CONSIDERATION
184 For the following reasons, I conclude that the taxpayers are successful in these proceedings. The 'core' losses were made by VIA, VPH and VPO as contended for by the taxpayers, and the ensuing deductions and loss transfers were valid.
185 The principle of law which is at the centre of this case is clear: if the intention or purpose of the relevant entity in entering into a transaction or upon acquiring an asset was to make a profit or gain, that profit or gain will be income, even if the transaction was extraordinary by reference to the ordinary course of that entity's business: see Westfield Ltd v Commissioner of Taxation (1991) 28 FCR 333; Commissioner of Taxation v Cooling (1990) 22 FCR 42; Federal Commissioner of Taxation v Myer Emporium Ltd (1987) 163 CLR 199; Federal Commissioner of Taxation v Whitfords Beach Pty Ltd (1982) 150 CLR 355; and Visy Industries USA Pty Ltd [2012] FCAFC 106. Similarly, if the intention or purpose was to make a profit or gain but a loss was ultimately in fact sustained, then a deduction in the amount of that loss would be permitted.
186 It is not necessary that the sole or dominant purpose of entering into the relevant transaction is to make a gain or profit. It is enough if a "not insignificant purpose" of the relevant transaction was to obtain a profit or gain: see eg Cooling (1990) 22 FCR 42 at 56-57.
187 Accordingly, in these proceedings, if the intention or purpose of acquiring the relevant shares (in the context in which that occurred), was to make a profit or gain, then the losses ultimately incurred are deductible. If that intention or purpose did not exist, then in the circumstances of these proceedings the losses incurred would be of a capital nature for the purpose of s 8-1 of the 1997 Act, and no losses could be deducted as sought by the taxpayers.
188 As previously noted, the Court's principal task is to identify and characterise the relevant transactions, and determine whether each of VIA, VPH and VPO had the requisite purpose or intention for the losses to be deductible.
189 It is to be recalled that this inquiry relates to each of VIA, VPH and VPO, in the context where each is a corporate entity.
190 In determining the nature of the transactions and their purpose, I take into account the documentation tendered in evidence and the evidence of the witnesses called. To a certain extent the inquiries as to the identity and nature of the relevant transactions and purpose are related.
191 The disposal of these proceedings depends in part upon my assessment of the evidence of the witnesses called by the taxpayers. I should say at the outset that I do not consider that, having regard to the weight of the evidence and the course of cross-examination, I should accept the submission of the Commissioner that I should give "little weight" to the statements as to purpose by various witnesses before the Court. Reference was made by the Commissioner to Federal Commissioner of Taxation v SNF (Australia) Pty Ltd (2011) 193 FCR 149 at 176 and Spassked Pty Ltd v Commissioner of Taxation (No 5) (2003) 197 ALR 553; [2003] FCA 84 at [196]-[198], which was affirmed in Spassked Pty Ltd v Commissioner of Taxation (2003) 136 FCR 441, see Hill and Lander JJ at 476.
192 No direct or real attack was made upon the credit of the witnesses called by the taxpayers. There were no contradictions in the evidence of any significance, and the evidence of each witness was objectively supportable by reference to the sequence of events and relevant documentation. Mindful of 'self-serving' statements of purpose (not being contemporaneous evidence of purpose), I nevertheless accept the evidence of each of the witnesses as truthful and compelling. Further, the oral evidence that I have referred to above was not challenged. Whilst I am not compelled to accept the evidence of a witness that is not challenged, I observe nothing in the other evidence referred to by the Commissioner that would lead me to not accept the evidence of the witnesses as called by the taxpayer.
193 The Commissioner's case, not based on a direct attack upon the evidence called by the taxpayers, was based instead on inferences to be drawn from certain documentation and the transactions themselves. I have accepted the evidence of the witnesses, and the documentation relied upon by the Commissioner does not contradict that evidence. It may be that the inferences to be drawn from the documentation referred to by the Commissioner are open, but such inferences are not so compelling as to support the Commissioner's case when read in light of the oral testimony. In any event, even accepting the Commissioner's view or characterisation of the evidence does not lead to a contrary conclusion as to the nature of the losses.
194 I make one other observation on the evidence of the witnesses, and this in no way reflects upon Counsel for the Commissioner who undoubtedly put the case as instructed. However, to some extent in the course of cross-examination, there was put to the witnesses, particularly Mr O'Halloran, imputations only half hinted at by the cross-examiner. These imputations were not followed up in any meaningful way. It brought to mind the conduct described by Alexander Pope in his 1734 poem "Epistle to Dr Arbuthnot" in which he referred to those "willing to wound, and yet afraid to strike". Despite this approach to cross-examination, in final submissions by the Commissioner, references were made to the oral evidence, with an invitation it not be believed. I have not accepted that invitation, and see no basis to do so.
195 In light of the clear view I have come to as to the nature of the events and scheme involved, this approach taken by the Commissioner is of no great importance. This is not a case where the oral evidence is incredible or unconvincing, or contradicted by other credible evidence, which may cause a Court not to accept evidence even if not the subject of cross-examination at all. To the extent there was an attempt to undermine Mr O'Halloran's evidence by inferences relied upon by the Commissioner, I prefer to rely upon the direct evidence of Mr O'Halloran. Significantly, the Commissioner did not attack the oral evidence directed to the intention or purpose of the relevant entities, but instead sought to argue that there was an indifference to profit, and a focus on proceeds from the divestment programme. The Commissioner sought to rely upon a number of factors in support of this conclusion. However, even accepting that there was a focus on proceeds, as I have said already, this does not preclude the simultaneous existence of a purpose of making a profit or gain.
196 Further, even accepting that there was a purpose of acquiring some businesses and a separate purpose of disposing of others, these purposes were not in conflict, and would be equally significant purposes in the actual transactions that went ahead. I do not consider that the proper characterisation is to view the divestment of some of the Southcorp businesses as merely being an integral part of a wider scheme for the acquisition of synergistic business. Undoubtedly the Visy Group did proceed to acquire the whole of the packaging business, and this was done in part to expand and strengthen then the capital structure of the Visy Group. However, equally significantly, the intent and purpose of the scheme was to divest some of the businesses that were not wanted. This was doing more than realising an asset in an enterprising way: see eg Steinberg v Federal Commissioner of Taxation (1975) 134 CLR 640 at 709-10 as per Stephen J. I do not see the acquisition as being on a capital account as it has sought to be characterised by the Commissioner: see eg Sun Newspapers Ltd v Federal Commissioner of Taxation (1938) 61 CLR 337 at 363-364 per Dixon J; Hallstroms Pty Ltd v Commissioner of Taxation (1946) 72 CLR 634 at 648 per Dixon J; Federal Commissioner of Taxation v Citylink Melbourne Limited (2006) 228 CLR 1 at 43 per Crennan J; and Macquarie Finance Ltd v Commissioner of Taxation (2005) 146 FCR 77, 106-107 per French J (as his Honour then was).
197 From a practical and business point of view, the purchase of the businesses that were ultimately divested, whilst facilitating the purchase of all the Southcorp businesses, also enabled the opportunity for profit upon divestment.
198 I say opportunity for profit, because when considering various options, an entity may not know which one will ultimately be to its commercial advantage. A participant in business can only rely upon his or her own judgement, sometimes based upon external advice. It may be, as is the nature of business, the plan of action set in motion does not achieve the desired result. This does not mean, however, that the entity putting in place that plan of action did not have an intention to achieve that desired result. The various witnesses called by the taxpayers in these proceedings were experienced businessmen, and gave evidence as to their opinions and views over the relevant period, and explained the opportunity for profit they sought to take advantage of at the time.
199 In these circumstances, I have proceeded to consider the issues before the Court relying upon the evidence of those who were actively and directly involved in the various events that occurred, based upon what the witnesses have said as to their opinions at the relevant time. It should also be noted that the Commissioner did not suggest to any witness that they did not undertake the tasks, or hold the opinions, they described in their evidence.
200 I then turn to identifying the directing minds for determining the intention and purpose in entering into the relevant transactions of the relevant corporate entities, namely, VIA, VPH and VPO.
201 In Whitfords Beach (1982) 150 CLR 355 at 370, Gibbs CJ set out orthodox principles by which a company's purpose can be established. Gibbs CJ said:
… [i]n deciding whether what was done was an operation of business, it is relevant to consider the purpose with which the taxpayer acted, and, since the taxpayer is a company, the purposes of those who control it are its purposes. In Ruhamah Property Co. Ltd. v. Federal Commissioner of Taxation (1928) 41 C.L.R. 148 the majority of the Court regarded as important, if not decisive, the purposes with which the shareholders and directors of the company acted, although Isaacs J., who dissented, thought it erroneous to consider a company merely as machinery for carrying out individual purposes ((1928) 41 C.L.R., at p.p. 160, 162, 166). However, in my opinion Isaacs J. took too rigid a view of the effect of Salomon v. Salomon & Co. [1897] AC 22 if he thought that in determining the purpose with which a company acted it was not permissible to have regard to the intentions of the directors who controlled it. In the present case, the three companies which became the shareholders, or the two which became the managers (it matters not which), represented the directing mind and will of the taxpayer and controlled what it did, and their state of mind was the state of mind of the taxpayer: H. L. Bolton (Engineering) Co. Ltd. v. T. J. Graham & Sons Ltd. [1957] 1 Q.B. 159, at p. 172, cited in Tesco Supermarkets Ltd. v. Nattrass [1972] A.C. 153, at p.p. 171, 187; and see Bernard Elsey Pty. Ltd. v. Federal Commissioner of Taxation (1969) 121 CLR 119, at p. 121.
202 More recently, in GE Capital Finance Australasia Pty Ltd v Commissioner of Taxation [2011] FCA 849, Gordon J held that a senior executive had implied authority, by reason of his office, to relevantly make decisions on behalf of a company: see [63] to [65].
203 It may well be that in certain circumstances it is the mind of a particular director that is to be treated as the directing mind and will of a company, but this is not necessarily so as a matter of law: see eg Tesco Supermarkets Ltd v Nattrass [1972] AC 153 at 170-171 (per Lord Reid) and at 187 (per Viscount Dilhorne); Smorgon v Australia and New Zealand Banking Group Ltd (1976) 134 CLR 475 at 482-3.
204 The directing minds in the present circumstances comprised a group of senior executives of the Visy Group who relevantly received advice, considered options, analysed data, and made the key decisions relating to the acquisition (and ultimate sale) of businesses from Southcorp, leading up the acquisition of the relevant shares on 31 January 2001. The evidence discloses that the key members of that group comprised Messrs Pratt, Geminder, Byrd and O'Halloran. Other than Mr Pratt, who was deceased by the time of trial, each of these key members gave evidence and was cross-examined. As I have said, I have accepted their evidence.
205 As previously outlined, Mr O'Halloran was the Group Finance Director for the Pratt Group with responsibility for "all of the group's financial matters". He was a member of the "bid team", and was relevantly responsible for putting together the "due diligence team", and for the "data room and due diligence of Southcorp's financial information". He was also responsible for setting up the companies to be used to complete the Procurement Agreement. He was a critical member of the group of senior executives who relevantly made decisions about the transactions entered into to sell the unwanted Southcorp businesses.
206 Mr Geminder was at the time a director of each of VIA, VPH and VPO. The other directors were Mr Pratt, now deceased, and Mrs Pratt. He was asked by Mr Pratt "to be closely involved with the evaluation of the assets and any bid for the assets" and was appointed "the leader of the bid team". For these reasons, Mr Geminder's evidence about his objectives, expectations, purposes and intentions may be attributable to each of VIA, VPH and VPO.
207 Mr Byrd was also a member of the "bid team". He was "heavily involved in the financial due diligence of the transaction" including "interrogating the financial statements and trying to get an idea of what the businesses were worth". He was a "key decision maker in determining the purchase price" together with Messrs Geminder and O'Halloran.
208 I accept that these individuals were the relevant controlling minds of each of the relevant companies for the purposes of developing the common scheme of the Visy Group; establishing and directing the various companies for the purposes of acquisition and sale of particular Southcorp businesses; determining the expectation of profit on the sale of these businesses; and ascertaining the likely value of these businesses.
209 The only other person identified by the Commissioner as a possible controller was Mr Pratt himself. I do not consider the evidence supports the view that he acted "alone". Rather, the evidence supports a finding that members of the bid team performed a variety of roles in the acquisition and subsequent divestment of the Southcorp businesses. As Mr O'Halloran said in cross-examination, "Mr Pratt was part of the team, he knew what was going on, we knew what he was doing". There can be no suggestion that Mr Pratt's expectations and objectives were different to those of Messrs O'Halloran, Geminder and Byrd. I accept, however, that Mr Pratt obviously reached the in principle agreement and agreed the price of $818 million with Southcorp. However, it is unreal to conclude from this, in light of the involvement of Messrs Geminder, O'Halloran and Byrd, that Mr Pratt "acted alone in entering into the in principle agreement". Where Messrs Geminder, O'Halloran and Byrd gave evidence in their affidavits that Mr Pratt subsequently told them he had "done the deal", that must be read in the context of their prior involvement, and that Mr Pratt had agreed the final price of $818 million on the basis that Southcorp did not share any of the risk or upside of the divestments. I consider (to the extent it is relevant) that Mr Pratt shared the same purpose as Messrs Geminder, O'Halloran and Byrd in entering into the in principle agreement.
210 Further, I do not consider there to be any disconformity between a wider "Visy" purpose, as against the purpose of any of VIA, VPH and VPO as individual entities.
211 VIA and VPH were in existence on 20 November 2000; and were parties to the Procurement Agreement concluded on that date. The Procurement Agreement contemplated a mechanism whereby individual contracts for the sale of particular businesses would be used. As has previously been considered in these reasons for judgment, Mr O'Halloran said that he arranged for separate companies to be established to buy each of the businesses "to accommodate the various ways in which purchasers may want to buy the assets we were to sell".
212 VPO existed as a shelf company on 20 November 2000, but was only relevantly acquired in December 2000. This was after the entry into the Procurement Agreement. The guiding minds of VPO were the same as those of the other entities - namely, Messrs Geminder, Byrd and O'Halloran.
213 A party may adopt a profit-making scheme, arrangement or plan which has already commenced (or such a scheme can be entered into on behalf of a party): see eg Steinberg (1975) 134 CLR 640 at 716-717 per Stephen J. Here, the Procurement Agreement was part of the wider scheme to divest businesses, and the guiding minds of Visy remained constant and in control of each relevant corporate entity at all relevant times. VPO became part of the implementation of the arrangements set out in the Procurement Agreement, and in this way could readily have attributed to it the same purpose or intention as the other entities and Visy itself. I say this because of the role of each of Messrs O'Halloran, Geminder and Byrd throughout the whole period up to 31 January 2001. The principal persons involved in the scheme remained constant throughout, much like the scheme itself basically remained constant leading up to the ultimate acquisition on 31 January 2001.
214 From the time of its incorporation, VPO was effectively required to carry out the purpose and intention earlier put in place as evidenced by (at least) the Procurement Agreement. There has been no suggestion that this was not permissible under applicable legislation or general law. Even if the reality was that as of 31 January 2001, no profit could be made by VPO as a separate entity, VPO had purchased the shares with the imputed intention and purpose of making a profit under the scheme it became part of.
215 In respect of VIA and VPH, the Commissioner then argued that those entities abandoned any profit-making scheme before realising their loss on the disposal of their shares.
216 In my view, I do not consider that the intention to divest for a profit was abandoned by VIA or VPH (or for that matter, by VPO), before the relevant sales which led to the 'core' losses. The evidence does not suggest, contrary to the submissions of the Commissioner, that the intention was abandoned when the profit forecasts declined, or when the SSB retainer was terminated, or when there was a disposal of the Industrial Packaging businesses to Mr Geminder and a Westpac subsidiary.
217 The decline in the profit forecasts did not, as far as the relevant entities were concerned, impact on the minds of Messrs O'Halloran, Geminder and Byrd. Their focus remained constantly on profit. They were committed to the scheme being fulfilled.
218 The fact that the SSB retainer was terminated does not indicate abandonment of either the requisite purpose or intention of profit-making, or of the relevant scheme or transactions themselves. The manner in which the divestment transactions were brought to fruition did not involve SSB. SSB was not required for the divestment scheme to be implemented. The SSB retainer was terminated because SSB was not performing in undertaking the task of divestment.
219 Similarly, the sale of certain divestment businesses to a different and independent company (involving Mr Geminder) and to a Westpac subsidiary (as joint venturers) does not indicate abandonment of the intention to sell at a profit. Consideration of other options for sale, including different purchasers, does not demonstrate abandonment of the main elements of the scheme contemplated.
220 In my view, none of the events relied upon by the Commissioner support the contention that supervening events of the type considered by Stephen J in Steinberg (1975) 134 CLR 640 at 714 in fact occurred to demonstrate abandonment.
221 Instead, the evidence (involving that of Messrs O'Halloran, Geminder and Byrd) indicates a continuum of conduct, all directed towards the successful and profitable sale of the businesses to be divested. It may be with the benefit of hindsight that endeavour in respect of some of the businesses was doomed, or it can be concluded there was unlikely to be a profit depending on market activity. But this does not mean that there was no continuation of the scheme put in place, at the very latest in place by 20 November 2000. It is not a matter of looking back now to see whether profits (modest or otherwise) would have been possible. The Court needs to determine whether there was an intention to make a profit or gain at the relevant time, and whether there was any abandonment of that intention by the relevant controlling minds.
222 Of course, the initial focus must be upon VIA, VPH and VPO, and the time VIA, VPH and VPO subscribed for the shares, namely 31 January 2001. I will return to the issue of the relevant time later in these reasons.
223 However, there is another question that needs to be addressed. For the taxpayers to succeed it must also be shown that, looking at each of VIA, VPH and VPO, the required nexus existed between the claimed losses and the transactions by which assessable income was sought to be earned.
224 If one characterises the relevant transactions in this inquiry as simply being the isolated subscription for shares by VIA, VPH and VPO on 31 January 2001, devoid of context, it may be that such nexus does not exist. However, this is to focus on this aspect of the scheme too narrowly, and in my view, in a way that is contrary to the evidence.
225 The facts speak for themselves to demonstrate the context in which the share transactions occurred on 31 January 2001. However, a number of salient features warrant mention. The controlling minds of the various participants remained constant throughout, as I have already mentioned. In the period from the July 2000 meeting in Chicago to 10 August 2000, when there was indecision as to purchasing strategy, the key executives of Visy involved in the acquisition (and the manner in which an acquisition would be structured) were Messrs Geminder, Byrd and O'Halloran. At or shortly after the SSB presentation when the 'buy and divest' strategy was adopted, the key Visy executives involved in decision-making were Messrs Geminder, Byrd and O'Halloran, with Mr Pratt being aware of and in agreement with the buy and divest strategy. The 18 August 2000 offer to Southcorp, by which Visy companies would participate in the proceeds of sale of Southcorp businesses and thereby profit, was formulated with the direct involvement of Messrs Geminder, Byrd and O'Halloran. That offer was rejected. A different transaction was agreed in principle by Mr Pratt on or about 28 August 2000. It ultimately transpired that there was a mismatch in understanding of what that transaction entailed. Southcorp appears to have understood the transaction as a share sale transaction, whilst Visy understood it as an asset sale transaction. That difference in understanding was resolved in a two-part process that involved Messrs Geminder, O'Halloran and Kraehe. Upon an increase in the aggregate purchase price by $10 million, with Southcorp having the primary right to allocate the value of goodwill to the businesses being sold, an asset sale structure was agreed. This process involved Messrs Geminder and O'Halloran on behalf of the Visy companies.
226 The evidence shows that the scheme and profit-making purposes or intentions of these controlling minds were developing to 20 November 2000, and that purpose or intention continued through to the time when the shares in VFL, VFLH and VIPH were purchased (and sold). During July and early August 2000, acquisition strategies were discussed and formulated. They matured following the SSB presentation on 10 August 2000 when Visy was advised that the businesses were readily saleable at values reflected in the EBITDA multiples set out in the SSB presentation. They were manifest in the profit-sharing arrangements detailed in the 18 August 2000 offer to Southcorp, and were the subject of review by Mr O'Halloran when purchase price allocations were received from Southcorp.
227 We then come to 20 November 2000. By reason of the entry into the Procurement Agreement, there arose a legally binding commitment to purchase the Southcorp businesses. The Procurement Agreement set out the process primarily as follows:
(1) by cl 4.1 Southcorp agreed to procure the "Associated Vendors" to sell, and Visy agreed to procure the "Purchasers" to buy the "Packaging Business";
(2) the "Packaging Business" included the Films & Laminations business and the Industrial Packaging businesses (Steel Drums, Tubes and Rigid Plastics): cl 1.3;
(3) "Purchasers" was relevantly defined to refer to a wholly-owned subsidiary of Visy: cl 1.1; and
(4) the parties agreed that the sales and purchases were to be made under separate agreements, each involving a separate Purchaser: cl 1.5.
228 So VPH covenanted to procure that purchasers (as defined) would purchase the Southcorp packaging businesses and that is what happened: companies wholly-owned by Visy Group companies purchased the Southcorp packaging businesses. The corporate ownership structure that was put in place to facilitate this was at the direction of Mr O'Halloran, who wanted to facilitate realisation options allowing potential purchasers the flexibility in the manner in which businesses could be acquired. Allowing special purpose companies to purchase discrete businesses allowed realisation of businesses at a business sale level and at a company level by selling shares in the company that acquired the business.
229 Therefore, on 20 November 2000, the parties had committed to an unconditional contract. From a commercial and legal perspective, there was a commitment to a purchase and a price that was subject to alteration only for movements in working capital and depreciation and that would not otherwise alter, irrespective of the performance of the businesses from that date onwards.
230 The scheme continued to be implemented, but necessarily in accordance with the terms of the Procurement Agreement. Events that occurred after that time bear out the unconditional nature of the commitments made and the continuation of the scheme to realise the divestment businesses. In December 2000 difficulties were encountered. Nevertheless, work continued in marketing the divestment businesses, without immediate success and ultimately without any success in achieving the values that had been expected. Delays occurred, but only due to marketing difficulties and other vicissitudes of the commercial environment.
231 With this context in place I find that the relevant nexus did exist between the losses incurred and the earning of assessable income, and the relevant intention or purpose was to make a profit.
232 Finally, I note that there was some debate concerning the time for ascertaining the relevant purpose or intention. The time for determining the existence of a profit-making purpose is when the relevant transaction or transactions were entered into, which in these proceedings was 31 January 2001. As Gordon J said in Visy Industries USA Pty Ltd v Commissioner of Taxation (2011) 284 ALR 455; [2011] FCA 1065 at [78]:
It is well established that a gain from a transaction will be assessable as ordinary income under s 6-5 of the 1997 Act if it was realised in an isolated business operation or commercial transaction in circumstances in which the taxpayer, at the time it engaged in the transaction, had the intention or purpose of making the gain: Westfield Ltd v Federal Commissioner of Taxation (1991) 28 FCR 333; 99 ALR 510 (Westfield); Federal Commissioner of Taxation v Cooling (1990) 22 FCR 42; 94 ALR 121 (Cooling); Federal Commissioner of Taxation v Myer Emporium Ltd (1987) 163 CLR 199; 71 ALR 28 (Myer Emporium) and Federal Commissioner of Taxation v Whitford's Beach Pty Ltd (1982) 150 CLR 355; 39 ALR 521.
233 However, one cannot look at the events on this date out of context. As previously explained, the subscription for shares was but one step in a wider scheme whereby the Visy Group purchased discrete businesses for the purposes of subsequent profitable disposition. The divestment programme was organised much earlier than 31 January 2001. Even though neither VPH nor VPO was originally part of this programme (assuming its genesis in August 2000), each became part of it later. This is apparent from the facts that I have found.
234 I am again mindful of the danger in making references to schemes and plans, but do so only to put the transactions that occurred on 31 January 2001 in context. By way of analogy only, and for the purpose of context, the following judicial observations are relevant. There is no requirement for the scheme to have been delineated in all of its eventual detail for it to be able to be concluded that such a scheme exists. A sufficient scheme will be present even if only a general, plan or expectation or intention has been formed. As Gibbs J (as he then was) said in Steinberg (1975) 134 CLR 640 at 699-700:
I am in agreement with the view expressed by Mason J. that "it is not an essential element of a profit-making scheme in s. 26(a) that every step which culminates in the making of a profit should be planned or foreseen before the scheme is put into operation". Schemes may be precise or vague; every detail may be arranged in advance, or the working out of the plan may be left for decision in the light of circumstances as they arise. It is no objection to a plan that it allows room for manoeuvre. When property is bought with the purpose of making a profit in the easiest or most advantageous way that may present itself, and the taxpayer adopts "one of the many alternatives" that his plan leaves open, thereby returning himself a profit, he will rightly be said to be carrying out a profit-making scheme: cf. Premier Automatic Ticket Issuers Ltd. v. Federal Commissioner of Taxation (1933) 50 C.L.R. 268, at p. 300; Buckland v. Commissioner of Taxation (1960) 34 A.L.J.R., at p. 62; [1960] A.L.R., at p.p. 602-603; 12 A.T.D., at p. 169."
235 I observe that in Steinberg, the Court was willing to find a profit-making scheme notwithstanding that the asset acquired and the asset sold differed. I do not consider the fact that the taxpayer there acquired one asset (shares) and sold another (land) after distribution in specie of the assets of the company distinguishes that case from the present as a matter of legal principle. Once the profit-making intention has been found to exist in each of the relevant entities (VIA, VPH and VPO), being the entities which acquired and disposed of shares, then the conclusion I have reached follows. The scheme of the Visy Group may well have been to acquire assets and the scheme may well have been that of the Visy Group. However, this does not mean that each of VIA, VPH and VPO, on the facts as I have found them, is not also to be regarded as having had the same purpose.
236 Each company within the Visy Group (working together) sought to make a profit in the "easiest or most advantageous way" by using newly established companies to buy discrete businesses. This was the common scheme adopted or to be adopted by each participant.
237 Whilst the actual transactions which must be considered involved VIA, VPH and VPO and occurred on 31 January 2001, the true nature of the scheme and purpose are seen from an examination of the entry into the Procurement Agreement on 20 November 2000, whilst still having regard to all the events leading up to that date. The Procurement Agreement did not come out of nowhere. Nor did the transactions that occurred on 31 January 2001.
238 It is necessary to look to the whole factual matrix in which a transaction occurs. This approach was expressed by Hill J in Cooling (1990) 22 FCR 42 at 53 (Lockhart and Gummow JJ agreeing on this issue) as follows:
This [the Duke of Westminster doctrine] however does not mean that in determining the legal effect of a contract between parties (and therefore the characterisation of the payment made under it as being income or capital), regard may not be had to the whole factual matrix of which the contract forms part.
..
When one looks at the entire context in which the payment was made including the interrelationship between the firm and Bengil (the latter being but the alter ego of the former), his Honour was in my view entitled to find as he did that the payment was an incentive to the firm to cause it to move rather than a payment for services to be rendered by the firm. This being the case, the character of the payment as income is not to be determined by focusing upon the words of the letter of 29 November to the exclusion of all the circumstances surrounding the payment which provide the real context in which the task of characterisation is to be assayed. In my view, his Honour was not in error in considering what his Honour saw as "the reality of the situation", namely that the payment was made so that the firm would move to Comalco House and that it was made independently of the entity which formally took over the lease.
239 Put another way, the Court must consider the whole business context of what has occurred: see eg BP Australia Ltd v Federal Commissioner of Taxation (1965) 112 CLR 386 at 399.