er . a - oe a er - wee - - CATCHWORDS INCOME TAX - Leasehold interests - Claim for deduction in respect of amortisation of improvements - Lease entered into before 22 October 1964 - Whether consent of lessor to the making of the improvements was given in the lease itself - Whether lessor agreed in the lease to consent to the improvements. Income Tax Assessment Act 1936 ss. 83AA(2), 87, 88. Kosciusko State Park Act 1944 (N.S.W.)ss.4, 5, 10,11. G.J. Coles and Coy. Limited v. Federal Commissioner of Taxation (1975) 132 C.L.R. 242 referred to. BOWEN Cd, TOOHEY and WILCOX Ju. 13 DECEMBER 1985 SYDNEY COMMISSIONER OF TAXATION V KOSCIUSKO THREDBO PTY LIMITED IN THE FEDERAL COURT OF AUSTRALIA ) NEW SOUTH WALES DISTRICT REGISTRY ) G447 of 1984 GENERAL DIVISION ) BETWEEN : THE COMMTSSTONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA Appellant AND: KOSCIUSKO THREDBO PIV. LIMITED Respondent BETWEEN : KOSCIUSKO THREDBO PTY. LIMITED Cross-Appellant AND: THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA Cross-Respondent JUDGES MAKING THE ORDERS: BOWEN C.J., TOOHEY and WILCOX JJ. DATE OF ORDERS: 18 DECEMBER 1985 WHERE MADE: SYDNEY MINUTE OF ORDERS: THE COURT HEREBY ORDERS THAT: 1. The appeal of the Commissioner of Taxation be allowed. 2. The order of the Supreme Court of New South Wales in matter No. 691 of 1982 be amended: {a) by omitting therefrom sub paragraph (a) of paragraph 1; (b) by omitting therefrom paragraph 2; and (c) by substituting therein new paragraphs 2 and 3 reading as follow: "2. The Respondent pay the Appellant's costs incurred in relation to so much of the appeal as concerned the claims by the Appellant in relation to which the Appellant has been successful. 3. The Appellant pay the Respondents' costs incurred in relation to so much of the appeal as concerned the claims by the Appellant in relation to which the Appellant has not been successful." 3. The respondent Kosciusko Thredbo Pty Limited pay to the appellant Commissioner of Taxation his costs of the appeal. 4. The cross appeal by Kosciusko Thredbo Pty Limited be dismissed with no order as to costs. NOTE: Settlement and entry of orders is dealt with in order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES REGISTRY GENERAL DIVISION BETWEEN BETWEEN ; re t THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF' AUSTRALIA Appellant KOSCIUSKO THREDBO PTY. LIMITED Respondent KOSCIUSKO THREDBO PTY. LIMITED Cross-Appellant THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALTA Cross-Respondent MINUTE OF ORDERS JUDGES MAKING ORDERS: BOWEN Cd, TOOHEY AND WILCOX JJ. DATE OF ORDERS: 18 DECEMBER 1985 WHERE MADE: SYDNEY THE COURT HEREBY ORDERS THAT: 1. The appeal of the Commissioner of Taxation be allowed. 2. The order of the Supreme Court of New South Wales in matter No. 729 of 1982 be amended: a) by omitting therefrom paragraph 2; b) by omitting therefrom sub-paragraph (a) of paragraph 3; c) by omitting therefrom sub-paragraph (a) of paragraph 4 and substituting therefor: "(a) reducing the taxable income by $2121 being the claim for amortisation of preliminary costs of subdivision works in connection with the Western Subdivision". d) by omitting therefrom paragraph 5; and e) by substituting therein new paragraphs 5 and 6 as follows: "S, The Respondent pay the Appellant's costs incurred in relation to so much of the appeal as concerned the claims by the Appellant in relation to which the Appellant has been successful. 6. The Appellant pay the Respondent's costs incurred in relation to so much of the appeal as concerned the claims of the Appellant in relation to which the Appellant has not been successful." 3. The respondent Kosciusko Thredbo Pty Limited pay to the appellant Commissioner of Taxation his costs of the appeal. 4. The cross-appeal by Kosciusko Thredbo Pty Limited be dismissed with no order as to costs. NOTE: settlement and entry of orders is dealt with in order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA ) ) NEW SOUTH WALES DISTRICT REGISTRY ) No. G447 of 1984 ) No. G448 of 1984 ) GENERAL DIVISION 'ON_APPEAL FROM THE SUPREME COURT OF NEW SOUTH WALES BETWEEN: THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA Applicant AND: KOSCIUSKO THREDBO PTY, LIMITED Respondent BETWEEN : KOSCIUSKO THREDBO PIY. LIMITED Cross-Appellant AND: THE COMMISSIONER OF TAXATION OF HE COMMONWEALTH OF AUSTRALIA Cross-Respondent CORAM: Bowen C.d., Toohey and Wilcox JJ. DATED: 18 December 1985 REASONS FOR JUDGMENT BOWEN C.J: The Commissioner of Taxation ("Commissioner") appeals against the decision of the Supreme Court of New South Wales in two matters which concern tax payable by Kosciusko Thredbo Pty. Limited ("taxpayer") in respect of the income years ended 30 June 1978, 1979, 1980 and 1981. The matters were heard together in the Court below and before us. The taxpayer cross-appealed in both matters where 1t was held that premiums received by the taxpayer constituted gross income within the meaning of sub-s.25(1) of the Income Tax Assessment Act 1936 ("the Act"). These cross-appeals were not pursued. It was agreed they should be dismissed with no order as to costs. The facts and the relevant provisions of the Act are set forth in the reasons for judgment of Toohey and Wilcox JJ. I shall not repeat them except so far as may be necessary to explain my reasons. The first question concerns the application of para. 88(2)(c) and para. 83AA (4)(a) of the Act. The taxpayer in each of the years in question was a lessee of land used for the purpose of producing assessable income and incurred expenditure in making improvements not subject to tenant rights. The question is whether such improvements were made with the written consent of the lessor given on or before 22 October 1964. The requirement that improvements in order to qualify must be made with the written consent of the lessor 1s related to inclusion in the assessable income of the lessor of a proportionate part of the value of the improvements spread over the term pursuant to s.87. Sections 87 and 88 operating together were in the ordinary case substantially though not precicely neutral so far as tax revenue was concerned. In the present case this was not so because the lessor was the State Minister for Lands and he was not liable for the tax. In phasing out the provisions of ss.87 and 88, the date 22 October 1964 was adopted in s.83AA as the date of transition. For a written consent to be sufficient it must cover the improvements in respect of which the expenditure 1s claimed to be deducted by the lessee. In fairness to the lessor, who will normally be taxed under s.87 on the value of such improvements, the requirement that he has consented to the making of them must be seen to be satisfied. On a first reading of sub-s.88(2), having regard to the reference in para.(b) to "improvements he was required to make under the lease, one might assume that para.(c) in referring to the "written consent of the lessor" was referring to a written consent outside the lease. However, the lease 1s in writing. If it contains a consent to the making of certain improvements as distinct from requiring them to be made, there would seem to be no reason for denying the deduction. Indeed, Jacobs J. in G.J. Coles Pty. Limited v Federal Commissioner of Taxation (1975) 132 CLR 242 at p.256 said: "Such a consent may appear in the lease itself or may appear in a separate written instrument." In the present case it is not suggested that prior to 22 October 1964 there was a separate written consent. The consent is' said to be in the terms of the lease. It is a lease dated 29 June 1962 between Mr. Compton the Minister of Lands being the Minister administering the Kosciusko State Park Act 1944-1952 (thereinafter called the "Lessor") of the first part The Kosciusko State Park Trust being the Trust constituted by the Kosciusko State Park Act 1944-1952 (thereinafter called the "Trust") of the second part and Kosciusko Thredbo Pty. Limited (therein called the "Lessee") of the third part whereby the Minister demised the premises to the Lessee for the term of 45 years from 29 June 1962 for the rent specified in the lease. Clause 2 concerns the present and future use of the lands. It provides: 2. The parties hereto declare and acknowledge that the demised premises include lands on which some facilities and amenities for tourists and visitors to the Park have been provided and they include lands which are intended to be used by the lessee for the purpose of the erection thereon of accommodation hotels or accomodation houses and the provision thereon of further facilities and amenities for tourists and visitors and in particular (but without limiting the generality) for the purposes hereinafter more particularly defined." To speak of lands intended to be "used" by the lessee "for the purpose of the erection thereon of accommodation hotels" etc. may seem odd, but this and some of the other language in cl.2 appears to have been taken from sub-s.11(3) of the Kosciusko State Park a ' ' ¢ te La wa Act 1944 which conferred the power which the Minister was exercising in granting the lease. It is clear that cl.2 expresses the common intention of the parties to the lease. The words used would in general terms cover the kind of improvements in question in these appeals. The words are not antithetical to consent to the making of such improvements but neither are they an express consent. Sub-clauses 4(5)(6) and (7) are important. They are as follows: 4. (5) The lessee shall not (without the written consent of the Trust) use the demised premises otherwise than for any purposes provided for in any covenant by the lessee herein contained or for the conduct of an Bipine and Summer Tourist Resort and Village or for purposes reasonably incidental thereto as hereinafter provided including the sale of liquor. (6) Purposes incidental to the aforesaid use of the demised premises by the lessee are (a) Hotels Motels Restaurants Boarding and Residential Establishments and holiday premises, {b) Residential Clubs (provided always that the constitution of any such Club shall first be approved in writing by the Trust). {c) Residences for persons bona fide permanently employed or engaged in business n the demised premises and for their families. {d) Shops, stores, garages, service stations, parking areas and other necessary or desirable business and commercial premises. (e) Caravan Parks and camping areas. (f) Provision for transport of and transport facilities for members of the public and goods. (g) Provision of adequate water, electricity, sewerage, drainage and other utility services. (h) Provision of facilities for ski-ing, skating, golf, bowls, tennis, squash, racquets, swimming, riding, fishing and for such other sports and games appropriate to the Park as the Trust may in writing approve and for instruction in all such sports and games as aforesaid and the supply or hire of all equipment therefor. (1) Ski tows, Ski lifts, passenger carrying ropeways and other appropriate means of uphill transport. (9) Provision of such other amenities facilities and services for the public as the Trust may from time to time in writing approve. (7) The lessee may in connection with any use improvement or development of the demised premises authorised by these presents and subject as hereinafter appearing with the consent in writing of the Trust: (a) Sub-divide the demised premises. (b) Provide roads rights of way paths and trials through the demised premises. (c) Clear and groom trails. (d) Lay erect use maintain replace and remove on and through the demised premises dams reservoir pipes mains sewers drains wires lines and other plant buildings and equipment in relation to water electricity sewerage drainage road and other services or facilities. {e) Enter into Agreements with any public authority for the supply of any of the foregoing or similar services. PROVIDED ALWAYS that the consent of the Trust as aforesaid shall not be required to such of the foregoing as relate to necessary or desirable maintenance repair or replacement of the demised premises or any services or facilities thereof or as relate to the normal use operation or enjoyment of improvements and facilities existnig from time to time and previously authorised or approved by the lessor or the Trust." The words in sub-cl.4(5) (the lessee shall not use the demised premises otherwise than for the specified purposes) come close to providing that the lessee shall use the demised premises for those purposes only, unless 1t obtains the written consent of the Trust. Certainly sub-cl.4(5) means that the lessee may use the premises for the specified purposes and may not (without consent) use them for any other purposes. Included in the "purposes reasonably incidental" in sub-cl.4(5) are the purposes set forth in sub-cl.4(6). The improvements in respect of which deductions were claimed for the income years ended 30 June 1978, 1979, 1980 and 1981 such as a new top station to the existing chair lift, a restaurant, a caravan park, staff accommodation, a hotel, a car park, shops and stores and the provision of water and sewerage services fell within the express words of one or more of the paragraphs of sub-cl.4(6). In addition the taxpayer claimed in respect of the year ended 30 June 1981 a small amount for landscaping pursuant to sub-cl.4(5) and preliminary costs of subdivision sub-cl.4(7). Under sub-cl.4(7) the lessee may with the consent in writing of the Trustee (see sub-cl.4(11)) do any of the things set forth in the lettered paragraphs "in connection with any..-improvement...of the demised premises authorised by these presents." The reference to "1mprovement...authorised by these presents" must, it seems to me, anclude reference to the improvements just mentioned in sub-clauses 4(5) and (6). The conclusion appears to be inescapable that they are "authorised improvements" -so far as the lease, that is, so far as the lessor and lessee are concerned. This is so notwithstanding the added requirement of the consent of the Trust. By sub-cl.4(9) the lessee covenants to commence and diligently proceed with "the works" mentioned in that sub-clause. These works also fall within the description of "1mprovements". However, they are not subject to the approval of the Trust presumably having been already approved, though the lessee in carrying out these works covenants to observe such directions in writing as may reasonably be given to it by the Trust. By sub-cl.4(10) the lessee "may" by way of "further improvement" of the demised premises but subject to the approval of the trust in regard to plans specifications and relevant details do certain things set forth in five lettered paragraphs. these might be called "authorized further improvements". Permission or consent is given by the lessor to the doing of them (subject to the consent of the Trust) as "further improvements", i.e. as improvements additional to those previously "authorised" by the lessor in the lease. It is argued for the Commissioner that a written consent to be effective for the purposes of sub-s.88(2) must be consent of the lessor to "specifically identified" improvements so that the expenditure incurred may be readily identified as having been incurred in respect of improvements made with the written consent of the lessor. Sub-section 88(2) is silent upon this point. I would agree that improvements for which a deduction is claimed under sub-s.88(2) must be identified by the consent in the sense that they are embraced by the description in the consent. The words in some cases may be specific even tied to plans and drawings; in other cases they may be general. There is no requirement in sub-s.88(2) that the improvements be "specifically" identified. It is enough if 1t can be said that the lessor has in writing consented to the improvements. Many improvements which the lessee, may or must, make under the lease involve obtaining the consent or are subject to the directions of the Trust. The terms of the lease concerning the requirement of the Trust's consent are set out aun sub-cl.4(11): -10- "(11) That neither the lessee nor any sub-lessee will construct nor permit to be constructed buildings or other improvements without the consent of the Trust provided always that as regards the lessee such consent shall not be required in respect of minor buildings or improvements necessary or desirable for the normal use operation or enjoyment of the demised premises and provided further that in any case where such consent should have but has not been obtained the lessee will comply with the reasonable requirements of the Trust as regards alteration or removal of any such buildings or improvement." It was argued for the Commissioner that on the true construction of the lease, it provides in effect that "the lessee may make such improvements as the Trust consents to." In other words the consent (implied by the lease) of the lessor was conditional upon, that is, did not become operative as a consent until the Trust had consented. It is said three Trust's consent was a condition precedent to the coming into effect of the lessor's (implied) consent. I cannot accept a construction of the lease which says it provides "the lessee may make such improvements as the Trust consents to." A lease which so provided would be much wider and quite different from the present lease. It would not he restricted to "authorised improvements" 1.e. those which the lessor has specified. The argument overlooks the difference in function performed by the Minister and the Trust. The Minister has responsibility for the administration of the Kosciusko State Park Act 1944-1952 andiais invested with power to grant leases under sub-s.11(3) of that Act for the purposes there stated. He -lli- has to decide upon the purpose for which he will grant the lease, the length of its term, the covenants and provisions to be contained in it, the identity and suitability of the lessee, the amount of rent and the way it is to be calculated. In the present case it will be noted that the Minister provided for an escalating scale of rent tied to calculations related to the improvements for which he was providing (by his decision) in the lease. The Trust in relation to the lease 1s concerned with other matters. It 1s constituted under the Kosciusko State Park Act and has the care, control and management of the Kosciusko State Park. It has responsibility for some environmental matters, It is concerned more with matters of detail. The Minister is himself a member of the Trust and Chairman of it. Regarding improvements the lessee would under this lease need the consent both of the lessor as to the matters with which he was concerned and also of the Trust. The terms of the lease were such as to record the consent of the lessor as to the general nature of the improvements. The approval of the Trust would, under the terms of the lease, have to be obtained as to detail. This does not mean the consent of the lessor was not complete. So far as his general consent was required it was given 1n the lease. It 1s not unusual in practice to find that in the case -12- of substantial improvements to be made with the lessor's cansent on demised premises it is necessary to obtain the approval of a local council or a planning authority. If the lessor's consent is subject to the lessee obtaining the approval of the council or authority this does not mean the lessor has not consented. It simply means that if the lessee cannot obtain the necessary approval of the third party the lessor's consent will not be of much use to him. But this 1s not to say that he does not have the lessor's consent. To state the matter in another way, if the third party an fact approves, the lessee may go ahead with his improvements. The question then is when did the lessor consent? When he gave his written consent subject to the lessee obtaining the approval of the third party or at the date when the third party gave its approval? It appears to me the date of the lessor's written consent is the date when he gave it, not the date when the third party gave approval. The latter is the date it could be fully acted upon, not the date the lessor's consent was given. In the result I am of opinion that the improvements in question in these appeals were made with the written consent of the lessor given before 22 October 1964. In the circumstances it 1s unnecessary to express a view on another argument based on para.83AA(4)(b) by which the taxpayer sought to uphold the judgment below. -13- The Commissioner also appealed on costs onthe basis that his Honour should have ordered the taxpayer to pay the Commissioner's costs in relation to an issue as to the taxability of premiums on leases granted by the taxpayer. On this issue the Commissioner was successful. This was a matter which lay in the discretion of the trial Judge. I am not persuaded that any error has been shown such as should lead us to interfere with the exercise of that discretion. In my opinion the appeal should be dismissed with costs and the cross-appeal should be dismissed with no order as_ to costs. er ee ree et eee Re ee te ak ee ne ree erie = ne ee IN THE FEDERAL COURT OF AUSTRALIA ) ) NEW SOUTH WALES DISTRICT REGISTRY ) Nos. G447 of 1984 ) G448 of 1984 ) GENERAL DIVISTON BETWEEN : THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA Appellant AND: KOSCIUSKO THREDBO PTY. LIMITED Respondent BETWEEN : KOSCIUSKO _THREDBO Pry. LIMITED Cross-Appellant AND: THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA Cross~-Respondent CORAM: BOWEN C.J., TOOHEY AND WILCOX JJ. DATE: 18 DECEMBER 1985 PLACE: SYDNEY REASONS FOR JUDGMENT TOOHEY AND WILCOX JJ.: Two appeals from the Supreme Court of New South Wales (Rogers J) have, by consent, been heard together. Although the litigation between the parties at an earlier stage raised other matters, the argument before us has related only to a single issue: the entitlement of the respondent, Kosciusko Thredbo Pty. Limited, to claim deductions from its taxable income in respect of the years ended 30 June 1978, 1979, 1980 and 1981 in relation to the amortisation of certain improvements made by the respondent upon land leased by it at Thredbo in the Snowy Mountains. The claim depends upon statutory provisions whose force is spent, except in residual cases. The question - which turns upon events which occurred over 20 years ago - is whether this is such a case. Part III of the Income Tax Assessment Act 1936 deals with liability to taxation. Division 4 of that Part (ss. 83 - 89) relates to leases. Sections 87 and 88 - which have stood substantially in their present form since the enactment of the legislation in 1936 - deal with the tax implications of leasehold improvements which are not subject to tenant rights. Section 87 provides that where such improvements "have been made upon any land by any person as consideration for the grant to him of a lease of that land. or by a lessee of the land who was required to make them under the provisions of the lease, or who made them with the written consent of the lessor", there shall be included in the lessor's assessable income of the year in which the improvements have been completed, and of each subsequent year during the life of the lease, an instalment of the estimated value to the lessor of such improvements as at the expiration of the lease. The section makes provision for the calculation of such instalments and for presently immaterial exceptions. an Aw bee me a i a er a eee a ad red Section 88(2) is a corollary of s. 87, looking at the matter from the lessee's point of view. That sub-section provides - "88.(2) Where a taxpayer, who in the year of income is a lessee of land used for the purpose of producing assessable income has, either before or after the commencement of the lease, incurred expenditure in making improvements not subject to tenant rights on that land, and such improvements - (a) have, under an agreement entered into after the commencement of this Act, been made as consideration for the grant to him of that lease; (b) are improvements which he was required to make under the provisions of that lease; or {c) have been made with the written consent of the lessor aiven after the commencement of this Act, a proportionate part of the amount of that expenditure arrived at by distributing that amount proportionately over the period of the lease unexpired at the date when the expenditure was incurred, shall be an allowable deduction. In calculating the deduction under this sub-section, expenditure in excess of the amount. if any, specified in the agreement for the lease, or in the lease, or in the lessor's consent, shail not be taken into account." Section 88(2) is subject to an exception contained in subs.(3) which is not relevant to the present appeals. The respondent is the lessee of land at Thredbo under a lease granted in 1962, which land is used for the purpose of producing assessable income. It incurred expenditure in making improvements not subject to tenant rights, which improvements it says were made with the consent of the lessor. It therefore claims to amortise, that is to deduct from its assessable income in subsequent years, a proportionate part of the expenditure incurred in making those improvements. However, it faces a difficulty caused by the insertion into the Act in 1964 of a section - s.83AA - which was designed to bring to an end the provisions of the Division relating to leases. For the purposes of that section, 22 October 1964 is a critical date. Thus s. 83AA(1) excludes the application of Division 4, subject to the section itself, other than to leases qranted before. or granted in pursuance of an agreement made before, 22 October 1964. Section 83AA(2) and (3) in effect limit the assignment and surrender provisions to transactions entered into before that day. Subsection (4), which is critical to these appeals, provides: "(4) Where, after 22 October 1964, improvements are made on land the subject of a lease with the written consent of the lessor of that land, sections 85, 87 and 88 do not apply in relation to those improvements unless - (a) the written consent was given on or before that date: or (b) the Commissioner is satisfied that, on or before that date, the lessor had agreed, whether absolutely or subject to conditions, to give that consent and the written consent was given with a period after that date that the Commissioner, on the joint application in writing of the lessor and the lessee made not later than 60 days from that date or within such further time as the Commissioner allows, has 4s ane approved (whether before or after the giving of the consent) as reasonable for the purposes of this sub-section." The improvements the subject of the amortisation claims in the relevant taxation vears were all made after 22 October 1964. However, the respondent refers to the exceptions contained in paras (a) and (b) of the sub-section, relying upon each of them in the alternative. The appellant, the Commissioner of Taxation, concedes that. to the extent that the reliance upon either paragraph is made good, the respondent is entitled to the deductions claimed. If not, the respondent concedes, the claims fail. The lands upon which the relevant improvements were erected are owned by the Crown in right of the State of New South Wales. At the date of the relevant lease those lands were included in an area which was reserved, under the Kosciusko State Park Act 1944 (NSW), for the Kosciusko State Park. The situation changed in 1967 when that Act was repealed and administration was vested in the National Parks and Wildlife Service pursuant to the National Parks and Wildlife Act 1967 (N.S.W.) but nothing turns on that fact. By s. 4 of the 1944 Act there was constituted the Kosciusko State Park Trust, consisting of the Minister - as ex officio chairman - and nine other members appointed by the Governor. Subject to the Act, the Trust had the care, control and management of the Park and was authorized to carry out any work in connection with its improvement, development and ws nF ne re ee ee Cee a ee eee ee - nee maintenance.(3.5). Section 10 of the Act provided that land within the Park should not be sold or leased or otherwise dealt with except as provided in the Act. Provision was made ins. 11(1) for snow leases - leases of grazing areas above the snowline - and permissive occupancies. The only other provision relating to leases was that contained in s. 11(3) which read as follows: "11.(3) The Minister may - (a) grant leases of land within the Kosciusko State Park for the purpose of - {i} the erection thereon of accommodation hotels or accommodation houses; (ii) the provision thereon of facilities and amenities for tourists and visitors; (b) grant leases of land within the Kosciusko State Park on which accommodation hotels or accommodation houses have been erected or facilities and amenities for tourists and visitors have been provided." The relevant lease is a deed dated 29 June 1962. The parties to that deed were the Minister for Lands for the State of New South Wales (the Minister then administering the Kosciusko State Park Act) as lessor, the Kosciusko State Park Trust and the present respondent, as lessee. The lease is lengthy and complex. It 1s necessary, for present purposes, to note only those provisions referred to in the argument before us. aA + wo a te eo, - a ee ee ey rae a ed - sme Clause 1 is an interpretation clause. It contains a general statement upon which the appellant places some reliance in relation to the intention of the parties: "ANY provision expressed or implied in this Deed requiring the consent or approval of the Minister the lessor or the Trust shall be deemed to be subject to a proviso that such consent or approval shall not be unreasonably withheld and to a further proviso that it shall not be deemed to be unreasonable for the Minister the Lessor or the Trust to withhold consent or approval to any action or requirement of the lessee which is inappropriate to the development of the Park." Clause 2 is curiously worded. It nominates as a purpose of the lease the erection. rather than the use, of accommodation hotels and houses and visitor facilities. The clause reads: "2. The parties hereto declare and acknowledge that the demised premises include lands on which some facilities and amenities for tourists and visitors to the Park have been provided and they include lands which are intended to be used by the lessee for the purpose of the erection thereon of accommodation hotels or accommodation houses and the provision thereon of further facilities and amenities for tourists and visitors and in particular (but without limiting the generality) for the purposes hereinafter more particularly defined." The singling out of the erection of accomodation as a purpose of use is, no doubt, because that is the language of the Kosciusko State Park Act: see ss.5, il. Clause 4 sets out lessee's covenants. They include sub-ci.{(5) as follows: "(S) The lessee shall not (without the written consent of the Trust) use the demised premises otherwise than for any purposes provided for in any covenant by the lessee herein contained or for the conduct of an Alpine and Summer Tourist Resort and Village or for purposes reasonably incidental thereto as hereinafter provided including the sale of liquor." Sub-clause (6) contains a list of "purposes incidental to the aforesaid use of the demised premises by the lessee". The sub-clause does not, in terms, contain any consent to the erection of improvements for those purposes. However, sub-cl. (7) does contain a consent in these terms: "(7) The lessee may in connection with any use improvement or development of the demised premises authorised by those presents and subject as hereinafter appearing with the consent in writing of the Trust:- (a) Sub-divide the demised premises. (b) Provide roads rights of way paths and trails through the demised premises. (c) Clear and groom trails. (d) Lay erect use maintain replace and remove on and through the demised premises dams reservoirs pipes mains sewers drains wires lines and other plant buildings and equipment in relation to water electricity sewerage drainage road and other services or facilities. (e) Enter into Agreements with any public authority for the supply of any of the foregoing or similar services." a heen nie oO On ere os wa i he ee er ar nota FS . ~ - ~ an Sub-clause (8) provides that all improvements, whether existing at the commencement of the lease or made under the lease - unless otherwise agreed - "shali belong to the lessor in right of the State of New South Wales." Sub-clause (9) casts upon the lessee an obligation to carry out certain works. The operative words of that sub-clause are: "(9) The lessee will at its own expense at the earliest practicable time commence and thereafter diligently proceed with and complete in a proper and workmanlike manner the works hereunder mentioned AND in so doing will observe such directions in writing as may reasonably be given to it by the Trust." Then follows a detailed list of works. Sub-clause (10) provides that "the lessee may by way of further improvement of the demised premises but subject to the approval of the Trust in regard to plans specifications and relevant details" construct certain earth works and recreational facilities. Sub-clause (11) provides: "(11)That neither the lessee nor any sub-lessee or licensee will construct nor permit to be constructed buildings or other improvements without the consent of the Trust provided always that as regards the lessee such consent shall not be required in respect of minor buildings or improvements necessary or desirable for the normal use operation or enjoyment of the demised premises and provided further that in any case where such consent should have but has not been obtained the lessee will comply with the reasonable requirements of the Trust as regards alteration or removal of any such buildings or improvements." 10. Following upon the execution of the lease, the respondent presented to the Trust, in July 1964, a master plan incorporating its proposals for the development of the demised area. This plan was discussed with the trustees at a site inspection and in about September or October of 1964 an amended plan was submitted. The chairman of the respondent discussed the plans with the trustees at a meeting on 30 October 1964 but the trustees resolved to defer further consideration of the plans until the next meeting of the Works and Finance Committee. The matter was considered again on 11 December 1964 when the trustees resolved to approve in principle the master plan - presumably in its amended form - but subject to final approval upon the submission of plans and specifications relating to each individual project. The respondent became aware of the introduction into the Income Tax Assessment Act of the then recently enacted s.83 AA. Although it took the position that para (a) applied to its case, it determined to take steps to bring itself within para (b). By a letter dated 1 March 1965 it sought from the Commissioner of Taxation an extension of time within which to make an application in terms of that paragraph. That extension was granted and on 23 March 1965 there was submitted to the Commissioner a letter, signed both by the Minister as lessor and by the respondent as lessee, which set out the above history. It stated that "the types of development" eee ee a ee ee ee ee ee san - - il. submitted in the July plan "are the subject of consent under the terms of the above-mentioned lease and were therefore approved in principle prior to 22nd October 1964 subject only to the approval of plans, specifications and relevant details by the... Trust. This consent is hereby confirmed". The letter referred to two enclosed schedules: Schedule A listing the improvements shown on the amended master plan and Schedule B being improvements not on that plan but "the subject of the lessor's consent being covered by the terms of clause 4 (6) and (7) of the document of lease, and were therefore also approved in principle prior to the 22nd October, 1964. This consent is hereby confirmed". The Commissioner responded to this letter on 21 April 1965 stating that "the joint application is accepted as satisfving the requirements of section 83AA (4)(b) only insofar as it related to the item (sic) shown on the master plan and particularised in Schedule A". The Commissioner has adhered to that approach, allowing claims for amortisation in relation to improvements which he considered to be accurately identified on the master plan and listed in Schedule A. He has disallowed claims in relation to other improvements. The improvements the subject of the present claims for amortisation are as follows: (a) For the year ended 30 June 1978: the cost of erection of three staff accommodation (b) (ce) (d) 12. lodges known as "Bimbadeen", "Bogong" and "Celesia" and preliminary costs in respect of the erection of visitor accommodation in Mowamba Place. Those buildings are claimed to have been built, or to have been intended to be built, pursuant to cl. 4(6) of the lease, that is for one or more of the listed incidental purposes of the lease. For the year ended 30 June 1979: the earlier items plus the cost of erection of a restaurant and two shops known as "Mowamba Stage 1" and a staff lodge known as "Byadbo". These buildings are claimed to have been built pursuant to cl. 4(6) of the lease. For the year ended 30 June 1980: the earlier items plus the cost of six shops and an apartment in Mowamba Stage 2 and the cost of constructing the Merritts Park Caravan Park. All these items are claimed to be covered by cl. 4(6) of the lease. For the year ended 30 June 1981: the earlier items plus further costs of the 13. Merritts Park Caravan Park, the cost of erecting the Black Sallees Restaurant and the Nastar Hut - both above the snowline - the cost of erecting visitor accommodation known as Thredbo Aipine Apartments, the cost of visitor and staff accommodation known as Merritts Park Cabins, together with preliminary costs for further cabins, the cost of certain site works - a car park, a road bridge and an exercise track - the cost of extensions to the valley ski terminal and associated works, the cost of increasing the capacity of the sewerage treatment works and of providing new water supply tanks; all of which works were claimed to have been carried out pursuant to cl. 4(6). In addition, the company Claimed a small item for landscaping pursuant to cl.4 (5) and for the preliminary costs of subdivisional works pursuant to cl. 4(7). The respondent claimed, in relation to some of these items, that they were specified in the master plan and in Schedule A to the letter of 23 March 1965 but the Commissioner was not satisfied in relation to these items and disallowed them all. 14. Rogers J. upheld the claim to amortise these improvements by reference to para (a) of s.83AA (4). Having reached that conclusion, he found it unnecessary to consider the alternative claim by the respondent that the case fell within para (b). Both paragraphs have been relied upon by the respondent in the argument before us. In relation to para (a), the respondent accepts that the confirmations of consent in the joint letter of 23 March 1965 cannot assist its case. The consents there given were too late. However, it contends that it did obtain consent before 22 October 1964 because the lessor granted his consent to the relevant improvements in the lease itself. The respondent argues that the purpose of the lease was to enable the respondent to develop and to operate a ski village containing facilities - including accommodation for visitors and for staff - and that, by the mere grant of the lease, the Minister evidenced his consent to the erection of such improvements for that purpose as the respondent should wish to construct and as the Trust should see fit to approve. The respondent submits that a consent falling within s. 83 AA(4)(a) need not be either specific or unconditional. Reliance 1s placed upon G.J. Coles and Coy. Limited v. Federal Commissioner of Taxation (1975) 132 C.L.R. 242, a case in which the High Court of Australia upheld the claim of a lessee to amortise under s.88(2) the total amount of its expenditure 15. upon improvements notwithstanding that this amount considerably exceeded the amount which it had covenanted to expend. The Commissioner, in that case, had allowed, as a deduction from assessable income, only an amount sufficient to amortise the amount ($150,000) referred to in the covenant. It is convenient, at the outset, to consider what was decided in G.J. Coles. The leading judgment in that case was given by Mason J., with whom Barwick C.J. and Gibbs J. agreed. Although the taxpayer then argued that the lessor had given written consent to the making of the improvements - in documents approving an assignment to the taxpayer of the lease - before 22 October 1964, Mason J. found it unnecessary to consider the claim under s. 88(2)(c). He held that the improvements fell within s.88(2)(b); that they were improvements which the taxpayer was "required to make under the provisions of that lease". At p. 254 his Honour said: "The appellant undertook to erect 'buildings to the value of not less than' $150,000, without reference to the amount of expenditure to be incurred. As the sole permitted use was for the purpose of a warehouse and general distribution depot, it followed that the building to be erected must necessarily conform to that character. The relevant requirement, then, was for the erection of a building suited to that purpose with a proviso that it should have a value not less than the amount specified. This requirement was satisfied once a buiiding of the requisite type was erected, so long as its value was $150,000 or more. The parties contemplated that its value might exceed this amount. Indeed, the inference is irrestible, having regard to the character of the buildings ee ee ed Tm ee AT ee ee et ee ee ee ee et net ' » 16. required to be erected, that the value would exceed this amount. That it did so does not alter the character of the building as a satisfaction of the lessor's requirement. To conclude otherwise would be to deny the appellant any part of the expenditure which it incurred. The essence of the matter is that the sub-section does not direct itself to the value of improvements made. Subject only to the qualification which arises from the last sentence of sub-s.(2), a provision which relates to expenditure in excess of an amount specified, par.(b) merely requires an identity between the improvements required and the improvements made. Consequently if by a lease the lessee covenants to build a dwelling-house (no value being specified) and he complies by erecting a house costing $50,000 he is entitled to a deduction in that amount. It would not be open to the Commissioner to reduce this figure on the ground that the lessee could comply with the covenant by building a less substantial dwelling-house for $25,000. The fact 1s that the expenditure of $50,000 would be incurred in making the improvement which was required to he made, the lessee having the power to decide how much will be expended." McTiernan J. dissented, holding that s. 88(2)(b) limited the available deductible expenditure to the amount required to be expended by the covenant of the lessee. Jacobs J., in essence, agreed with this view but he went on to consider the alternative claim that the case fell within s.88(2)(c). He upheld that claim by reference to the terms of the covenant itself, apparentiy sharing the view of Mason J. that there was an identity between the improvements referred to in that covenant and the improvements in fact made. At p. 256 his Honour said: ' '4 ry 17. "It must therefore be determined whether the improvements, in addition to being improvements which the lessee was required to make, were also improvements made with the written consent of the lessor. If they were, then no amount was specified as the expenditure which the lessee should or might make on improvements regarded as improvements to which written consent was given. The only amount specified was that which the lessee must expend in respect of improvements which it was required to make, and therefore the last sentence of s. 88(2) would not be applicable. The construction of the covenant which I have stated above leads me to the conclusion that by the written lease all the improvements were improvements made with the written consent of the lessor. That consent flows from the wide terms of the covenant whereby the lessee was required to make improvements. An obligation imposed on a lessee to make improvements implies as a corollary a consent on the part of the lessor that the lmprovements may be made." Jacobs J. expressed the view that a consent, for the purposes of s. 88(2)(c), "may appear in the lease itself or May appear in a separate written instrument". We respectfullv agree but, as the consent must be in writing, it will always be a matter of construction whether that writing constitutes a consent to the making of the relevant improvements. In that sense, the consent must be specific. To adapt the test applied by Mason J. to s. 88(2)(b), there must be an identity between the improvements the subject of consent and the improvements made. Any other approach would be unfair to taxpaying lessors who, by virtue of s. 87, suffer an addition to their taxable income of an amount calculated by reference to the value of those improvements. ep en ee et Bah en a ee ee Te ee ae nek oa - ween at rrr' 18. We accept the submission that it is not essential that the consent be unconditional. Lessors commonly require their lessees to obtain the prior approval of third parties, notably planning and building authorities, to improvements upon demised land. If the present respondent's claims are well founded, it does not matter that the consent of the Trust was required in relation to each particular building or work before construction could begin. The question is whether, as the respondent claims, the Minister, as lessor, gave his consent in the lease to the relevant buildings and works. Rogers J. answered this question favourably to the respondent by reference to what might, without disrespect, be called a broad approach. His Honour rejected a submission, made on behalf of the Commissioner, that the control of the Park was vested in the Trust and that the only relevant power of the Minister was to grant a lease pursuant to s. 11(3) of the Kosciusko State Park Act. His Honour said: "For the purpose of the grant of a lease, the owner, the Crown in the right of the State of New South Wales, was represented by the Minister. It is the right of a lessor to determine whether or not any building or improvement is to be erected on the demised premises. It 1s for the lessor and the lessee to agree whether, in the event that the buildings and improvements are erected, tenant rights are to obtain in respect of them. That is part of the package of rights adhering to a lessor. In my view it is only with respect to the detail of the specific structures and improvements to be erected that a legitimate field of operations is confided to the Trust by the Act and by the lease. 19. "There is no doubt that it was within the contemplation of the parties that extensive work should be carried out by the lessee in effecting improvements to the demised premises. This appears of necessity from clause 2 where it refers to the intention to erect accommodation hotels or accommodation houses and the provision of further facilities and amenities for tourists and visitors. The lease then requires the lessee to obtain the approval of the Trust to the plans and specifications, to some of the improvements (cl. 4(10)) and the consent of the Trust to buildings or other improvements generally (cl. 4(11)). Such approvals and consents are not in lieu of the consent of the lessor, they are additional to the qeneral consent of the lessor to the effecting of improvements at large within the demised premises. That consent is in my view to be spelt out from the general structure of the Deed and from the specific clauses to which I have adverted." We respectfully agree that the power granted to the Minister, by s. 11(3) of the Kosciusko State Park Act, to lease land within the Park for the purpose thereby specified carried with it the power to grant consent, in the lease itself, to the making by the lessee of particular improvements. In that sense, 1t 1s accurate to say that the determination of what building and improvements are to be erected "is part of the package of rights adhering to a lessor". But the question must always be whether in fact the lessor has exercised that right. There may be cases in which agreement has been reached as to the general purposes of the lease but in which the lessor desires to leave for later consideration - perhaps when more complete proposals are available - the desirable form of the improvements necessary to effect those purposes. In such a case the lessor would not 20. ordinarily grant his approval to the making of the improvements in the lease itself. By the lease he would require the lessee to submit the plans for his approval at a later stage. There may be cases in which the lessor thinks it more appropriate that the particular improvements be considered, on behalf of the interest which the lessor represents but not necessarily as his agent, by some third party. In such a case it would be natural for the lessor to impose a covenant prohibiting the lessee from carrying out those improvements until the approval of that third party was obtained. In the present case there was agreement between the Minister and the respondent as to the purposes for which the demised lands were to be used. At the date of the lease there were already some visitor facilities. They were intended to be used for that purpose by the lessee in the future. The parties also had in mind the augmentation of those facilities. Clause 2 spoke of an intention to use the demised lands "for the erection" - and, by implication, therafter the use - of various facilities. No doubt it would have been contrary to the common intention disclosed by this clause for the Trust to have refused all subsequent requests for its approval of particular buildings and works. But ¢cl.2 did not itself confer a consent to make any particular improvements; it simply assumed that they would be able to be made pursuant to other provisions in the lease. 21. The deed of lease is a carefully drafted document. The lease makes separate provision for four different categories of improvements: those which the lessee is obliged by the lease to effect (cl. 4(9)), specific improvements which the lease is permitted to effect, subject only to approval by the Trust of the particular details (cl. 4(10), improvements, generally described, which the lessee is permitted by the lease to effect subject to the approval of the Trust, in relation to principle as well as to detail (cl.4(7)), and those which are identified as relating to purposes for which the demised premises may lawfully be used and which may or may not be permitted by the Trust (cl.4 (5),(6), (11)). It is, in our opinion, clear that the Minister - by the lease - gave his consent to the making of all improvements falling within the first two categories. In relation to subcl.(9) the lessee accepted an obligation to effect the improvements listed therein. Although the sub-clause is framed in terms of the lessee's obligation, it also evidences the consent of the lessor to the carrying out of those works. In relation to sub cl.(10) there is no obligation imposed by the lease upon the lessee. But by the sub-clause the Minister expressly permitted the making of specified improvements, subject to the consent of the Trust being obtained in relation to detail. Had any of the items in dispute fallen within sub-cl1.(9) or 10, the case for amortisation would have been made out. However, none of the items did so. wheat 2 OAL ee ee ee be ee we nee a 22. The situation in respect of cl1.4(7) is less clear; the answer depends upon the degree of specificity necessary in a consent complying with s.88(2) (c) and s.83AA(4)(a). By sub.cl(7) the lessor indicated his consent to the lessee carrying out such works, within any of the descriptions contained in the sub-clause, as the Trust might approve in writing. The desciptions were extremely general; for example, "subdivide the demised premises; "provide roads rights of way paths and trails through the demised premises". Major questions remained as to whether particular areas should be subdivided, whether roads and trails should be opened in particular locations; and so on. In relation to these matters there was no commitment by either the Minister or the Trust. It may be accepted that the Trust was bound genuinely to consider any proposal for a particular work falling within c1.4(7). However, it would be entitled - as was acknowledged in cl.1 - to take into account that the relevant land was part of an area being managed as a State Park; so that there was no guarantee of approval. Notwithstanding these matters c1.4(7) did contain an expression of the Minister's consent to the making of such of the improvements specified therein as the Trust might approve in writing. Section 88(2) requires that a lessor direct his attention to the making of improvements on the demised land and give his consent to those improvements. This does not mean 23. that the improvements must be specifically identified in the consent. It is sufficient that it be possible to say of the document relied upon to constitute consent that the lessor has adverted to the improvements in question, either with particularity or with language that permits a conclusion that the lessor has in truth given his consent to those improvements. In the present case the Minister directed his mind, at least in a general way, to the matter of improvements falling within the list contained in cl.4(7). He decided to give a general consent, whose operation in the particular case would depend upon the subsequent decision of the Trust. We think that, to adopt the words of Jacobs J. in G.J. Coles, it may properly be said that any particular improvement made with the subsequent written consent of the Trust was an improvement "made with the written consent of the lessor". Accordingly, to the extent that reliance is placed upon cl.4(7) - and there appears to be only one item within this category - the claim for amortisation should, succeed. In practical terms, that is in relation to procuring a consent from the Trust, there may have been little difference between the lessee's position under cl.4(7) and its position in relation to works for the purposes referred to in c1l.4(5) and (6). In each case the question of consent was at large; there was no commitment to any particular work. However, in relation to the Minister's consent, there is a major distinction between cl.4(5) and (6) on the one hand and ae ern er er ee ge rte ee me ee iar te pene wee mete me yr Ne rR etn nee we em nn rh es x ae . . . . ~ ee a es - - ~ * 7 - --t Swat ee st ee eo we ee ~ 24. cl1.4(7) on the other. The lease contains an express ministerial consent to the making of improvements within the latter category; it contains no consent in relation to improvements intended for the purposes referred to in c1.4(5) and (6). This may have been an oversight; but in such a carefully drawn document this appears to us to be unlikely. In our opinion it is more likely that, although the Minister envisaged that new buildings would be likely to be erected for the purposes referred to in cl.4(5) and (6), he preferred at the time of the lease not to commit himself, even in principle, upon that matter. It is not difficult to think of reasons why he may have preferred to leave this as an entirely open question to be determined by the Trust; he, no doubt, had in mind his own participation in the decisions of the Trust. Whatever the reason for the omission, the fact is that the lease contains no consent to the making of improvements for the purpose of uses within cl.4(5) and (6). Clause 4(7) cannot, in our opinion, be construed as indicating that improvements for the purposes in cl.4(5) and (6) are approved by the lessor. That sub-clause gives permission to carry out certain works, generally described, "in connection with any ... improvement or development of the demised premises authorised by these presents". If the lease contained no express authorization of improvements, 1t could be argued that these words contained an elliptic approval to the making of improvements to serve the purposes referred to in cl.4(5) a a Se are ere aba a tae awe erent rs 25. and (6). However, on any view, sub-cll.(9) and (10) of cl.4 authorize the making of particular improvements so that the wording of sub-cl.(7) is readily understandable without reference to sub.cl1.(5) and (6). Counsel for the taxpayer submit that where a lessee, after obtaining possession of land, makes alterations to the land which may or may not qualify for the description of improvements, then in the absence of any express provision in the lease or any covenant implied by statute, the rights and obligations of the parties to the lease are governed by the law of waste. The obligation of the lessee is not to engage in activity constituting waste. In counsel's submission, the question whether a particular form of building activity constitutes waste is a question intimately related to the use which the lessee is permitted to make of the land under the provisions of the lease. There is implied in a lease, so the argument runs, a consent by the lessor to the making by the lessee of improvements or alterations which are reasonably appropriate to the use which the lease contemplates the lessee will make of the subject land; that 1s to the making of all improvements and alterations other than those which would constitute waste. Counsel cite in Hyman v. Rose £1912] A.C. 623, in which the House of Lords held that, because the terms of a lease did not prohibit the use of land on which a chapel was erected as a cinema, none of the alterations made to that end by the lessee constituted either a breach of covenant or waste. enn em ee ee tn nee = ame ~ - oe " ake me eee 26. In the case now before the Court, it is said, not only is the use of the land for a ski lodge and ancillary recreational facilities not a breach of covenant, but the lease expressly contemplates that use. This much may be accepted but it does not follow that, because the lease does not prohibit the use of land for a ski lodge, the erection of such a lodge is done with the consent of the lessor for the purposes of sub-s.88(2). Indeed, the taxpayer's submission carries with it the conclusion that no matter what improvements the lessee may make upon the land over the 45 year term of the lease, so long as those improvements fall within the general description in cl.2 of the lease, the lessor must be taken to have consented to them. That submission cannot be accepted. And it is no more acceptable because of the requirement in the lease that the Trust approve the making of such improvements. Nor is it the case that there is to be implied in the lease a consent by the lessor to the making of such alterations amd improvements as are reasonably appropriate to the use of the land, which the lessee 1s permitted to make. Such an implied term is inconsistent with the express term contained in ¢cl.4(11), inconsistent in the sense that there is no justification for implying a consent by the lessor when the lease expressly provides for the Trust's consent to the making of improvements. In any event we agree with counsel for the 27. Commissioner that a term to be implied from the lease falls short of the written consent required by s.88. In our opinion the condition contained in para(a) of s.83AA(4) is not satisfied. The claim based upon that paragraph fails. Paragraph (b) of s.83AA(4) applies where a lessor did not give a written consent to the making of particular improvements prior to 2 October 1964 but where the Commissioner 1s satisfied that the lessor had agreed, prior to that date, whether absolutely or conditionally, to give that consent. In the present case the respondent is not able to point to any agreement by the lessor to give consent otherwise than in the lease itself. In respect of those improvements which may be related only to cl. 4(5) and (6) of the lease, it is, in our view, clear that there was no agreement by the lessor to consent, whether absolutely or conditionally. The lessor did not reserve to himself the function of granting consent. He simply nominated approved purposes under cl. 4(5) and (6) and left it to the Trust to determine under cl. 4(11) what improvements should be permitted to be constructed to serve those purposes. It is true that once the Trust granted a consent the lessee would be free to effect the improvements, regardless of the view of the lessor, without thereby contravening the lease. But the possibility that the lessor would be unable successfully to oppose the making of 28. particular improvements does not mean that he has agreed to consent to those improvements. It follows from the above that the appeal of the Commissioner succeeds insofar as it relates to the works referable to cl.4(5) or (6) of the lease. As appears from the analysis set out above, only one of the disputed items falls outside that category: the preliminary costs of subdivision works claimed in the year ended 30 June 1981. In relation to that item a deduction of $2121 from assessable income is claimed, Except in relation to that item the appeals should be allowed. That item is insignificant in amount. Its inclusion in the case has not affected the costs of the appeals. The successful appellant should have an order for the costs of the appeals. The order for costs made in the Supreme Court should be varied so as to give to the taxpayer the costs of the issues upon which 1t has ultimately succeeded - whether in that Court or before us - but to require it to pay the costs in that Court of the issues in relation to which the Commissioner has been successful. It is certified that this and the twenty-seven (27) preceding pages are a true copy of the Reasons for Judgment herein of their Honours Mr Justice Toohey and Mr. Justice Wilcox. Associate: YUCAAE A Mtoe Date: 18 December, 1985. " Counsel for the applicant: Solicitors for the applicant: Counsel for the respondent: Solicitors for the respondent: Date(s) of hearing: 29. Mr T. Simos QC and Mr S. Gibb Australian Government Solicitor Mr A.M. Gleeson QC and Mr R.A. Gelski Freehill Hollingdale and Page 18/10/85