FC of T v SARA LEE HOUSEHOLD & BODY CARE (AUSTRALIA) PTY LTD

Judges: Gleeson CJ
Gaudron J
McHugh J
Hayne J

Callinan J

Court:
High Court of Australia

MEDIA NEUTRAL CITATION: [2000] HCA 35

Judgment date: 15 June 2000

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Callinan J

51. The question in this case is, upon what date for the purposes of the capital gains tax provisions of the Income Tax Assessment Act 1936 (Cth) (``the Act''), did the respondent dispose of assets in Australia? There are only two possibilities, 31 May 1991, the date upon which Sara Lee Household & Body Care (Australia) Pty Ltd and others entered into a written agreement for the sale of various assets (``the businesses'') in a number of countries (``the May agreement''), or 30 August 1991, the date upon which Sara Lee executed an agreement to vary the earlier one, (``the variation agreement'').

52. It is convenient to refer to the reasons for judgment in the courts below in the context of the facts and the relevant provisions of the agreements.

53. Sara Lee and it subsidiaries carried on various businesses including the making and selling of medical and therapeutic substances and equipment in many countries of the world. There was goodwill associated with the businesses and the brand names controlled by Sara Lee. The Australian subsidiary was Nicholas Kiwi Pty Ltd (``NKA'').

54. On 31 May 1991, by the May agreement, Sara Lee agreed to sell the businesses which I have described to Roche Holding Ltd (``Roche'') of Switzerland. The named sellers were Sara Lee and twenty-four other corporations including NKA. The property which was to pass included assets of different kinds, for example, goodwill, machinery, intellectual property and shares in various companies. A recital to the May agreement stated that NKA ``will be selling the Assets (as defined...) of the Health Care Group''. ``Health Care Group'' was defined to mean, in effect, the business of manufacturing, marketing, selling and distributing products being carried on by NKA on 31 May 1991 or ``as it [ might] be changed in the ordinary course of business'' until completion of the contract. The May agreement also made provision for the assumption by Roche of some of the liabilities of NKA and other subsidiaries of Sara Lee. Section 1.7 referred to the completion date of the contract:

``The later of (i) July 31, 1991, or (ii) the fifth business day after the date when each of the conditions precedent specified in Sections 9.1 and 9.2 have been fulfilled (or waived by the party entitled to waive that condition).''

Section 2.4 of the May agreement defined the price payable:

``(a) Amount

The purchase price payable by Buyer to Sellers for the Health Care Group shall be 597,681,000 US Dollars, subject to adjustment as provided in Section 2.6.

(b) Allocation

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The Purchase Price shall be allocated among the Shares, the Assets and the Intangible Rights in accordance with Schedule 2.4(b) of the Disclosure Schedules.''

55. ``Assigned Contracts'' were defined as contracts relating to the business of the Health Care Group. Section 2.8 of the May agreement required Sara Lee and the subsidiaries to assign and transfer their rights and obligations under these to the purchaser. The relevant contracts were listed in a schedule to the agreement.

56. Section 3.3 of the May agreement obliged the parties to co-operate and to do all such acts as might reasonably be required to give effect to its terms. The sellers were, by section 6.1 of the May agreement, bound to operate the business of the Health Care Group in the ordinary course pending closure.

57. Because the respondent places some store on the change that was made to the arrangements with respect to the employees of NKA I will set out a portion of section 8.1 of the May agreement which is concerned with these.

``As to the employees of Nicholas Kiwi Aus and Nicholas Kiwi Philippines employed in the conduct of the Health Care Business which are listed in Schedule 8.1(a), Buyer undertakes to offer to each of these employees employment at terms and conditions which are substantially comparable to and no less favorable in the aggregate than those currently applied to them by Nicholas Kiwi Aus and Nicholas Kiwi Philippines, as the case may be. Such offer has to be made either on the Completion Date or, in respect of the employees of Nicholas Kiwi Aus, upon termination of the distribution agreement for Australia referred to in Section 10.2, if any.''

58. Article IX of the May agreement stated conditions precedent to the performance of the obligations of the parties. I need only refer to those which gave rise to substantive obligations. Section 9.1(c) contained a condition for the benefit of the buyer:

``The obligation of Buyer to consummate the transactions contemplated in this Agreement is subject to the fulfillment, prior to or at the Closing, of each of the following conditions (and or all of which may be waived by Buyer):

• ...
• (c) the receipt of all foreign investment approvals in Australia and France and all antitrust approvals in France and the United Kingdom if required in connection with the transactions contemplated by this Agreement.''

59. A like condition precedent to the performance of the obligations of the sellers was contained in section 9.2(c):

``the receipt of all foreign investment approvals in Australia and France and all antitrust approvals in France and the United Kingdom if required in connection with the transactions contemplated by this Agreement.''

60. It is common ground that the conditions precedent were not fulfilled until after 31 July 1991.

61. Provision was made for assignment by section 12.3:

``This Agreement shall not be assigned by any party hereto without the prior written consent of the other parties; provided, however , that Buyer may assign any of its rights or obligations hereunder to one or more of its subsidiaries or affiliates without the prior written consent of Sellers; provided further, however , the assignee shall agree to be bound by the terms and conditions of this Agreement and that such assignment shall in no way limit or relieve the assignor of any of the assignor's obligations hereunder. This Agreement shall inure to the benefit of and be binding on and enforceable against the parties hereto and their respective successors and permitted assigns.''

62. In Sched 2.4(b), ``Allocation of Purchase Price'', against the name of NKA appears the sum of $61,461,000. The dollars are United States dollars. The total price for the assets the subject of the May agreement was US$597,681,000. But that was not the full amount of the financial liabilities assumed by the purchaser. An acquisition summary of 29 August 1991 refers to a payment of $200,000,000 for a covenant not to compete and other sums on other accounts.

63. On 30 August 1991 the May agreement was amended by the variation agreement. The latter commenced with this paragraph:

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``THIS AMENDMENT is made this 30th day of August, 1991 between SARA LEE CORPORATION, a company organized and existing under the laws of the State of Maryland, United States of America (`SLC'), on behalf of itself and the other Sellers (as defined below), and ROCHE HOLDING LTD, a company organized and existing under the laws of Switzerland (`Buyer', and amends the Purchase and Sale Agreement, dated May 31, 1991 (the `Agreement'), among SLC, the other sellers named therein (collectively with SLC, `Sellers') and Buyer with respect to the sale of the worldwide pharmaceutical and related health care business of SLC. Unless otherwise defined herein, capitalized terms used in this Agreement shall have the respective meanings ascribed to such terms in the Agreement.''

64. The only recital was in these terms:

``WHEREAS, the parties to the Agreement desire to amend, clarify and supplement the provisions of the Agreement.''

65. Section 2(b) made different provision for the employees of NKA from those made by section 8.1 of the May agreement. The substance of the changes was that the buyer of the relevant business would not be obliged to make offers of employment to more than fourteen employees, and adjustments would be made between the parties in respect of redundancy payments which might become payable to other employees. Section 2(l) and Sched 6 of the variation agreement identified the employees whose names were to be deleted from Sched 8.1(a) of the May agreement.

66. Section 5(a) effected a reduction (disregarding other financial obligations assumed) in the total purchase price by US$296,000 a percentage of less than 1 per cent and cl 5(b) effected a consequential re- allocation of that total price. The re-allocation and change in price were presumably occasioned by a readjustment of assets between a New Zealand subsidiary and NKA. Sections 10(2) and (3) provided as follows:

``(a) The recitals to the Agreement are hereby amended in the following manner:

2. Nicholas Kiwi NZ should be removed as a Seller of Intangible Rights from the second WHEREAS clause of page 5.

3. Nicholas Kiwi Aus should be added as a Seller of Intangible Rights to the second WHEREAS clause on page 5.''

67. Section 11 of the variation agreement affirmed the May agreement. It was as follows:

``Effect on Agreement . This Amendment to Purchase and Sale Agreement shall be deemed an amendment of the Agreement for purposes of Section 12.6 of the Agreement. Except as provided in this Amendment and in any other agreement executed by the parties on or after May 31, 1991, the Agreement remains in full force and effect.''

68. I reproduce that part of the new allocation schedule that is relevant to the case:

+------------------------------------------------------------------+

| ACTS AS |    NET    |           | PRICE US$  |    PURCHASER      |

| CASHIER | ASSETS OF |           |            |                   |

|------------------------------------------------------------------|

|  Self   | Nicholas  | Australia | 62,461,000 | Nicholas Products |

|         |   Kiwi    |           |            |   Pty Ltd (new    |

|         |           |           |            |     company)      |

+------------------------------------------------------------------+
          

69. Nicholas Products Pty Ltd (``NP'') had only been incorporated a few days before the making of the variation agreement. The varied allocation had the effect of increasing the amount receivable by NKA by US$1,000,000.

70. On the date of completion, 30 August 1991, Sara Lee handed to the purchasers a letter which contained the following:

``In accordance with Section 12.3 of the Agreement, Buyer has assigned its rights and obligations under the Agreement to certain of its subsidiaries and affiliates as set forth in Schedule A hereto (the `Assignees') and the Assignees have agreed to be bound by the terms and conditions of the Agreement.''

71. Among the companies referred to in Sched A under the heading ``Buyer'' appears NP. Opposite its name under the heading ``Seller & Items Purchased'' are the words: ``Assets, Assumed Liabilities and Assigned Contracts from Nicholas Kiwi Pty Ltd''.

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72. Other documents changed hands on 30 August 1991. One was a Deed of Assignment between the respondent and NP. It stated that:

``Roche has assigned to the Buyer pursuant to Section 12.3 of the Agreement certain of its rights and obligations under the Agreement.''

It then provided:

``... in consideration of the sum of US$62,461,000 paid by the Buyer to the Seller pursuant to the terms of the Agreement at or before the execution and delivery hereof (the receipt and sufficiency of which is hereby acknowledged), subject to Section 10.6 of the Agreement, the Seller does hereby sell convey, assign, transfer and deliver to the Buyer, its successors and assigns forever, all of the Seller's right, title and interest in and to its Assets, the Intangible Rights... and the Assigned Contracts, to have and to hold such Assets, Intangible Rights and Assigned Contracts unto the Buyer and its successors and assigns, to and for its or their use forever.

This instrument shall inure to the benefit of the Buyer and its successors and assigns and shall be binding upon the Seller and its successors and assigns, effective immediately upon its delivery to the Buyer.

This deed of Assignment is delivered pursuant to the Agreement and it shall not alter, supersede, augment, abridge or affect any provision of the Agreement. In the event of any conflict between the terms of the Agreement and the terms hereof, the terms of the Agreement shall be controlling.''

73. Another document executed by NP and the respondent was a deed of assumption of liabilities. It recited, inter alia, that the appellant had ``concurrently herewith sold, conveyed, assigned, transferred and delivered to Roche certain Assets and Intangible Rights...'', [ and] the Buyer agreed to assume the liabilities as contemplated by the May agreement.

74. Finally a receipt was given to the purchasers by the sellers. It was dated 30 August 1991 and acknowledged that NKA, as a receiving company, had received US$62,461,000.

75. The respondent made a capital gain as a result of the sale of the Australian assets which the appellant brought to assessment in the year of income ending 30 June 1991. The appellant made the assessment upon the basis that on the proper construction of s 160U(3) of the Act, the date of disposal of the Australian assets was the date of the May agreement, 31 May 1991. It was the respondent's contention that the disposal did not occur until the date of the variation agreement.

76. At first instance, the Federal Court (North J) held that the contract under which the disposal of the assets of the Australian businesses was effected, was made, for the purposes of s 160U, on 31 May 1991. His Honour was of the view that the language of the section recognised that the time fixed in accordance with the section might not reflect the time at which the actual transfer of the actual assets occurred. ^[14] Kiwi Brands Pty Ltd v FC of T 97 ATC 4879 at 4892; (1997) 148 ALR 605 at 621. It had also been argued by the respondent that because it was common ground that the signing of the agreement by Mr Patten was not done with the authority of the appellant, the earliest occasion upon which the agreement could be regarded as being completed and enforceable was the date of the ratification of Mr Patten's execution of it by the Board of Directors on 20 August 1991. In rejecting the respondent's submission, North J ^[15] 97 ATC 4879 at 4892-4893; (1997) 148 ALR 605 at 622. relied upon Bolton Partners v Lambert ^[16] (1889) 41 Ch D 295. and Keighley, Maxsted & Co v Durant ^[17] [ 1901] AC 240. and statements by Isaacs J in Davison v Vickery's Motors Ltd (In Liq) ^[18] (1925) 37 CLR 1 at 19. in which it was held that ratification operated retrospectively to the original date of execution of a contract. Accordingly North J dismissed the appellant's appeals. (There were two appeals because the appellant amended the first assessment and the respondent challenged both the original and the amended assessment.)

77. The respondent appealed to the Full Federal Court (Hill, Finn and Sundberg JJ) who unanimously upheld the appeal. ^[19] Kiwi Brands Pty Ltd v FC of T 99 ATC 4001; (1998) 90 FCR 64.

78. The first question which the Full Court considered was whether the Australian assets had been disposed of under a contract. Their Honours held that they had. ^[20] 99 ATC 4001 at 4010; (1998) 90 FCR 64 at 75. In answer to the next question that the Full Court posed, whether the disposal had occurred under the May agreement or the variation agreement, the Court said that in the context of s 160U(3), the first time there was a contractual obligation on the part of the appellant to transfer assets for a consideration of US$62,461,000 was in August 1991, and then only as a result of the variation agreement.

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79. It is against that decision that the appellant appeals to this Court.

80. It is the appellant's submission that the Full Court erred in two respects: by concluding that the variation agreement gave rise to a new contract; and, by focusing on the question when a particular provision of the agreement(s), that is the provision for the disposition of the Australian assets at the new price, was incorporated into the variation agreement.

81. There was no dispute, and the Full Court held that the variation agreement did not rescind the May agreement. Not only was this holding in accordance with a number of authorities ^[21] Morris v Baron & Co [ 1918] AC 1; British and Beningtons Ld v NW Cachar Tea Co [ 1923] AC 48; United Dominions Corporation (Jamaica) Ltd v Shoucair [ 1969] 1 AC 340; BBC v Kelly-Phillips [ 1998] 2 All ER 845 ; Tallerman & Co Pty Ltd v Nathan's Merchandise (Victoria) Pty Ltd (1957) 98 CLR 93 ; Dan v Barclays Australia Ltd (1983) 57 ALJR 442 ; 46 ALR 437 ; Permanent Building Society (In Liq) v Wheeler (1992) 10 WAR 109 . but it was also a reflection of the clear intention of the parties as expressed in cl 11 of the variation agreement which I have quoted and which affirmed the May agreement. There may be cases in which what is expressed to be a variation of an earlier agreement, as a matter of construction cannot be so regarded. However, this is not such a case.

82. It is important to place s 160U, which appears in Div 2 of Pt IIIA of the Act in context.

83. This was a transaction expressed in a foreign currency. Section 160K(5) provides that the Australian currency equivalent is to be calculated at the time of disposal of the assets. It should be noted that s 160K(6), a provision for the fixing of the time of the acquisition of an asset, focuses upon the actions or payments of the taxpayer in acquiring the asset and makes no reference to any disposition of it. On the other hand, s 160K(8) and s 160K(9) focus upon, and refer only to the disposition of an asset.

84. Division 2 is headed ``Application'' and the words ``Part applies in respect of disposals of assets'' appear before s 160L is set out in the Act. All of the sub-sections are concerned with the disposal of assets and not their acquisition.

85. Section 160M(1) provides as follows:

``Subject to this Part, where a change has occurred in the ownership of an asset, the change shall be deemed, for the purposes of this Part, to have effected a disposal of the asset by the person who owned it immediately before the change and an acquisition of the asset by the person who owned it immediately after the change.''

86. It can be seen that the sub-section refers separately to a disposal and an acquisition of an asset, although in terms the section does appear to contemplate one instantaneous change in ownership only.

87. Section 160M(1A) declares that a change in the legal ownership of an asset does not constitute a change in its ownership unless there is also a change in the beneficial ownership of the asset. Beneficial ownership may of course change without a change in legal ownership.

88. It is unnecessary in this case to identify and resolve the extent of any differences between Gibbs CJ and Murphy J on the one hand, in Legione v Hateley , and Mason and Deane JJ on the other. The latter had said there: ^[22] (1983) 152 CLR 406 at 446. See also KLDE Pty Ltd ( in liq) v Commr of Stamp Duties (Qld) 84 ATC 4793 at 4797-4798; (1984) 155 CLR 288 esp at 297 .

``In this Court it has been said that the purchaser's equitable interest under a contract of sale is commensurate only with her ability to obtain specific performance of the contract ^[23] Brown v Heffer (1967) 116 CLR 344 at 349. ...

A competing view - one which has much to commend it - is that the purchaser's equitable interest under a contract for sale is commensurate, not with her ability to obtain specific performance in the strict or primary sense, but with her ability to protect her interest under the contract by injunction or otherwise ^[24] Tailby v Official Receiver (1888) 13 App Cas 523 at 546-549 ; Redman v Permanent Trustee Co of New South Wales Ltd (1916) 22 CLR 84 at 96 ; Hoysted v FC of T (1920) 27 CLR 400 at 423 ; Pakenham Upper Fruit Co Ltd v Crosby (1924) 35 CLR 386 at 396-399 ; Jordan, Chapters on Equity , 6th ed (1945) at 52, n (e). ...

However, for the purposes of this case we are prepared to accept the correctness of the statements in Brown v Heffer .''

89. But there is no doubt that the rights of Roche and its subsidiaries included rights to protect their interests under the May agreement by injunction or otherwise, before 30 June 1991 notwithstanding that the conditions precedent to completion had not by then been satisfied. That this was so follows not only from cl 3.3 of the May agreement, the effect of which I have summarised but also from settled principle which holds that all parties to a contract are under a duty to co-operate in the doing of acts necessary for the performance by the parties of their fundamental obligations under the contract. ^[25] McKay v Dick (1881) 6 Cas 251 at 263 ; Butt v M'Donald (1896) 7 QLJ 68 at 70-71 ; Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 .

90. Section 160M(2) evinces an intention to cover all conceivable means of effecting a change in the ownership of an asset. It provides as follows:

``A reference in subsection (1) to a change in the ownership of an asset is a reference to

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a change that has occurred in any way, including any of the following ways:

• (a) by the execution of an instrument;
• (b) by the entering into of a transaction;
• (c) by the transmission of the asset by operation of law;
• (d) by the delivery of the asset;
• (e) by the doing of any other act or other thing;
• (f) by the occurrence of any event.''

91. Section 160U is the section which is directly concerned with the fixing of the time of a disposal or an acquisition of an asset. Relevantly, it provides as follows:

``(1) Subject to the provisions of this Part other than this section, where an asset has been acquired or disposed of, the time of acquisition or disposal for the purposes of this Part shall be ascertained in accordance with this section.

(2) If the time of acquisition or disposal as ascertained under a subsection of this section is different from the time of acquisition or disposal as ascertained under a subsequent subsection of this section, the time of acquisition or disposal shall be taken to have been the time of acquisition or disposal as ascertained under that subsequent subsection.

(3) Where the asset was acquired or disposed of under a contract, the time of acquisition or disposal shall be taken to have been the time of the making of the contract.''

92. It should be noted that the relevant sub- sections refer disjunctively to a disposition or an acquisition of an asset. It may also be noted that s 160U(3) does not speak in terms of a change of ownership in an asset but of the acquiring or disposing of an asset under a contract .

93. Finally, reference should be made to s 160ZD, sub-s (1) of which I set out:

``Subject to this Part, for the purposes of this Part, the consideration in respect of a disposal of an asset is:

• (a) if the taxpayer has received or is entitled to receive an amount or amounts of money as a result of or in respect of the disposal - that amount or the sum of those amounts;
• (b) if the taxpayer has received or is entitled to receive property other than money as a result of or in respect of the disposal - the market value of that property at the time of the disposal; or
• (c) if the taxpayer has received or is entitled to receive both an amount or amounts of money and property other than money as a result of or in respect of the disposal - the sum of that amount or those amounts and the market value of that property at the time of the disposal.''

94. The sub-section, which is concerned with the amount of consideration in respect of a disposal of an asset does not require for its application only that the taxpayer has actually received the consideration but may apply if the taxpayer is entitled to receive it.

95. The importance of distinguishing between a variation that operates to rescind an existing contract and substitute a new one and a variation that was intended to amend an existing agreement whilst leaving the existing contract on foot first arose in cases dealing with parol variations of contracts required to be in writing. But as the appellant submits, there is no reason why those cases should not be regarded as being of general application. ^[26] Dan v Barclays ; Broken Hill Pty Co Ltd v FC of T 99 ATC 5193 ; [ 1999] FCA 1628 ; Travelers Insurance Co v Workmen's Compensation Appeals Board 434 P 2d 992 (1967) ; International Business Lists Inc v American Telephone and Telegraph Co 147 F 3d 636 (1998) .

96. As I have pointed out, the variation agreement affirmed the May agreement. The recital to the former stated that the parties desired only to amend, clarify, and supplement the provisions of the May agreement. In the overall scale of the transaction, however viewed, the changes were not large ones. The intention of the parties was only to amend the May agreement almost all of which was left on foot.

97. On 31 May 1991 on any view the respondent executed an instrument and entered into a transaction as contemplated by pars (a) and (b) respectively of s 160M(2) of the Act.

98. I do not take the language of the Act to require that in all cases and for all purposes there must be a simultaneous, or immediately consecutive disposition and acquisition of an asset. The Act is drawn up in such a way, as the sections to which I have referred indicate, as to deem an event or sequence of events a disposition and some other event or sequence of events an acquisition.

99. The respondent was bound to do all such acts and things as it reasonably could to carry

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into effect the May agreement. Its obligation in that regard would have been enforceable at least by mandatory injunction. Its and Roche's obligations (save as to a minor adjustment to the allocation of the sale price) remained unchanged. It had, therefore in my view, disposed of all of the relevant assets under a contract within the meaning of s 160U(3) of the Act.

100. I am also of the opinion that Tallerman & Co Pty Ltd v Nathan's Merchandise (Victoria) Pty Ltd ^[27] (1957) 98 CLR 93. has application to this case. There the plaintiff wished to pursue an action in the Supreme Court of New South Wales. To do so it needed to show that a contract had been concluded between the parties in that State in circumstances in which the original contract had been concluded in Victoria and had been varied by subsequent correspondence originating in New South Wales. Dixon CJ and Fullagar J dealt with the plaintiff's contention that a new contract had been made in New South Wales in this way: ^[28] (1957) 98 CLR 93 at 112.

``But what is the position where a contract is concluded in one place and subsequently varied by agreement in another place? There is only one contract, and one would think it clear that that contract must, if it ever becomes material to inquire where it was made, be regarded as made at the place where it was originally concluded. The variation affects the content of the obligation but not the obligation itself. The place where the parties assumed that obligation, and became bound to one another, is the place where their contract was really made.''

101. There is no reason why their Honours' statement of principle should not apply to the date of the making of the contract in this case as well as to the place of the making of a contract.

102. If attention be directed, as I think it should be, to the disposition of the assets rather than their acquisition then it does not matter that the particular transferee did not come into existence until after 31 May 1991. But in any event, that is, in a sense an irrelevant consideration anyway. Section 12.3 of the May agreement, although contemplating the possibility of an assignment of rights or obligations under the agreement to some other legal personality, operated at all times to hold the respondent bound to the terms of the May agreement.

103. It may be, as I have said, that in some circumstances a variation may have the effect of rescinding an original contract and creating a new one. It is not without relevance however that an absolute principle, that any variation, however minor, should be regarded as creating a fresh agreement, would provide virtually unlimited scope for the manipulation of the date of disposal of assets for the purposes of assessment of capital gains tax.

104. True it may be that the first time that there was a contractual obligation on the part of the respondent to transfer assets for a consideration of US$62,461,000 was in August 1991 as a result of the variation agreement, but at all times there was a clear contractual obligation to transfer them for US$1,000,000 less than that amount by virtue of section 12.3 of the May agreement.

105. In summary therefore, the disposition in this case must be taken to have occurred on the making of the May agreement on the application of the principle preferred in Tallerman and by reason of the language of s 160K(5), s 160M(1), (1A) and (2), s 160U(1) and (2) and particularly s 160U(3) of the Act. On that date the respondent executed an agreement and entered into a transaction for the disposal of assets and became entitled (subject to the fulfilment of conditions precedent) to receive consideration which included a component of capital gain. The contract, although subsequently varied (albeit not very significantly in the overall scale of things) was made on 31 May 1991 and the relevant assets were disposed of under it on that date.

106. The respondent filed a notice of contention. For the most part I have dealt with the points that it raised, in discussing the appellant's grounds of appeal. The respondent points out that the variation agreement was an agreement between Roche and Sara Lee acting for various sellers including the respondent and on its own behalf. NP was not a party to this variation. But the variation agreement in no way altered the obligations of the respondent to sell and convey the Australian assets pursuant to section 2.2 and it did not impose any obligations directly upon NP. The obligation to dispose remained unchanged.

107. The Full Court was correct to the extent that it concluded as follows: ^[29] Kiwi Brands Pty Ltd v FC of T 99 ATC 4001 at 4010; (1998) 90 FCR 64 at 75.

``... The Deeds of Assignment and Assumption of liabilities and related

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documents were but the working out of the contractual obligations of the parties provided for by the terms of the contractual relationship between them. Although the drafting of the Deed of Assignment is far from felicitous using both the expression `sell' as well as `assign' it does not sound in contract. It is the assignment for which the contractual obligations themselves provided.''

108. The last matter which needs to be considered is the submission of the respondent that there was no agreement until Mr Patten's execution of the May agreement was ratified by the Board of Directors on 20 August 1991.

109. The Full Court did not need to deal with this argument as their Honours formed the view that the respondent should succeed on its argument that the relevant date was the date of the variation agreement. On this issue North J at first instance was right to apply the statement of Lord Macnaghten in Keighley, Maxsted & Co v Durant : ^[30] [ 1901] AC 240 at 247. See also Bolton Partners v Lambert (1889) 41 Ch D 295 at 307-308 per Cotton LJ; Davison v Vickery's Motors Ltd (In Liq) (1925) 37 CLR 1 at 19 per Isaacs J.

``And so by a wholesome and convenient fiction, a person ratifying the act of another, who, without authority, has made a contract openly and avowedly on his behalf, is deemed to be, though in fact he was not, a party to the contract.''

110. Except to the extent that the Act deems or provides otherwise, doctrines of general contractual law should be taken to apply to contracts when they are mentioned in the Act.

111. I would allow the appeal with costs and order that the respondent pay the appellant's costs in the Federal Court and the Full Federal Court.

ORDER

1. Appeal allowed with costs.

2. Set aside the orders made by the Full Court of the Federal Court of Australia on 11 December 1998, and in place thereof, order that the appeal to that Court be dismissed with costs.