47 SAGA sought to explain why it did not supply real property, and in particular why SAGA did not make a grant… of real property within s 9-10(2)(d) of the GST Act, for the following more detailed reasons:
(i) as I have foreshadowed, the supply made by SAGA to an overseas tourist constitutes a supply merely of rights, being contractual rights enforceable exclusively in England against SAGA, and those rights do not constitute any grant… of real property within s 9-10(2)(d); it was acknowledged by SAGA that it 'supplies' a promise that the tourist will receive the benefit of the hotel accommodation in Australia; however the supply of a promise to receive a benefit was said by SAGA not to constitute the supply of that benefit; the structure of the statutory meaning of supply contained in ss 9-5, 9-10 and 9-25 of the GST Act was therefore said by SAGA to make clear that the GST Act, in relation to any supply for consideration… made in the course or furtherance of an enterprise… connected with Australia (within s 9-5), distinguishes between the supply of things, such as goods, services and real property, and the supply merely of rights to receive any of those things; this submission was elaborated upon in greater detail in SAGA's submissions in reply, to which I shall shortly draw attention;
(ii) there could be no supply of realty by SAGA in the circumstances here postulated, since at the time of formation of the contracts, neither SAGA nor AOT held realty in Australia which either could supply; moreover the hotel rooms had not at that time been allocated; even if it could be assumed, favourably to the Commissioner, that the supply of hotel accommodation amounted to a supply of realty, nevertheless for there to be a licence to occupy realty, the same must be identifiable; there can be no licence to occupy realty without identifying the particular realty which is possessed and controlled, reliance being placed upon a passage from the reasons for judgment of Lord Scott of Foscote in Commissioners of Customs and Excise v Sinclair Collis [2001] STC 989 at [73]-[77].
48 I would make the preliminary observation that the Meaning of supply provisions of s 9-10 include in particular, by par (e) of subs (2), the creation or grant… of any right, and by the preceding par (d), a grant… of real property, and further include, by par (h) of the same subsection, any combination of any 2 or more of the matters referred to in (ie the preceding) paragraphs (a) to (g). By s 9‑10(1) supply is defined as 'any form of supply whatsoever'. Those are statutory notions of wide import and operation. It is unnecessary for me to decide whether the supply by SAGA is of a contractual right in relation to land by way of a license to occupy land, or whether it is the supply of a license to occupy land, since both notions are here attracted in relation to the SAGA traveller.
49 In Sinclair Collis, Lord Scott of Foscote encapsulated at [73]-[74] the following principles in a value‑added tax context involving a tobacco company's placement of tobacco vending machines in clubs in exchange for a specified percentage of profits which were paid to those clubs, and where the critical statutory description involved specified that a supply of services that amounted to '[t]he grant of an interest in or right over land or of any license to occupy land' was exempt from VAT:
'73. So what are the characteristics that distinguish a licence to occupy from a mere licence to use? There are, in my opinion, two characteristics, one or other of which must, in some sufficient degree, be present. One is possession. The other is control. If neither is present, I find it difficult to understand how the licensee could be said to "occupy".
74 There is some assistance to be gained from authority. In R v St Pancras Assessment Committee (1877) 2 QBD 581, 588, Lush J said:
"Occupation includes possession as its primary element…"
And in Newcastle City Council v Royal Newcastle Hospital [1959] AC 248, 255, Lord Denning said:
"Occupation is matter of fact and only exists where there is sufficient measure of control to prevent strangers from interfering…"
These two elements, possession and control, seem to me to be the important ingredients of a relationship between an individual and land apt to be described as "occupation". A "licence to occupy" is, in my opinion, to be read as meaning a licence to go into possession, not necessarily exclusive possession, or to go on to the land and take some degree of control of it. If neither of these features is present, the licence cannot, in my opinion, properly be described as a licence to occupy.'
I have difficulty in comprehending why the occupier of a hotel room does not for the time being, and however briefly, 'go into possession though not necessarily exclusive possession' of that room, and thereby 'take some degree of control of it'; moreover a hotel room occupier for the time being possesses, in at least a practical sense, 'sufficient measure of control to prevent strangers from interfering…'. Earlier at [56], his Lordship had observed:
'So it seems that Parliament thought that taking a room for a night in a hotel, or reserving car parking space, or taking a seat at the theatre, sports ground etc would, or at least might, be regarded as involving the grant of a license to occupy land.'
50 His Lordship provided the following contrasting illustrations of the kind of occupations or licences to occupy which would or would not satisfy the description of occupation:
'75. Accordingly, a person entitled to place an advertisement on a wall cannot, in any meaningful sense, be described as being in occupation of the space occupied by the advertisement. The commissioners' practice in regard to advertisements is, in my opinion, correct. It is not concessionary. It is a recognition that the right granted is not a "letting" of land and that the exercise of it does not involve the occupation of land. For the same reasons the grant of a right for a salesperson with a tray suspended from his or her neck to wander around a public house or the foyer of a theatre offering for sale the contents of the tray would not constitute the grant of a licence to occupy. There would be no part of the premises of which the salesperson could be said to be in possession or control or, therefore, in occupation. Nor, in my opinion, would the result be any different if the salesperson were obliged under the agreement to be stationed in a specific corner of the premises. There would still be nothing that could reasonably be thought to constitute "occupation" or a "letting" of land.
76. On the other hand, the grant of a licence to set up and maintain a stall or a kiosk in some defined area of the premises in order for a salesperson to sell some product or other from the stall or kiosk might create in the licensee something that could be called "occupation". There might well be a sufficient degree of control of the area in question.
77. So how is the right to install and maintain a vending machine under the terms of such an agreement as this case involves to be regarded? A "licence to occupy" is something to be enjoyed by persons, whether natural or corporate. It is people or companies who must be in possession or exercise control, not inanimate objects like tables, kiosks, cars or vending machines. A right, for example, to use a safe deposit box at a bank does not grant the customer a "licence to occupy" the safe deposit box. It is the bank that is in possession and control of the whole of its premises, including the space taken up by the box. The customer has no more than a right to put things in the box and is not, in any meaningful sense, in occupation of the space taken up by the box.'
51 Taking the above passage with that extracted earlier from Lord Scott's speech in Sinclair Collis as authority, SAGA submitted that there could be no licence to occupy land without first identifying the particular land which is possessed and controlled, albeit temporarily.
52 In the result, it seems to me that rather than supporting SAGA's case, aspects of the foregoing dicta in Sinclair Collis tend to tell against it. The circumstances I must address here involve, to use his Lordship's further description '… people… who must be in possession or exercise control, not inanimate objects…'. I should also refer to the speech of Lord Slynn of Hadley at [20] in Sinclair Collis, where his Lordship cited with apparent approval the reasons for judgment of Advocate General Jacobs of the European Court of Justice in Swedish State v Stockholm Lindopark AB [2001] STC 103 at [30]-[32], which effectively drew, or at least acknowledged, that kind of distinction, significantly in my opinion for present purposes, by reference to 'occupation of a hotel bedroom':
'30. … I consider for at least two reasons that Lindopark's business, as it has been described to the court, did not fall within the concept of leasing or letting of immovable property.
31. First, there is the general question whether the transaction should be regarded as the occupation of the immovable property or as the supply of services for which the property is an incidental, albeitessential, prerequisite.
32. An example of that distinction might be provided by comparing the provision of accommodation in a hotel - which could be considered to fall within the Community definition of leasing and letting for these purposes on the ground that otherwise there would have been no need to exclude it from the exemption - with the provision of a meal in the hotel restaurant. Whereas the occupation of a hotel bedroom for one or more nights (or even for a shorter period) may well be classified as a let in various legal systems, this is unlikely ever to be the case for the consumption of a meal in the public dining room in the same hotel. In the case of the occupation of a bedroom, the dominant feature of the contract is the use of the premises, whereas in the case of the restaurant meal the dominant feature is the provision of the meal, no matter how important the décor or other facilities may be in the customer's choice of venue.'
53 SAGA sought to emphasise that not only are there no specific hotel rooms in respect of which the right to occupy is originally granted to its customers travelling to Australia, being 'originally in the sense of the time of hotel reservation', but also that SAGA may change the itinerary. As such, continued SAGA, no particular land the subject of the putative licence was capable of identification at the time of formation of contract between SAGA and the tourist. At the time of formation of the travel contract, and at the time of full payment by the tourist, SAGA emphasised that it therefore possessed 'no real property it can supply', and nor did AOT. But a difficulty with that SAGA submission is with the breadth of operation of the statutory notion of supply as it appears in Subdivision 9-A, which is not necessarily confined to any sense of simultaneous or immediate actual supply in the context of a grant… of real property or the creation, grant,… of any right. The statutory notion of supply is a broad one in temporal terms, and need not be confined in scope of operation, as a general rule, to a single point in time, nor in my opinion is it so confined here by any implication. Its basic operation is exemplified in each of the critical ss 9‑5, 9‑10 and 9‑25 (and also in s 9‑15 concerning Consideration, s 9‑20 concerning the conduct of Enterprises). SAGA's case would necessarily seek to confine the occurrence of supply to the point in time of a tour reservation made in favour of the tourist, and upon that footing by way of a bundle of rights. The Commissioner disputes of course that the occurrence of supply is here to be determined as at the point in time of making a tour reservation, or at the time of confirmation of a reservation of an accommodation booking of a place on a tour. A broader conspectus is seemingly required in the light of the breadth of the statutory terms employed, and in the light of the nature or character of what is a value-added business tax. The combination provision of par (h) of s 9‑10(2), and the generality of the non-exclusive s 9‑10(1) description of supply as being any form of supply whatsoever, together serve to demonstrate the conceptual scope of attraction of GST. The Commissioner's case here is that the circumstance that a SAGA customer might not be allocated a specific hotel room until he or she ultimately arrives at the hotel, or in any event at some point in time subsequent to a tour group reservation, has no bearing upon the resolution of the issue whether in all the circumstances, SAGA supplies its customers relevantly with real property.
54 It may therefore be said that the right to occupy a hotel guest room located within a given hotel complex, in the course of a SAGA 'A Taste of Australia' tour, will actually crystallise in favour of a particular named tourist at a point in time between the original group booking and the tourist's arrival at the hotel. By crystallise I refer to the specific allocation by the hotel staff of a specific guest room by reference to its number (or other designation) and floor location (if more than a ground level complex). In the meantime any person joining the SAGA list of tourists obtains what might be described as an inchoate right to being accommodated at the itinerary designated hotel, as between that person and SAGA, which right is contractual in operation. When that right ultimately crystallises or manifests by way of allocation to that person in the hotel's reservation system will obviously vary. The point in time of supply of the hotel accommodation is a broad notion, as is to be seen from the authoritative dicta cited in these reasons. Hence supply may take any form of supply whatsoever, including a grant... of real property… connected with Australia,… or a creation… of any right within the scope of ss 9‑10(d) and 9‑10(2)(d) and (e), together with s 9‑25(4). It is significant that the s 195‑1 definition of real property includes the notion, and hence the broad conceptual implications, of a personal right to call for or be granted any interest in or right over land, and also a license to occupy land or any other contractual right exercisable over or in relation to land. A hotel room is rightly to be characterised in law as a form of real property, notwithstanding that it is likely to comprise part only of the strata, or of the single level, of a hotel building complex erected on land somewhere in Australia.
55 A licence under the general law of property in Australia is of course at odds with the notion of exclusive possession. So much does not mean however that conversely, a purported grant of possession excludes the implementation or operation of a contractual licence. A licence of realty may include the grant of a right of lawful entry upon that realty for a contractually agreed period of time, and for the use of that realty for some stipulated purpose or purposes (see Radaich v Smith (1959) 101 CLR 209 at 222-223, per Windeyer J). The occupier of a hotel room enjoys the sole occupation of that room for the duration of the contractual period of time of occupation, together with a right of entry into common areas of a hotel building, at least in order to access that room for his or her occupation, and those common areas designated for dining, leisure etc. SAGA submitted that what the tourist receives from SAGA at the material time, being his or her inclusion in the touring party prior to leaving for Australia, is no more or higher than the contractual right to be provided with accommodation, being a right 'subject to the other terms of the contract', and being therefore part of the bundle of contractual rights that constitute the package called 'A Taste of Australia'. That thesis however, in the context of the GST legislation, and Subdivision 9A in particular, is artificially confined or restricted in scope of operation.
56 A similar basis upon which SAGA contended for exclusion of the operation of the GST Act in the present circumstances was that SAGA does not own or possess real property which it is capable of supplying to an overseas tourist, and all that SAGA is able to supply is a contractual right (or rights) emanating from third parties to its travel arrangements, SAGA not being the owner or lessee of the tourist hotels which it patronises from time to time for use by its customer tourists. As I have sought to explain, that submission tends to beg the critical issue as to the scope of the statutory notion of supply, being as I have earlier emphasised an expression of wide import, particularly in the context of Subdivision 9-A, which extends to any right, inclusive of a right to a supply of real property connected with Australia, being real property within the broad sweep of the s 195‑1 definition. Part of SAGA's response not already recorded, but consistently nevertheless with its submissions I have recorded, was that the definition of real property should be 'read narrowly', in the light of the context of the opening words of the critical par (c) of that definition, being 'a license to occupy land'. I observe however that par (b) of the definition refers to any interest in or right over land, and the second component of par (c) of the definition extends to any other contractual right exercisable over or in relation to land. The GST Act does not define 'land' or 'occupy'. Normally a reference to land, at least in a statutory context, imports the notion of realty inclusive of any improvements erected on land, and there is no reason why that notion is here to be excluded from operation, and the contrary was not suggested by SAGA. A hotel forms part of the realty upon which it is erected, irrespective of the hotel's tenure of ownership or occupation of that land, and a hotel room used for tourist occupation forms part of the hotel's building structure, as do the common areas of the hotel dedicated to guest access and use.
57 It was asserted by SAGA nevertheless that the contractual rights obtained by the overseas tourist from SAGA are not exercisable over or in relation to land, and are limited to enforcement against SAGA. All that the tourist receives, and all that SAGA supplies, the SAGA submissions continued further, '… is a chose in action comprising the rights arising under the contract'. Upon that footing or at least in that context, it was asserted by SAGA that the prevailing position on true analysis is 'not entirely dissimilar' from the principle underpinning the ratio in Livingston v Commissioner of Stamp Duties (Qld) (1960) 107 CLR 411 (High Court) and Commissioner of Stamp Duties (Qld) v Livingston [1965] AC 694 (Privy Council), to the effect that beneficial interests do not definitively crystallise in relation to the assets of a deceased estate for death duty purposes until the administration of executorial duties has been substantially completed. That purported exemplification does not sufficiently bear in my opinion upon or have any analogy to the statutory notions of personal right and contractual right, at leastwithin the context in which they appear in the s 195-1 definition of real property, being a definition which extends of course beyond equitable interests in property to mere contractual rights, albeit rights exercisable over or in relation to realty. The acceptance of a hotel room or suite booking or reservation communicated by a hotelier, as I have already indicated, confers a personal right of a contractual nature in relation to the use and occupation of the hotel room for the duration of the booking or reservation, together with a right of entry upon the common guest areas of the hotel building in order to access that room, and over parts of the hotel building provided for use by hotel guests, generally. In the light of the analysis of the implications of the definition of real property, it is readily apparent that the GST Act definition of real property extends beyond legal and equitable interests in real property, and indeed the traditional notions of a licence over land. Nothing appearing in Australian Taxation Office ruling GSTR 2003/7 at [91] justifies any narrower reading of the s 195‑1 definition, for what that might ultimately matter.
58 Specifically as to the ambit of the expression in relation to appearing in par (c) of the s 195-1 definition of real property, I was referred by the Commissioner to the view of a Full Federal Court in HP Mercantile Pty Limited v Commissioner of Taxation (2005) 143 FCR 553 at [35], to the effect that such expression signifies 'some connection between two subject matters', being a '… connection or association … [which] may be direct or indirect, substantial or real', but nevertheless 'must be relevant and usually a remote connection [will] not suffice… [the] sufficiency of the connection or association [being] a matter for judgment which will depend, among other things, upon the subject matter of the inquiry, the legislative history, and the facts of the case… the degree of relationship implied by the necessity to find a relationship will depend upon the context in which the words are found' (per Hill J with whom Stone and Allsop JJ agreed). As I have already indicated, any hotel in Australia erected on realty (or comprising a strata of realty) would be expected to be subject to a proprietary interest in that realty held by the hotel owner or lessee or sublessee, such as to authorise or empower the hotelier to grant licenses to guests or prospective guests in respect of the individual accommodation suites forming part of its structure, together with rights of entry to and use of other areas in common with the other guests. There is persuasive force in the Commissioner's proposition that '[i]f, as a matter of substance and reality, there is a connection between a right arising from a contract and certain land, that connection will bring the transaction within the definition of real property', and furthermore that '… [t]he… connection or relationship need not be direct but may be indirect', and '[t]he definition should not be construed as requiring, for example, that the contractual right be directly exercisable against the owner of the land'. The operator of a hotel in Australia, not being an owner or lessee (or sublessee) of a hotel, may hold merely a form of licensing arrangement with the owner or lessee of the hotel, but that does not exclude that operator effecting A supply of real property… connected with Australia. Nor should such technical considerations act as a hindrance on the otherwise broad terms of s 195-1 definition of real property and the sub-div 9A notion of supply, insofar as they relate to the supply effected in the present case by SAGA.
59 A further submission advanced by SAGA, by way of attempted distinction of the operation of authorities relating to the licensed occupation of parts of realty structures, nevertheless remains for yet further consideration, to the extent that I may not have already addressed or fully addressed the same. That submission was related further to the theme that at the time an intending tourist finalises or formalises his or her entry into overseas travel arrangements with SAGA such as 'A Taste of Australia', it may well be the case that 'rooms have not been allocated', and whether it may therefore be said with sufficient justification that there is thereby constituted a … supply … connected with Australia within s 9-5(c). SAGA asserted that it was necessary to address the point in time when the accommodation is originally 'booked' or reserved on behalf of the tourist, at which time, all that '… the tourists receive, and all SAGA supplies, is a chose in action comprising the rights arising under the contract'. It reflects an emphasis which is not readily persuasive from any consideration of the GST Act, and in particular Part 2-2 thereof headed Supplies and acquisitions which addressesthe subject of taxable supplies. It also tends to be at odds with the general observation made by Stone J of this Court in Sterling Guardian Pty Limited v Federal Commissioner of Taxation (2005) ATC 4796 at 4806 that '[t]he clear thrust of the GST Act, both in its wording and as explained in the [Explanatory Memorandum], is that of a business tax imposed with respect to elements of commerce' (my emphasis), and where her Honour adopted the approach that '… although in economic terms the burden of the GST is borne by the ultimate consumer, in terms of "imposition, collection and administration", it is a tax on business', and further that in the context of preparation of business activity statements and payment of the appropriate GST, '… abstract propositions about interests in land and the acquisition of a brand new set of rights arising from registration of a strata plan are irrelevant'. Of course the circumstances as such in Sterling Guardian were different to those here involved, but her Honour's approach to the operation of the legislation and in particular its application in relation to realty, seems to me to be generally in line with the approach in principle taken by the English authorities on value-added tax. Those approaches have the relevant effect on notions of timing arising under the GST Act that I have discussed earlier in my reasons for judgment.
60 It was further contended by SAGA that on true analysis, the 'accommodation component was not real property' at all, but comprised no more than a bundle of rights in relation to accommodation services made up of various components, including 'the right to occupy unspecified rooms albeit on specific dates, the use of furniture and facilities within each such room, cleaning and linen changing services, and the other usual facilities of a hotel room and of a hotel's common areas'. Those services and facilities, aside from the right to occupy, were described by SAGA as parts of its 'larger accommodation package', albeit important and integral parts of the so-called wider supply of services involved, and were not to be seen as merely incidental to the supply of the right to occupy a room. Those services and facilities were asserted by SAGA to extend, not just to meals, porterage, cleaning, linen, television and concierge services, but also to recreational facilities 'beyond the hotel room', for instance of sport or physical exercise. It was therefore submitted by SAGA that the entire supply by hotel operators in the subject context should indeed be characterised alone as 'a supply of services' within s 9-10(2)(b) of the GST Act rather than as a supply of real property. Hotel accommodation was described by SAGA as made up of a substantial number of elements, albeit that the same are provided for or included at a single price charged by SAGA to its travelling customer. Whilst one of those elements involves the right to occupy a room, that element was said by SAGA to be not so dominant that it resulted in hotel accommodation being characterised, for the purposes of the GST Act,by reference to that element. Perhaps a complicating factor is that a tourist will not necessarily use all of the services made available, whilst some services, such as meals, may be separately charged for.
61 At least one difficulty with that SAGA proposition is that without conferral of the right to occupy the hotel room, the SAGA tourist would have no occasion to enter and stay at the hotel in Australia in the first place. Realistically the right to accommodation is the principal focus of an accommodation hotel's business purposes and operations, and of an overseas traveller's patronage. Moreover without the accumulation of rights to accommodation at the successive hotels the subject of tour pre-bookings, a tourist would doubtless not acquire a SAGA holiday tour package in the first place. The inference reasonably open to be drawn is that the provision of hotel accommodation is a fundamental component of SAGA's 'A Taste of Australia' holiday tour package. The viability and reality of SAGA's submission that '[w]hile one of these elements involves a right to occupy the room, that element is not so dominant that it would result in the accommodation being properly characterised by reference to it' seems to me to be difficult to sustain. SAGA's submission, that features of hotel accommodation available for guest use and enjoyment, as incidents to its packages, should be characterised as discrete rights within the ambit of, and not as merely incidental to, the right to hotel room accommodation, is I think at odds with at least the broad sweep of s 9-10, operating as it does in the context of what has been described in the authorities as 'a tax on business'.
62 SAGA's case on this point was alternatively framed upon the basis that the supply provided by the hotel operators to SAGA's customers per medium of AOT (of course undisclosed) is that of the creation or grant… of any right within the ambit specifically of para (e) of s 9-10(2) of the GST Act, for the following reasons:
(a) the accommodation component is obtained by AOT, not for its own use, but for on-sale to SAGA and thereafter to the overseas tourists who ultimately use and enjoy the accommodation provided by the hotel operators; and
(b) at the time of the supply of the contractual rights to accommodation made by the hotel operators in response to the advance booking requests of AOT, there is no right granted in respect of any particular area of property, it not being likely that the hotel room or rooms would have been by then specifically allocated.
SAGA's analysis would thus continue to confine the time for evaluation or determination of the fulfilment or otherwise of the statutory notion of supply, in the subject circumstances,as at the occasion of acceptance by SAGA of the tour booking. I would repeat what seems to me to be the inherent difficulty of attributing to that threshold circumstance the significance for which SAGA contends, for such an approach curtails the extent of practical business tax operation of the GST Act. Moreover it is similarly difficult to afford any decisive relevance to the circumstance, in a GST supply context, that SAGA contracted in the first place with a third party (ie AOT) for the organisation of the hotel accommodation, in the light of the structure of this revenue legislation. For what it may matter, the Commissioner pointed out that SAGA's contractual documented arrangements with its customer tourists make no reference to any other supplier to the customer, and thus to the circumstance that SAGA obtains the holiday accommodation from another entity which in turn obtains it from the hotels. SAGA description of 'on-sale' is not apposite, bearing in mind the nature and substance of the SAGA/AOT contractual structure which I have earlier summarised.
63 As I understood that SAGA submission to be, being a further submission apparently in the alternative, it is only when the accommodation component is supplied by AOT to SAGA, in discharge of AOT's obligations under its agreement with SAGA, that such component may conceivably fall to be characterised as a form of supply, and then still only by way of any right falling within s 9-10(2)(e) of the GST Act. SAGA reasoned in that context that although the overseas tourist to Australia ultimately obtains the benefit of accommodation provided by the hotel operators in Australia, the tourist acquires the right to that accommodation from SAGA, and not from the Australian hotel operators. Hence, so this SAGA submission continued, that right could only be enforced litigiously by the tourist against SAGA, and the forum for any such litigation would be exclusively confined to a court of competent jurisdiction in the United Kingdom. Bearing in mind that the present statutory context is of course that of the GST Act, where the notion relevantly involved is that of any form of supply whatsoever falling within s 9‑10(1), and further bearing in mind the exemplifications of that generality of expression by way of the broadly conceived s 9‑10(2) descriptions of grant… of real property appearing in par (d), creation and grant… of any right appearing in par (e), and entry into… an obligation to do anything in par (g), and the comprehensive statutory notion of supply, there are evident difficulties in accordingviability to that further SAGA submission. Of course as earlier pointed out, the SAGA tourist makes his or her arrangements solely with SAGA, and does not purport to deal directly or indirectly with AOT, whose services are alone retained by SAGA for its assistance.