length consideration in respect of the supply of property is a reference to the consideration that might reasonably be expected to have been received or receivable as consideration in respect of the supply if the property had been supplied under an agreement between independent parties dealing at arm's length with each other in relation to the supply; ... (e) a reference to the supply or acquisition of property under an agreement includes a reference to the supply or acquisition of property in connection with an agreement. 6 Subdivision 815-A was inserted into the 1997 Act in 2012, but is relevantly expressed to apply retrospectively to the 2007 to 2009 years by reason of s. 815-1 of the Income Tax (Transitional Provisions) Act 1997 (Cth.) (the "Transitional Provisions Act"). The taxpayer did not challenge the validity of Subdiv. 815-A's retrospective application. 7 The object of Subdiv. 815-A of the 1997 Act is set out in s. 815-5, which relevantly provides: Object The object of this Subdivision is to ensure the following amounts are appropriately brought to tax in Australia, consistent with the arm's length principle: (a) profits which would have accrued to an Australian entity if it had been dealing at *arm's length, but, by reason of non-arm's length conditions operating between the entity and its foreign associated entities, have not so accrued; 8 The operative provision is s. 815-10, which relevantly provides: Transfer pricing benefit may be negated (1) The Commissioner may make a determination mentioned in subsection 815-30(1), in writing, for the purpose of negating a *transfer pricing benefit an entity gets. Treaty requirement (2) However, this section only applies to an entity if: (a) the entity gets the *transfer pricing benefit under subsection 815-15(1) at a time when an *international tax agreement containing an *associated enterprises article applies to the entity; or (b) the entity gets the transfer pricing benefit under subsection 815-15(2) at a time when an international tax agreement containing a *business profits article applies to the entity. 9 The Commissioner made determinations here pursuant to this provision for the 2007 to 2009 years in addition to the determinations made under Div. 13 of the 1936 Act. 10 Section 815-15 delineates when a taxpayer gets a transfer pricing benefit for the purposes of s. 815-10. The section relevantly provides: When an entity gets a transfer pricing benefit Transfer pricing benefit - associated enterprises (1) An entity gets a transfer pricing benefit if: (a) the entity is an Australian resident; and (b) the requirements in the *associated enterprises article for the application of that article to the entity are met; and (c) an amount of profits which, but for the conditions mentioned in the article, might have been expected to accrue to the entity, has, by reason of those conditions, not so accrued; and (d) had that amount of profits so accrued to the entity: (i) the amount of the taxable income of the entity for an income year would be greater than its actual amount; or (ii) the amount of a tax loss of the entity for an income year would be less than its actual amount; or (iii) the amount of a *net capital loss of the entity for an income year would be less than its actual amount. The amount of the transfer pricing benefit is the difference between the amounts mentioned in subparagraph (d)(i), (ii) or (iii) (as the case requires). 11 The term "associated enterprises article" is defined by s. 815-15(5) in the following way: Meaning of associated enterprises article (5) An associated enterprises article is: (a) Article 9 of the United Kingdom convention (within the meaning of the International Tax Agreements Act 1953); or (b) a corresponding provision of another *international tax agreement. 12 Relevantly here, the Commissioner may only make a determination under s. 815-10 to negate a transfer pricing benefit if an international tax agreement containing an associated enterprises article applies to the taxpayer. There was no dispute that this requirement was satisfied because of the application to the taxpayer of Art. 9 of the Agreement between Australia and Switzerland for the Avoidance of Double Taxation with Respect to Taxes on Income, and Protocol [1981] ATS 5 (the "Swiss Treaty"). The Swiss Treaty has since been replaced by the Convention between Australia and the Swiss Confederation for the Avoidance of Double Taxation with respect to Taxes on Income, with Protocol [2014] ATS 33, but that agreement only entered into force on 14 October 2014. Accordingly, Art. 9 of the Swiss Treaty is the relevant associated enterprises article for the 2007 to 2009 years. It provided: Where - (a) an enterprise of one of the Contracting States participates directly or indirectly in the management, control or capital of an enterprise of the other Contracting State; or (b) the same persons participate directly or indirectly in the management, control or capital of an enterprise of one of the Contracting States and an enterprise of the other Contracting State, and in either case conditions operate between the two enterprises in their commercial or financial relations which differ from those which might be expected to operate between independent enterprises dealing wholly independently with one another, then any profits which, but for those conditions, might have been expected to accrue to one of the enterprises, but, by reason of those conditions, have not so accrued, may be included in the profits of that enterprise and taxed accordingly. 13 The taxpayer did not dispute that some conditions operated between C.M.P.L. and G.I.A.G. which differed from those which might be expected to have operated between independent enterprises dealing wholly independently with one another. It accepted that G.I.A.G. exercised financial and managerial control over C.M.P.L.'s mine. 14 Subdivision 815-A identifies certain extrinsic documents which must be considered when applying its provisions. A determination as to whether a taxpayer got a transfer pricing benefit must be made "consistently" with those documents "to the extent the documents are relevant." Similarly, an international tax agreement must be construed consistently with those documents to the extent that they are relevant to that task. Section 815-20 thus provides: Cross-border transfer pricing guidance (1) For the purpose of determining the effect this Subdivision has in relation to an entity: (a) work out whether an entity gets a *transfer pricing benefit consistently with the documents covered by this section, to the extent the documents are relevant; and (b) interpret a provision of an *international tax agreement consistently with those documents, to the extent they are relevant. (2) The documents covered by this section are as follows: (a) the Model Tax Convention on Income and on Capital, and its Commentaries, as adopted by the Council of the Organisation for Economic Cooperation and Development and last amended on 22 July 2010; (b) the Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations, as approved by that Council and last amended on 22 July 2010; (c) a document, or part of a document, prescribed by the regulations for the purposes of this paragraph. (3) However, a document, or a part of a document, mentioned in paragraph (2)(a) or (b) is not covered by this section if the regulations so prescribe. (4) Regulations made for the purposes of paragraph (2)(c) or subsection (3) may prescribe different documents or parts of documents for different circumstances. 15 By reason of s. 815-5 of the Transitional Provisions Act, the parties agreed that the relevant version of the Transfer Pricing Guidelines are those which were published by the Council of the Organisation for Economic Co-operation and Development (the "O.E.C.D.") in 1995 (the "Transfer Pricing Guidelines").

The Role of this Court 142 The first issue for consideration is the role of an appeal court in a transfer pricing case. The Commissioner urged us to review most of the evidence before the learned primary judge, which comprised thousands of pages and thousands of transcript lines, and form our own view about whether the taxpayer had discharged its onus for the purpose of applying Div. 13 and Subdiv. 815-A to the sales of copper concentrate under the C.M.P.L.-G.I.A.G. agreement. For that purpose, over almost two days of argument, it appeared to us that the Court was taken to every piece of evidence, and every transcript reference, that supported the Commissioner's case. The Commissioner submitted that the following passage from the decision of this Court in Branir Pty Ltd v. Owston Nominees (No 2) Pty Ltd (2001) 117 F.C.R. 424 at 436 [25] (per Allsop J. as his Honour then was) was applicable: The inability to identify error may arise in part from the unwillingness of the appeal court to be persuaded that it is in as good a position as the trial judge to deal with the issues, because of the kinds of considerations referred to in [24] above. Or, it may be that the nature of the issue is one such that (though not a discretion) there cannot be said to be truly one correct answer. In such cases the availability of a different view, indeed even perhaps the preference of the appeal court for a different view, may not be alone sufficient: see Zuvela v Cosmarnan Concrete Pty Ltd (1996) 71 A.L.J.R. 29 at 30-31; 140 ALR 227 at 229-230. In circumstances where, by the nature of the fact or conclusion, only one view is (at least legally) possible (for example, the proper construction of a statute or a clause in a document, where, although, as often said, minds might differ about such matters of construction, there can be but one correct meaning: see generally Enfield City Corporation v Development Assessment Commission (2000) 199 CLR 135 at 151-156) the preference of the appeal court for one view would carry with it the conclusion of error. However, other findings and conclusions may be far more easily open to legitimate differences of opinion eg valuation questions, see Fenton Nominees Pty Ltd v Valuer-General (1981) 27 SASR 258 at 259-263; 47 LGRA 71 at 73-76. 143 The Commissioner submitted that this was a case where only one view was possible about the application of Div. 13 and Subdiv. 815-A to the facts. Consequently, the formation of a different view of the facts by an appeal court, following a review of all of the evidence, would be sufficient to ground the existence of legal error. 144 The taxpayer took a different view. It referred the Court to the reasons of Gageler J. in Minister for Immigration and Border Protection v. SZVFW (2018) 264 C.L.R. 541 at 556-557 [33], where his Honour said: Performing its obligation to conduct a "real review", the appellate court "must, of necessity, observe the 'natural limitations' that exist in the case of any appellate court proceeding wholly or substantially on the record". Limitations of that nature can include: "those occasioned by the resolution of any conflicts at trial about witness credibility based on factors such as the demeanour or impression of witnesses; any disadvantages that may derive from considerations not adequately reflected in the recorded transcript of the trial; and matters arising from the advantages that a primary judge may enjoy in the opportunity to consider, and reflect upon, the entirety of the evidence as it is received at trial and to draw conclusions from that evidence, viewed as a whole". The appellate court needs to be conscious that "[n]o judicial reasons can ever state all of the pertinent factors; nor can they express every feature of the evidence that causes a decision-maker to prefer one factual conclusion over another". The more prominently limitations of that nature feature in a particular appeal, the more difficult it will be for the appellate court to be satisfied that the primary judge was in error. (Footnotes omitted.) See also CSR Ltd v. Della Maddalena [2006] HCA 1; (2006) 80 A.L.J.R. 458 at 465 [17]. 145 The taxpayer in particular emphasised the advantage of the learned primary judge here who had the opportunity to consider, and reflect upon, the entirety of the evidence as a whole. In that respect, not all of the evidence led below was before this Court. The justification for appellate constraint was also referred to by Kirby J. in State Rail Authority of New South Wales v. Earthline Constructions Pty Ltd (in liq) [1999] HCA 3; (1999) 73 A.L.J.R. 306 where his Honour said at 330 [89]-[90]: None of the foregoing considerations requires the abandonment of the respect which appellate courts, by present legal authority, must pay to the advantages enjoyed by the trial judge. Instead, they require renewed attention to precisely what the advantages are which the trial judge has over those enjoyed by the appellate court, conducting a second look at the facts, usually with more opportunity to evaluate particular facts than is possible in the midst of a trial and with the appellate advantage of viewing such facts in the context of the record of the complete trial hearing. The true advantages in fact-finding which the trial judge enjoys include the fact that the judge hears the evidence in its entirety whereas the appellate court is typically taken to selected passages, chosen by the parties so as to advance their respective arguments. The trial judge hears and sees all of the evidence. The evidence is generally presented in a reasonably logical context. It unfolds, usually with a measure of chronological order, as it is given in testimony or tendered in documentary or electronic form. During the trial and adjournments, the judge has the opportunity to reflect on the evidence and to weigh particular elements against the rest of the evidence whilst the latter is still fresh in mind. A busy appellate court may not have the time or opportunity to read the entire transcript and all of the exhibits. As it seems to me, these are the real reasons for caution on the part of an appellate court where it inclines to conclusions on factual matters different from those reached by the trial judge. These considerations acquire added force where, as in the present case, the trial was a very long one, the exhibits are most numerous, the issues are multiple and the oral and written submissions were detailed and protracted. In such cases, the reasons given by the trial judge, however conscientious he or she may be, may omit attention to peripheral issues. They are designed to explain conclusions to which the judge has been driven by the overall impressions and considerations, some of which may, quite properly, not be expressly specified. (Footnotes omitted.) 146 More recently, in Jadwan Pty Ltd v. Rae & Partners (A Firm) [2020] FCAFC 62; (2020) 378 A.L.R. 193 at 307-312 [402]-[415], Bromwich, O'Callaghan and Wheelahan JJ. considered all of the applicable authorities concerning appellate review. Leeming J.A. in Council of the Law Society of New South Wales v. Zhukovska [2020] NSWCA 163 at [85] has since described Jadwan as containing a "helpful summary of principle and authority." We respectfully agree. 147 In Jadwan an issue of causation arose which required the Court to consider the content of a hypothetical event concerning what advice a reasonable and prudent lawyer would have given one of the parties. The Full Court rejected the following submission put to it (at 311 [413]): The fourth respondent also submitted that the possibility that one or more of the judges constituting this Court might, or might well have, formed a different view of the contested evidence or might, or might well have, reached different findings open on the evidence to those of the primary judge that were also open on the evidence, does not provide a principled basis for interfering with the findings of fact of the primary judge. 148 In answer to this submission, the Full Court referred to the following well known passage from Fox v. Percy (2003) 214 C.L.R. 118 at 126-127 [25]: Within the constraints marked out by the nature of the appellate process, the appellate court is obliged to conduct a real review of the trial and, in cases where the trial was conducted before a judge sitting alone, of that judge's reasons. Appellate courts are not excused from the task of "weighing conflicting evidence and drawing [their] own inferences and conclusions, though [they] should always bear in mind that [they have] neither seen nor heard the witnesses, and should make due allowance in this respect" [Dearman v Dearman (1908) 7 CLR 549 at 564, citing The Glannibanta (1876) 1 PD 283 at 287]. In Warren v Coombes [(1979) 142 CLR 531 at 551], the majority of this Court reiterated the rule that: [I]n general an appellate court is in as good a position as the trial judge to decide on the proper inference to be drawn from facts which are undisputed or which, having been disputed, are established by the findings of the trial judge. In deciding what is the proper inference to be drawn, the appellate court will give respect and weight to the conclusion of the trial judge but, once having reached its own conclusion, will not shrink from giving effect to it. 149 The Full Court in Jadwan then said the following at 312 [414]: What is set out in the above passage is subject to other principles of appellate review to which we have referred, including the requirement that an appellant show error in the primary judge's decision, and the acknowledgement in the authorities of the circumstances in which the appellate court will not be in as good a position as the trial judge to decide on the proper inferences to be drawn. The weight to be given to the findings of a trial judge will vary according to the type of issue in question, and the nature and the extent of the advantage enjoyed by the trial judge. But if error is shown, a court of appeal may then be required to make its own findings of fact and to formulate its own reasoning based upon those findings if it is in a position to do so: Robinson Helicopter at [43]; and see also, Waterways Authority v Fitzgibbon [2005] HCA 57; (2005) 221 ALR 402 at [134]-[135] (Hayne J). 150 The principles expressed in the foregoing passage are, in our view, applicable to this appeal. In particular, the reference to the "position" of the trial judge referred to in the foregoing passage includes the advantage enjoyed here by the learned primary judge who had the opportunity to consider, and reflect upon, the entirety of the evidence as a whole. It follows that the task of this Court is to undertake a "real review" of the evidence, but to do so with a degree of restraint and deference when considering the findings of the learned primary judge. That is all the more so where, as here, those findings followed the review and consideration of a rather large volume of evidence.

The Personality of the Parties to the Hypothetical Contract 164 The Commissioner submitted that no evidence was led about C.M.P.L.'s or G.I.A.G.'s attitudes to risk taking as at February 2007. The taxpayer had therefore failed to show that C.M.P.L. would have wanted to secure the commercial benefits of using price sharing as a methodology, so it followed that such benefits were irrelevant. That conclusion was said to be open because both Div. 13 and Subdiv. 815-A require the hypothetical parties to the hypothesised copper concentrate transaction to be clothed with the very same attributes that C.M.P.L. and G.I.A.G. had in February 2007. In such circumstances, the Court was left with the stark evidence that in February 2007, and based on forecast information, C.M.P.L. was going to be worse off by agreeing to price sharing, and there was no other commercial reason as to why it had submitted to such an adverse pricing methodology. 165 In that respect, the presence of the pre-existing C.M.P.L.-G.I.A.G. agreement on different terms loomed large in the Commissioner's case. His case was built upon a comparison of the benefits conferred on C.M.P.L. by that contract as compared with the reduced cash benefits which were expected to arise by reason of the amendments made in February 2007. Why, it was asked, would a party in the position of C.M.P.L. have agreed to such a debilitating change of terms? It simply was not what an independent party dealing at arm's length with a buyer of copper concentrate would ever have agreed to. 166 With respect, we think the Commissioner has asked the wrong question. As a result, whether the C.M.P.L.-G.I.A.G. agreement fell within that range of hypothetical contracts for the sale of copper concentrate which independent parties dealing at arm's length with each other might reasonably be expected to have entered into, did not feature in the Commissioner's analysis. Because the Commissioner was not asking the correct question, he submitted that there was no range of possible outcomes for this particular mine, but just one outcome, namely retention of the pre-existing terms as they were just before February 2007. 167 The Commissioner's submission suffers from a potential difficulty in applying Div. 13 of the 1936 Act. In Federal Commissioner of Taxation v. SNF (Australia) Pty Ltd (2011) 193 F.C.R. 149, this Court squarely rejected the Commissioner's contention that the hypothetical taxpayer had to stand in the shoes of the actual taxpayer and be clothed with all of the attributes of the actual taxpayer. The Commissioner's submission was recorded at 179-180 [96] of the judgment of the Full Court constituted by Ryan, Jessup and Perram JJ., as follows: The Commissioner's argument hinges, as he submitted in reply, on the proposition that one of the independent parties referred to in the definition of "arm's length consideration" in s 136AA(3)(d) was the taxpayer. This was the case, so he submitted, because the definition provision had to "be read in the context of s 136AD, the operative provision" and that provision commenced "its inquiry with the 'taxpayer' and it is the 'taxpayer' which is the subject of the hypothetical in s 136AA." The three propositions for which the Commissioner contends are, therefore: (a) the definition provision must be read in the context of the operative provision; and (b) the operative provision - s 136AD(3) - begins its inquiry with the taxpayer; (c) therefore the hypothesis required by the definitive provision - s 136AA(3)(d) - must relate to the taxpayer so that "arm's length" in that provision means "arm's length from the taxpayer". 168 The Court rejected the submission at 180 [98]-[99]: [T]he description of a transaction as being at arm's length is a statement about the independence of two parties from each other. The connexion thus disclosed is a relative one. Generally speaking a statement that two parties have a relative connexion of a particular kind does not carry with it any information about their absolute status. A requirement, for example, that two businesses be more than 20 km apart says nothing about where either business is situated. If one were to look at the definition provision in s 136AA(3)(d) in isolation it would be unsound to read it as requiring any more than that the two parties in question should be independent of each other; that is, the ordinary meaning is not as the Commissioner contends. The question then is whether the ordinary meaning is somehow displaced or modified by the fact that the definition provision feeds into an operative provision - s 136AD(3) - which in turn utilises it to assess the position of the taxpayer. There is no doubt that s 136AD(3) is, as the Commissioner submits, about the taxpayer; that it requires a comparison between that which was actually paid by the taxpayer and an arm's length consideration; and, that, in appropriate circumstances, it then substitutes one for the other. However, it does not follow from acceptance of all those features that arm's length consideration - which does not, in general, refer to the actual position of either party - must be treated as overlaid by a further requirement that the consideration not only be at arm's length but that the arm in question be attached to the taxpayer. (Our emphasis.) 169 Chevron must be taken to have softened the foregoing conclusion, at least to an extent. The judgment of the Chief Justice, with respect to the application of Div. 13, recognised the great variety of arm's length transactions that independent parties may negotiate. Each contract will be different but each will still be the product of an arm's length dealing. As a result, Div. 13 should not be applied pedantically or inflexibly. As Allsop C.J. observed at 50-51 [42]: There may be a free market into which disembodied independent third parties and the taxpayer alike could enter for substitutable or fungible goods; or there may be a market of sorts in which individually reached pricing will be available depending upon the precise characteristics of the party seeking to avail itself of the market. Given the great variety of commercial circumstances to which the provision may apply, it would be wrong either to approach the interpretation of the provisions pedantically or to dictate a rigid or fixed approach to the task of determining the arm's length commercial consideration. 170 For that purpose his Honour observed that the inquiry does not necessarily require the detachment of the taxpayer as one of the independent parties to the hypothetical transaction. At 51 [43] the Chief Justice thus said: There is no reason derived from the language of s 136AA(3)(d) why the hypothesis based on independence should, of necessity, do other than assess what the taxpayer or a person in the position of the taxpayer would be expected to give by way of consideration in respect of the acquisition of the property to a party independent from it. The independence hypothesis does not necessarily require the detachment of the taxpayer, as one of the independent parties, from the group which it inhabits or the elimination of all the commercial and financial attributes of the taxpayer being part of the circumstances that gave the commercial shape to the property the subject of the acquisition and that may be relevant to the consideration for the property. 171 After considering SNF, the Chief Justice was of the view that the "utter disembodiment of both parties" was not required by Div. 13. At 51-52 [44] his Honour said: In SNF, the Commissioner's submissions were directed to the asserted inadmissibility of evidence of certain allegedly comparable transactions because the parties did not have the same features as the taxpayer, being a history of making losses. Some of the language in SNF may be seen to be broader than was necessary to deal with the arguments and controversy in question. I do not take from SNF any requirement for a rigid or fixed approach to the place of the circumstances of the taxpayer or the party posited in the position of the taxpayer, in particular, here, its position in the group of which the other party to the actual transaction was a member also. Naturally, the one fixed and rigid proposition is that the parties to the dealing posited by s 136AA(3)(d) must be independent from each other - mutually independent. It does not follow that the party in the position of the taxpayer in the real transaction (here the borrower) must be disassociated in the hypothesis from its place in the group for whose interests it was borrowing. I do not read SNF as requiring the utter disembodiment of both parties from the circumstances of reality if one is seeking to understand not what a market price for goods was but the consideration that would be given for acquiring a characterised loan from an independent lender. The fundamental purpose of the hypothesis is to understand what the taxpayer, CAHPL, or a person in the position of the taxpayer and in its commercial context would have given by way of consideration in an arm's length transaction. 172 The foregoing passages neither support a test which is the "utter disembodiment" of the actual parties from the hypothetical transaction, nor a test whereby the hypothetical party stands entirely in the shoes of the taxpayer. Critically, Allsop C.J. expressed the applicable test in the following way at 52 [45]: The degree and extent of the depersonalisation will be dictated by what is appropriate to the task of determining an arm's length consideration - that is one that satisfactorily replaces what the taxpayer gave by what it should be taken to have given had it been independent of its counterparty. (Our emphasis.) 173 We shall return to this expression of the test. But there is another aspect to the hypothetical which we must emphasise at this point: the hypothetical "must be made to work", and in order to make it work, one is required to draw upon those commercially rational practices adopted by independent parties operating in a particular market for goods and services. As Allsop C.J. said in Chevron at 53 [48]: That the hypothesis must be made to work, if it can, is also to be taken from the commercially rational nature of the task - the property, the acquisition, the consideration are to be seen in their relationship to each other by reference to what can be reasonably expected, assuming independent commercial parties. 174 The reasons of Pagone J. are to similar effect. As his Honour observed at 73-74 [119]: The hypothetical agreement contemplated by the definition of arm's length consideration in s 136AA(3)(d) does not compel one of the parties necessarily to be the taxpayer (see Federal Commissioner of Taxation v SNF (Australia) Pty Ltd (2011) 193 FCR 149 at [9], [97]-[102]). 175 Justice Pagone was also of the view that in general, the hypothetical transaction for the purposes of Div. 13 had to remain "close" to the actual transaction and that the actual characteristics of the taxpayer must "serve as a basis" in the comparable agreement. As Pagone J. observed at 76-77 [128]: The need to posit a hypothetical acquisition under an agreement for the purpose of evaluating it by reference to the standard of reasonable expectation requires a consideration of the evidence to determine a reliably comparable agreement to that which was actually entered into. That, as his Honour said at [499] required the hypothetical to remain close to the actual loan. The function of the hypothesis is to identify a reliable substitute consideration for the actual consideration which was given or agreed to be given, and the reliability of the substitute consideration depends upon the hypothetical agreement being sufficiently like the actual agreement. Thus, as his Honour held, the purchaser in this case need not be a hypothetical standalone company (see [79]) and was to be an oil and gas exploration and production subsidiary (see [80]). The characteristics of the purchaser must be such as meaningfully to inform an inquiry into whether the consideration actually given under the agreement exceeded the arm's length consideration under the hypothetical agreement; or, to use the words of the learned trial judge at [80], in the hypothesis the independent parties are to have the characteristics relevant to the pricing of the loan "to enable the hypothesis to work". The actual characteristics of the taxpayer must, therefore, ordinarily serve as the basis in the comparable agreement. That does not mean that all of the taxpayer's characteristics are necessarily to be taken into account. The decision in SNF is an illustration of a feature of the taxpayer (namely that of having a history of incurring losses) being held not to be relevant to determining the arm's length price of an arm's length acquisition. In some cases the consideration that might reasonably be expected to be given in an agreement in which the parties were independent and dealing at arm's length may be found in comparable dealings in an open market. What may readily be ascertained as the consideration in an open market for the property in question may supply the answer to the question but in each case the inquiry called for is a factual inquiry into the consideration that might reasonably be expected to be given in an agreement which did not lack independence between the parties and in which they dealt with each other at arm's length. 176 The extent of depersonalisation here depends, to use the language of Allsop C.J., upon what is appropriate to the task of determining an arm's length consideration. A number of considerations arise. 177 First, one should commence with the simple and uncontroversial proposition that it is only those attributes or features which can affect the consideration which is receivable which should clothe the hypothetical seller of copper concentrate. 178 Secondly, it is only the objective attributes or features which should be included. In SNF at first instance (SNF (Australia) Pty Ltd v. Federal Commissioner of Taxation [2010] FCA 635; (2010) 79 A.T.R. 193) Middleton J. observed at 201 [44]: Just as in a valuation, the focus is not on the subjective or special factors of the parties involved in the transaction (for example whether they were financially sound or not), but is on the transaction itself and the consideration paid. In this sense, the task is not dissimilar to that undertaken in a valuation: see, for example, Boland v Yates Property Corporation Pty Ltd (1999) 74 ALJR 209 at 225-226 [82]-[83]; 167 ALR 575 at 596-597 [82]-[83] and Spencer v The Commonwealth (1907) 5 CLR 418. 179 Nothing said by this Court in SNF or in Chevron has led us to doubt the general correctness of this observation which we adopt. It means that one should include all of the objective circumstances of the actual C.S.A. mine, such as the means of production, the levels of production, the costs of production, the size of the mine, its location, and any problems arising from the location (e.g. water supply issues), and so on. It would include the objective circumstances of the copper concentrate market as at February 2007, including what was being reported by Brook Hunt, and what C.M.P.L. had budgeted and forecasted about the market. It would also include being a wholly owned subsidiary of a multinational natural resources group, but that group would not necessarily need to be the Glencore Group. 180 Thirdly, we think that it would be appropriate to exclude any considerations that are the product of C.M.P.L.'s non-arm's length relationship with G.I.A.G. and the broader Glencore Group. In our view, that would include whatever attitude or policy C.M.P.L. had formed about the issue of risk when selling to G.I.A.G. Of necessity, any such attitude or risk would have been distorted by C.M.P.L.'s lack of independence from G.I.A.G. Inferentially, as a separate entity it is unlikely to have considered the issue of risk when selling to G.I.A.G., save for its attempt to comply with Div. 13 in the 2007 to 2009 years. It follows that the taxpayer's failure to lead evidence about C.M.P.L.'s appetite for risk taking is not fatal. Nor is the failure to lead evidence about the Glencore Group's policy about risk taking (if any). Whilst such a policy, if it existed, might have been relevant, it was also, for the reasons given below, open to the taxpayer to discharge its onus on this issue through the opinions of Mr. Wilson. 181 Fourthly, and in any event, because the issue of risk taking is so bound up here with the method or formula for determining the consideration payable for the sale of copper concentrate, the taxpayer was entitled to support the appropriateness of the particular formula chosen in February 2007 by reference to what an independent party in the position of C.M.P.L. might have done to address risk in the objective circumstances of the copper concentrate market at that time in selling either to an independent trader or smelter. For that purpose, it could legitimately adopt a more conservative approach to risk so long as it was commercially rational to do so, and it is what an independent party dealing at arm's length might reasonably be expected to have done. The Commissioner was entitled to do likewise in support of a different pricing formula. Such a conclusion is consistent with Div. 13 imposing an objective test: W.R. Carpenter Holdings Pty Ltd v. Federal Commissioner of Taxation (2007) 161 F.C.R. 1 at 8 [27]. 182 Importantly for this case, in our view it was open to the taxpayer to form its own commercial judgment about how risk was to be assessed as at February 2007 in the hypothetical transaction between independent parties. It was also open for Mr. Wilson to form such a commercial judgment arising from the fact that the C.S.A. mine was a high cost venture, so long as that judgment was the expression of what an independent party acting at arm's length might reasonably be expected to have adopted. On behalf of the Commissioner, it was also open for Mr. Ingelbinck to perform a similar exercise. It follows that choices which are open to be made about risk may affect the determination of the arm's length consideration. It also follows that there is likely to be more than one price which is an arm's length price. In that respect, a taxpayer is under no obligation to choose a pricing methodology which pursues profitability in Australia at the expense of prudence. There is no obligation to "maximise" profitability at the expense of all else. 183 Fifthly, the possibility of a range of arm's length outcomes, each of which would be sufficient to answer the statutory test, is supported by authority. As this Court said at 187-188 [125] in SNF: But that does not mean, more generally, that there is only one arm's length consideration. Often enough, for example, goods will change hands at prices which are different to the market value for perfectly legitimate reasons such as a need to secure long term or large volume arrangements or with traded securities, a premium for control and so on. No doubt, it was for similar reasons that Dr Becker, the Commissioner's own witness, in response to the question '[a]nd you accept that, typically, there's not one arm's length price for a particular product?' answered '[t]hat's correct, yes'. 184 Sixthly, what controls the range of acceptable arm's length outcomes is the concept of what might reasonably be expected. As Pagone J. observed in Chevron, that concept calls for evidence which supports a "sufficiently reliable" prediction which can be seen as reasonable. As his Honour said at 76 [127]: The standard of reasonable expectation found in the words "might reasonably be expected" in s 136AA(3)(d) calls for a prediction based upon evidence. In Federal Commissioner of Taxation v Peabody (1994) 181 CLR 359 the High Court said at 385: A reasonable expectation requires more than a possibility. It involves a prediction as to events which would have taken place if the relevant scheme had not been entered into or carried out and the prediction must be sufficiently reliable for it to be regarded as reasonable. The prediction contemplated by Division 13, like that contemplated by s 177C of the 1936 Act, involves an evaluative prediction of events and transactions that did not take place but the prediction must be based upon evidence and, where appropriate, upon admissible, probative and reliable expert opinion: see Federal Commissioner of Taxation v Futuris Corporation Ltd (2012) 205 FCR 274 at [79]-[81]; see also Peabody v Commissioner of Taxation (1993) 40 FCR 531 at [39] (Hill J). 185 The Commissioner in his written submissions appeared to contend that the hypothetical mandated by Div. 13 required a taxpayer to prove what independent parties would have agreed to be the arm's length consideration, rather than what independent parties might reasonably be expected to have paid or received. He relied on certain sentences in Chevron which appeared, on one view, to adopt a "would" test, but clarified during the hearing before us that he accepted that Div. 13 mandates a "might" test. We respectfully agree with this clarification. We do not think that those sentences in Chevron were intending to convey a test at odds with the language of s. 136AA(3)(c) and (d) of the 1936 Act. The statutory test relevantly requires the hypothetical price to be ascertained by reference to what might reasonably be expected to have been received or paid if the property had been supplied under an agreement entered into between independent parties dealing at arm's length with each other. In our view, Art. 9 of the Swiss Treaty mandates a relevantly analogous inquiry. It refers to what might be expected and not to what would be expected. 186 Finally, in applying the foregoing a degree of flexibility and pragmatism is required. Whilst the onus remains on the taxpayer to discharge its onus of proof of demonstrating excessiveness in the amended assessments, one should not apply Div. 13, or indeed Subdiv. 815-A, narrowly. Predicting how independent parties dealing at arm's length with each other would price a wholly controlled transaction is a difficult and complex issue. That is especially so when one integer which here directly affects the consideration payable is the formation of a commercial judgment about risk taking. The Court should acknowledge, and take into account, the practical difficulties faced by both the taxpayer and the Commissioner in finding evidence that grounds what is sufficiently reliable, or which demonstrates that something is insufficiently reliable. The answer is not always to be found in overly lengthy and complex expert reports. Common sense is required. 187 The foregoing seven propositions are what we consider to be relevant in deciding the "appropriate" degree of "depersonalisation" here, to use the language of the Chief Justice in Chevron, given the particular facts and circumstances of this case. 188 Something should be said at this point about the focus of Mr. Ingelbinck's opinion, and thus also of the Commissioner's case, upon the proposition that if C.M.P.L. had been dealing independently and at arm's length with G.I.A.G., it would never have agreed to the amendments made to the pricing formula in February 2007. In that respect, we think the Commissioner established that, from the perspective of C.M.P.L.'s earnings, it might have been expected in February 2007 for those earnings to decrease with the adoption of price sharing. But in our respectful opinion, the ultimate issue for determination is not whether an arm's length party would have agreed to the amendments, given the pre-existing terms of trade. We agree with the submissions of the taxpayer that the framing of the issue in this way is at odds with the text and purpose of Div. 13 and Subdiv. 815-A. Rather, the relevant issue is whether the consideration received by C.M.P.L. in the 2007 to 2009 years was less than the arm's length consideration, as that term is defined in s. 136AA(3) of the 1936 Act, for the copper concentrate in fact supplied. The answer to that question does not turn upon whether the amendments made in February 2007 were in C.M.P.L.'s interests. It may be the case that both the pre-existing C.M.P.L.-G.I.A.G. agreement, and the agreement as amended in February 2007, included pricing formulae that arm's length parties might reasonably be expected to have adopted. Both may fall within the range of arm's length outcomes. In making this observation, we do not think that the pre-existing terms were irrelevant to the application of Div. 13 here. They form part of the objective history which may bear upon the issue as we have defined it. 189 We turn to consider the issue of "personality" under Subdiv. 815-A and Art. 9 of the Swiss Treaty. As we understood the judgment of Chief Justice in Chevron, Subdiv. 815-A applies in an analogous way to Div. 13. Both must be applied flexibly. As his Honour observed at 62 [90]: [T]he causal test in s 815-15(1)(c) based on Art 9 is a flexible comparative analysis that gives weight, but not irredeemable inflexibility, to the form of the transaction actually entered between the associated enterprises. A degree of flexibility is required especially if the structure and detail of the transaction has been formulated by reference to the group relationship and a "tax-effective" outcome (even if, as here, one that is not said to be illegitimate). The form of that transaction may, to a degree, be altered if it is necessary to do so to permit the transaction to be analysed through the lens of mutually independent parties. 190 To similar effect Pagone J. said at 90-91 [156]: The comparison which Art 9 required to be undertaken is akin to that contemplated by Div 13. The object was to determine whether conditions actually prevailing between the relevant enterprises differed from those which might be expected to operate if they had been independent and had been dealing wholly independently with each other. The hypothetical in that exercise is undertaken for the purpose of determining whether the dealing which actually occurred might have been expected to occur on different terms. That will generally require that the parties in the hypothetical will generally have the characteristics and attributes of the actual enterprises in question. The comparison required by Art 9 is expected to be undertaken in a practical business setting of potential transactions able to be entered into and which are to be used as a basis for a reliable hypothesis upon probative material. Ultimately the question was that of determining whether profits might have been expected to accrue to CAHPL if the transaction it entered into with CFC had been entered into where the conditions which operated between CAHPL and CFC did not operate, that is, where CAHPL and CFC had been dealing with each other wholly independently. The hypothetical thus required hypothesising circumstances in a dealing between an enterprise like CAHPL and an enterprise like CFC where, however, the conditions operating between them were between independent enterprises dealing wholly independently with each other. 191 In our view, one of the "conditions" that operated between C.M.P.L. and G.I.A.G. was the price sharing formula adopted from February 2007. As Allsop C.J. observed in Chevron (at 60 [82]), the word "conditions" is "broad and flexible". In our opinion, it is plainly apt to include those terms in the contract which defined the consideration C.M.P.L. was to receive. The task for the taxpayer was thus to demonstrate that the pricing formula established by those terms did not differ from those formulae which might be expected to have operated between independent enterprises dealing wholly independently with one another in the copper concentrate market at the time. In that respect, it was again entirely open for the Commissioner to contend that the pricing formula did so differ, and that as a result profits that might have been expected to accrue under a different arm's length pricing formula had not so accrued. For analogous reasons to those set out above, because risk and the pricing formula were inextricably bound up with each other, it was open for either party to lead evidence about how independent enterprises dealing wholly independently with one another might be expected to have assessed the issue or issues of risk as at February 2007. The failure by C.M.P.L. to lead evidence about its actual risk appetite or that of G.I.A.G. or the broader Glencore Group did not foreclose C.M.P.L.'s ability to lead expert evidence more generally about, and make submissions concerning, what independent enterprises might have done to address the issue of risk.

Commissioner of Taxation v Glencore Investment Pty Ltd

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