• The impact of this case on ATO policy is discussed in Decision Impact Statement: South Steyne Hotel Pty Ltd & Ors v Commissioner of Taxation (NSD 97/2009).

SOUTH STEYNE HOTEL PTY LTD & ORS v FC of T

Judges:
Finn J
Emmett J
Edmonds J

Court:
Full Federal Court, Sydney

MEDIA NEUTRAL CITATION: [2009] FCAFC 155

Judgment date: 20 November 2009

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ATC 10333

Finn J

1. I have had the advantage of reading the reasons of Emmett J and of Edmonds J in draft. I agree with the reasons and conclusions of Emmett J and with the orders he proposes. Given that I disagree in part both with Edmonds J and with the primary judge, it is appropriate that I make the following three comments.

2. First, the sales of three apartments to MBI Properties subject to their respective leases did not constitute a new or further supply. The covenants of the initial leases remained but the benefit of the respective tenants ' covenants and the burden of the landlord ' s covenant " ran " with the reversion by virtue of real property legislation: see Conveyancing Act 1919 (NSW) ss 117, 118; Real Property Act 1900 (NSW) s 40(3); and not by virtue of a distinct supply agreement or arrangement: see generally Butt, Land Law [ 15159 ] - [ 15175 ] (5 ^th ed, 2006).

3. Secondly, the sale of apartments to Properties as a going concern. For the reasons given by Emmett J, cl 47.6.6 of the Contract of Sale was inconsistent in its effects both with the " Tax information " provided on page 1 of the Contract (which indicated that the sale was " GST-free because the sale is the supply of a going concern under section 38-325 " of the A New Tax System (Goods and Services Tax) Act 1999 (Cth)) and with the provisions in cl 47.6.3 (which were to like effect). This clearly is a case where cl 47.6.6 destroys the effect of the statement on page 1 and of cl 47.6.3. It should be rejected as repugnant: on " internal inconsistency " see generally, Lewison, The Interpretation of Contracts , 9-08 (4 ^th ed, 2007).

4. Thirdly, the supply of residential accommodation to Ms Young. The relationship of Mirvac Management and Mirvac Hotels under the Serviced Apartment Management Agreement was unquestionably that of principal and agent, but it was an agreement which gave Mirvac Hotels exclusive control of the serviced apartment business. As the primary judge concluded, Mirvac Hotels also exercised control over the Hotel by virtue of its ownership of the " Management Lot (which included the reception area, offices and car parking spaces) and had " considerable control over the conduct of the restaurant " which was leased by Red Elm. While Mirvac Hotels did not " own " the commercial residential premises that were the Hotel, it clearly controlled them for s 40-35 purposes and it was the " entity " which supplied accommodation in the premises. It may have been Mirvac Management ' s agent, but in supplying accommodation to Ms Young it contracted as a principal: cf
Carminco Gold and Resources Ltd v Findlay & Co Stockbrokers (Underwriters) Pty Ltd (2007) 243 ALR 472 ; and it could make that supply because it controlled the premises. The exception in s 40-35 (1)(a) was satisfied.

5. I agree with the orders proposed by Emmett J.