467 2 IN THE FEDERAL COURT OF AUSTRALIA ) ) NEW SOUTH WALES DISTRICT REGISTRY ) No. G624 of 1986 ) GENERAL DIVISION ) BETWEEN: W. & J. INVESTMENTS LTD. Appellant AND: THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA Respondent MINUTES OF ORDER Court: Beaumont, Burchett and Einfeld JJ. Date order made: 28 August 1987 Where made: Sydney THE COURT ORDERS: 1. Appeal allowed. 2. Orders of the Supreme Court of New South Wales set aside; a new trial ordered. 3. No order as to costs of the hearing in the Supreme Court or of the appeal. 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. G624 of 1986 ) GENERAL DIVISION ) BETWEEN : W. & J. INVESTMENTS LTD. Appellant AND: THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA Respondent CORAM: Beaumont, Burchett and Einfeld JJ. PLACE: Sydney DATED: 28 August 1987 REASONS FOR JUDGMENT BEAUMONT J. W. & J. Investments Ltd. appeals from orders made by a Judge of the Supreme Court of New South Wales dismissing its appeal against the Commissioner's assessment of the income tax payable by it in respect of the year of income ended 30 June 1979. The appeal raises for determination the proper construction of the "investment allowance" provisions (ss.82AA and 82AB in Subdivision B of Division 3 of Part III) of the Income Tax Assessment Act 1936 ("the Act") as they stood in 1979. They may be summarised, so far as relevant, as follows: (1) (2) (3) 2. Subdivision B applies in relation to a unit of eligible property acquired by a taxpayer that 1s a "leasing company", for use wholly and exclusively in Australia and for the purpose of producing assessable income, by another person to whom the taxpayer has, on or after 1 January 1976, leased the eligible property under a long-term lease agreement that was entered into by the taxpayer in the course of carrying on business in Australia and was so entered into by the taxpayer and the other person at arms' length (s.82AA(b)). (It is common ground that the requirements summarised in (1) above were met here). Where, inter alia, the eligible expenditure was incurred in respect of a unit of property "acquired by the taxpayer under a contract entered into before 1 July 1978" there shall be allowed as a deduction from the taxpayer's assessable income an amount being 40 per centum of the eligible expenditure where, as here, that expenditure is not less than $976.00 (s.82AB(2)(3)). (The appellant claims, and the Commissioner denies, that the provisions summarised in (2) above were satisfied here). Where, inter alia, the eligible expenditure was incurred in respect of a unit of property "acquired by the taxpayer under a contract entered into on or after 1 July 1978" a deduction of only 20 per centum of the eligible expenditure (where 1t is not less than $976.00) shall be allowed (s.82AB(4) (5)). (The Commissioner contends, and the appellant disputes, that this is the deduction applicable in the present case). The appellant is a subsidiary of Waugh & Josephson Pty. Limited ("Waugh & Josephson"). That company carries on the business of the supply by retail of vehicles, plant and equipment for use in earthmoving or similar operations. The appellant's business consists, in the main, of the provision of finance to customers of Waugh & Josephson to assist them to acquire goods from its parent. In May 1978, the appellant sought advice from its accountants with respect to the operation of the provisions of the Act dealing with investment allowances. The accountants advised, that in order to claim a deduction for 40 per centum of the expenditure, a leasing company must place an order for the goods and have its order confirmed prior to 30 June 1978. In June 1978, executives of the appellant met with representatives of Waugh & Josephson and discussed the quantities and types of vehicles, plant and equipment anticipated to be acquired by customers of Waugh & Josephson for which financial accommodation would need to be provided by the appellant. On 29 June 1978, the appellant placed a number of written orders with Waugh §& Josephson for the purchase of several items of plant and equipment. The orders were confirmed in writing by Waugh & Josephson on 30th June. For instance, by written order No. 000004 dated 29 June 1978 signed on behalf of the appellant and addressed to Waugh & Josephson, the appellant requested the supply of two "New Caterpillar Model D10O Tractors fitted with attachments" at the "Price ruling at time of delivery". The order contained the following printed notes: "Enter our order subject to terms and conditions stated hereon... Important...We reserve the right to cancel any part or all of this order prior to shipment." No date was inserted after the statement "Delivery required" appearing on the order. By letter dated 30 June 1978, Waugh & Josephson confirmed the appellant's order. As mentioned, on 29 June 1978, the appellant also placed a number of orders with Waugh & Josephson for other vehicles, plant and equipment on similar terms. The description of the goods in these orders was similar to that quoted above - e.g. a "New Caterpillar Model 983 Wheel Loader fitted with attachments"; Five "New Caterpillar Model D6 Tractors fitted with attachments". Although all these orders were also confirmed on 30 June, Waugh & Josephson did not itself order the goods from the wholesale suppliers until at least September 1978 and in one case 5. not until June 1979. The goods were, in the main, manufactured in Japan by Caterpillar Mitsubishi Limited and were not exported from that country until October 1978. The goods shipped from Japan were not delivered to Waugh & Josephson until November 1978. In February 1979, Waugh & Josephson negotiated a lease arrangement with one of its customers in respect of certain of the goods now in question. In that connection, in February 1979, Waugh & Josephson informed the appellant of the "cost" of the goods and arranged for their delivery to the customer. At this time, the appellant entered into a written lease of the goods to the customer. Later in 1979, similar lease transactions were entered into by the appellant with that and other customers of Waugh & Josephson. In 1ts return of income for the year ended 30 June 1979, the appellant claimed a deduction by way of investment allowance in the total sum of $2,458,854.00. Details of the claim were set out in a schedule to its return of income in the following terms: 00 9IS'ERt$ 661 'YOAPH 46 "qeo "S'd'O'U pue Quaudznba pzepuris TTP YIM P9IITZ 9999MBy 'OU autTsua '7Z09XT 'ou TeTaas ~yonz9 9692 TePOW 'ABT Tyd20Ie9 mau aug "paz "43g SdITAIag BupAaoutTsuq pueq "Qe "S'd'O'N pue guaudytnba PrepueIs LTE YIM paratyz 7Z6z79Ngy "OU GO O1S'E8TS 6461 'Arenaqgoyz 42727 Pp OC $95'66 $ 6461 'Azenaqgey yazz OM" 160'L02 $ 6261 *Aazenzqag yI9z 2anowy Juawezynboy jo 936g suy3ua 'gEcx] "ou TeTzas 'tyona3 9692 T2poW 'zeT{}dzaqep mau sug "PAT 'Ald saotazas S8utzveutsuq pucy "S400Q UOTISNAASUT pue s3ited STOO} 'wa asks BuyayZtt 'uotq9a30Id zemioy pus Adoued 'saud2 aa1y2 pue OSEEHZT "Ou Tezras 'zaddtz 9 'on '666CHLT "OU TeTx1aS 'AepuTTso JTF pue apeiq so '6I9OXEE 'ou Teyzas 'soy{neaphy yrtm payazyz ELESTAYY "ON aUT3Ug 'ETOXTE "ON [T8T179gG 'AOJeAL AZT YSAaaMog 'd9d [9poy '2e,[[Td1a9e9 mau aug "PAT "Add sdoTArVg ButzaautBuy puey *aUOFATpUOD aye pue UTQBD "s'd'O'U 'B1OZAES "ou [Teyaas 'xzoddy2 yueys aTsuts 'OLOEAS9 'ou [eTI9s 'zapuz{so J1F3 pue spetq "Ss 'gczHVviz "Ou TBFAIs 'ToOIQUOD JT [NBApAY YIFA PINT C6OVADS 'ON auTBuy "9LO07A99 "ON TBTAeg '1079ea1 Nd Tapown 'ze TT Td1a3e9 mau sug 'PIT "AIqg saozazas Buysseut3uq puey UOT Id ;109S0q JONVMOTIV LNAWLSAANI %04 IUITID 817 V1 807 V1 £09 VI 90" V1 azaquny aoQudIazoOY Yt su €06'0L7 $ 00 OOO'ZTI $ 6261 00 OOO'EIT $ 6L61 00 VEE'BET $ 6L6T 09 OZO'S8T $ F- ouy 6L6t JUuoweatnboy jo ajeq 121 [nd ujd puv 9927 1L6 2eqwnu [wiles 'saddts 6 ON 'OOTZNST Jaqiem [e}zay 'apKTq $6 Hupuo} apples AGE VY AED Sid OY CSOPLAZY 'OU [BFI9S Slots 3zL HE tpsY Yate pasate CE90INLG 2ed-uu auyduc "EOHLADG 2PQunu Tepes '2097%eT2 AZLUF 'key ya0z -a20emod 'H6d 1epow 'zeTTIdad2e9 dUYQ "woyss Buy aysT{ pue xABuoT Itpuod ATe pue uTqro "s'd'O'U ''BLYSHZL 'OU [BFAVS 'zade19s BuUTIVAZTA GET9 apow 'sre, {Fd19avog mau auo 43TH p|aIatz YCESAGL AAQunu auzy8ue 'YESSNBE "OU TeTAas '1029PI1] 'ttady y3Zz QC19 Tapow 'ze, {TdzaaegQ mau auo *Adoured °§ d OU YIFH poraty SOISHZL 'OU TeyAes 'aadezas Buz La "912 €19 Tepom 'ae{T}d1z9qVD wou auo YITM 'CREAGL ABqGQuNU aUTBUa "wBISMGE 2OqQUNU TeTI|aS '1099813 '{tady 4y3gT -€19 Tapou 'AzeyT{TTdza3e9 mau sup 'Adoues *§*d°O°Y Pue OOZZHOT "OU yeyazas 'zaddq3i { 'on Ae{[dazsqe9 'OZOELES 'OU TeTzas 'zepuTTAd 3TI3 pue apetq aysrerzqs 'zey{[pd1z93e9 YI PaIIty YICITAyy "OU eUTsuUE "SZZZAG9 'OU Te}FAasS '1099e1) 'ttady y2Z} 40 [PPOW 'eT TTd199e9 Mou sUuQ . 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Aye pue uyqeo Yat pa2ITZ ZL01S86 "OU auTdua '660¥7g "OU TBTazas 'yonzy AemysTY 00 000°80" $ 626t 'Punr y39zZ = F50 LLL STPoU 'zeT{Tdra3e9 mou aug "pat "43g asny jo 'diop attiosfayg €l> V1 'hpoq Susddty pue siaut{ Apoq XauoyITpuos rye pue UTED YIF" PII3TZ STIISB6 "OU auysua 'L6¥7g 'OU TeTzas 'yon. 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'waqjsks Buyayszy, pur AVUOFITPUOD Aye pue uTqPd '/THM6L 'ou [Byzvs 'apeiq § QT AzPTTFdaz2qVD 'COEMZE 'OU TeT2asS 'zaddyI QT 'ou Ae[T}dzs3PD YIM paqIty Z60TS86 "ou auysua 'GyNyg "OU TeyIJas '21079v1) 00 91S'SES $ 6261 'unr YALZ Old 1epow 'sze{]{Td19Ie9 Mau aug 'wagsks uz aysty, pure Apoq Sutddt3 '1auoy3ypuod ate pue uTqeo "S'd°O'U YIFM PIIITZ ZLgNCL "OU auTsuo °. 69ZNCEQ 'OU T¥TAas 'HONI] duinp AemysTYy 00 Z61'182 $ 626t 'unc YIZZ =JJO ELL Tepow 'ae{{tdzajeg Mau au 'woqysks Bur qysi1z pue Apoq B3urddy3 'zaUOFITpuoD aye qed *§ d'O UU YA Peq3Tz gOgNe, "ou auz3ua 'ggz7NC9 'ou [efazeas 'yon1q dump Aeaysty OU 261182 $ 6261 'Fun Y3ZZ = FJO ELL Tapow '2zez{yd19IVD Mau su *aUOFITpuos aje pue utqed *s d'o°y 'Yy2903 pue Jayong yo01 'sairhq ssatpeeq Yyatm pazatzZ Lz7yMCL "Ou auT3ua ; *C<U9X7Z7 «(OU Teas 'AapeoyT yaaus 00 009'S6% § 6L61 'aunr YyazZZ '766 T2pow 'aey{{tdzaqeQ Mau 9uO *Adoued *s'g'O uy puP sauda (¢) aa242 pue gtgorze 'ou jetzas '1zaddtz ¢¢6 ae[[ydazsqvy '3ayx9nq asodand ta [Nw YITA P222TzZ 'C99VTALY 'Ou auTsua ; 'TB8LWLS OU TeTIes 'aapeoy, yoe12 00 009'88 $ 6261 'Funr YyaZZ 1SS6 Tapow 'ae, {tdazzqIeD Mau 3suO udtadtaoseq Junouwy Judwartnboy jo 23eq 'pat Aad "pay *414 p31 Ald "prt Aad SIdTAIOS ButaavouT8uy pucy saotadas ButiaautTsuy purty SaodTAtasg ButTarsaursuy pur] sadtaiag Butzsaut3uq puey pay Aajg suog 9 sutyMeH 9 WUATTD £8" VI 87 V1 165 WI oR YT gl7 VI zaqunyy BIUIIT SOY ll. tesm ty Los == ley bag GI) L7B'EST § 00 261182 $ unouly 6261 'Aunr 4IZZ 6261 'eunr 42727 JusWdrzyNbsy yo a3eq *kdoues "S$°d°O°U PUe HHEZHOT 'ou JetIas seuky ¢ pue azaddtz ¢ On 'E66zrEs 'ou [eylos 'apetq s 'EZz790Z "OU Tetras oT[Nespky CfT _YITM paraty 9L891A7) "Ou suT8ua '1Té6¢7AS9 "ou TeTIas '1079b12 IZ TYSIamod 'O4d Tapow '2zv,[f#dzaIegQ MoU auO 'waisks Sutqyfry pue Apoq Sutddt1 'xau013;puoo ate pue urqeos § d OM YITM party 698MEL "OU auTBUa 'Q/7HNEg "ou Teyzas 'yon dunp Avmysty zo €L42 Tepow 'zep{rdsaje9) mau aug uotjdtaosoq PIT 43d PIOJTIN 49D "pal *4aq saozarag Buqazaoauy3uy puey WeITID 887 VI 98" VI aquny JIUIIIoy 12. By his amended assessment, the Commissioner allowed a deduction at the rate of 20 per centum rather than 40 per centum. The Commissioner was of the view, which was upheld in the Supreme Court, that because the contract for the acquisition of the property by the appellant from Waugh & Josephson was not entered into until after 1 July 1978, the provisions of s.83AB(4) and (5), rather than those of s.82AB(2) and (3),applied. It will be remembered that the latter provisions speak of the acquisition of property under a contract entered into before 1 July 1978, whereas the former provisions refer to a contract entered into on or after 1 July 1978. In support of its contention that s.82AB(2) and (3) apply, the appellant relies on the exchange of documentation between it and Waugh & Josephson on 29 and 30 June 1978. It says that these documents, read together, constitute a valid contract for the sale of the subject goods which was entered into on 30 June. The Commissioner, on the other hand, contends that no valid contract has been entered by that date. He acknowledges that, subsequently, a contract for sale was consummated between the appellant and Waugh & Josephson and that this contract qualified under s.82AB(4) and (5). He argues that the exchange of documents on 29 and 30 June did not then constitute a binding agreement. He advances a number of reasons to support this conclusion. In the first place, the Commissioner says that any such "agreement" was void for uncertainty. It is said, for one 13. thing, that the reference in the order to a tractor being "fitted with attachments" is so vague and indefinite that the subject of the order was not then identified with certainty. The appellant tendered evidence on the question. Mr. Knox, the Sales Manager of Waugh & Josephson, said that a Caterpillar tractor was "absolutely useless" without attachments. He explained that there was a "standard" set of attachments for Caterpillar tractors. He described it as "a professional abbreviation" used in discussions between himself and Mr. Kenny, a former employee of the appellant who died before the hearing in the Supreme Court. Mr. Knox also said that, prior to the transactions now in question, a number of orders of tractors with standard attachments had passed between the appellant and Waugh & Josephson. In the course of his evidence, he was shown a copy of an order dated 6 September 1978 addressed by Waugh & Josephson to Caterpillar of Australia Ltd. for a D6D Tractor there described as follows: "D6D P.S. TRACTOR WITH R.O.P.S. ADAPTABILITY" Mr. Knox's attention was drawn to the following items appearing under the heading "Description": REF No. DESCRIPTION 9P 2417 163 Hyd. Control 3Y¥ 4999 35 amp Alternator SP 4177 Engine Enclosure IP 8494 Reversible Fan 7S 1976 Crankcase Guard 9M 5046 Final Drive Guard EP 0525 Hinged Radiator Guard 7M 2570 Track Roller Guard 7B 4464 Front Pull Hook 8P 6568 Lighting x 4 3P 5422 ROPS Mountings 7N 6470 Precleaner 6D 4700 Seat Belt 14. 9S 7977 Tool Kit 3P 1139 SALT 22" 8P 4314 Instrument Guard 8S 3749 Engine Oil Cap Lock 6N 1568 Engine Oil Dipstick Lock 8P 0456 Fuel Tank Lock 5D 1910 Hydraulic Lock 2P 6330 Radiator Lock In Mr. Knox's opinion, these items were standard attachments. In cross~examination, Mr. Knox acknowledged that there were also "non-standard" attachments which were optional. His evidence continued: "HIS HONOUR Q: By referring to being non-standard does that include other options? A. No, it doesn't, but it refers to the various options and as far as we are concerned, some of the machines as listed have never been sold in this country, although it is in the pricing order; so it would be possible, yes, perhaps to order one of those - no one ever has, but there 1s a world wide pricing. MR. CONTI Q. We know from the dealer's document in relation to the D6 tractors there is what is called a 6S blade and a 6A blade and presumably some other specifications of blade? A. That's correct. Q. When one talks about standard attachments one wouldn't be talking about a single blade specification? A. Blade options. Q. There would be a blade option but in what way if at all does the blade option fit into the idea of a standard attachment? A. Well, of the 22 D6s we delivered that year you would find that probably 22 of them had blades on them, S blades on them. We didn't sell an angle blade that year and while it is an option, it is an option world wide. It 1S not one that we considered to be used locally. Q. Looking at the first page in Ex.K you can see reference to two D6s, one was a 6A and one with a 6S blade. You say that the one with the 6A blade was not ultimately delivered? A. No. The tractor was, but not the blade. Q. Why would there be reference to a 6A blade on the document, the first page of Ex.K, when it was not delivered? A. Well, let me put it to you this way: we are forecasting out against requirements. We are not talking about any given time. We can talk about 15. what we have got on stock and what we got on order. That order bank is a standard set of items within item 1. That could be for a government department, some specialised tender department, not a forward order for stock but a machine specifically tendered to a government department, for instance; so it was nothing to do with - Q. What ultimately was delivered 1t was a subject of a tender which presumably was not accepted? A. Correct. Q. Looking at the next document the dealer's order on Caterpillar Australia; do you have it there? A. Right. Q. There is some considerable description there of attachments? A. Correct. Q. Are all of the items referred to in the block headed 'Description' half way down the page attachments or does one of those items refer to the basic unit? A. They are all the basic unit. Q. Every part of it? A. That's right. Q. The basic unit is called a 6D? A. Yes. QO. P is tractor? A. Yes. Q. Is every one of the items in that block before the heading "Related products" part of the basic unit? A. Yes, it is. Q. Would you not categorise any of those items as an attachment, attachments? A. No, not according to our standard consist. HIS HONOUR Q: Did you say 'consist'? A. Yes. Q. MR. CONTI: The related product, those two items, are they attachments? A. True." The reference to "related products" referred to the two further items on the order dated 6 September 1978 appearing below the description of the items already mentioned. Under the sub-heading "related product(s)" there appeared: "6S Bulldozer Tilt Cylinder" 16. Later in cross-examination, Mr. Knox gave this evidence: "oO. On your understanding of the reference to attachments in the order of 29th June, 1978 and the order prepared by Mr. Kenny, he was referring to attachments in a wider way 1n which there had been set out in the Caterpillar order, that is to say, he understood the expression as covering all of the details under the heading 'description' in folio 2 of Ex. K including the hydraulic system whereas you, yourself would, as a dealer use the expression 'attachments' by reference only to the two items appearing in the Caterpillar order under the heading "related products'? A. Basically, yes." In an attempt to clarify his evidence, Mr. Knox was re-examined as follows: "MR. MEAGHER: Q. The reference Number 3Y5132 [1.e. the order dated 6 September 1978] would have regard to the appropriate number for a D6D tractor in the then current version of Lx. L? A. Correct. Q. Yesterday you answered a number of questions from my learned friend Mr. Conti about what you and Mr. Kenny meant by attachments. Would you look at the opening documents of Ex. F, folio (1) and folio (2)? A. Yes. Q. Folio (1), the order by investments of Waugh and Josephson Pty. Limited for five new Caterpillar model D6 tractors fitted with attachments? A. Yes. Q. Folio (2) is your confirmation of that? A. Yes. Q. When these documents were sent from one company to the other by you and Mr. Kenny, did you understand the attachments referred to in the order - do you have Folio (2) of Ex.K? A. Yes. Q. To mean the items under the word 'description' or the items under the words 'related products' or both? (Objected to.) A. To both. HIS HONOUR: Yesterday I understood you to say attachments related to related products. MR. MEAGHER: That is at p.18 of the transcript. WITNESS: If I could explain. If we refer to this order at Caterpillar of Australia and we look at description and we look at reference No. 3Y¥5132 and 17. then we look at the block of reference numbers under that and various items that would be considered to be, to us, internal and to our customers to be our standard consist for the tractor, a standard consist for the tractor, they are items that are supplied as the tractor is built at the factory, they cannot be purchased separately. They are either purchased at the time we ordered the tractor or not. However - and they are all grouped under one SC number 61749 to Caterpillar. Related products, we are required by Caterpillar to supply a separate order number as that is considered to be a unit, and it is possible for us to order that bulldozer blade complete from Caterpillar without a tractor, as it is possible for us to order a No. 6 ripper complete, not necessarily with the tractor." Although Mr. Knox's explanations are far from clear, the learned judge made no findings on this evidence. The appellant submits that we should now find that the expression "fitted with attachments" used in the orders referred to what the parties called a "standard consist" for the equipment, that 1s to Say, standard attachments. The expression "fitted with attachments" or the simpler "with attachments" appeared in many of the orders tendered in evidence in the Supreme Court but in connection with different basic equipment, for instance: Order No. Description 000004 "Two (2) only New Caterpillar Model D10 Tractors, with attachments." 000005 "Pive (5) Only New Caterpillar Model D9 Tractors fitted with attachments." 000006 "Pive (5) only New Caterpillar Model D8 Tractors fitted with attachments." 000007 "Five (5) only New Caterpillar D7 Tractors fitted with attachments." 000008 "Five (5) only New Caterpillar D6 Tractors fitted with attachments." Before dealing with the appellant's invitation that we now make appropriate findings of fact based on Mr. Knox's 18. evidence, it should be mentioned that a separate, but related, question arises whether the agreement for sale alleged to have been made is void for uncertainty on the additional ground that the parties failed to agree on a price for the goods. In this connection, there was in evidence in the Supreme Court a price List published by Waugh & Josephson described as: "NEW EARTHMOVING EQUIPMENT PRICES CURRENT: 24.7.78" The document throws some light on the submission that the reference in the orders to "attachments" meant that the "contract" alleged by the appellant was uncertain. By way of illustration, the price list dealt with the D6D tractor in these terms: "D6D Tractor-Powershift $ 73,420 D6D Tractor-Direct Drive 70,965 6S Blade 12,058 6A Blade 12,495 No. 6 Ripper (Incl. 3 Teeth) 8,758 Extra Tyne 345 No. 56 Winch - Std Speed 14,300 No. 56 Winch - Std. Speed Drum Disconnect - 14,944 CAT ROPS Cab, A/C, & S/S 8,313 Local ROPS Cab 4,664 Local ROPS Canopy 2,300 Forward Protection 680 Hyster Winch 14,981 D6D LGP Tractor-P/Shift 97,662 19. D6D LGP Tractor-D/Drive 95,658 No. 56 Winch - with Drum Disconnect 14,944 No. 56 Winch - without Drum Disconnect 14,299 CAT ROPS Cab - A/C & S/S 8,413 CAT ROPS Canopy 2,084 D6D S.A. Tractor 71,786 CAT Cab & A/C 6,960" The expression "fitted with attachments" does not, of itself, identify any particular "attachment". Mr. Knox's attempt to do so, read alone, leaves the matter in doubt. In the absence of any findings by the trial Judge, it is difficult, 1f£ not impossible, to form any view on the weight to be given to his testimony. On the face of it, there appear to be difficulties in applying his explanations to the transactions now in question. The price list confirms the expectation that in any dealing at the retail level with sophisticated equipment, as this was, a potential customer may wish to consider a range of possible accessories. It 1S not even clear from a reading of the evidence, without the assistance of findings choosing between the conflicting references it suggests, whether there is such a thing as a "basic unit" of any of the goods in question. As has been said, there is no finding on any of these matters. If there had been findings or clear evidence on these matters, it would have been open to this Court to proceed to examine the legal questions which would then arise. There is not only the question of uncertainty, that 18 to say, whether the orders defined the subject matter of the transactions with 20. sufficient precision = in the first instance a question of construction (cf. Upper Hunter County District Council v. Australian Chilling and Freezing Co. Ltd. (1968) 118 C.L.R. 429 at pp.436-7). There are also the related questions of whether "background" material may be looked at as an aid to construction (see, e.g., Greig and Davis, The Law of Contract at p.407) and whether extrinsic, parol evidence is admissible to vary or explain the written documents (see, e.g. Bruton (trading) v. Farm and Dairy Machinery Company [1910] V.L.R. 196 at pp.201-3; Greig and Davis, op. cit., at p.421; Chitty on Contracts, General Principles, 25th ed. at p.445; McNamara, The Parol Evidence Rule and_ the Substantive Law of Contract, (1986) 2 Aust. Bar Rev. 137 at pp.150-1). Not every order mentioned attachments. But even where attachments were not specified, a question arises whether the subject matter of the transaction had been defined with sufficient certainty on the face of the documentation. In the absence of findings on the circumstances' surrounding the transaction, 1t is not possible to express a view on the question of alleged uncertainty. Since I cannot accept the basis on which the learned trial judge was able to dispose of the matter, it must follow that unless the Commissioner succeeds in one or other of his remaining contentions, the appeal should be allowed and a new trial ordered so that findings of fact may be made on these matters. I turn therefore to the Commissioner's other submissions. 21. As has- been noted, it is also argued for' the Commissioner that the agreement 1s void for uncertainty because the parties failed to agree on a price. It will be remembered that the order document spoke of the "price ruling at delivery". There are two aspects to this argument. First, 1t raises again the earlier questions as to the process of identification of the subject matter of the transaction. In the absence of any findings by the Supreme Court, it is difficult to see how this aspect of the appeal can proceed any further. Plainly, one must first identify the subject of the sale before attempting to link it up with its "ruling price". For the reasons previously given, this cannot be done. Further, a question arises as to whether, in objective terms, there was a "ruling" price evidenced by a price list or the like. There was evidence from which a finding was open to this effect but again no finding was made. In these circumstances, it is not possible to proceed to deal here with the suggestion of uncertainty (cf. Hillas & Co. Ltd. v. Arcos Ltd. (1932) 147 L.T. 503; Cudgen Rutile (No. 2) Pty. Ltd. v. Chalk [1975] A.C. 520 at p.536). The Commissioner further submits that the contract alleged by the appellant was "illusory" in the sense that neither party intended to commit itself to buy or sell the goods described in the documents. Instead, it is said that the appellant intended to reserve to itself a discretion or option as to whether the so-called contract should be performed. Reliance is placed upon Placer Development Ltd. v. The Commonwealth (1969) 121 C.L.R. 353 at pp.359-361, 366-367. In support of this submission, the Commissioner urges that the absence of any 22. contractual intention should be inferred from a number of circumstances. He relies upon the facts that a price was not specified; that the attachments (which vary from case to case) were not specified; that the parties were not at arms' length; that the equipment had not by then been ordered from the Caterpillar company and may well not have existed as at 30 June 1978; that no time was specified for performance; and that a power to cancel the order was reserved. In these circumstances, the Commissioner says that the arrangement should be branded as "artificial". He calls in aid the reasoning of the Full Court in Federal Commissioner of Taxation v. Just Jeans Pty. Ltd. (1987) 72 A.L.R. 213 at pp.224, 228-9. The learned Judge did make some findings in this area. He said (at pp.10-11 of his reasons): "An elementary requirement of a contract is that the parties to it must "mean business." They must intend to enter into legal relations. In this case I accept that the appellant and Waugh and Josephson intended to enter into legal relations but it was not for the purpose of the appellant acquiring tractors and their attachments from Waugh and Josephson in all circumstances and at that time. It was for the purpose of being able to take advantage of the forty per cent investment' [allowance] that was then available and which would be available later when one of the two essential requirements for eligibility would be missing and when the real transaction could be expected to take place." It must follow from this finding that no sham could be suggested here. That is to say, it must be accepted that the transactions were genuine and real and intended to have legal effect. His Honour seems to have found that the motive underlying the transactions was the expectation of a tax advantage. But there is not in this country, whatever he the position in the United Kingdom, any principle of fiscal nullity 23. (see Oakey Abattoir Pty. Ltd. v. Federal Commissioner of Taxation (1984) 55 A.L.R. 291 at pp.298-9). Once 1t 1S concluded that the parties intended to enter into a contract for sale, it 18 difficult to see any scope for a suggestion here that the promises were illusory. Assuming for the purposes of this branch of the argument that the goods and the price are sufficiently defined, the absence of a time limit for performance could not prevent the formation of a contract: the law would imply that it be performed within a reasonable time (see York Air Conditioning and Refrigeration (A/sia) Proprietary Limited v. The Commonwealth (1950) 80 C.L.R. 11 at p.62). Further, the corporate association between the parties could not, of itself, prevent them from entering into a contractual relationship giving rise to actual legal liability (see, e.g. Cecil Bros. Pty. Ltd. v. The Commissioner of Taxation of the Commonwealth of Australia (1962) 111 C.L.R. 430). Put differently, there is no requirement in s.82AB, expressed or as a matter of implication, that the contracting parties be at arms' length. Finally, in my opinion, the existence in the appellant of a power to cancel its order did not mean, in the absence of its exercise, that no contract for sale had been made between the parties (see Barro Group Pty. Ltd. v. Fraser [1985] V.R. 577 at pp.582-4). A preliminary question of construction of the order form arises. It will be remembered that the reservation of the right to cancel was part of the appellant's printed order form. It may be that it was not intended to apply here given the appellant's wish to proceed with a view to obtaining the investment allowance. Further, such a printed term may not have 24. been intended to survive beyond the confirmation of the order on 30 June. But, in any event, as has been said, unless and until the "right" to cancel were exercised, and 1t was not in fact exercised, the contract remained on foot. It was a contract for the purposes of s.82AB. The learned Judge was of the view that the deduction claimed should not be allowed because it was not "incurred" by the appellant by 30 June 1978. His Honour said: "I bear in mind that the appellant carries the onus of proof in this matter and in all the circumstances, I am not satisfied that before the lst July (sic) and Ist January 1976 the appellant incurred the expenditure under a contract entered into between Ist January 1976 and Ist July 1978. I find that it did not. Having reason to believe that in the twelve months following lst July 1978, there would almost certainly be orders coming 1n to Waugh and Josephson that it would be called upon to finance, it entered into an arrangement and an understanding with Waugh and Josephson whereby 1t could claim a tax advantage that would be of benefit to it, and possibly to Waugh and Josephson. Later, it was not in accordance with its ordinary way of business and was merely a step towards gaining a financial advantage in a way that the Parliament did not intend. Accepting that title to goods would pass to them at some time in the future, when Waugh and Josephson found customers and placed orders and when it entered into its usual leasing agreements with customers, 1t sought to give the appearance of acquiring title in this way for this specific tax purpose." With all respect, I cannot accept this analysis. Once it 1s concluded first, that a contract for sale was intended to be entered into (as his Honour found); secondly, that the contract was sufficiently certain (a matter for future debate but presently assumed); and finally, that the contract was made by 30 June 1978, the provisions of s.82AB(2) and (3) will have been satisfied. It will be no answer to the taxpayer's claim that the 25. contract was entered into with an eye to its tax advantages. Further, it is not an ingredient of s.82AB(2) or (3), express or implied, that expenditure be incurred by 30 June 1978. The only question is whether a valid contract had been made by that date. It should be noted that it was not suggested by the Commissioner that in order to qualify under s.82AB(2) and (3), property had to pass by 30 June 1978. The agreement was one for the sale of unascertained goods, that is to say, goods to be acquired by Waugh & Josephson from the Caterpillar company and, possibly, goods yet to be manufactured by that company. [In that sense, property in the goods could not pass from Waugh & Josephson to the appellant until the goods were ascertained, that 1s, until a date after 30 June 1978 (see Sutton, Sales and Consumer Law at p.249; Pridman, Sale of Goods at p.41; Atuiyah, Sale of Goods at p.236; Benjamin's Sale of Goods, 2nd. ed. at p.175). But all that is required by s.82AB(2) and (3) is that an agreement for sale be entered into by the stipulated date. There is no additional requirement that property also pass by that date. It should also be noted that, on the hearing of the appeal, the Commissioner abandoned any reliance on the provisions of s.260 of the Act. Since writing the above, I have had the advantage of reading the reasons of Burchett J. I concur in his Honour's observations. 26. It follows that the Commissioner's arguments, other than those directed at the alleged uncertainty of the agreement, have, un my opinion, failed. As has been said, it 1S not possible to consider properly the uncertainty arguments without the appropriate findings of fact. I would allow the appeal, set aside the orders of the Supreme Court and order a new trial. There should be no order as to the costs below or in this Court. I certify that this and the preceding twenty fve (25) pages are a true copy of the Reasons for Judgment herein of his Honour roe a Gve<cr,! FAANION) Associate Dated: 28 August 1987 Counsel and Solicitors Mr. R.P. Meagher 0.C. with for Appellant: Mr. A.H. Slater instructed by Minter Ellison Counsel and Solicitors Mr. D. Bloom instructed by for Respondent: Australian Government Solicitor Date of hearing: 18 June 1987 Date Judgment Delivered: 28 August 1987 IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY No. G.624 of 1986 GENERAL DIVISION BETWEEN: W. & J. INVESTMENTS LIMITED Appellant AND THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA Respondent : Beaumont, Burchett & Einfeld JJ. PLACE: Sydney DATE: 28 August 1987 REASONS FOR JUDGMENT BURCHETT J. I agree with the judgment of Beaumont J. In my opinion, the impossibility of dealing with the question of uncertainty without detailed findings of fact 1s highlighted if one considers what would be the position in the event that certain accessory attachments to a tractor, as ultimately leased, were found not to have been comprehended with sufficient certainty within one of the orders delivered prior to 30 June 1978. In that case, further questions would necessarily arise. 2. Unless it could be said that the original contract was wholly void for uncertainty, the nature of the changes, and the way in which they came about, would have to be examined in order to determine whether there had been a substitution of a new contract involving the rescission of the original contract, or whether there had merely been a variation of the original contract so that it could still be said either that all the items delivered were delivered "under a contract entered into before 1 July 1978," though varied subsequently, or that at any rate the items other than those added by virtue of the variation were so delivered. In this regard, findings of fact concerned with the intention of the parties at the time of the alleged variation would be crucial: see Tallerman_and Company Proprietary Limited v. Nathan's Merchandise (Victoria) Pty. Ltd. (1956) 98 C.L.R. 93 at 135, 144; Commissioner of Taxation v. Mercantile Credits Ltd. (1986) 10 F.C.R. 340 at 343; and Federal Commissioner of Taxation v. Booth (1986) 68 A.L.R. 547 at 563. In the first of these cases, Kitto J. at 135 said: "TA] long line of authorities has committed the law to an acceptance of the doctrine that an agreement which deals with subsisting rights and obligations of the same parties under an earlier contract may vary that contract without terminating it, and that whether it effects a variation on the one hand or a discharge on the other is a question depending upon the intention of the parties as appearing from the new agreement." Even if, upon the facts being fully found, it appeared that the expression "fitted with attachments" did, as the Commissioner claims, introduce an element of uncertainty into the contracts by reason of the existence of competing items to which 3. it could refer, there would remain a question whether those words could be severed, leaving a valid contract in respect of a tractor. See Lindgren Carter and Harland, Contract Law in Australia (1986) 70, 531-2. I do not see how this question could be answered without clear findings relating to the particular items of equipment arguably falling within the expression "attachments", as well as any matters relevant to the intention of the parties. I agree with the orders proposed. I certify that this and the preceding two (2) pages are a true copy of the Reasons for Judgment herein of his Honour Justice Burchett. Cen Gites Associate Dated: 28 August, 1987. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY No. G.624 of 1986 GENERAL DIVISION BETWEEN: W. & J. INVESTMENTS LTD. Appellant AND: THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA Respondent CORAM: Beaumont, Burchett & Einfeld JJ. PLACE: Sydney DATE: 28 August 1987 REASONS FOR JUDGMENT EINFELD J. The facts of this matter are adequately summarised by Beaumont J. and I shall not repeat them. I agree with his Honour's analysis of the issues involved. It is clear that the trial Judge assumed, as I believe in the nature of things properly and safely, that these litigants were experienced at their respective businesses and occupations and fully advised as to their rights and positions. For reasons which can therefore only be considered as having been tactically adopted, they placed before the learned trial Judge a large body of documentary material which little effort was made to explain or delimit. The appellant seems to have taken the view that precision as to what the parties to the lease agreements intended by the so-called "attachments" would not avail its case; the Commissioner appearing to accede in this "operation vagueness" by relying upon the failure of the appellant to discharge its onus of proof by an absence of sufficient persuasive evidence. This type of forensic byplay in a case of this nature is to be deplored. It left the trial Judge in the invidious position of either taking over the conduct of the case himself - a case, be it noted, conducted on both sides by highly experienced and talented senior and junior counsel - or of doing the best he could with the evidentiary tools supplied to him. In my opinion, his Honour wisely chose the latter course and forbore from deciding the Matter on the basis of a simple onus of proof failure because of insufficiency of evidence. Unfortunately, in the absence of agreement that any one lease agreement could be treated as typical of all, or evidence that it was so typical, the balance of his Honour's approach required an investigation of and aé_e series of findings of fact in relation to each and every lease - especially as to what was the basic unit in each case, what attachments were included with the basic unit comprised in each lease, and what was the method by which the purchase price of each of the sets of goods leased was ascertained. In the way the evidence was left, apparently deliberately so, this task would have been formidable but if an appellate court is properly to review this decision, at least these basic findings of fact would have to be available. In these respects, I therefore agree with the reasons for judgment of Beaumont J. on the principal questions raised in this appeal. The possibility that the evidence might nonetheless have permtted findings by this Court as to some type of precise basic agreement from which the uncertain adjuncts could be excised, has been dealt with by Burchett J. After some consideration, I agree with his Honour's reasons for judgment. Apart from the legal questions identified by his Honour, with the analysis of which I also respectfully agree, the evidentiary problems here are quite forbidding. Even if it were possible to determine the basic unit of each lease, its price at the relevant date does not seem to have been the subject of any evidence at all. Nor was this method of approaching the problem apparently canvassed at trial. There were for these reasons no findings by the trial Judge that would permit appellate adjudication by this mechanism now. It was not really argued on appeal. In the circumstances, despite the heavy desirability that any option not requiring a new trial be fully explored, it is neither possible nor proper for this Court to attempt to adopt this approach. I agree with the orders proposed by Beaumont J. concerning the outcome of the appeal and costs. ! certify that this and the two i preceding pages are a true copy of the Reasons for Judgment herein of his Honour Mr. Justice Einfeld — MSA espa