The impact of this case on ATO policy is discussed in Decision Impact Statement: Aurora Developments Pty Ltd v Commissioner of Taxation (QUD 251 of 2008; QUD 252 of 2008).

AURORA DEVELOPMENTS PTY LTD v FC of T

Judges:
Greenwood J

Court:
Federal Court, Brisbane

MEDIA NEUTRAL CITATION: [2011] FCA 232

Judgment date: 18 March 2011

Greenwood J

Part I

Background and aspects of the contentions of the parties

1. The applicant, Aurora Developments Pty Ltd ("Aurora"), appeals pursuant to s 14ZZ(a)(ii) of the Taxation Administration Act 1953 (Cth) (the "Administration Act") from the Commissioner's objection decision concerning an assessment of GST for the period 1 July 2004 to 31 July 2004 and the assessment of penalty pursuant to s 298-30 of the Administration Act. By the objection decision of 20 June 2008, the Commissioner disallowed in part an objection against a GST assessment and penalty assessment in relation to the sale of lands by Aurora to three companies controlled by Australand Limited ("Australand").

2. The central question to be determined in these proceedings is whether Aurora made a taxable supply for the purposes of s 9-5 of A New Tax System (Goods and Services Tax) Act 1999 (the "GST Act") having regard to whether a relevant supply was GST-free for the purposes of s 38-325 of the GST Act. Section 38-325 of the GST Act provides that the supply of a "going concern" is GST-free if the supply is made for consideration, the recipient is registered in the relevant sense (or required to be registered) and the supplier and the recipient of the supply have agreed in writing that "the supply is of a going concern". A "supply of a going concern" is, by s 38-325(2), "a supply under an arrangement under which: (a) the supplier supplies to the recipient all of the things that are necessary for the continued operation of an enterprise; and (b) the supplier carries on, or will carry on the enterprise until the day of the supply (whether or not as part of a larger enterprise carried on by the supplier)".

3. I have given italic and bold emphasis to those aspects of the statutory integers which have engaged argument in the proceeding. Having regard to aspects of the argument, an anterior question arises as to whether Aurora has engaged in a taxable supply at all. However, the questions of fact and law arising in the proceeding are fundamentally addressed to the question of the satisfaction or otherwise by Aurora of the statutory integers comprising s 38-325 and, in particular, those matters required to be satisfied under s 38-325(2). The resolution of the controversy turns almost entirely on the facts and the examination and construction of the documents.

4. A further question concerns matters of penalty. On 7 November 2006, the respondent issued an administrative penalty assessment to the applicant of $708,008.10 under the Administration Act on the footing that Division 284 of that Act applied for the tax periods the subject of GST assessments. Aurora objected to the assessment under s 298-30 of Schedule 1 to the Administration Act and Part IVC of that Act. On 20 June 2008, Aurora received notice of the respondent's decision under s 14ZY of the Administration Act to allow the objection in part. The respondent reduced the penalty assessment by $126,090.85. Aurora has appealed from that decision to this Court under s 14ZZ of the Administration Act. That application is the subject matter of proceedings QUD252 of 2008 which was heard together with the principal proceeding (QUD251 of 2008).

5. The parties have filed a Statement of Agreed Facts (the "the agreed facts"). Aurora relies upon it. The directors of Aurora have been called and cross-examined about aspects of their affidavit evidence and, in particular, the nature of the activities of Aurora, the development approvals obtained, the character of the development it undertook and points along the continuum of that development so as to identify changes to it, those aspects of the development which were abandoned and those aspects which were continued. The directors were cross-examined as to those factual matters rather than as to questions of credit. There is no contention by the respondent that the arrangements recited in the contract at the centre of the proceedings are a sham. Plainly enough, the parties to an agreement cannot, by agreement, determine that a particular supply is GST-free for the purposes of the GST Act. That is a conclusion which arises as a matter of law having regard to the factual foundation for the operation of the statutory integers properly construed.

6. Aurora contends however that the parties can quite properly agree the content of the enterprise and reach agreement about the things that will be done to carry on the enterprise until the day of supply. Aurora further contends that once the parties have reached agreement about those matters, the agreement or contract governs the matter. Questions in cross-examination directed to the content of the enterprise or the understanding of the directors of Aurora about matters leading up to the distillation of the agreed enterprise in the contract are said by Aurora to be irrelevant and evidence given in answer to such questions is inadmissible as not relevant to the matters in controversy.

7. The Commissioner contends that the context within which the transaction, governed by the contract, occurred, remains relevant to the construction of the contract. Moreover, the question is not simply one of construing the contract but involves the statutory integers to be applied in the operation of s 38-325 and whether those integers are satisfied. As explained in these reasons at [166]-[171], I accept that evidence going to the context of the agreement and each of the integers of s 38-325 is relevant in determining whether a GST-free supply has occurred.

8. Mr Richard Fulcher, an employee of Australand at the relevant time gave evidence and was also cross-examined. Mr Michael Adamson, a lawyer who undertook professional legal work as a member of a law firm on behalf of Aurora and who then became an employee of Aurora gave evidence and was cross-examined. Mr Grant Cameron who undertook and supervised particular earthworks on lands relevant to the proceedings gave evidence and was cross-examined about aspects of the earthworks.

9. On 2 October 2003, Aurora entered into a contract with three entities controlled by Australand namely, Australand Land and Housing No. 5 (Hope Island) Pty Ltd, Australand Land and Housing No. 7 (Hope Island) Pty Ltd; and Australand Land and Housing No. 8 (Hope Island) Pty Ltd. Where relevant, I will refer to the No. 5, No. 7 and No. 8 entities as the "buyer". Otherwise, "Australand" is a reference to Australand Limited and its interest in its dealings with Aurora.

10. The contract is described as a "Contract For Houses and Land" and describes Aurora as the seller and the three Australand entities as the buyer. It provides for the sale by Aurora to Australand of particular "parcels of land shaded on Annexure B" (defined by the contract as the "Land") comprising an area of 9.9722 hectares for a consideration of $28,201,261.18 (see Plans D1, D2 and D3 attached to these reasons).

11. The contract by Annexure A contains 22 Special Conditions which are either in addition to the standard terms or replace some of those terms contained in the standard form contract document adopted by the parties. The parcels of land shaded on Annexure B to the contract are two lots described as Lot 28 and Lot 34. Those two lots are contiguous with a section of a road reserve (in large part undeveloped) called Pendraat Parade which was to be surrendered with Aurora securing a title to the surrendered part through the appropriate processes. That title would then form part of the land to be conveyed to the buyer under the Aurora contract.

12. By Special Condition 4.3, Aurora and Australand agree, subject to Special Conditions 4.4 and 4.5, that any GST as that term is defined by the GST Act imposed on any supply made under the contract (where the consideration is not expressed to be GST inclusive) is to be paid by the buyer at the stipulated rate at the same time as the GST exclusive consideration is payable. However, if GST becomes payable to the Australia Taxation Office ("ATO") by Aurora before the time for payment of the buyer's consideration, the amount of the GST is payable by the buyer to Aurora on demand subject to the issue of a tax invoice by Aurora.

13. By Special Condition 4.4(a), Aurora and the buyer "acknowledge and agree" that the "sale of the Enterprise effected pursuant to this Contract constitutes the supply of a Going Concern that is GST Free" [emphasis added]. By Special Condition 4.4(b), Aurora "acknowledges and warrants that it is currently [that is as at 2 October 2003] carrying on and will continue to carry on the Enterprise until the day of supply [emphasis added]. By Special Condition 4.4(c), Aurora and the buyer acknowledge that "this Contract constitutes an agreement under which the Seller will supply to the Buyer all of the things that are necessary for the continued operation of the Enterprise" [emphasis added].

14. Special Condition 4.5 is enlivened if for any reason Special Condition 4.4(a) does not apply. In those circumstances, the parties agree that the provisions of Special Condition 4.5 would apply instead of Special Condition 4.3. Special Condition 4.5 deals with the application of the "Margin Scheme".

15. The contract does not recite or expressly provide for, by its threshold operative description, the sale and transfer of an enterprise or a business or a development project. Rather, it addresses an agreement to "sell and buy property". However, within the framework of the GST Special Condition, the parties acknowledge and agree that the contract "effects" the "sale of the Enterprise" and the sale constitutes the supply of a "Going Concern" with the agreed conclusion that the supply is "GST Free".

16. The "Enterprise" contemplated by the contract and thus the parties to it, is defined to mean "the enterprise of the development of the Land and the assets of that enterprise, including the Land, the Development Material and all other items, books, plans, approvals and all ancillary materials". The "Development Material" is thus described as one of the "inclusive" assets of the enterprise and by Special Condition 1.1(c), Development Material means:

"… all documentation prepared or compiled by or on behalf of the Seller or obtained by it in relation to the development of the Site and in particular, but without limiting the generality of the foregoing the following:

• Plans and engineering drawings in respect of the development of the Site;

• Any reports, files and materials prepared by and on behalf of the Seller were obtained by it; and

• Any computer disks containing copies of the abovementioned plans or documents;

• any rights (but no obligations) under existing contracts in respect of the Land."

17. The definition, folding as it does into the definition of "Enterprise", talks of documentation, plans and engineering drawings in relation to the development of the Site and that term means the Land (that is, the Annexure B parcels and the shaded section of Pendraat Parade) and the "Adjoining Land". The Adjoining Land means particular land adjoining the Annexure B land of Aurora. It is defined to mean firstly, part of Pendraat Parade and a section of land on the western side of a canal (to be built (or completed), the precise alignment of which had to be determined) owned by Sickle Avenue Pty Ltd ("Sickle"); and, secondly, part of land also on the western side of the canal owned by Atmeygor Pty Ltd ("Atmeygor") and located north west of the shaded Annexure B land of Aurora.

18. Aurora, Sickle and Atmeygor are companies controlled, in terms of their shareholding, (through particular entities) by Mr John Atkinson and Mr Craig Gore who are the directors of each company.

19. The term "Site" used within the definition of "Development Material" in turn adopted within the definition of "Enterprise" does not include property within the description "Balance Contracts" (at Special Condition 1.1(b)). Those contracts concern the sale of a parcel (or part of a lot) owned by Atkinson Gore Group Pty Ltd ("AGG") to the buyer and the sale of two other particular lots by Atmeygor to the buyer.

20. On 2 October 2003, Atmeygor entered into a contract with the buyer for the sale of those parcels of land owned by it shaded on Annexure B to that contract which consists of a plan showing lots described as Lots 1 and 2 on RP908283 (1.153 hectares) for $4,499,541.58. A further contract was signed on 2 October 2003 with Atmeygor for Lot 3 on RP908283 for $40m. These contracts reflect symmetry with the Aurora contract. The adjoining land, in the case of the first Atmeygor contract mentioned above (Lots 1 and 2), is defined as AGG's land on the western side of the canal (previously described) bearing Lot 177 on the relevant registered plan. The "Balance Contracts" are defined as the Aurora contract, the Atmeygor contract in respect of Lot 3 on the north western side of Aurora's land, and the Sickle contract. The relevant definitions are in the same terms as the Aurora contract.

21. On 2 October 2003, Sickle entered into a contract with the buyer for the sale of its section of land on the western side of the proposed canal (part of Lot 1 on SP149221) for $1,798,732.82 and on 2 October 2003 AGG entered into a sale of its parcel of land to the buyer (Lot 177, RP92299 - 4.0052 hectares) for $15,550,458.42.

22. The lands acquired under these purchase agreements are the aggregated parcels or lots on which Australand proposed to undertake its particular property development project.

23. The Aurora enterprise, at least as defined by the Aurora contract and thus adopted by the parties to it, means the development of the Annexure B land owned by Aurora (and that section of Pendraat Parade to be surrendered and made the subject of a fresh title) and the assets of that enterprise, that is, that development, including however, particular documentation prepared or compiled by or on behalf of Aurora in relation to the Land and the relevant lands of Sickle or Atmeygor being the Adjoining Land falling within the definition of the term Site. The reference in the definition of "Enterprise" to all other items, books, plans, approvals and all ancillary materials must necessarily mean all of those things in relation to "the development of the Land" as that phrase is used in Special Condition 4.2.

24. Having regard to that notion of enterprise, the parties to the contract by Special Conditions 4.4(a), (b) and (c), recited the position they had reached on 2 October 2003 after a period of examination by Australand of the Aurora land and contiguous land owned by Sickle, Atmeygor and AGG, under the terms of an Exclusivity Deed dated 21 July 2003 by recording that they acknowledged and agreed that the contract effected the sale of the "Enterprise" and the sale constituted "the supply of a Going Concern that is GST Free"; Aurora acknowledged and warranted that it was at 2 October 2003 carrying on the enterprise and would continue to carry on the enterprise until "the day of supply"; and the parties acknowledged that the contract constituted an agreement under which Aurora would supply to the buyer all of the things necessary for the continued operation of the enterprise.

25. The phrase "the development of the Land" in the definition of "Enterprise" in the contract and the term "Enterprise" itself, is said by Aurora, to be given content by other provisions of the contract. In particular, Special Condition 6 sets out the works Aurora was to undertake at its cost in relation to such matters as taking all steps necessary to obtain the required approvals for works to be undertaken as described in Annexure C to the contract. Aurora was to procure the commencement of the works as soon as reasonably practicable after the contract date and proceed with those works through suitably qualified contractors. Special Condition 6.1(a), (b), (c) and (d) give content to that matter. Aurora was to provide the buyer with a program for the works prior to commencement and provide updates to the program on a monthly basis (6.1(e)). Aurora was to allow the buyer to inspect the works, keep the buyer fully informed about the works and provide the buyer with test results (6.1(f), (g) and (h)). Aurora was required to take and ensure that the relevant contractor took all necessary action to do the things recited in 6.1(i). Aurora was "fully responsible" for the care of the works and the reinstatement of any loss or damage to the works (6.1(j)).

26. Aurora says that the content of its continuing engagement can also be seen from the remaining provisions of Special Condition 6. Special Condition 6.2 contains a warranty by Aurora that any contractor has all relevant licenses and qualifications to carry out the Annexure C works. By Special Condition 6.4, Aurora warrants that the works when completed will comply with the contract. By Special Condition 6.5, Aurora must ensure that the property (being the "Land") is kept safe, secure, clean and tidy; all fencing, roads, landscaping, footpaths and surfaces adjacent to the property are cleaned up and made good to the buyer's reasonable satisfaction before completion; in carrying out the works all people are to be protected from death or injury; damage to property is to be made good; and the works are not to be varied without the consent of the buyer. By Special Condition 6.8, Aurora is required to rectify any part of the works found to be defective.

27. Annexure C specifies the seller's works to be undertaken by Aurora under Special Condition 6.1. The specification contains 15 categories of work. Aurora contends that a very large part of the works specified in Annexure C represent works Aurora was required to undertake as part of the development approvals it had obtained in connection with the development of the Annexure B Aurora land. The works also related to the land of Sickle, Atmeygor and AGG. Items (ii), (iii), (iv), (v), (vi) and (vii) of Annexure C are said to be emblematic of that proposition. The certifications required by (xi) and (xii) of Annexure C, the provision of plans of wick drains (Item xiii) and the completion of Pendraat Parade works under Item (xiv) are also said to be consistent with the continuing enterprise activities being undertaken by Aurora in connection with the lands the subject of the Aurora contract. Items (i), (viii), (ix) and (x) are not consistent with activities characterising Aurora's continuing enterprise. Those matters concern the demolition of a sales office and the removal of particular construction works. That work was not required to be undertaken as an element of Aurora's continuing enterprise.

28. The contract, not surprisingly, contemplated that things would happen between the date of contract and a later date being the date of settlement. Most notably those things involved the completion of the Annexure C works subject to the protocols within the contract about completion and the buyer's satisfaction as to completion. Special Condition 6.3 provides that the drawings and specifications and all documentation relating to the works would become the property of the buyer on settlement. By Special Condition 6.6, as a condition of completion, Aurora was required to provide the buyer with "as constructed" drawings of the works, certificates referred to in the drawings and specifications, a costs breakdown, particulars of expenditure, all approvals and evidence satisfactory to the buyer that completion of the works had been achieved. By Special Condition 12, Aurora assigned and set over to the buyer from settlement Aurora's full right, title and interest in and to the Development Material. By Special Condition 12(b), Aurora was required on settlement to deliver "the original of the Development Material and all files, plans, notes and papers relating thereto to the Buyer".

29. The date for settlement of the contract was to be determined by operation of Special Condition 11. Special Condition 11.1(a) provides that settlement will be 60 days from the date Aurora gives the buyer written notice that five things have either occurred or have been satisfied. First, that the relevant titles as contemplated by Special Condition 5 of the contract have issued, including the amalgamation of the Pendraat Parade land with Aurora's land. Secondly, that "Completion of the Works, as provided in special condition 6 has occurred". Thirdly, that the Special Condition as to titles for the "Adjoining Land as recited in the contracts for the Adjoining Land has been satisfied" (that is the Sickle contract and the Atmeygor contract (Lot 3)). Fourthly, that "Completion of the Works, as provided in special condition 6 of the Sickle Avenue Contract has occurred". Fifthly, that "Completion of the Phase 1 Works, as provided for in special condition 6 of the Atmeygor Contract has occurred" (that is, the Lot 3 Atmeygor contract). Special Condition 11.2 provides that if Completion of the Works has not occurred in accordance with Special Condition 6 within 20 months of the contract date [2 October 2003], a particular protocol under Special Condition 11.2(i) to (vii) is to apply. Special Condition 11.4 confers an entitlement on the buyer upon receiving notice from Aurora under Special Condition 11.1 that all of the five events contemplated by 11.1(a) have either occurred or have been satisfied, to nominate a settlement date earlier than the 60 day period from the receipt of Aurora's "written notice".

30. Apart from settlement of the contract being conditional upon matters related to the completion of works contemplated by the Sickle contract and the Atmeygor Lot 3 contract as recited in Special Condition 11, Special Condition 17.1 of the Aurora contract provides that the contract is subject to and conditional upon the buyer entering into contracts to purchase the Adjoining Land on the same day as the (Aurora) contract date and, by 17.2, the Aurora contract is subject to and conditional upon the contemporaneous completion of the contracts for the sale of the Adjoining Land. If the contemporaneous completion of those contracts is not fulfilled, the party not in default is entitled to terminate the Aurora contract.

31. Aurora contends that although it is true that the question to be determined in the present proceeding is whether Aurora, and only Aurora, has made a relevant GST-free supply by operation of s 38-325 of the GST Act, the interdependence between the Aurora contract and the contracts for the Adjoining Land makes the arrangements made with Sickle, Atmeygor and AGG relevant in understanding the context, scope and content of the "activities" conducted by Aurora on its land and the arrangements Aurora made with Australand.

32. Section 9-5 of the GST Act contemplates the making of a supply (of goods, of services, the creation or grant of any rights, a grant of real property or any form of supply whatsoever - s 9-10, GST Act) for consideration in the course or furtherance of an enterprise carried on by the supplier and characterises that supply as a taxable supply unless, relevantly, it is a GST-free supply. Rather than make a supply in the course or furtherance of an enterprise, the supplier might elect to supply an enterprise as a going concern. The supplier might do so by making an arrangement by contract (that might or might not recite all of the elements of the relevant arrangement) under which the going concern is supplied. A supply of a going concern is a supply under an arrangement under which (s 38-325(2)):

(a) the supplier supplies to the recipient all of the things that are necessary for the continued operation of an enterprise; and
(b) the supplier carries on, or will carry on, the enterprise until the day of the supply (whether or not as part of a larger enterprise carried on by the supplier).

33. The Commissioner contends for two threshold matters arising out of s 38-325(2).

34. First, s 38-325(2) contemplates the making of an arrangement (under which a supply of a going concern occurs) which is necessarily made at a particular moment in time, with a supplier carrying on the enterprise until a later time, described as "the day of the supply". That later day is said to represent a transition date upon which the recipient assumes possession, occupation and control of the enterprise; upon which the supplier supplies to the recipient all of the things necessary for the continued operation of the enterprise; and upon the day on which the supplier ceases carrying on the enterprise upon transfer of possession and control to the recipient. The recipient however, might elect to change the nature of the enterprise or might choose not to continue to undertake the enterprise as supplied. However, the recipient's post-supply choices in that regard cannot be determinative of whether a supplier has made a supply of a going concern.

35. Secondly, s 38-325(2) addresses the notion of all of the things that are necessary for the continued operation of an enterprise, and the supplier carrying on the enterprise until the transition date being the day of the supply. It follows, it is said, that in order to make sense of the conjunction of s 38-325(2)(a) and (b), the enterprise carried on until the transition day (or supply day) is the same enterprise about which all things necessary for its continued operation are to be supplied. The Commissioner contends that the section is expressly concerned with continuity of supply of something which is an enterprise characterised by a bundle of things to be supplied as a going concern and the continued operation of that thing until a day of supply occurs. In effect, s 38-325(a) requires, it is said, the identification of the relevant enterprise and all things necessary for the continued operation of that enterprise (and the supply of those things to the recipient), and s 38-325(b) requires the supplier to carry on that enterprise until the day of the supply to the recipient.

36. Consistent with that view, the Commissioner contends that "the day of the supply" is the settlement date under the Aurora contract rather than the date of the contract. The Commissioner further contends that having regard to the terms of the contract and the evidence, the relevant enterprise concluded some time prior to the settlement date and thus Aurora was not carrying on the relevant enterprise at the day of supply. Those contentions require a close examination of the contract and the evidence.

37. Aurora contends that the day of the supply is the date of contract.

38. Aurora also contends that, in any event, if the day of supply is the settlement date, Aurora carried on the relevant enterprise until that day. Aurora also contends that although the Commissioner gives emphasis to the provisions of the contract directed to settlement at a particular time (a maximum of 60 days after written notice predicated upon satisfaction or the occurrence of the five matters mentioned earlier), Aurora continued to discharge obligations under the contract up to the date of settlement which Aurora contends is entirely consistent with Aurora carrying on the relevant enterprise until "the day of the supply".

39. Further, Aurora contends that a dispute as to completion arose and the resolution of that dispute continued until 22 June 2004, a date closely approximating the date of settlement of the Aurora contract, namely, 2 July 2004. Thus, having regard to the contract, the obligations cast upon Aurora and the evidence in relation to the dispute, Aurora contends that it satisfies s 38-325(2)(b) even if the "day of the supply" is found to be the settlement date rather than the contract date.

40. Further, Aurora contends that s 38-325(2) operates expressly upon the differential language of an enterprise and the enterprise.

41. Aurora contends that it follows that the "arrangement", which Aurora contends is comprehended solely by the contract, must provide for the supplier to supply to the buyer all of the things necessary for the continued operation of an enterprise and not necessarily the enterprise carried on by the supplier at the date of the arrangement. So long as the buyer is supplied with all things necessary to continue the operation of an enterprise, the supplier need not show, it is said, that it has supplied all things necessary for the continued operation of the supplier's enterprise as undertaken by it at the date of the arrangement.

42. The first issue for determination then is the question of what enterprise was Aurora undertaking at the date of the arrangement, that is, the date of the contract.

43. By s 9-20 of the GST Act, an enterprise might consist of a single activity or a series of activities undertaken in the form of a business or in the form of an adventure or concern in the nature of trade.

44. Aurora contends that the content of the enterprise is to be found in the contract where the parties have defined the enterprise, elaborated by Special Condition 6 and Annexure C, the "Seller's Works", and informed by Special Conditions 12 and 17 (T 224, ln 10; T 226, ln 39). That enterprise is said to be property development of the land (that is, Aurora's land having regard to its relationship with the adjoining land) with a view to realising profit on sale (T 221, ln 23). The content of the enterprise is said to be the collection of activities contained in the contractual description (T 226, lns 21-23). The enterprise of "the development of the Land" means, it is said, land development carried on at all material times with a view to achieving the "highest and best use [of the land] and maximising the profit on resale" (T 228, lns 33-35; T 232, lns 25-30; and T 236, ln 35) rather than land development according to particular approvals or a specific conception of a project that might, and usually does, change throughout the course of a property development.

45. The Commissioner contends that Aurora carries on the business of land development which involves buying up land, developing it in different ways and then selling it. The Aurora land, it is said, was acquired as part of that business undertaking. Aurora, it is said, embarked upon a significant or substantial residential property development as part of its broad business undertaking as a property developer. The particular expression of that development, as it applied to the Aurora land, of residential development, was abandoned in favour of the preparation of the land for an "en globo" sale in the course of or in furtherance of Aurora's business of property development. Aurora made, it is said, improvements to the land in order to secure a better price and in doing so embarked upon an activity of carrying out earthworks to improve the land to make it more attractive for en globo sale so as to attract a greater price for the land (T 251, lns 14-34).

46. The Commissioner says that the sale of the land was in furtherance of Aurora's business of land development and thus fell within s 9-5 of the GST Act as a taxable supply, subject to the question of whether the supply was GST-free by operation of s 9-30, Division 38 and s 38-325 of the GST Act. The Commissioner contends that Aurora did not supply a going concern because it did not supply its business of land development (that is, the broader enterprise of property development) to the recipient and nor did it supply its particular activity of "the carrying out of earthworks" to the recipient. Moreover, the earthworks ceased, it is said, consistent with the contract, prior to completion and thus Aurora did not carry on the relevant activities comprising the relevant enterprise (as a sub-set as contemplated by s 38-325(2)(b) of its larger enterprise of property or land development), "until the day of the supply".

47. Aurora ceased the earthworks activities, it is said, before settlement, as required by the contract, and thus s 38-325(2) is not satisfied.

48. Aurora contends that the Commissioner's initial conception of the enterprise is misconceived.

49. First, it reflects an unnecessarily narrow approach to the concept of enterprise because it confines the scope of the enterprise to the specific and detailed characteristics of "residential development" rather than the broader enterprise of acquisition and development of land with a view to realising profit upon sale. Aurora says that the particular elements of the development proposals are simply one form of expression of the development of the relevant land for profit-making by sale.

50. Secondly, if the enterprise is characterised as the Commissioner contends and that enterprise ceased, Aurora, it is said, did not make a "taxable supply" for the purposes of s 9-5 of the GST Act at all.

51. Thirdly, the conception of the enterprise as having migrated to one of "the carrying on of earthworks", is simply artificial and inconsistent with the enterprise reflected in the contract.

52. Fourthly, Aurora contends that it continued to undertake the enterprise of developing the land with a view to realising profit upon sale and that the "Seller's Works" were entirely consistent with that enterprise and, in large part, those works were consistent with and required by the particular approvals Aurora had obtained in relation to its proposed development.

53. Fifthly, for the reasons already mentioned, Aurora contends that it continued to undertake works up to and beyond notice of completion of the works (that is, beyond practical completion) and throughout the period of the controversy (including the performance of the settlement) in relation to whether the relevant "flood level" did or did not include a level including "top soil". Moreover, earthworks, although also related to lands owned by Sickle, Atmeygor and AGG continued until at least 22 June 2003.

54. Sixthly, consulting engineers certified compliance with Special Condition 6 on 28 June 2004 on the cusp of settlement on 2 July 2004.

55. Seventhly, if the day of settlement constitutes "the day of the supply", Aurora says that, having regard to the terms of the contract, it assumed continuity of obligations in relation to the land until settlement which has the legal consequence that Aurora continued to "carry on" the relevant enterprise until the assumption of occupation and control by the buyer on the day of settlement, if the day of settlement constitutes "the day of the supply".

56. The second issue for determination then is the bundle of questions concerning the activities undertaken, whether any of those activities ceased and when; and whether, upon all the evidence and the construction of the contract, Aurora carried on the relevant enterprise, as determined, until the day of the supply, as determined.

57. The third issue concerns the question of whether Aurora supplied to the buyer all of the things necessary for the continued operation of the enterprise as found.

58. The final question is one of penalty which will be addressed in these reasons irrespective of the question of whether Aurora is found to have made a GST-free supply.

Part II

The special conditions of the aurora contract

Reference Schedule

Property Land

Those parcels of land shaded on Annexure B [see Plan D1, D2 and D3].

Special Condition 1.1

(a) "Adjoining Land" means those lands described at the date of this Contract as:

(i) part Pendraat Parade and part Lot 1 [SP 149221] … western side proposed [canal] ( Sickle Avenue Contract ); and

(ii) part Lot 3 on [RP 908283] … western side proposed [canal] ( Atmeygor Contract )

(b) "Balance Contracts" means the following contracts:

(i) … contract [AGG] and the Buyer for the land which is currently part of Lot 177 on RP 92299;

(ii) … contract [Atmeygor] and the Buyer for the land described as Lots 1 and 2 on RP 908283.

(c) "Development Material" (see [16] of these reasons).

…

(g) "Other Contracts" means the contracts for sale of the Adjoining Land and the Balance Contracts.

(i) "Site" means the Land and the Adjoining Land.

(j) "3 Contracts" means this contract and the contracts for sale of the Adjoining Land.

Special Condition 2

Deposit

2.1 The initial deposit … [$900,000.00] shall be paid by the Buyer to the Deposit Holder immediately upon formation of this contract.

2.2 The balance deposit … [$3,600,000.00] shall be paid by the Buyer to the Deposit Holder within … (14) days of the Seller notifying the Buyer that each of the following events have occurred:

(a) Completion of the Works has occurred in accordance with special condition 6; and

(b) Completion of the Phase 1 Works referred to in special condition 6 of the Atmeygor Contract has occurred;

(c) Completion of the Works referred to in special condition 6 of the Sickle Avenue Contract has occurred.

…

Special Condition 4

GST

4.1 …

4.2 In this Contract:
Enterprise means the enterprise of the development of the Land and the assets of that enterprise, including the Land, the Development Material and all other items, books, plans, approvals and all ancillary materials.

GST Act … [as defined in these reasons];

GST has the same meaning as in the GST Act;

GST Free has the same meaning as in the GST Act;

Tax Invoice has the same meaning as in the GST Act;

Going Concern means the supply which meets the requirements set out in section 38-325 of the GST Act;

Margin Scheme means the margin scheme referred to in Division 75 contained in Part 4-2 of the GST Act.

4.3 Subject to special conditions 4.4 and 4.5, if GST is imposed on any supply made under this Contract by one party (the "supplying party") to another party (the "receiving party") and the consideration payable or to be provided for the supply under any other clause in this Contract is not expressed to be inclusive of GST, the receiving party must pay, at the same time as any GST exclusive consideration is payable or to be provided for the supply, an additional amount calculated by multiplying the value of that GST exclusive consideration … by the prevailing GST rate. However, if the supplying party is required to account to the [ATO] for GST on a supply before the total GST exclusive consideration is payable by the receiving party, the receiving party must pay the additional amount of GST to the supplying party upon demand. Payment of the additional amount by the receiving party is subject to the issue of a tax invoice by the supplying party.

4.4

(a) The Seller and the Buyer acknowledge and agree that the sale of the Enterprise effected pursuant to this Contract constitutes the supply of a Going Concern that is GST Free.

(b) The Seller acknowledges and warrants that it is currently carrying on and will continue to carry on the Enterprise until the day of supply.

(c) The Seller and the Buyer acknowledge that this Contract constitutes an agreement under which the Seller will supply to the Buyer all of the things that are necessary for the continued operation of the Enterprise.

(d) Each party warrants that it is, or will become, registered under the GST Act at the Settlement Date.

4.5

(a) If for any reason special condition 4.4(a) does not apply, then the Seller and the Buyer agree that … [provisions (i) to (iii)] apply to the supply of the Land under this Contract instead of special condition 4.3: [provisions concerning the application of the Margin Scheme].

(b) …

(c) …

Special Condition 5

Seller to obtain Separate Certificate/s of Title

5.1 Subject to [sc 5.5], this contract is subject to and conditional upon an indefeasible title for the Land (comprised as two or more lots, but in no circumstances more than 5 lots) being created.

5.2 The parties acknowledge that the plan comprised in Schedule B specifies the area of land the subject of this contract ("Developable Land").

5.3 Subject to [sc 5.4], the Buyer shall raise no objection and shall not be entitled to delay settlement in the event that any of the title boundaries for the Land … are altered by the Seller and result in the Developable Land being varied by no more than … (2) per cent.

5.4 …

5.5 The Seller will do all things within its power to cause part of Pendraat Parade proposed to form part of the land sold under this contract to be amalgamated with such land. To remove doubt, the Seller must … do all things necessary, to cause this to occur (including …). If, by the Settlement Date, that part of Pendraat Parade proposed to form part of the land sold under this contract has not been amalgamated with that land, the Purchase Price payable under this contract will be reduced by $… to compensate for its non-inclusion in the Land.

Special Condition 6

Seller's Works

6.1 The Seller must, at its cost:

(a) take all steps necessary to obtain any necessary statutory approvals, consents, licenses, certificates, authorisations and permits ( Approvals ) required for the works detailed in Annexure C ( Works ) as soon as reasonably practicable after the Contract Date and after all Approvals are obtained, procure that the Works are promptly commenced and proceeded with in accordance with the terms in Annexure C, by a suitably qualified contractor or contractors engaged by the Seller for the Works (Contractor), with due expedition and without delay to achieve Completion of the Works as soon as reasonably practicable and in any event by twenty (20) months from the Contract Date [2 October 2003];

(b) comply with, and ensure the Contractor and the Works comply with, all Approvals for, and laws relevant to, the Works and pay all fees, taxes and charges directly relating to the Works (excluding headworks and other infrastructure charges);

(c) procure that the Works are carried out in a proper and workmanlike manner using new materials … in compliance with … the drawings and specifications for the Works described in Annexure C ( Drawings and Specifications ), any applicable Australian Standards and in accordance with this Contract;

(d) use only consultants with the necessary skills, experience and qualifications … and ensure … professional indemnity insurance in [the nominated amount];

(e) provide the Buyer with a program for the Works prior to their commencement and provide updates to the program on a monthly basis;

(f) allow the Buyer … to inspect and test the Works … following reasonable notice …

(g) provide the Buyer with test results and other information relating to the Works on reasonably request;

(h) … keep the Buyer fully informed as to any matters affecting the timing or quality of the Works …

(i) take, and procure that the Contractor takes all action necessary … to protect and preserve the environment from harm or damage arising from or in connection with carrying out the Works and pay and indemnify the Buyer against: (A) all fees, fines and other amounts payable under environmental laws …; and (B) all claims … arising from … [a] breach by the Seller of its obligations …

(j) be fully responsible for the care of the Works and procure the reinstatement of any loss or damage to the Works.

6.2 The Seller warrants that any Contractor … engaged by the Seller has all licenses, qualifications and experience necessary for carrying [out] the Works.

6.3 The Drawings and Specifications and all documentation relating to the Works including those provided by or on behalf of the Seller to the Buyer, shall become the property of the Buyer on settlement.

6.4 The Seller warrants that the Works when completed will comply with this Contract (including the Drawings and Specifications) and be fit for their purpose.

6.5 The Seller must procure that:

(a) … the Property is kept safe, secure, clean and tidy;

(b) fencing, roads, landscaping, footpaths and surfaces adjacent to the Property are cleaned up and made good to the Buyer's reasonable satisfaction, before Completion.

(c) procure that in carrying out the Works:

(i) all people are protected from death or injury (including … by the provision and maintenance of barricades, guards, fences …;

(ii) the Works are protected … and all other property … from loss or damage;

(d) promptly procure that any damage to any property of the Buyer … is made good; and

(e) not vary the Works without the prior consent of the Buyer.

6.6 For the purposes of this Contract, as a condition of Completion the Seller must provide to the Buyer:

(a) as constructed drawings of the Works;

(b) the certificates, and other documents that are referred to in the Drawings and Specifications (including without limitation the certifications required for the Works as listed in Annexure C);

(c) a cost breakdown of the total cost of all items included in the Works that are subject to tax depreciation;

(d) particulars of all Construction Expenditure as defined in the Income Tax Assessment Act 1997;

(e) all warranties and inspection or testing certificates in relation to the Works available to the Seller, or required by this Contract or the Drawings and Specifications (on terms allowing their enforcement by the Buyer);

(f) all Approvals required before the Works can be used; and

(g) evidence satisfactory to the Buyer that Practical Completion has been achieved under the Seller's contract with the Contractor for the carrying out of the Works;

(h) all other documents required by this contract to be delivered by the Seller before Completion.

6.7 The Seller warrants that the Land … will not be contaminated … within the meaning of the Environment Protection Act 1994.

6.8 … the Buyer may in its discretion, require the Seller to promptly rectify any part of the Works which the Buyer finds to be defective ( Defective Works ) at any time prior to Completion or before expiry of the period of six months (commencing from Completion or in relation to any rectification work, completion of that rectification work) ( Defects Liability Period ) provided the Buyer serves written notice to the Seller comprising detailed particulars of the Defective Works. If the Seller fails to carry out rectification works … within three (3) months of receiving written notice in accordance with this clause … then …: (i) the parties will agree on a quantity surveyor to prepare a detailed costing of the Defective Works … not … rectified … within … (14) days of the Rectification Period …; (ii) the cost of the quantity surveyor shall be shared … equally; (iii) …; (iv) … the … amount determined by the quantity surveyor will be final and binding …; (v) the Buyer may deduct [the amount so determined by the quantity surveyor from the Purchase Price as an offset or recover the offset amount as a liquidated debt from the Seller].

6.9 … Completion means completion of the Works except for immaterial defects which can later be conveniently rectified (without interfering with the use of the Works) and satisfaction of all other obligations of the Seller and conditions required by this Contract to be satisfied before Completion.

6.10 The Seller acknowledges that neither the Seller nor Contractor has any entitlement to, and the Purchaser has no liability to the Seller or any Contractor for payment by the Purchaser for the Works and that the Purchaser is entering into this Contract and agreeing to pay the Purchase Price for the land as improved by the Works …

6.11

(a) The Seller must … effect and maintain … insurances … [four classes of insurance].

(b) The Seller must [ensure that the Buyer's interest is noted in two classes of insurance].

6.12 The Seller indemnifies the Buyer … against all claims … or other liability … arising out of or in connection with the carrying out of the Works …

Annexure C

Specifications for Seller's Works

Aurora Developments Pty Ltd

Seller's Works (refer Special Condition 6.1)

(i) Demolish/remove existing sales office (excluding boardwalk)

(ii) Construct internal earthworks to a Level 1 standard (as described in AS 3798 Table 5.1 Residential); 30 days prior to settlement the Seller will provide Level One Certification and reporting results. The certification must be undertaken by a NATA registered testing authority who hold Professional Indemnity insurance.

(iii) Fill the Land at or above the Local Government nominated flood level (for residential development) in general accordance with Council drawing titled "Flood Data Hope Island" attached.

(iv) Topsoil and grass seed the Land (not to exceed 200 mm of topsoil at or above flood level) unless directed by the buyer to nominated onsite stockpile site.

(v) Construct Westlake inclusive of revetting wall in general accordance with Knobel Consulting Drawings "DWG No. 11"; "DWG No. 12"; "DWG No. 13" & DWG SK22 (Project No. 1060.03) attached.

(vi) Construct Eastlake inclusive of revetting wall in general accordance with Knobel Consulting Engineers Drawing No. 46 (amendment A & SK22 (Project No. 1060.03) attached.

(vii) Excavate and construct section of the Hope Island Canal abutting the Land inclusive of revetting wall in general accordance with Knobel Consulting Engineers Drawing No 5 (Project No. 1060.03) attached.

(viii) Remove al existing sewer, water, electrical, gas and stormwater reticulation infrastructure/services with site backfilled and levelled in accordance with paragraphs (ii) and (ii) above.

(ix) Remove all existing building slab and associated construction materials with exception of existing piling works, which are to remain with Seller supply "As Constructed survey" for piles inclusive of location and depth to top of pile. On provision of "As constructed survey" the site/s are to be backfilled and levelled in accordance with paragraphs (ii) and (iii).

(x) Remove all boardwalk supports.

(xi) All site works to be certified by RPEQ registered engineer in accordance with design drawings and Knobel Consulting standard specification titled "Aurora Developments Standard Specification of Earthworks" attached. The RPEQ certifying engineer must hold Professional Indemnity insurance or be an employee of a registered company which holds Professional Indemnity insurance.

(xii) Seller to provide certification from RPEQ registered Geotechnical engineer stating preload/surcharge loads were sufficient for residential development with a maximum footprint pressure of 15Kpa (typical two storey) excepting areas of existing unit foundations (including piled areas), existing sales office site (refer Knobel Drawing No. SK23; which has not been preloaded) and setback areas as shown in Knobel Consulting Drawing No SK12. The RPEQ certifying engineer must hold Professional Indemnity insurance or be an employee of a registered company which holds Professional Indemnity insurance.

(xiii) Seller to provide to Buyer all plans of wicked areas prior to settlement.

(xiv) Seller to complete Pendraat Parade works in general accordance with Knobel Consulting Drawing No. 57 (Amendment A Project No. 1060.03).

(xv) All certifications referred to above must be provided on terms in favour of, and allowing for, their enforcement by the buyer.

Special Condition 11

Settlement

11.1

(a) Settlement will be sixty (60) days from the date the Seller gives the Buyer written notice that all of the following have been satisfied or occurred (as the case may be):

(i) the condition in special condition 5 has been satisfied;

(ii) Completion of the Works, as provided in special condition 6, has occurred;

(iii) the condition in special condition 5 of the contracts for the sale of the Adjoining Land have been satisfied;

(iv) Completion of the Works, as provided in special condition 6 of the Sickle Avenue Contract has occurred; and

(v) Completion of the Phase 1 Works, as provided in special condition 6 of the Atmeygor Contract has occurred;

The Seller must promptly give written notice to the Buyer when all of the above things have been satisfied or occurred (as the case may be).

(b) To remove doubt, only when:

(i) an indefeasible title has issued for the relevant land; and

(ii) all relevant works have been completed,

under each of the 3 Contracts, can the notice be given under special condition 11.1(a).

11.2 If Completion of the Works has not occurred in accordance with special condition 6 within twenty (20) months of the Contract Date ( 20 Months Date ), then the following provisions shall apply (and shall prevail over any inconsistency): (i) to (vi) [a protocol for the appointment of a quantity surveyor, assessment of the cost of completing the Works and offsetting those costs from the balance Purchase Price].

11.3 Despite anything else in this contract, if the condition in special condition 5.1 has not been fulfilled by the 20 Months Date, the Buyer may terminate this contract …

11.4 After the Buyer receives notice from the Seller in accordance with special condition 11.1, the Buyer may, by not less than 14 days' prior written notice to the Seller, nominate an earlier date for settlement than that provided in special condition 11.1, provided that notice is given under each of the 3 contracts at the same time which nominate the same Settlement Date. Upon that notice being given, the Settlement Date will be the date nominated in the notice.

Special Condition 12

Development Material

(a) In the event that the Buyer settles this Contract, in consideration of this Contract, from settlement the Seller hereby sells, assigns, transfers and sets over to the Buyer (to the extent permitted by law) its full right, title and interest (including any copyright or other intellectual property rights vested in the Seller) in and to the Development Material, free of any encumbrances, charge or lien.

(b) On Settlement, the Seller shall deliver the original of the Development Material and all files, plans, notes and papers relating thereto to the Buyer.

(c) If for any reason the Seller is unable to sell, transfer, or set over to the Buyer any copyright, or other intellectual rights in the Development Material, the Seller must obtain, at its cost, a licence from the relevant owner, in favour of the Buyer (and its nominees) to use and reproduce the Development Material for the development of the Land (and any other land) without restriction.

…

Special Condition 17

Contemporaneous formation and settlement of contract/s for sale of Adjoining Land

17.1 This contract is subject to and conditional upon the Buyer entering into contracts to purchase the Adjoining Land on the same date as the Contract Date.

17.2 This contract is subject to and conditional upon the contemporaneous completion of the contracts for the sale of the Adjoining Land. If this condition is not fulfilled due to the default of a party under this contract the party not in default may terminate this contract (and exercise its other rights due to that default) or waive the benefit of the condition by written notice to the defaulting party.

17.3 The parties agree that default under any of the Other Contracts by the Seller or Buyer thereunder shall be and be deemed to be default under this contract by the Seller or the Buyer hereunder respectively.

Part III

The events in relation to the acquisition and development of the aurora land

59. Aurora was incorporated on 10 January 2000.

60. Since incorporation, Aurora's principal business activity has been the development of land by itself and with others, including the following activities: (a) sourcing and acquiring land holdings; (b) development of feasibility studies; (c) preparation and lodgement of (through appropriate town planners) development applications with local government; (d) carrying out land subdivisions; (e) carrying out all supervision of earthworks by relevant licensed contractors; (f) carrying out all supervision of building and construction works by relevant contractors; and (g) the sale of land to third parties. Aurora carries on and has carried on no principal business activity other than these development activities: the agreed facts, 8, 29 and 30.

The relevant parcels of land

61. On or about 1 June 2000, Aurora purchased land at Hope Island, Queensland which consisted of four lots, namely, Lot 5 on SP100485, Lot 2 on SP105465, Lot 2 on RP171481 and Lot 138 on RP79932.

62. The Aurora land is more conveniently referred to as a parcel of land (comprising 5.521 hectares) described as Lot 28 on SP164191 and a second parcel of land (comprising 4.423 hectares) described as Lot 34 on SP164190: the agreed facts, 31 and 32.

63. Attached to these reasons are plans marked A, B and C which are located at pages 116, 78 and 626 of Exhibit A, under the relevant tabs. The plans marked A and B show the layout of the relevant lands referred to in the proceedings. Plan A shows the position of Lots 28 and 34 marked as the Aurora lands, as those lots were described at the time of the contract with Australand. Plan B shows both Aurora lots by shading. Between each lot is a portion of Pendraat Parade. The arrangements provided for the surrender of the shaded portion of Pendraat Parade, the acquisition of new titles and the transfer of those titles to the shaded land on Plan B to the buyer. The lots as re-titled are shown on Plan B. For example, Aurora's Lot 34 became Lot 134 on a different plan. Lot 177 (AGG's land) became Lot 77 on another Special Plan. Plans D1, D2 and D3 show the Aurora land sold to the buyer by reference to the plans contained in the contract.

64. Adjacent to and abutting part of the Aurora land was a large parcel of land (comprising approximately 15.566 hectares) owned by Atmeygor described as Lot 3 on RP908283. Lot 3 is shown on Plan A marked Atmeygor. That land is also shown on Plan B. The Atmeygor land was purchased by Atmeygor on 13 September 2001. The original parcel comprised approximately 17.103 hectares although Lots 1 and 2 as shown on Plans A and B were partitioned from Lot 3. Those two lots comprise 1.15 hectares: the agreed facts, 33, 34, 35, 36 and 37.

65. Adjacent to and abutting part of the Atmeygor land was a large parcel of land owned by AGG acquired on 3 April 2002 comprising approximately 4.0052 hectares described as Lot 177 on RP92299: the agreed facts, 38 and 39. Plan A shows the AGG land bearing allotment number 177. Plan B shows the AGG land bearing its lot description under the re-titling arrangements so as to satisfy Special Condition 5 of the contract with AGG.

66. Adjacent to and abutting part of the Aurora land was a parcel of land owned by Sickle comprising 0.6353 hectares described as Lot 1 on SP149221. Plans A and B show that land marked "Sickle". Plans A and B show the contour for a canal to be built across lands including the AGG, Sickle, Atmeygor and Aurora lands. A triangular section of land on the western side of the proposed canal immediately contiguous with Aurora's Lot 34 (which became Lot 134) is marked on each plan with the letter "S" being part of the Sickle land. That triangular section of Sickle land was the subject of the subsequent sale by Sickle to the Australand entities (Lot 121).

67. The real property description for each parcel of land is not particularly important for present purposes. The particular lot numbers on Plan A identify the land by reference to the contract description in each case. Plan B corresponds with the particular lot numbers upon re-titling. In any event, Plans A and B each show the land marked with the name of the relevant land-owning entity. Turning to Plan B, the shaded lots (being the Aurora Lots 28 and 134), the AGG land (marked Lot 77), the Atmeygor land (marked Lot 29) and the triangular section of the Sickle land (marked "S" and bearing Lot 121) is the land sold by each company to the Australand entities: the agreed facts, 44. The total value of the contracts is approximately $90m.

Aurora's development applications

68. In February 2000, Aurora's intention was to proceed to assess and lodge a development application for the development of a multi-faceted residential and care facility: the agreed facts, 45.

69. On 28 or 29 February 2000 Aurora, by its consulting surveyors Bennett & Bennett, lodged a development application dated 16 February 2000 for a material change of use of a vacant development site to a "retirement community". The application was supported by a planning report prepared by Bennett & Bennett entitled "Aurora Retirement Community Pendraat Parade Hope Island Planning Report". The land use proposal suggested that the development would involve filling land below an adopted flood line and the creation of lakes of an area greater than 5,000m². The authors of the report said this:

"The development proposed for the site is to be a 'retirement community' within the definition of the planning scheme, viz, 'premises used or intended for use as permanent residential accommodation for persons aged 50 years or over and which consists of a grouping of dwelling units and/or serviced hostel units together with ancillary facilities provided for exclusive use by residents or staff of the community and which may include staff accommodation, chapels, medical consulting rooms, meeting rooms, recreational facilities, therapy rooms and kiosk facilities'.

As such, approval under the scheme for a development permit for a material change of use for the site to Special Facilities (Retirement Community) and preliminary approval for building work and operational work is appropriate."

70. In describing the proposal in the report, the authors gave emphasis to the proportion of aged persons in the community above age 65 and the unprecedented demand for retirement housing in the following decade. The planning report describes nine classes of structures to be built on the site. They include three tower block apartments comprising three-storey/three bed townhouses; three-storey/one bed townhouses; and two-storey/three bed townhouses; single-storey/three bed cluster houses; single-storey/two bed cluster houses; and community facilities consisting of hostel beds and nursing beds. The document attached 15 proposed schematic plans for the layout on the site of those structures (including perspective drawings) prepared by "Cornucopia Architects Planners" ("Cornucopia").

71. The Planning Report also observes (Exhibit A, 82, p 1996) that:

"Fundamental to the design is the inclusion of water features which are to be salt-water filled using water from the proposed Boykambil floodway/waterway when it is constructed. The developers of the Aurora Retirement Community will, in accordance with planning scheme requirements, construct part of the floodway/waterway along the frontage of the site".

72. The Cornucopia drawings depict as part of the site, two lakes described as "Westlake" on the western side of the surrendered section of Pendraat Parade and "Eastlake" on the eastern side of that surrendered reserve road. A bridge crosses the waterway.

73. The site for the proposed development was Aurora's land described by reference to the four lot descriptions previously mentioned which when aggregated became Lots 28 and 34 (Plan A) which ultimately became Lots 28 and 134 (Plan B) upon the re-titling mentioned earlier.

74. The Gold Coast City Council (the "Council") acknowledged the application on 10 March 2000 noting a proposed material change in use and an application for a "preliminary approval for carrying out building work and operational work".

75. On 27 June 2000, the Council wrote to Aurora advising that on that date a "Development Permit for Operational Works" had issued in response to Aurora's proposal. The approval for the conduct of operational works was subject to 53 conditions. The general conditions included a requirement that the operational works would be constructed in accordance with the nominated approved engineering drawings prepared by Auspacifik Design Engineers Pty Ltd and staged and constructed in accordance with nominated engineering drawings prepared by Knobel Consulting Pty Ltd (consulting engineers) ("Knobel"). The general conditions also required a performance bond to be established and before any works commenced Aurora was required to consent to particular matters concerning the design of the works and the carrying out of canal construction on the approved alignment as accepted by the owners of the properties affected by the canal. The Council required signed survey plans for the transfer of the areas of the land where the canal was to be constructed to be submitted to Council for registration.

76. On 13 July 2000, the Council approved the issue of a "Development Permit" for a "material change of use" of the Aurora lands for use as a retirement community. The approval was subject to 45 conditions. The Council required the applicant to submit amended plans setting out details generally in accordance with specified plans drawn by Cornucopia depicting particular modifications. The applicant was also required to lodge a detailed lake operation plan and water quality management plan for the proposed lake. Conditions 14 to 20 dealt with the issue of "service and utilities". Those conditions included a requirement to: connect the development to Council's reticulated sewerage system; connect the development to Council's water supply system; provide a medical waste collection service; ensure that any alterations to public utility mains, services or installations necessitated by the development be undertaken at no cost to the Council and to the satisfaction of the Council's Chief Executive Officer; and, ensure that all proposed structures be located a minimum distance of 2.0 metres from services (that is, sewer, stormwater and water services).

77. Conditions 32 to 35 address questions of "drainage & filling". Those conditions included a requirement that the developer submit to Council a certification by an experienced engineer of a hydraulic report entitled "Aurora Retirement Community Revised Flooding Report" dated 6 June 2000 and a requirement that all earthworks and engineering plans associated with the development of the site be accompanied by certification from the developer's hydraulic consultant that the plans comply with the recommendations set out in the report of 6 June 2000 prepared by Cardno MBK (Qld) Pty Ltd. A further condition required the consolidation of the lots into one allotment.

78. On 13 September 2000, the Council advised Bennett & Bennett that on 8 September 2000 the Council had agreed to issue a "Negotiated Decision Notice" consequent upon a consideration of requested changes to the existing approval as provided for in the Council's letter of 13 July 2000.

79. On 31 May 2001, the Council reviewed Aurora's development application and supporting information relating to "operational works" concerning changes to "ground level", the subject of an application dated 4 May 2001. The Council requested Aurora to provide particular information relating to an "Engineering Assessment" particularly in relation to floodwater issues, and an "Environment Assessment" concerning an Environmental Management Plan.

80. On 16 April 2002, Aurora requested the Council to approve a minor change to the development approval for the Aurora site "so as to remove reference to 'retirement community' from the approval". In lieu of that reference, Aurora suggested the adoption of the description "comprehensive residential community", in the approval. In its application, Aurora said that the development was not intended to be a traditional retirement village and that Aurora wished to avoid the burden of seeking registration under Retirement Villages legislation.

81. On 13 May 2002, the Council wrote to Aurora referring to the letter of 16 April 2002 and advised Aurora that on 13 May 2002 the Council had accepted the representations made by Aurora and had agreed to issue a further "Negotiated Decision Notice" amending the previous Negotiated Decision Notice. The Council advised Aurora that the approval under the further Negotiated Decision Notice would read as follows:

"The Acting Manager - Statutory Planning under authority delegated by Council, approves the issue of an amended Negotiated Decision Notice for a Development Permit for Material Change of Use for a "Comprehensive Residential Development and Care Facility (Nursing Hostel - maximum 232 beds)" at the site described below [being the property description for the Aurora land]."

82. The "proposed use" would be described as: "Comprehensive Residential Development and Care Facility (Nursing Hostel - Maximum 232 Beds)".

83. The letter set out 40 matters to be addressed by Aurora as, in effect, conditions of the issue of the further Negotiated Decision Notice Those conditions concerned the lodging of amended plans with the relevant details relating to modifications to the Cornucopia plans; the lodging of an amended Environmental Management Plan; the finalisation of all matters relating to the design of works and the carrying out of canal construction on an approved alignment; matters relating to infrastructure charges, car parking spaces and access to the site. The conditions restated the conditions relating to "services and utilities". The conditions restated the requirements in relation to drainage and filling as previously indicated. The Council observed that on 7 July 2000 approval had been given for the issue of a "Preliminary Approval for Building Work" on the site for the proposed use as a "retirement community" subject to an application for the carrying out of building work. The Council noted that further development permits would be required for "Carrying Out Building Work/Carrying out Operational Work".

84. On 4 June 2002, the Council notified Aurora that it had approved the issue of a "Development Permit for Operational Works" on Aurora's site the subject of the development subject to 28 conditions concerning the content of those works. Those conditions included a requirement that the works be constructed in accordance with specified engineering drawings prepared by Knobel; the approved works be constructed in accordance with the current edition of the Council's land development guidelines, standard drawings and specifications; any variation from the nominated engineering drawings as may take place in the field would require amended engineering drawings to be submitted to Council for further approval; and "as constructed" data was to be submitted to and approved by Council before a certificate of practical completion would issue by Council.

85. As to hydraulic issues, the conditions required Aurora to ensure that there would be no adverse affect upon property external to the site arising out of any increase in the velocity or redirection of water flow. As to earthworks, Aurora was required to ensure that all earthworks complied with the Council's land development guidelines; appropriate construction procedures would be adopted and implemented; earthworks would be carried out in accordance with AS3798-1996 described as "Guidelines on earthworks for commercial and residential developments" with Aurora ensuring the supervision of bulk earthworks to a standard of "Level 1"; and, the frequency of field density testing would be undertaken in accordance with the relevant standard, namely Table 8.1 of AS3798-1996.

86. On 10 October 2002, Aurora lodged an application for a "minor change to existing approval" so as to "permit a boundary realignment and slight change to the form of development". Aurora sought to use part of the adjoining land (that is, part of Lot 3 on RP908283 being a part of Atmeygor's land) in order to facilitate a greater separation between some of the residential townhouses proposed for the Aurora site. A slight change to the layout of the proposed development would thus occur. Aurora noted that since the issue of the amended Negotiated Decision Notice on 13 May 2002, Atmeygor, described as a related company, had purchased Lot 3 on RP908283 and that that land was zoned "Special Residential". Aurora noted that "a detailed plan of development (for that land) is yet to be submitted" to Council". Aurora said that the proposed amendment to the planned development for the existing Aurora site would not impact upon any development proposals for Lot 3.

87. On 10 December 2002, Aurora applied to the Council for a material change of use of the site so as to "remove reference to a 'Nursing Hostel' within the development permit for that project". Aurora put the proposal in these terms:

It is proposed to marginally increase the area to be developed as the Aurora Adult Residential Community by including some uncommitted land from the adjacent lot 3 on RP908283 within the approved development area of the Aurora Adult Community. It is proposed to remove reference to a six storey nursing hostel within the development permit for the Aurora project. It is proposed to replace the nursing hostel with a six-storey apartment building. It is proposed to remove a Public Open Space zoning from an isolated remnant of land within the Aurora land holdings and include that land within the development. It is proposed to include land presently forming part of a road reserve into the Aurora development.

[emphasis added]

88. In the application Aurora noted that in July 2000 the development was intended to be a large scale retirement community with nursing facilities and that the latest approval had removed a reference to retirement community and, in its place, a reference to a comprehensive residential development and care facility including a nursing hostel with a maximum of 232 beds, had become the content of the approved development. The application noted that extensive earthworks had been undertaken and were then in progress on the Aurora site and that building applications had been lodged for four of the approved apartment buildings in the first building stage of the development. Aurora observed that with the first part of the development underway, it was "timely to identify the strategy for the site as well as the balance of our landholdings on Hope Island". Aurora noted that it, together with associated entities, had acquired in excess of 50 gross hectares in one contiguous parcel extending to both sides of Pendraat Parade and on both sides of a proposed canal to be called the "Boykambil canal".

89. Aurora observed that it had moved away from a large-scale retirement community enabling residents to "age in place" in conventional housing or smaller apartments with an onsite nursing hostel. The project was now directed "to the wider market of mature-aged adults and to adults without children". Aurora said:

"We now wish to complete the transformation and remove all unnecessary constraints of the previous approvals. We also wish to prepare for the linking of the existing Aurora development to other landholdings immediately to the north of the Aurora development. This land viz, Lots 1, 2 and 3 on RP908283 [Atmeygor's land] and Lot 177 in RP92299 [AGG's land] will provide approximately twenty-two (22) hectares of developable land onto which we will extend the Aurora adult community. … Our planning will certainly focus on the approved harbour which is central to the site appurtenant to the Boykambil canal."

90. Aurora made reference to the draft master plan which provided for the closure of a section of Pendraat Parade and the construction of the canal affecting the various lots. Aurora noted that a small part of Lot 3 and a section of the road reserve of Pendraat Parade would be incorporated into Stage 1 of the Aurora development. As to the "proposed built development", Aurora said this:

"Within the site, it is proposed to develop a three storey, 24 unit apartment building fronting the Boykambil canal. It is also proposed that the six-storey nursing hostel presently approved for the northern side of the Aurora development be replaced by a six-storey apartment building which will extend over the area presently designed for hostel, over part of Lot 1 on SP149221 [the triangular section of Sickle's land] and over part of the former Pendraat Parade reserve [the Aurora site]. In addition the community facilities building presently proposed adjacent to the nursing hostel is to be reduced in footprint."

91. The future Aurora Stage 2 development was described as generally covering Lots 1, 2 and 3 on RP908283 [Atmeygor's land] and Lot 177 on RP92299 [AGG's land].

92. At paras 49, 50 and 51 of the agreed facts, the parties state that Aurora was undertaking the "Aurora Adult Community Development" in conjunction with Atmeygor, AGG and Sickle; the Aurora Adult Community Development was a staged development which required the effective collaboration of the entities with landholdings relevant to the development; and, a management structure had been adopted with Mr Craig Gore responsible for property market analysis and marketing, Mr John Atkinson responsible for financial analysis and control, Mr Adam Slijderink and Mr Grant Cameron responsible for earthworks, Mr Murray Lumsden responsible for construction, Ms Marion Becker responsible for external architectural advice and Mr Adamson responsible for the provision of external legal advice.

Mr Adamson's evidence

93. Mr Michael Adamson is a solicitor.

94. During the period 2000 to 2004 he was an employee of the solicitors for Aurora and companies he describes as Aurora's related entities which I assume means Atmeygor, Sickle, AGG and other companies of which Mr Atkinson and Mr Gore were directors. Mr Adamson received instructions from Mr Atkinson and Mr Gore to act in various matters concerning the Aurora Adult Residential Community Project. Mr Adamson says that development works on the Aurora Project as then proposed and approved commenced during the financial year ending 30 June 2001. Mr Adamson gave evidence that a marketing scheme was adopted for the sale of interests in buildings comprising the Aurora Adult Residential Community project comprised within a body corporate scheme plan. Mr Adamson agreed with counsel for the Commissioner that Plan C attached to these reasons diagrammatically shows Aurora's planned development for the land subsequently sold by Aurora to Australand.

95. Plan C has a legend that identifies each of the structures forming part of the "Aurora Adult Community" and the proposed development lots. The "overall principal scheme" is described as the "Aurora Adult Community" and the collection of buildings and other structures making up the Aurora Adult Community are described in this way within the plan:

Aquila Lifestyle Homes Lot 900 SP149205

Aquila Canal Terraces Lot 901 SP149206/SP149207

Aquila Lakeside Terraces Lot 902 SP149208

Carina Canal Tower Lot 903 SP149209

Carina Parkland Tower Lot 904 SP151331

Aurora Lakeside Lot 905 SP151332

Ceros Lakeside Terraces Lot 906 SP151333

Ceros Apartments Lot 907 SP151334

Ceros Terraces Lot 908 SP151335

Ceros Lifestyle Homes Lot 909 SP151336

Premier Lakeside Terraces Lot 910 SP151337

Carina Canal Terraces Lot 911 SP151338

96. Mr Adamson accepted that Plan C represents the content of the Aurora Adult Community which was being marketed through television, newspaper and other advertising with a view to securing sales of interests in the various buildings "off the plan". Aurora had established a sales office on the Aurora site. Aurora conducted its own selling program and had also appointed a real estate agent to assist in selling interests in the homes and units in the various structures.

97. Plan C shows (as do Plans A and B) an area within Lot 28 of Aurora's land described as "Portofino" with access to Pendraat Parade. That development consisted of approximately 22 partially completed townhouses. Aurora acquired 19 of those townhouses (in respect of which titles had issued notwithstanding their partial construction), completed the townhouses and sold them. The acquisition and sale of the townhouses was a project conducted independently of any development proposal concerning the Aurora land and in particular, the Aurora Adult Community Project, depicted in terms of the structures laid out on Plan C.

98. Mr Adamson either prepared or supervised the preparation of a schedule (Exhibit A, 29) as the solicitor for Aurora setting out as at 16 June 2003 the sales of units or houses within the Aurora Adult Community development "off" the relevant scheme plan for each building to members of the public. The first two pages of the schedule relate to units in "Ceros Terraces" represented by Lot 908 on Plan C. The next two pages concern sales of units in "Aquila Canal Terraces Building 1" represented by Lot 901 on Plan C. The next two pages concern Building 2 of the "Aquila Canal Terraces". The next two pages concern sales of units in "Aquila Lakeside Terraces, Building 1", Lot 902 and so on. There seem to be approximately 190 sales recorded in the schedule leaving aside those transactions where only option contracts have been entered into, and those units and houses reserved as developer's stock. Clearly enough, a substantial number of "off the plan" sales occurred as a result of the efforts to market the Aurora Adult Community project.

99. In addition, Exhibit A, 28 contains typical examples of files conducted under Mr Adamson's supervision for the sale of off the plan interests in the various developments depicted in Plan C. One such file concerned a sale to Barry Reed and Sheena Reed of Lot 620 in "Carina Canal Tower" (Building 903 as set out in Plan C). The "Annexure C, First Statement" in that transaction is dated 15 June 2002 and the Aurora Adult Community "Information Statement" in that transaction is dated 9 October 2002.

100. Aurora was marketing and selling interests in its Adult Community Project from about the middle of 2002 and certainly by October 2002.

The views of the directors Mr Atkinson and Mr Gore

101. Although Mr Atkinson could not be sure of the matter, he accepted that it was most likely that the configuration of the Aurora Adult Community development as depicted in Plan C represented the version or form of the project as marketed to the public and that the lots in the various buildings or homes were sold off the plan to members of the public (T 74, lns 31 to 47). Mr Gore who was much more familiar with the development aspects of the proposal also seemed to accept that Plan C generally reflected the buildings to be developed as part of the Aurora Adult Community development. Mr Gore however was not confident that Plan C was necessarily the final plan for the layout of the development. He said that the precise alignment or boundary of the canal had to be determined and that may have involved a reasonably substantial relocation of the boundaries of the canal and, in consequence, some of the buildings as depicted in Plan C would necessarily have been relocated once the alignment of the canal was determined. The building depicted at Lot 911 is an example of that. Nevertheless, Mr Gore accepted that subject to the buildings that might have been moved to accommodate changes in the particular alignment of the canal, the buildings and structures depicted in Plan C reflect the buildings to be developed or constructed as the Aurora Adult Community development (T 197, lns 23-25).

The Community Title Scheme

102. The Aurora Adult Community development is given greater particularity by the "New Community Management Statement" set out at pages 619 to 626 of Exhibit A, 28 which describes the "Aurora Adult Community, Community Title Scheme" for the purposes of the Body Corporate and Community Management Act 1997 (Qld). The statement also describes the staging of the development of the scheme land. Stage 1 is described as the development and possible subdivision of land and buildings to be known as "Aquila Lifestyle Homes ('Stage 1A'), Aquila Canal Terraces ('Stage 1B'), and Aquila Lakeside Terraces ('Stage 1C')". Stages 2 to 10 represent the remaining building stages. Each of the "residential lots" comprised within the buildings in Stages 1, 2, 4, 5, 6, 7, 8, 9 and 10 are set out in the scheme documents. Stage 3 consists of retail and commercial premises comprising 10 allotments.

Mr Adamson's further evidence

103. Mr Adamson's schedule at Exhibit A, 29 sets out the "off the plan" sales achieved by Aurora for the staged development by 16 June 2003. Each of the contracts of sale but for two contracts contained clause 29.2 which entitled the vendor, despite any other provision in the contract, in its absolute discretion, to terminate the contract by giving the purchaser notice by 31 December 2004. Upon such termination, all money paid by the purchaser to the stakeholder was to be refunded to the purchaser without deduction together with interest, if any, which had accrued on such money. Neither party would have any claim against the other under the contract or by reason of its termination.

Mr Claxton's memorandum

104. Mr Claxton was at the material times an employee of Mr Atkinson's accountancy practice and also Company Secretary of Aurora. On 2 May 2003, Mr Claxton prepared and sent a memorandum to Mr Atkinson and Mr Adamson setting out an explanation of the status of Aurora's approvals and the status of other approvals obtained by entities controlled by Mr Atkinson and Mr Gore such as the Special Residential Zone development approval obtained in 1997 for Lots 1 and 3 (Atmeygor's land) facilitating residential development of approximately 295 dwellings. Mr Claxton says that development applications had been lodged in respect of the Aurora site and adjoining lands owned by other companies controlled by Mr Gore and Mr Atkinson "to over-ride the earlier zoning approvals so as to facilitate expansion of the approved Aurora development". That expansion proposal was still, by May 2003, "under consideration" by Council. Mr Claxton notes that AGG's land (then Lot 177) was subject to a development approval in accordance with the elements of the "Special Facilities" zone which had been obtained in 1992.

105. Mr Claxton then sets out a series of observations under the heading Earthworks Status of Land under Sales Proposals. As to the Aurora development site the subject of those sales proposals, Mr Claxton said this:

" Aurora development site:

The bulk earthworks program for the Aurora development is 90% complete.

Works to date: To date works have included the following:

1. Preloading of all lots,

2. Removal of preload from all lots with the exception of an area of est. 1 ha adjacent to the Portofino development,

3. Excavation and installation of revetting walls for both West and East lakes,

4. Excavation and installation of revetting walls for the Hope Island canal frontage,

5. Installation of 90% of the civil infrastructure to sales stage One "Aquila" this includes: all stormwater, water, sewerage, electrical reticulation, and installation of base course for roads,

6. Completion of preliminary fill and preloading works for Pendraat parade; inclusive of electrical conduiting and removal of poles,

7. Construction works for the Stage one canal and lakeside terraces has commenced with the basement slab completed for canal terraces and piling completed for lakesides. This is the only construction activities completed to date.

Works to be completed: The following works are required to complete Aurora bulk earthworks and stage one civil works, and remaining construction:

1. Removal of preload adjacent Portofino,

2. Completion of Pendraat Parade to final form inclusive of gas reticulation, sewerage, water and stormwater infrastructure,

3. Installation of road surface (pavers), street lighting, and connection to mains service for infrastructure (water and sewer),

4. Construction of pump station and rising main,

5. Construction of entry statement,

6. Installation of bridge,

7. Completion of all civil infrastructure for remaining three stages,

8. Construction of remaining building works which is generally all 386 unit/structures. These works are extensive and will require separate programming review.

Completion Dates:

Bulk earthworks related activities will be fully completed within a 10 month period.

Civil works will be completed within an 18 month period.

Construction works will be completed over a 4 year period."

106. Apart from those observations about the Aurora development site, Mr Claxton also set out comments in relation to the progress made to the date of the memorandum concerning Lots 1, 2 and 3 on RP908283 (being Atmeygor's land) and the future works required to complete the bulk earthworks program for those sites. As to those works, Mr Claxton said this:

"The development has been staged to ensure the earliest possible release of waterfront land, construction of the Hope Island canal and proposed harbour facilities.

The construction of the canal is considered important to control both local and regional flooding issues, with significant improvements in land value obtained from adoption of such a strategy.

Town planning advice indicates a 40 unit/ha yield is currently allowed under the existing proposed Gold Coast city council town plan.

An operational works approval has also been obtained which reflects a 78% filling allowance for the respective sites. The remaining land forms part of the harbour and Hope Island Canal.

This document is limited to projected works associated with the design and implementation of the Bulk earthworks programs.

No allowance for building works has been included.

The development has four distinctive earthworks stages.

• Stage 1: Fill and preloading of the North-eastern corner (Area 1: Canal and Harbour).

• Stage 2: Removal of preload from Area 1 to the South-eastern corner (Area 2: fill and preloading).

• Stage 3: Removal of preload from Area 2 and fill and preloading of the South-western corner (Area 3: remainder of site).

• Stage 4: Removal of preload from Area 3.

Stage one works have concentrated on release of waterfront areas as a primary focus, and is nearing completion. Stage two fill and preloading has commenced.

Works to date:

Works have focused on the following items:

1. Creation of haul roads and stripping;

2. Importation and placement of some 600,000m³ of structural and preload (surcharge) material CBR 10-15 in harbour and canal fronting areas, with preload crest setbacks some 35-40 metres.

3. Importation and preloading of adjacent Aurora property boundary (to minimise future setback requirements).

Progress to date:

As of April 15^th of 2003

1. Preloading of the harbour for settlement and strength improvement has been completed, sufficient to allow for loads commensurate with 15 Kpa loads (two storey homes).

2. Excavation of the harbour has commenced and will be completed within two months (15th of June).

3. Preloading adjacent the Aurora site has been 90% completed, however an additional requirements for preloading against Hope Island road is required for an additional three months. No adverse impacts arise from this additional preloading.

4. Preloading of Stage two has commenced some three months ahead of schedule, completion date for Stage two preloading is anticipated around December 2003.

Future works:

• Stage two fill and preloading works are anticipated to be completed by end of July. It is currently anticipated sufficient settlement will be achieved by December 2003 (subject to geotechnical review and advice).

• The construction of an access road and roundabout off Hope Island Road will be constructed and completed by December. This will coincide with and complement the completion of stage two works.

• Stage three fill and preloading will start on completion of Stage 2 in December and is anticipated to be completed late January 2004. Sufficient settlement should be achieved within a 4-5 month period such that all works will be completed by July 2004."

Mr Atkinson's evidence

107. Mr Atkinson gave evidence that on 8 May 2003 shortly after Mr Claxton's position paper, "all work on the Aurora Land was suspended for a period of 30 days" (para 51, affidavit sworn 14 April 2009). Mr Atkinson gave evidence that the reason for the suspension of the works was to enable Aurora to consider budget over-runs arising in the project; unauthorised expenditure; defects; design issues; technical difficulties as well as the likely completion dates.

108. About two months earlier, in March or early April 2003, Mr Gore had been contacted by Mr Gordon Douglas, the Managing Director of PRD Nationwide Realty and was told that Mirvac Limited ("Mirvac") was interested in discussing the purchase of the Aurora lands together with the adjoining land controlled by companies related to Aurora. Discussions were conducted with Mirvac's Chief Executive, Mr Freeman. In April, Mr Douglas told Mr Gore that Mr Freeman wished to make an offer. That matter was discussed between Mr Gore and Mr Atkinson. Mirvac's proposal was unacceptable and the matter lapsed.

109. In May 2003, Mr Gore was again contacted by Mr Douglas. Mr Gore was told that Australand was interested in discussing an opportunity to purchase the Aurora lands and the adjoining lands. Arrangements were made for a meeting between Mr Gore, Mr Atkinson, Mr Lawrence (the State Manager for Australand) and Mr Fulcher, a Development Manager for Australand.

110. The approach by Australand came to Aurora at or about the same time that Aurora had either suspended or was considering the suspension of all work on the Aurora land for approximately 30 days to consider the matters described by Mr Atkinson. Mr Atkinson in his affidavit sworn 14 April 2009 (Exhibit A, 1) says this about the subsequent events:

"47. For various commercial reasons Aurora made the decision to withdraw from the Aurora project. Aurora confirmed its decision in that respect by corresponding with each individual "off the plan" purchaser in writing on or about 29 July 2003 wherein each sale contract was terminated.

48. Aurora decided that, commercially, it would be well served to pursue a process whereby it would prepare the lands held for sale to a single purchaser as a development site en-globo.

49. The operational works required to be performed on the Aurora lands at the time of making the commercial decision were still very much that which was contemplated under the Development Permits that were issued to Aurora at the outset.

50. More specifically, the work required to be performed on the properties from around 29 July 2003 onwards to prepare them for sale en-globo as a development site was, to a great extent, the same as what was specified in the Development Permits originally obtained. This is because the bulk earthworks and general civil works, for example, are similar to that which would have had to be performed to complete the Aurora project originally intended."

111. In giving oral evidence, Mr Atkinson explained that the reference at para 51 of his affidavit (at [107])to suspension of all work on the Aurora land on 8 May 2003 was intended to be a reference to the suspension of building work, that is, the construction work (T 77, lns 4-10). The earthworks, he said, had not stopped. Mr Atkinson accepted that building work in the form of laying slabs, piles, putting in drainage for stormwater or sewerage "and those sorts of works" which had commenced on site, stopped on or about 8 May 2003.

112. On 21 July 2003, Aurora, Atmeygor, Sickle and AGG (all described as "the owner") entered into an "Exclusivity Deed" (Exhibit A, 12) with Australand under the terms of which Australand proposed to "investigate the economic feasibility of developing property" described by reference to the lots describing Aurora's land, Atmeygor's land, AGG's land and a part of Sickle's land (being the triangular section on the western side of the proposed canal and contiguous with a part of Aurora's land (Lot 34 which became Lot 134)). By clause 2, the owner granted Australand the exclusive right to deal with the owner to investigate the future purchase of the property for 30 days or such term as might be determined under clause 2.3. The owner agreed not to list, market, dispose of or grant rights over, the property during the exclusivity period.

113. On 27 August 2003, Australand made an offer to purchase the property for $90m subject to the completion of due diligence to Australand's satisfaction by 25 September 2003 (Exhibit A, 13).

114. In the period between 8 May 2003 and July 2003, Aurora elected to withdraw from its development project for the land (Atkinson, para 47, affidavit 14 April 2009; T 77, lns 36-37). Aurora closed down the project and notified the purchasers (Exhibit A, 29) of termination of the contracts under clause 29.2, but for negotiated terminations with two buyers whose contracts did not contain clause 29.2 (Atkinson, para 47, affidavit 14 April 2009; T 77, lns 40-43). Marketing activities probably ceased and the continuing engagement of a real estate agent to secure sales logically would have also ceased (Atkinson, T 78, lns 11-17).

115. Mr Atkinson explained his understanding of the things involved in preparing the lands for en globo sale to a single purchaser consequent upon the decision to withdraw. In doing so, Mr Atkinson regarded those considerations as relevant or applicable to the en globo sale of a site consisting of Aurora's land and the land of Atmeygor, Sickle and AGG (T 79, ln 8), and not just Aurora's land. To prepare for such a sale the companies, according to Mr Atkinson, continued with the earthworks "because a lot of the earthworks were going to have to be done anyway"; the site had to be filled; a canal had to be constructed (and continued) and it was a "major attraction of the site" (T 78, lns 42-47; T 79, ln 1). Mr Atkinson accepted that the "idea" was that the earthworks would make the site more attractive to a single buyer if canal construction was completed together with other earthworks (T 79, lns 10-13) and therefore a higher price might be obtained (T 79, ln 16). Mr Atkinson accepted that although the earthworks continued as he understood it (and perhaps "other aspects of work") the construction of the apartment buildings and houses set out on Plan C did not continue and the construction of services for those buildings such as "sewerage, stormwater and electricals" all ceased (T 79, lns 25-30). Mr Atkinson accepted that he had become aware (although the source of his knowledge was unclear) that Australand was "not interested in taking on the off-the-plan contracts that Aurora had made on the site" (T 79, lns 32-34).

116. On 21 July 2003, the Exclusivity Deed was signed. On 29 July 2003, Aurora, by Mr Adamson, gave notice of termination of Aurora's contracts to the buyers (but for the two contracts as previously described). On 27 August 2003, Australand issued its offer to purchase the particular lands of Aurora, Atmeygor, Sickle and AGG subject to a due diligence process.

117. Mr Atkinson's evidence on the issue of which works continued was qualified by his observation in oral evidence that he was not on top of or responsible for the engineering works (T 78, ln 45), although the position is put more affirmatively at para 50 of his affidavit of 14 April 2009 as to the works conducted after 29 July 2003 and the relationship of those works to the existing Development Permits.

118. Each of the contracts signed on 2 October 2003 adopted a special condition that required the seller to carry out various works on the site detailed in Schedule C. Schedule C is set out in Part II of these reasons (drawn from the Aurora contract, Exhibit A1, p 118 and 119).

119. Mr Atkinson gave evidence that his understanding was that Australand wanted the Aurora sales office removed and building construction that had been carried out on the land to that time removed, so as to "put the land back to where it was before that work had been done" (T 80, lns 22-29). Aurora accepts in submissions (although Mr Atkinson could not be sure of the timing) that the removal of all existing building slabs and associated construction material; the removal of existing sewer, water, electrical and gas services; the removal of the sales office; and the removal of all boardwalk supports, was not work required to be performed as part of the Aurora Adult Community project Development Permits. Mr Atkinson accepted that the demolition or removal of the existing building construction and construction materials (already positioned on the Aurora land), after the signing of the contracts on 2 October 2003, was not the "continuation of what was already being done on the land". Mr Atkinson described the continuing work as "the overall earthworks": (Atkinson, para 66, affidavit 14 April 2009; T 81, lns 1-24).

Mr Gore's evidence

120. Mr Gore was Aurora's director responsible for development issues, development approvals, negotiations with Federal and State governments (and their agencies) and the Council, feasibility considerations for particular development proposals, marketing and related matters.

121. Mr Gore generally accepted that the sequence of applications, approvals and permits (Exhibit A, 81-93A) speak for themselves. However, Mr Gore gave evidence that the particular applications, approvals and permits for operational works on the land (which concerned applications relating to Aurora's development proposal for the use of its land) ought not to be seen in isolation as, properly viewed, the Aurora land was "one piece of land in a much broader development" and as to operational earthworks, the construction of the canal was subject to other approvals (T 188 and 189).

122. Mr Gore accepted that by the time of Aurora's application to the Council on 16 April 2002 to remove references to a retirement community, construction works had commenced on the site; canal construction had begun; civil engineering works had commenced; plate management, soil works, sewerage, electrical and gas works, piles, foundations and slabs had all commenced; and, marketing of an "adult community" had begun through TV, radio, press, an on-site sales office on Aurora's land and the appointment of an external real estate agent, Mr Barry Ryan.

123. As already noted, Mr Gore broadly accepted that Plan C, subject to the final location of buildings consequent upon the final determination of the alignment of the canal, diagrammatically depicts the structures to be developed as the "Aurora Adult Community". Mr Gore also broadly agreed that subject to the difficulty of the use of the word "final" (T 195, lns 20-23), Plan C represents the final form of the collection of buildings marketed to the public as to the Aurora Adult Community.

124. Mr Gore gave evidence that in May 2003, he and Mr Atkinson decided to cease work on the buildings on site for a period of 30 days (T 197, lns 36-39) and in about the middle of 2003, Mr Gore and Mr Atkinson decided to withdraw from the Aurora community development (T 198, lns 6-7). Mr Gore gave evidence that preparation of the site for an en globo sale to a "single purchaser" was an unrealistic ("ludicrous", as he put it) conception of the directors' approach to a disposal as the relevant entities controlled 74 hectares of land and it was impossible to say that any piece of land would be sold en globo (T 198, lns 9-26).

125. Mr Gore accepted that from the time of the decision to withdraw from the residential development, construction of the buildings forming part of the development did not continue nor resume (T 198, lns 31-35).

126. As to the services, Mr Gore gave evidence that whatever shape the development of Aurora's land took (and the other parcels), electricity, gas and water services would be required and the approvals "would require the inclusion of those services" (T 198, lns 45-47). However, Mr Gore accepted that para 48 of Mr Atkinson's affidavit of 14 April 2009 (at [110]) correctly states the position and once a decision was made to prepare the lands for an en globo sale it followed that, because Aurora had halted construction of the building work (that is the building slabs and foundations for the residential development), Aurora did not continue to "run (or resume) infrastructure services such as stormwater and sewerage to the various (Plan C) building sites" (T 200, lns 9-13). Mr Gore agreed that the work undertaken by Aurora to prepare the site for an en globo sale consisted of the earthworks, filling the land, completion of or continuing work on the canal, construction of revetting walls for Westlake and Eastlake, and the completion of the Pendraat Parade works (although the work was not limited to Aurora's land) (T 199, lns 44-47; T 200, lns 1-6).

127. Mr Gore gave evidence that building construction work and the provision of services to buildings did not resume once the decision to "withdraw from the projects" had been taken as a requirement had emerged "to move the canal 30 metres" (T 213, lns 1-5). Mr Gore gave this evidence in response to a question from counsel for Aurora, at T 213, lns 1-13:

"MR BICKFORD: And my friend asked you a question or a number of questions which culminated in the question to the effect that the construction of the building, and services to the buildings, did not resume after you made the decision to withdraw from the projects, and you said no. Can you explain why you answered no to that question?

MR GORE: The decision to cease works was based on a requirement to move the canal 30 metres. It's a very big piece of infrastructure to move 30 metres. It encroached on other land boundaries, and to do so it required the movement - it required changes to the approvals that we had and were holding at that time. It also added to the cost of the development which meant that at that point the work that was being conducted on the buildings that were proposed in the previous approval, were placed on hold, but other works continued - the construction of the bridge on Hope Island, roads and so on and so forth."

128. Although the question put to Mr Gore by Mr Bickford was directed to the reason for Mr Gore and Mr Atkinson not resuming construction of the buildings or the provision of services to those buildings after the decision was taken by the directors to withdraw from the projects, Mr Gore may have been thinking about the reasons for the "decision to cease works" (being the 8 May 2003 decision) when explaining those circumstances (T 213, ln 5). In any event, the final alignment of the canal and the consequences for building work of that alignment was said to be a reason for not resuming building construction and the laying of services to building sites.

129. Mr Gore gave evidence that he and Mr Atkinson on or about 21 July 2003 considered (consequent upon Mr Gore receiving advice from Mr Adamson) Australand's request for an Exclusivity Deed and decided that Aurora's "best course of action was to terminate the contracts of sale that were presently in existence and pursue the sale to Australand" (Gore affidavit, Exhibit A, 16, paras 25 and 26). Mr Gore accepted that paras 47 and 48 of Mr Atkinson's affidavit accurately describes the decision taken. The Exclusivity Deed was signed on 21 July 2003. A Board decision was taken to terminate the contracts. Notices were given to the relevant buyers on 29 July 2003. The decision to terminate the contracts was based on two considerations. First, Mr Gore was confident that Australand would make an offer. Mr Gore considered that the pre-sold lots might inhibit it from doing so. Moreover, Australand (either by Mr David Lawrence or Mr Richard Fulcher) had informed Mr Gore that Australand did not wish to assume the sales contracts on foot in respect of the proposed lots in the Aurora Adult Community development (Gore affidavit, 18 August 2009, para 29).

130. The second consideration was that if the sale to Australand did not proceed, Mr Gore thought it likely that the configuration of lots on the Aurora site would need to be changed in any event.

131. Although Mr Gore in oral evidence confidently denied that he had been told by Australand's representatives that Australand did not wish to assume the existing contracts, Mr Gore agreed that para 29 of his affidavit put the matter correctly and that he had been told of that matter. That evidence is consistent with Mr Atkinson's understanding referred to earlier (at [110] and [115]).

132. Accordingly, it follows that the contracts were terminated on 29 July 2003 by Aurora on the footing that Australand did not want them and their existence might inhibit Australand from making an offer.

133. During the negotiations with Australand, it was also agreed that it would be "sensible to continue the works (that is, the works described at (T 199, lns 44-47; T 200, lns 1-5) as part of the approvals" (T 203, lns 1-15). Mr Gore regarded those works as necessitated by the existing approvals and, by agreement, the seller would continue to undertake those works. Mr Gore accepted that Australand required existing sewer, water, electrical, gas and stormwater reticulation services removed from within the site with the site then levelled and backfilled. Similarly, all existing building slabs and construction materials (other than existing piling works) had to be removed from within the site and all boardwalk supports were to be removed. Mr Gore, however, did not accept that these requirements were communicated to him by Australand in negotiations as a condition of a possible purchase of the land. Mr Gore thought that these removal steps were occurring in any event (T 208, lns 16-18; T 208, lns 45-46). Mr Gore gave evidence that he first learnt of these requirements when he saw the contracts (T 212, lns 11-15). Mr Gore did not intend any of the companies of which he was a director to be bound by anything other than the terms of the executed contracts (T 212, lns 25-31).

134. Earthworks continued on the site after the decision was taken to withdraw from the project. Mr Claxton in his memorandum (position paper) of 2 May 2003 sets out the work done to that date on the Aurora land (at [105]). The bulk earthworks were said to be 90% complete. The work remaining to be done is also set out in the position paper. Future bulk earthworks were expected to be completed, according to the position paper, within 10 months.

Mr Cameron's evidence

135. Mr Grant Cameron was the Operations Manager for Big State Earthmoving and Excavations Pty Ltd ("Big State") from 17 March 2003 to 13 February 2009 although he thinks he may have been involved with earthworks on the development lands for Big State from about February 2003. Big State was incorporated on 18 February 2003. Mr Atkinson and Mr Gore were appointed directors at incorporation and remained directors although Big State at the date of the trial was in liquidation: Agreed Facts 23 and 24. Mr Cameron says that prior to the sale of the lands to Australand, he (for Big State) was approached by Mr Gore and Mr Atkinson to undertake earthworks on Aurora's land and the lands of Atmeygor, Sickle and AGG. Mr Cameron says that in March 2003 he familiarised himself with the plans and scope of earthworks Big State was to undertake and complete for Aurora. Mr Cameron thinks he may have been first involved in a works program concerning the site from about the year 2000 when employed by a different company which must have concerned solely the Aurora land.

136. Mr Cameron accepted that Mr Claxton's description of the works under the heading "Earthworks Status of Land Under Sales Proposals" carried out to 2 May 2003 accurately describes the works undertaken by that date on the Aurora land. Mr Cameron gave evidence that the earthworks being carried out in April 2003 on the lands of Aurora, Atmeygor, Sickle and AGG did not cease; the works continued up to the date of the contracts each company struck with Australand on 2 October 2003; and the ongoing work consisted of the "sort of items mentioned in [Mr Claxton's] memorandum" (T 22, lns 15-27). Mr Cameron agreed that Mr Claxton's description in the position paper of the 'Works to be completed" on the Aurora Site is correct. Mr Cameron also agreed that he was involved in the works described in the "Summary Report Lot 1, 2 & 3" in Claxton's position paper and the description accords with his recollection of the work carried out to that stage. Mr Cameron gave evidence that the description of works under the headings "Progress to date" and "Future works" in the position paper was also correct. Mr Cameron said the site including all company holdings was a large site; earthworks continued for a number of years after 2 October 2003; and the works never stopped. Mr Cameron could not recall when works on the Aurora land ceased (T 24, lns 11-12) or whether works continued after the contract date of 2 October 2003 although he recalls that work on the lands of Atmeygor, Sickle and AGG continued after October 2003 (T 24, lns 15-17).

137. Mr Cameron described the principal work as "bulk earthworks, filling the site, pre-loading the site, construction or excavation of the canal with associated revettment walls" (T 24, lns 20-23). As to the canal, Mr Cameron said that fill had to be loaded over the top of the canal to consolidate, improve and strengthen the ground. The fill then had to be removed before excavation could occur. The process was a long and drawn out one (T 24, lns 25-30).

138. In cross-examination by counsel for the Commissioner, Mr Cameron gave evidence that in carrying out the earthworks, he saw the engagement as one large project for the Atkinson Gore Group of companies and distinguishing between parcels of land was only relevant when it came to providing "Certifications". Mr Cameron gave evidence that Big State was not engaged by Australand to carry out any earthworks and he did not carry out any earthworks on the land after Australand bought them (T 26, ln 26) which I infer to mean, having regard to the preceding question put to Mr Cameron, the period after settlement when Australand took possession of the lands.

139. Mr Cameron was taken to Plan C. Mr Cameron recognised the Aurora land depicted on Plan C. Mr Cameron had undertaken earthworks on the Aurora land and was familiar with it. As to that Plan, Mr Cameron gave evidence that prior to the sale to Australand he had filled and pre-loaded the land. Based on his observations and knowledge of the Aurora land, Mr Cameron gave evidence that prior to the sale to Australand, foundations for building slabs had been laid; piles had been driven for houses and apartment buildings; stormwater pipes had been laid; sewerage pipes had been laid; conduiting for electricity cables had been laid; some construction of internal temporary roads had occurred; a sales office had been established on the site at the area described at 910 on Plan C; and, a site office for operations had been established at 905 on Plan C. Mr Cameron understood that these works were directed towards the residential development of the land (T 28, lns 19-45; T 29, lns 1-37).

140. Mr Cameron gave evidence that the sales office at 910 was removed; in the area from 900 to 902 on Plan C and including a square-shaped area back to Pendraat Parade, all existing sewer, water, electrical, gas and stormwater reticulation infrastructure was removed (T 30, lns 40-46); all existing building slabs and associated construction materials (excepting piling works) were removed (T 31, lns 1-6); poles driven, when doing works to excavate and construct the canal, to support a deck or boardwalk along the edge of the canal running between proposed structures at 901, 903 and 911 on Plan C, were removed (T 31, lns 9-20); and the removal of the building slabs, associated construction and the removal of infrastructure services "put the land back to the earthworks state prior to the builders coming in" (T 31, lns 38-39) "so the incoming buyer could implement its own design there" (T 31, lns 29-30). That "state" seemed to be the filled and pre-loaded state of the Aurora land (T 31, lns 40-41). Mr Cameron gave evidence that the only area on Plan C where building construction had commenced was in the area between the structures at 900 and 902 on Plan C.

141. Mr Cameron accepted that the removal of the boardwalk supports, demolition of the building slabs and removal of infrastructure services had not been undertaken prior to Aurora entering into the contract with Australand, and the removal work was something new to be done on the site (T 35, lns 37-46).

142. Mr Cameron gave evidence that he understood that the work described in Annexure C to the Aurora Sale Contract (and reflected in the other contracts), reproduced at para 6 of his affidavit sworn 17 April 2009, had to be completed by a particular time. Aurora contends that the work continued up to (and possibly beyond) the date of settlement on 2 July 2004 having regard to a sequence of exchanges between each vendor and the buyer through their solicitors (and the evidence more broadly).

143. As to Mr Cameron's knowledge of the completion of the Annexure C works, he recalls that a notice of completion was given by Aurora to the buyer. Mr Cameron regarded that notice as a notice of "practical completion" rather than notice that the works were "100 [per cent] complete" (T 32, lns 12-17) because until the day of actual handover there is a continuing responsibility (upon Big State as contractor to the vendor) to maintain the land and "there's always minding stuff til the day we physically hand it over to somebody" (T 32, lns 20-24).

144. However, Mr Cameron accepted that apart from maintenance work, he would not dispute that the work described in Annexure C (and listed in para 6 of his affidavit) was complete when the vendor gave the buyer the notice of completion stating the work was complete (T 32, lns 26-28).

145. On 3 May 2004, the solicitors for each seller (Adamsons) sent a letter by facsimile (Exhibit A, 33, pp 810 and 811) to the buyers' solicitors (Allens Arthur Robinson ("AAR")) in which at point 2 it is said that under the Aurora contract completion of the works as provided for by Special Condition 6 had occurred and on 30 April 2004 Aurora had delivered notice of completion to the buyer together with "the requisite supporting documentation contemplated by Special Condition 6".

146. At point 4 of that letter, Adamsons say that Sickle has completed the Special Condition 6 works recited in its contract and that notice of completion had been delivered by Sickle to the buyer with supporting documentation on 30 April 2004. At point 6 Adamsons say that Atmeygor has completed the Special Condition 6 works in its contract and had delivered notice of completion to the buyer together with documentation on 30 April 2004.

147. That letter also asserts that Special Condition 5 of the Aurora, Atmeygor and Sickle contracts had been satisfied and having regard to completion of the Special Condition 6 works, settlement of each contract was due to be effected by 2 July 2004.

The content of the earthworks

148. As to the content of the earthworks, Mr Cameron gave evidence that due to the relationship between Big State and Aurora (para 4, Cameron affidavit, 13 August 2009) the terms of Big State's engagement by Aurora were not reduced to writing until 29 October 2004. Similarly, written agreements were not made between Sickle, Aurora, AGG and Big State until 29 October 2004. On that date, each company entered into an "Earthworks Management Deed" (the "Deed") which describes the earthworks Big State undertook on each company's land by reference to drawings and specifications in Schedule 2 to each agreement. In the Aurora Deed, Section A of Schedule 2 describes the earthworks under the heading "Roadworks and Drainage" which seems concerned predominantly with works relating to the construction of a particular section of Pendraat Parade. Mr Cameron agreed that that work was concerned with that part of Pendraat Parade outside the section to be transferred to the buyer under the Aurora Contract (that is, works on the section from Portofino to the Oxenford Hope Island Road). Section B of Schedule 2 is concerned with water supply and sewerage and describes works to excavate, supply, bed, lay, backfill and test water mains.

149. Schedule 2 to the Sickle contract describes six categories of earthworks on the triangular section on the southern side of the canal sold to the buyer (Lot 121). Those works concern clearing, grubbing, stripping topsoil, removal of topsoil to stockpile site, imported fill for canal pre-load, placement of canal edge pre-load and the removal of canal edge pre-load. The schedule of works also describes earthworks on the balance of Lot 1 and earthworks concerning canal excavation.

150. Schedule 2 to the Atmeygor deed describes eight items of Stage 2 and 3 bulk earthworks including stripping and removing topsoil to stockpile, pre-load Stage 1 to Stage 2, excavate harbour and canal (C1 works), fill pre-load Stage 2 to Stage 3 and the excavation of the canal (C2 works).

151. Schedule 2 to the AGG deed describes 16 items of earthworks on Lot 77 which include strip and stockpile topsoil, fill, pre-load inside canal edge, pre-load back of canal edge, remove pre-load, excavate canal, dewater, install revetting walls, balance pre-load, trim site and topsoil site.

152. Each item in each Schedule 2 is priced.

153. The date for "practical completion" of the works in each contract is: the Aurora deed, 28 February 2004; the Sickle deed, 31 March 2004; the Atmeygor deed, 28 February 2004; and the AGG deed, 28 February 2005 (which must be a typographical error for 28 February 2004).

154. The earthworks undertaken by Mr Cameron varied according to the particular lands and had to be completed to the relevant standards (T 33, lns 25-46; T 35, lns 22-27; Exhibit A, Aurora, Atmeygor, Sickle and AGG deeds with Big State).

Mr Fulcher's evidence

155. Mr Richard Fulcher is the General Manager of Australand Holdings Ltd, Western Australia. From late 2002 to July 2004, Mr Fulcher held the position of Land and Housing Manager of the Queensland Operations of Australand and was closely involved in and had direct knowledge of Australand's acquisition and proposed use of Aurora's land. Mr Fulcher gave evidence that he was responsible for the acquisition, development and implementation of "those sites" (that is, the lands of Aurora, Atmeygor, Sickle and AGG) once acquired. Mr Fulcher reported to Mr David Lawrence.

156. Mr Fulcher was responsible for the detailed feasibility analysis concerning the acquisition and how the contracts were "put together". Mr Fulcher was closely involved in the negotiations for Australand's acquisition from each seller and attended approximately half a dozen meetings with principally Mr Gore and Mr Adamson. Mr Gore gave evidence that he could not recall meetings with Mr Fulcher but accepted that Mr Fulcher may have been involved in the meetings. Mr Fulcher believes Mr Gore attended three or four of the meetings and Mr Adamson attended each meeting. Mr Fulcher gave evidence that Mr Lawrence attended the majority of those meetings.

157. At the outset of discussions with Mr Gore, Mr Fulcher inspected the Aurora site and in particular the south eastern corner of Lot 34 and also Lot 28. Mr Fulcher also inspected the lands of Atmeygor, Sickle and AGG which in general terms he described (including Aurora's land) as all the land between the Hope Island canal to the Oxenford Hope Island Road (by reference to Plan A). Mr Fulcher gave evidence that he first inspected the site about two months before July 2003, that is, May 2003 and that he has a very strong recollection generally of the works that were being undertaking on the site. Mr Fulcher remained involved with the development of the lands for a number of years after Australand's acquisition (T 142, lns 25-34).

158. Mr Fulcher inspected the site approximately six times between May 2003 and 2 October 2003 (T 146, lns 23-26). On Lot 34 Mr Fulcher observed conduits protruding out of the ground, some house slabs, house drainage works and boxing for internal roads. Mr Fulcher observed that earthworks were occurring at the time of his inspections. The canal from the southern part to the harbour (Plan A) had been completed, that is, filling and pre-loading had been completed. A "fair chunk of the northern canal" required preloading and so too some preloading was required in the northern part of the Aurora lands and hence the inclusion of the "Seller's Works" in Annexure C to the contract (T 157, lns 24-29).

159. At para 17 of Mr Fulcher's affidavit (Exhibit A, p 1205) he says that the majority of the seller's works incorporated in the contract related to completing the bulk earthworks and revetment construction for the canal and lake works. There were also minor works relating to servicing and roadworks. Mr Fulcher says that as these works were already underway at the time that Australand commenced negotiations with Aurora, it was logical and practical for them to be completed by the applicant.

160. Mr Fulcher was aware that a residential development was proposed for the site. Marketing information and some development approvals were available to Australand. The approvals were available to Australand either because it had obtained them through searches or alternatively copies of the approvals had been given to Australand by Aurora's representatives (T 132, lns 14-17).

161. Mr Fulcher gave evidence that he accepted that Mr Claxton's memorandum describing the works to 2 May 2003 on the Aurora site was correct (T 147, lns 32-35). As to Mr Claxton's summary of progress to 2 May 2003 of bulk earthworks on Lots 1, 2 and 3 (Atmeygor's land), Mr Fulcher gave evidence that, based on his visits to the site, earthworks continued including canal earthworks throughout the period from May 2003 to the date of the contracts on 2 October 2003 (T 148, lns 22-25).

162. Mr Fulcher could not recall any discussion (and ultimately said that there was none) of a proposal by Aurora to assign or transfer the business name "Aurora Adult Community" or "Aurora Residential Community" or "Aurora Retirement Community" to Australand. That would have been a material matter for Mr Fulcher had Australand wanted to use Aurora's project names (T 136, lns 14-23; T 137, ln 12).

163. Either Mr Adamson or Mr Gore told Mr Fulcher that contracts had been signed with members of the public. A copy of a schedule of lot sales and prices was given to Australand to help Australand "assess what the site might be worth" (T 121, ln 11). Australand expressed no interest in the contracts according to Mr Fulcher. Mr Fulcher cannot recall whether Mr Gore told Australand's representatives that the contracts were going to be cancelled or whether Australand requested them to be cancelled. In any event, it was "clear that they were either going to be cancelled or they already had been" (T 121, lns 13-19).

164. As to the buildings Aurora proposed to construct, Mr Fulcher and Mr Lawrence in the course of six or perhaps seven meetings told Aurora's representatives that Australand "had no interest in developing those buildings and the houses that they'd [Aurora] already had contracts on" and, put another way, so far as the works that had been done to commence the "first stage of Aquilla and the houses" were concerned, "we actually asked for them to remove it" (T 121, lns 36-44). Mr Fulcher recalls that at a meeting with Mr Gore, Australand's representatives identified its proposed concept and told Mr Gore that Australand was not interested in taking over the houses or the works to date. Mr Fulcher gave evidence that at that meeting, Mr Gore agreed to remove the work (T 122, lns 1-11).

165. Mr Fulcher gave evidence that as to the sales office, it was to be removed to facilitate better access to the site and better marketing of the site; all existing sewer, water, electrical, gas and stormwater reticulation infrastructure was to be removed because it did not "match up with" Australand's proposed residential plans and was of "no use to us"; the slabs and associated construction materials were to be removed because Australand was undertaking a different type of development requiring a different configuration of the site. Mr Fulcher described the removal of the slab and other construction material as unusual in his experience in conducting developments (T 145, lns 1-40).

The objection to aspects of Mr Fulcher's evidence

166. Mr Fulcher was not only asked questions about these discussions concerning Australand's lack of interest in taking over the existing contracts and the removal of the construction works to that date from the Aurora site, but he was also asked questions concerning other aspects of the negotiations (such as the earthworks that were to continue) leading up to the contract with each seller on 2 October 2003. Counsel for Aurora objected to questions directed to the content of negotiations on topics that were reduced to agreement in the contracts of 2 October 2003 on the footing that the agreement is the agreement; the terms are clear; what was said earlier in time is irrelevant and was overtaken by the agreement; and there are no other or collateral agreements between the buyer and the seller, or between Australand more broadly and the seller.

167. Aurora's central case is that it was engaged in an enterprise of developing Aurora's land (informed by Aurora's relationship with Atmeygor, Sickle and AGG and developments to occur on those lands) with a view to realising profit on sale or achieving the highest and best use and thus maximising the profit on resale. The definition of "Enterprise" in the Special Conditions of the contract adopts the phrase "the development of the [Aurora] Land". That phrase is not itself defined, although, it takes its meaning as a matter of construction in part by reference to its intersection with other provisions of the contract. A question arises (and is in controversy) as to the content or nature of the development of the Aurora land that Aurora was engaged in at the date of the contract.

168. The evidence of Mr Fulcher is relevant to that question.

169. Secondly, the question to be determined in the proceeding is the construction and application of the statutory integers of the relevant sections of the GST Act which concern, in part, the content of the "activities" carried on comprising the Enterprise.

170. Thirdly, the agreement of the seller and the buyer creates by the language chosen by the parties duties and obligations which have a context. The evidence of Mr Fulcher goes to that context in assisting in the application of the "principle of objectivity" (
Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451, by the Court at [22]) and in determining what a reasonable person would have understood by the term "Enterprise", (reliant upon its use of the phrase "the development of the [Aurora] Land") to mean, having regard to the text of the contract, the surrounding circumstances known to the parties and the purpose and object of the transaction:
Toll (FGCT) Pty Limited v Alphapharm Pty Limited (2004) 219 CLR 165, by the Court at [40]; Pacific Carriers at [22].

171. Accordingly, the evidence of Mr Fulcher on these topics is relevant and thus admissible.

The further evidence of Mr Fulcher

172. As to the continuation of the earthworks, Mr Fulcher gave evidence that Aurora offered to continue those works and that Australand was accepting of that arrangement subject to the setting of appropriate specifications and the earthworks being conducted to a certified standard (T 123, lns 41-44). On 9 September 2003 a submission was put to the Australand Board for approval to enter into contracts of purchase. The introduction to the submission sets out what Mr Fulcher agreed, in evidence, was his understanding of the activities on the site at that time and at Exhibit A, 47 at p 1245, Australand's development proposal is set out, in part, in these terms:

4.0 DEVELOPMENT PROPOSAL

Although the present master plan for the Aurora project has no major flaws a new proposal is required to not only comply with new traffic layout requirements but also reduce the risks associated with the large scale of this project.

Australand's proposal is to reduce the number of apartments and confine these buildings to the prime canal front land. The proposed marina and associated retail facilities will remain, with the remainder of the site limited to small lot housing.

[The development summary sets out a schedule identifying 271 proposed housing lots of 400m²; 37 lake front housing lots 500m²; 51 canal front housing lots 240m²; 102 two bed apartments 120m²; 229 three bed apartments 150m²; 130 marina berths and 600m² of retail space.]

Further detailed design work would be undertaken to identify the optimum mix and size of product. The proposed density is well below the allowable maximum outlined in the Hope Island Development Control Plan (1,050 dwellings).

The project would target the end user/owner occupier and quasi investor segment of the market. The apartment product would be smaller than the current Aurora proposal. The apartments would be more economical, eliminating waste and catering for the end user market …

Detached housing would be smaller in size to the current proposal with a value management process to be undertaken to eliminate some of the architectural features that are difficult to construct and are not adding value.

173. Australand's proposal for the development of the site (that is, the total site comprising the lands of Aurora, Atmeygor, Sickle and AGG) involved high-rise apartments around the marina/harbour precinct and low-rise residential accommodation throughout the rest of the site which required subdivision of the site. The marina element of the earlier proposal would be retained. The canal had to be completed. The canal land had to be dedicated for that purpose.

174. At para 11 of Mr Fulcher's affidavit (Exhibit A, p 1204) he says this:

"At all relevant times Australand intended to continue to develop the Aurora Lands in accordance with the applicant's existing plans and major infrastructure works, in particular, the construction of the canal and lake. However, while remaining primarily focused on residential development, the detailed form of Australand's proposal would differ from the applicant's development proposal. At no time did Australand propose to continue with the development of an adult residential community."

175. Those observations of Mr Fulcher are explained more fully by the following evidence.

176. The structures depicted on Plan C were to be replaced with stand-alone residential allotments for residential housing. On 23 December 2003, Australand through "Planet Consulting" lodged a Development Application (dated 22 December 2003) with Council with Aurora's consent as landowner (as settlement would not occur until 2 July 2004) for a subdivision to create the various allotments (Exhibit A, 52). This was Australand's first Development Application for the Aurora land. A further application was lodged on 11 May 2004 (Exhibit A, 53) for a material change of use over the Aurora, Atmeygor, Sickle and AGG lands by reference to a Master Plan so as to facilitate a series of residential and non-residential uses including cafes, restaurants, indoor relaxation facilities, an estate sales office, home office uses and a marina. The general Australand concept for the aggregated site, according to Mr Fulcher, was still going to be a residential development as opposed to a commercial or industrial site and in that sense that concept of development for the site remained the same (T 138, lns 11-19; T 158, lns 27-33). Access to the canal remained important. So too was the construction of the marina. The lakes would remain as they were as it would be too expensive to relocate them (T 158, lns 20-23).

177. On 19 May 2004 (Exhibit A, 54), Australand lodged a development application over Lot 28 (part of Aurora's land) and Lot 29 (Atmeygor's land) for a residential development incorporating 35 attached dwellings under the name "Cova Stage 1".

178. Mr Fulcher agreed that what was being conveyed by the contract of 2 October 2003 was the Enterprise as defined by Special Condition 4.2 and that Australand was entitled to receive all development approvals prepared by Aurora in relation to the land (T 132, lns 44-46). Mr Fulcher, in cross-examination, agreed that in his experience of property development projects, the original development conceived for a site is often not the final form the development takes; the "object of the exercise with property development is to achieve the highest and best use of the site"; in particular, the object is to "maximise the profit to the developer"; and, although a site might be acquired with an intention of undertaking one particular type of development, the ultimate development might take a quite different form in response to market changes (T 140, lns 4-27).

179. Mr Fulcher also accepted that the contracts of 2 October 2003 reflected the agreement which had been reached between the parties and there was no other agreement other than a Deed of Variation not relevant for present purposes.

The architectural plans and other plans, drawings, reports and specifications commissioned by Aurora and the subject of the issue in relation to the boxes

180. Mr Fulcher was asked whether, prior to entering into the contract of 2 October 2003, there was any discussion in the negotiations with Aurora's representatives about Australand obtaining access to whatever drawings or plans Aurora had for its proposed building construction on the site, that is, construction of the houses or apartment buildings forming its residential development. Mr Fulcher said that there was no such discussion and Australand did not request that information. Mr Fulcher qualified that answer by reference to his evidence earlier mentioned concerning access to development approvals obtained by the seller.

181. Mr Fulcher was also asked whether, after the contracts were signed in October 2003, he recalled receiving from Aurora any boxes containing material sent to Australand by any of the Atkinson Gore group of companies in relation to the site and whether he recalled receiving material from Mr Slijderink. Mr Adamson gave evidence that Mr Slijderink compiled extensive boxes of material containing geotechnical reports, plans, specifications, location services and anything that related to the site whatsoever. It was Mr Slijderink's job to index the material, box it and arrange for it to be delivered to the buyer. Mr Adamson said that he saw a number of boxes of material so assembled. He noticed that the boxes were there one day and not the next. Mr Adamson did not physically deliver the boxes but that task was undertaken by Mr Slijderink (T 58, lns 30-44; T 59, lns 1-23).

182. Mr Fulcher said that he recalled receiving around the time of the date of settlement quite a reasonable number of documents which, to the best of his recollection, were generally engineering documents relating to the works that had been undertaken on the site. The documents included Level 1 compaction reports, some engineering reports concerning acid sulphate studies and some sewerage and drainage studies. Mr Fulcher said that he had looked at the company's records and confirmed that Australand had a box containing information received at the time from the seller. The box contains what Mr Fulcher described as a "general suite of documents" principally relating to engineering items. Mr Fulcher does not recall ever having seen architectural plans showing the buildings that Aurora proposed to construct on the site nor any documents which would have enabled Australand to continue the construction of Aurora's proposed buildings on the site. Mr Fulcher said that Australand did not receive anything like that and such material would have been quite extensive and would have involved Australand in participating in negotiations with the authors of the architectural plans to make sure that Australand could use them (T 128, lns 11-45).

183. Mr Fulcher was asked this question (T 129, lns 1-4):

"MR O'DONNELL: Well, let me ask you a bit more about that. Let's assume, hypothetically, that Australand had wished to continue with Aurora's proposed residential development buildings for the site. What would Australand have needed to get from Aurora in order to achieve that?

MR FULCHER: We would have certainly had to receive quite detailed documentation that they had in relation to structural drawings, architectural drawings, hydraulics drawings -0 assuming that they'd all been done - but we would also [have] had to receive their consultancy agreements they had with the consultants that prepared those documents. We certainly would have required them because having the drawings themselves doesn't present significant use to you if you're restricted in actually using them. And we'd been involved in situations before where we've had - we've attempted to use other consultant's drawings and we've encountered some legal obstacles in relation to whether that consultant was paid for the work and therefore whether … they were still - it's still their copyright that we needed to utilise. So it would have involved a fair exercise."

(T 129, lns 4-15)

184. Mr Fulcher gave evidence that Australand did not receive material of the kind described in the above evidence. Mr Fulcher gave evidence that his examination of Australand's records revealed two boxes of documents although the second box seemed to contain other material unrelated to the site.

185. Mr Fulcher produced the boxes for inspection.

186. Mr Fulcher was taken in cross-examination to Exhibit A, 50 which is a letter from Bennett & Bennett to Australand setting out three options in relation to "a new development over the land". Option 1 involved amending the current approvals. The author of the letter observed that this could only occur on the basis that the new development is "generally in accordance with the existing approval". Option 2 involved making an application under the superseded planning scheme (ie. the old town plan) for the development Australand contemplated. That option was only available concerning applications submitted within two years of the adoption of the new town plan (ie. two years from 6 June 2003). The third option involved making an application under the new town planning scheme.

187. The author observed that having regard to the development Australand desired for the site, it was unlikely that an application generally in accordance with existing approvals could be supported due to the "significant changes to the concept" and the existing applications would "not logically fit with the new concept". The author observed that a new application under the new scheme would be the most desirable course from a Council perspective so that an approval might be obtained for a "new concept over the whole of the land" with the result that all the development issues could be considered "holistically rather than in a piecemeal basis".

188. Australand elected to pursue Option 3 which resulted in the various applications lodged by Australand with the Council already discussed.

189. The election on Australand's part to pursue Option 3 is said to have a relationship with the issue of the documents made available by the seller to the buyer. Mr Fulcher in cross-examination accepted that "the material or the documents and plans and consulting reports and things that were generally required by Australand in order to take over the site and carry out its own development were all to [Mr Fulcher's] knowledge set out in the terms of the contract. Counsel for Aurora put to Mr Fulcher that "anything that Australand needed to carry out its own business of property development in relation to these lands was catered for in the contract" [emphasis added], having regard to the definition of Development Material, the definition of Enterprise and clause 12 of the Special Conditions. Mr Fulcher in response gave evidence that "[T]he information that we required was given to us, correct, yes" (T 167, lns 35-44). Counsel for Australand then asked "Yes, and it [the information that Australand required] was all specifically required to be handed over under the contract, to your knowledge?" Mr Fulcher said "Yes". The following exchange also occurred:

"MR BICKFORD: Yes. And indeed, you're not suggesting that the contract wasn't complied with in that respect?

MR FULCHER: No … can I refer back to that definition of development material in the contract. … Our interpretation of point (c) [that is, the definition of 'Development Material' at Exhibit A, 49, p 1288 to which the witness was expressly taken and which is the definition of Development Material in the Aurora contract consistent with Exhibit A, 6 at p 89] was plans and engineering drawings in respect of the development of the site and obviously all the work that they were undertaking on the site.

MR BICKFORD: Yes, and the obligations under the contract may have been beyond what you actually needed in that you … and Australand were not really interested in the architectural drawings and plans that had been prepared by Aurora and related entities in relation to the particular type of property development that they were going to do. But nevertheless the contract seems to have required them to be produced.

MR FULCHER: I think my interpretation of that first bullet point ['Plans and engineering drawings in respect of the development of the Site' within the definition of 'Development Material'] wouldn't necessarily include all that material.

MR BICKFORD: All right … well, you don't believe that material was handed over.

MR FULCHER: As I said before, I don't believe it was, but I can't absolutely guarantee it."

The exchanges between the solicitors for the buyer and the solicitors for the sellers (including correspondence with Mr Adamson)

190. Mr Fulcher also gave evidence that he was the person ultimately responsible within Australand for approving (or not approving) "sign off" about whether Australand on behalf of the buyer would accept contended completion by the seller of the Special Condition 6, Annexure C, seller's works. Mr Fulcher ultimately gave the approval to Australand's solicitors to accept completion of the works (T 144, lns 26-30).

191. Accordingly, Mr Fulcher was taken to the sequence of exchanges between the solicitors as to completion particularly in relation to the question of whether the seller continued to undertake relevant works up to the date of settlement on 2 July 2004.

192. On 26 March 2004, Adamsons wrote to the buyer's lawyers (AAR) giving notice of the completion of the works as provided for in Special Condition 6 in each of the Aurora, Sickle and Atmeygor contracts.

193. On 21 April 2004, AAR responded to that letter and said that various documents had to be provided to the buyer as a condition of completion of the works and that the 60 day notice of settlement could not be given until completion "as provided in special condition 6" had occurred. AAR contended that completion could not occur for the purposes of the condition until the seller supplied all of the documents referred to in Special Condition 6.6 (see Part II).

194. AAR requested the seller to supply the documents referred to in Special Condition 6.6(a) to (f) and (h); Level 1 Test Certificates and all results; certification by a Supervising Engineer (RPEQ) of completed works (including earthworks, revetment walls, Pendraat Parade works, removal of surfaces and structures); all construction information in both hard and electronic formats including (but not limited to) finished surface levels (contours and spot levels), survey plan boundary details, datums, location of features, revetment walls (including cross sections) and levels concerning the bottom of the marina and lake, top batters; certification that wick drains had been sealed or removed including plans; certification from a geotechnical engineer that preload had been applied and the required results achieved (together with full details of testing); as-constructed detail (horizontal and vertical) of any feature or services left underground; RPEQ certification that preloading was sufficient for residential development with a maximum footprint pressure of 15kPa; a plan of areas not preloaded and not capable of supporting 15kPa load; copies of on-maintenance and plan sealing approvals; evidence of practical completion by the contractor; approval from Council that it accepted that the land has been filled to the required flood level; copies of all relevant consultant's professional indemnity insurance; and certification that all boardwalk supports had been removed.

195. On 3 May 2004, Adamsons wrote to AAR advising that the seller was giving and confirming the following notices under the Aurora, Sickle and Atmeygor contracts: Special Condition 5 of the Aurora contract had been satisfied; completion of the Special Condition 6 works under the Aurora contract had occurred and notice of completion had been given on 30 April 2004 together with all supporting documentation required by the condition; and, similar notices as to conditions 5 and 6 in relation to the Sickle and Atmeygor contracts. The letter observed that the balance deposit under the Aurora contract of $3.6m was due for payment on 14 May 2004 and in view of the notices concerning the three contracts, settlement of each contract was to occur on 2 July 2004.

196. On 14 May 2004, AAR wrote to Mr Michael Adamson who had by then taken up a position as in-house legal counsel for the Atkinson Gore group of companies. AAR again observed that to the extent that particular "things" had not been provided to the buyer, completion under Special Condition 6 could not occur and thus the 60 day notice calling for settlement could not be triggered. AAR observed that the buyer had been given a large amount of documentation from the sellers on 30 April 2003 and the buyer's consultants were reviewing the material. AAR observed that particular matters had to be addressed. The buyer, through AAR, reserved the right to raise further matters once the review of the 30 April 2003 documentation had been completed.

197. The matters to be addressed were these: the buyer required a copy of the canal excavation contract; confirmation was sought that Level 1 soil testing certificates related to work done on the whole of the site; information concerning levels, test certificates and engineers' certificates would need to be provided to Council so as to enable Council to conduct a final inspection to ensure that the works had been completed in accordance with the issued approvals; information in relation to professional indemnity insurance would need to be provided together with certificates of currency of professional indemnity; and the buyer sought confirmation that (point 6):

"… the levels of the land provided to [the buyer] are [taken] before topsoil. You would appreciate that the fill on the land should be at or about the local government nominated flood level (excluding topsoil)". A preliminary review of the site levels indicates that a number of areas are below the Council's flood level requirements. You will appreciate that, if that is confirmed, this will require urgent attention by [the seller]."

198. The AAR letter also observed that the engineering certificates already provided did not satisfy the requirement that a Geotechnical Engineer certify that pre-load/surcharge loads were sufficient for residential development with a maximum footprint pressure of 15kPa. The existing certificates contained a recommendation by Soil Surveys Engineering Pty Ltd ("Soil Surveys") that the site be assessed for any future development proposal. Finally, AAR observed that all certifications had to be provided on terms "in favour of and allowing for enforcement by the buyer".

199. The buyer, through AAR, required all of these matters to be properly addressed.

200. Mr Fulcher gave evidence that the large amount of documentation referred to in the AAR letter dated 14 May 2004 concerned engineering certificates and detailed drawings regarding the finished levels of earthworks and "various information like that" (T 150, lns 42-44). Mr Fulcher also gave evidence that most of the matters referred to in the AAR letter of 14 May 2004 were the subject of instructions from him including item 6, concerning the topsoil issue.

201. On 14 May 2004, AAR wrote to Adamsons (who continued to act in the sale and purchase transaction) attaching a cheque representing balance deposit monies. The letter observed that the buyer was currently reviewing the documents and information provided by the seller in relation to the works. The letter observes: "To remove doubt, the payment of the $3.6 million [balance deposit] does not waive our clients' rights to raise any matters relating to Completion of the Works or the giving of the 60 day settlement notice".

202. On 15 May 2004, Mr Adamson (as in-house counsel Atkinson Gore Group) wrote to AAR responding to the letter of 14 May 2004 setting out particular requirements. Mr Adamson responded to each of the matters raised by AAR and as to item 6 concerning the topsoil issue, Mr Adamson said this:

"The levels of the land provided include topsoil (as contemplated by the terms of the respective sales contracts). We confirm that the land has been filled at or above the local government nominated flood level (including topsoil not in excess of 200 mm) in general accordance with the Council drawing titled "Flood Data Hope Island" attached to respective sales contracts. The terms of the contracts do not specify that the fill on the land excludes topsoil - rather the contract specifies that the topsoil shall not exceed 200mm at or above flood level - this has been achieved in accordance with the respective sales contracts. We also note that no nomination has been given to us to stockpile any topsoil."

203. On 18 May 2004, AAR sent a facsimile to Mr Adamson addressing eight matters. AAR requested the seller to arrange for confirmation to be given by H & M Testing Pty Ltd ("H&M Testing") of particular matters; sellers were to pursue the consulting engineers to ensure they provided the required certificates to the Council; and, the issue of the certificates of currency was further addressed. At items 6 and 7 of the facsimile AAR said this:

"6. This is of major concern to our client. It is quite clear from the contracts that the sellers are required to carry out the works in accordance with all necessary Approvals. It is also clear that Council, when determining whether fill has reached the required minimum flood level, does not take into account top soil. Given the terms of clause 6, the Sellers Works can only be read in light of that. To suggest that the sellers can include topsoil in determining whether nominated flood levels have been achieved, when that is not an acceptable practice to Council, has no basis. Our clients require the sellers to comply with the contracts and the Approvals issued.

7. There is no basis for maintaining that the certificates have been issued in accordance with the requirements. It is clear they have not. Please show us where the certificates state preload/surcharge loads are sufficient for residential development with a maximum footprint pressure of 15kPa (typical 2 storey)."

204. The position adopted in the letter was an accurate reflection of Mr Fulcher's instructions (T 152, lns 41-42).

205. On 20 May 2004, Mr Adamson responded to the AAR letter of 18 May 2004. The letter observes that a copy of the canal excavation contract had been sent by Mr Slijderink to Mr Lawrence the previous day; documents relating to H & M Testing and the currency of professional liability insurance were enclosed; and a copy of a letter received by the sellers consulting engineer from the Council confirming a performance bond was no longer required in respect of lands subject to the Aurora contract was enclosed. As to item 6, Mr Adamson said: "Works under the respective Sale Contracts have been carried out (and completed) in accordance with all Approvals".

206. On 28 May 2004, AAR sent a letter to Mr Adamson (and, it seems, copied the letter to Big State). The letter refers to a meeting on 26 May 2004 in relation to the issues raised by AAR. At item 3 of the letter of 28 May 2004, AAR said this:

"We note the parties have a different interpretation of Annexure 'C' in relation to the required levels of structural fill. To resolve those differences it is agreed that despite any other provisions of the five contracts of sale:

(a) any further fill of the Land (ie in respect of all further Works to be done under each of the Contracts) are to be carried out so that structural fill is placed to a level no less than the [Council] nominated flood level for Q100 floods (for residential development);

(b) the required amounts of topsoil and grass seeding specified in Annexure 'C' of the Contract is to be placed above the level referred to in paragraph (a);

(c) the Seller shall leave, at a specified location on the site being purchased by Australand, 20,000.00 m³ of fill on the date of settlement of the initial three contracts. The fill will be of a standard suitable for structural fill and of a quality no less than the structural fill which the Sellers have already arranged to be placed on the site. We will give you a plan next week to indicate the location of the fill;

(d) [Big State] will sell and our clients will purchase 50,000 m³ of fill ('Fill') on the following basis:

• the Fill is to be of a standard suitable for structural fill and of a quality no less than the structural fill which the Sellers have already arranged to be placed on the Site;

• the Fill will be placed at a specified location on or before 1 November 2004 and may be used by our clients at any time after that date. Similarly, we will provide a plan next week to identify the location;

• our clients will pay [Big State] a purchase price of $150,000.00 plus GST for the Fill on 1 November 2004 in exchange for a valid tax invoice from [Big State];

(e) …"

207. Mr Fulcher gave evidence that the reference to leaving 20,000 m³ at a specified location on the site being purchased by Australand included the land acquired under the Aurora contract.

208. On 31 May 2004, Mr Adamson wrote to AAR enclosing a fresh certificate obtained from H&M Testing certifying that Level 1 reports prepared by that company were specific to the lands being acquired by Australand, together with an accompanying plan the original of which was to be sent by post.

209. On 3 June 2004, Mr Adamson wrote to AAR enclosing fresh certificates from Soil Surveys and Knobel. Copies of the certificates form part of Exhibit A at pp 1014 to 1031. On 4 June 2004, Mr Adamson wrote to AAR enclosing a revised certification from Soil Surveys and on 9 June 2004, Mr Adamson wrote to AAR enclosing fresh certificates from Soil Surveys, Knobel and Bennett & Bennett.

210. On 16 June 2004, AAR wrote to Mr Adamson enclosing a "Deed of Variation of Contract".

211. On 18 June 2004, AAR wrote to Mr Adamson with a copy to Big State. The letter refers to the meeting of 26 May 2004 and the issues raised by Mr Adamson in his letter of 20 May 2004. At point 3, AAR note that the parties have a different interpretation of Annexure C in relation to the required levels of structural fill and the letter notes that in order to resolve those differences, the parties have agreed to the matters recited at (a) to (e). Those matters are the same matters contained in the AAR letter of 28 May 2004 recited above (at [206]) with the exception that at item 3(a) the following words are added at the end of (a): "in general accordance with (and at levels not less than those indicated on) the Flood Data - Hope Island plan attached to the contracts;". At item 7 of the letter, AAR confirms that the buyer is satisfied with the certificates issued by Soil Surveys, Knobel and Bennett & Bennett. The terms of item 3 of the letter were accepted by Big State by Mr Craig Gore signing page 4 of the AAR letter (Exhibit A, pp 1075-1077) as the Managing Director of Big State. The letter was signed by Mr Michael Adamson on behalf of the sellers and is signed by Mr Tony Davies of AAR on behalf of the buyer.

212. On 22 June 2004, Mr Adamson wrote to Mr Davies at AAR enclosing a copy of the signed letter of 18 June 2004.

213. Mr Fulcher accepted that the controversy as to the different interpretation of Annexure C in relation to required levels of structural fill was resolved on 22 June 2004 by the sending by Mr Adamson of the signed copy of the AAR letter of 18 June 2004.

214. The further fill of 20,000m³ to be provided under the terms of settlement was provided on the day of settlement.

Mr Fulcher's understanding of the context in which the special conditions of the contract were adopted

215. Mr Fulcher gave evidence, as already mentioned, that he was responsible for how the contracts were "put together" (at [156]) and that he saw the contracts in final form before execution by Australand's Managing Director, Mr Crotty, and the Company Secretary, Mr Mackey. Mr Fulcher said that he read the final form of the contract; it truly reflected the agreement; it was the entire agreement; there were no other agreements apart from the variation (not relevant here) earlier mentioned; the document reached its final form after many discussions within Australand, with AAR and with others; and, Australand would not have executed the contract if it did not reflect the agreement the parties had reached.

216. As to the seller's works (Special Condition 6.1(a)), Mr Fulcher agreed that in his primary affidavit evidence he was simply expressing a summary of the obligations contained in Special Condition 6 of the contract. Similarly, Mr Fulcher accepted that para 17 of his affidavit was a summary of what constituted the seller's works [that is, the Annexure C seller's works]. Mr Fulcher accepted that those works or works of the same nature continued after the contract was entered into (T 164, lns 1-25).

217. Mr Fulcher was taken to Special Conditions 6.1(b), (c), (d), (e), (f), (g) and (h). Mr Fulcher seemed to accept that each of these obligations continued up to the date of settlement. Similarly, Mr Fulcher accepted that the obligations contained in 6.1(i) continued up to the date of settlement. Mr Fulcher accepted that there was more to Special Condition 6.1 than just the physical work. The physical work had to be done "in a manner that was - we were happy with" (T 165, lns 33-36). Mr Fulcher accepted that a lot of the obligations were "ongoing obligations" (T 165, ln 40), although Mr Fulcher qualified the response by observing that the obligation in relation to earthworks concerned "the works" and "[I]f the works were finished prior to settlement, then the obligation stops then". Mr Fulcher accepted that the seller's obligation to be responsible for the care of the works and procure reinstatement [6.1(j)] was an ongoing obligation up to the date of settlement.

218. Mr Fulcher was taken to Special Condition 6.5. Mr Fulcher accepted that some of the items within 6.5 referred to obligations continuing up to settlement although the obligation at 6.5(c) would not have continued to apply once the works were complete. As to Special Condition 6.8 in relation to defective works and the defects liability period, Mr Fulcher explained that in relation to work that involves a handover to Council, a defects liability obligation arises and Australand wanted to be protected from any exposure to Council under that provision. That obligation would continue until the end of a period of six months from the date of completion.

219. As to Special Condition 12, Mr Fulcher accepted that the obligations under that clause were obligations to be discharged at the date of settlement.

Part IV

The findings of fact and conclusions

220. I find as facts those matters set out at [59] to [92].

221. Consistent with the findings at [220] I find that Aurora's development of its land began as a multi-faceted residential and care facility described as a retirement community development; changed in emphasis by removing the description "retirement community" as part of the approval and became characterised by a proposed use as a comprehensive residential development and care facility including a nursing hostel for a maximum of 232 beds; further changed in emphasis and became characterised as the Aurora Adult Community development removing any reference to a nursing hostel and replacing that component with a six-storey apartment building; and the development ultimately became a development directed to a wider market of mature-aged adults and adults without children, with an intention to link and extend that development to other landholdings, notably, Atmeygor's land and AGG's land as described in the document quoted at [89].

222. I find as facts those matters set out at [93] to [100] and I accept the evidence of Mr Adamson concerning those matters.

223. I find that Plan C is a diagrammatic representation of the structures, cross-referenced to the legend contained on that plan and described in these reasons, comprising the Aurora Adult Community development subject to the final location of the alignment of the canal and the consequential adjustment to the location of those structures upon the determination of the final alignment of the canal. I find as facts, those matters set out at [101] to [103].

224. As to the works undertaken to 2 May 2003 on the Aurora lands, I find that the works described by Mr Claxton in his memorandum dated 2 May 2003 under the heading "Aurora development site … Works to date" were the works undertaken to that date on those lands. I also find that the works to be completed on the Aurora lands from 2 May 2003 were those works described by Mr Claxton in his memorandum under the heading "Works to be completed". I also find that Mr Claxton's description concerning the progress made to the date of the memorandum concerning works on Lots 1, 2 and 3 on RP908283 (being Atmeygor's land) and the future works required to complete the bulk earthworks program for those sites were the works done and the works to be done respectively.

225. I find as facts those matters set out at [107] to [109]. I accept the evidence of Mr Atkinson in that regard and I accept Mr Atkinson's evidence at paras 47 and 48 of his affidavit at [110]. I broadly accept Mr Atkinson's evidence at paras 49 and 50 of his affidavit at [110] subject to the qualification that the evidence establishes that the bulk earthworks were, in the main, earthworks consistent with the existing approvals and the removal work was not. I accept Mr Atkinson's evidence discussed at [111] and find as facts those matters of fact described at [111]. So too, I find as facts those matters at [112], [113], [114] and [115] and I accept Mr Atkinson's evidence in that regard.

226. I find that in or about the middle of 2003 and no later than the end of July 2003, Mr Gore and Mr Atkinson decided that Aurora would withdraw from the Aurora Adult Community development project. Those companies that might have been engaged in an extension of or linking of that development to their lands, namely, Atmeygor, Sickle and AGG, also withdrew from the development project. They all withdrew in the sense that none of them proposed to continue with the project. Aurora cancelled all of the many sales contracts but for two contracts and negotiated termination arrangements in respect of those two contracts. Aurora ceased all construction works. It removed existing construction works and all services to the apartment and house sites. All boardwalk supports were removed. Marketing ceased. I find as facts those matters set out at [119], [125], [126], [129], [130] and [132].

227. I find that Australand required the construction works and infrastructure services to apartment and house sites to be removed. I find that the removal steps so required were not otherwise occurring and the removal of construction work and services was required as an aspect of Australand's acquisition under the contracts of 2 October 2003. I find that the sales contracts were cancelled either at Australand's request or because Australand made it plain that it did not want them and had no use for them. Mr Gore accepted that Australand required existing construction, building slabs, construction materials and infrastructure services within the site removed [133] and I so find. I do not accept Mr Gore's evidence that this removal work was occurring in any event.

228. I find as facts those matters described at [155]-[165] and [172]-[177].

229. I find that as a result of the discussions between Mr Fulcher and Mr Lawrence for Australand and Mr Gore, Mr Atkinson and Mr Adamson for the sellers, the sellers agreed to undertake the earthworks that became recited in Annexure C for the purposes of Special Condition 6.1 of the contract of 2 October 2003 between the date of contract and the time for completion of those works as determined by the contract.

230. The contract of 2 October 2003 recites at Special Condition 4.4(a) that the seller and the buyer acknowledge and agree that the contract effects the sale of an enterprise defined by Special Condition 4.2, as the supply of a going concern which is GST-free. The enterprise so supplied is defined to mean the enterprise of the development of the [Aurora] land and the assets of that enterprise including the Aurora land, the Development Material and all other items, books, plans, approvals and all ancillary materials. The Development Material means all documentation prepared or compiled by or on behalf of the seller or obtained by it in relation to the development of Aurora's land and the land of Sickle and Atmeygor (as to Lot 3 so far as the Aurora contract is concerned) including, without any general limitation, the plans and engineering drawings relating to the development of those lands; any reports, files, materials or computer disks containing copies of such plans or documents; and any rights enjoyed by Aurora under existing contracts in relation to the Aurora land.

231. By Special Condition 4.4(b) the seller acknowledges and warrants two things. First, that it is currently carrying on the Enterprise of the development of the Aurora land including the assets of that Enterprise and, by reference to the Development Material, doing so having regard to all documentation in relation to the development of the "Site" as defined. Secondly, that it will continue to carry on that Enterprise until the day of supply.

232. It follows that an objective reading of Special Conditions 4.4(a) and (b), the definition in 4.2 of "Enterprise", and the definitions of "Site" and "Development Material" in 1.1(i) and 1.1(c) respectively, suggests that the seller is engaged in an enterprise characterised by the bundle of activities necessitated by all of the documentation (both generally and by reference to the inclusive documents mentioned in the definition of Development Material) prepared, compiled or commissioned by the seller in relation to the development of the site.

233. Yet, the evidence makes it plain that the enterprise at the date of the contract did not, and could not, have comprised the development of the land in accordance with all such documentation, including all architectural drawings and plans and all engineering drawings, because Aurora and each of the other sellers had withdrawn from a development characterised by that documentation and had thus withdrawn from that enterprise by the end of July 2003.

234. The enterprise so characterised was simply no longer happening for the reasons mentioned in the summary of the evidence at [226].

235. That is not to say that the arrangements recited in the contract are a sham. They are not. However, the terms of the contract must be given meaning, or a construction, that recognises that the seller was not, at the date of the contract, carrying on an enterprise characterised by all the documentation related to the site but had abandoned that project in favour of an en globo sale upon particular terms.

236. Australand wanted to retain some of the features that undoubtedly would have characterised the Aurora development had it not been abandoned. Those features were the lakes, the marina and the canal. Bulk earthworks were required to enable those features to be developed or completed and in that sense the seller continued those works (including pre-loading and filling the land).

237. However, Australand proposed to develop a residential development according to its own designs, plans and subdivisional approvals. It had no need of or use for the Cornucopia architectural plans and drawings. All of the contracts were either cancelled or terminated by agreement because none of the structures would be built. There was therefore no point assigning the contracts to the buyer. Since the structures were not to be built, all the construction works and services had to be removed. Since the Australand plans would be different with different structures, all boardwalk supports had to be removed.

238. The bulk earthworks were those works described by Mr Cameron in his evidence. I find as facts those matters described at [135], [137] to [141], [143], [144] and [148] to [154].

239. The contract in other respects reflects and gives effect to the changed arrangements. By Special Condition 6.1 the seller agreed to cause the Annexure C works to be done by a suitably qualified contractor to achieve completion within 20 months of 2 October 2003. The Annexure C works consist of the bulk earthworks set out at (ii) to (vii) of Annexure C. The site works had to be undertaken in accordance with design drawings for those works and meet the Knobel specifications (xi). Aurora was to provide certification from a geotechnical engineer that preloading and surcharge levels would enable a residential development with a maximum footprint pressure of 15kPa (with the exception of certain areas) (xii). Plans of the areas of the wick drains were to be provided to the buyer before settlement (xiii). The Pendraat Parade works had to be completed in accordance with Knobel Drawing No. 57.

240. Items (i), (viii), (ix) and (x) of Annexure C give effect to the arrangements for the removal of construction work and infrastructure services to the apartment sites and house sites.

241. The proper construction of the contract having regard to its text, the surrounding circumstances known to the parties and the purpose and object of the transaction is that it does not effect a sale of an enterprise consisting of a development characterised by all of the documentation that had characterised the Aurora enterprise until the directors elected to withdraw from it at the end of July 2003. Rather, the Aurora contract provides for the sale of the land coupled with an obligation on the part of the seller to undertake bulk earthworks to a design, standard and engineering specification as described, and an obligation to demolish and remove structures, construction works and infrastructure services as described. Settlement of the contract under Special Condition 11.1(a) was dependent upon a notice that the condition 6 works had been completed. Special Condition 17 made the Aurora contract conditional on the contemporaneous completion of the contracts for the sale of the "Adjoining Land".

242. I find that the continuation of bulk earthworks was not the expression of the continuation of the Aurora Adult Community development project. The earthworks represent works that Australand required to be done in order to enable it to undertake its proposed residential development project according to its own concept and its proposed reconfiguration of the aggregated site in accordance with its various planning proposals and particularly the election pursuant to Option 3 as described at [186], [176] and [177]. From the date of the contract on 2 October 2003 to the date of completion of the works, the activities conducted on the site by Aurora on its lands and by Atmeygor, Sickle and AGG on their land as described by Mr Cameron were the physical activities the sellers undertook on the lands having regard to the content of Annexure C as part of the sale obligations. The content of that work varied according to the lands and the matters referred to by Mr Cameron in evidence.

243. Special Condition 12 of the contract provides for an assignment, effective at settlement, of the seller's right, title and interest in and to the Development Material and on settlement the seller shall deliver to the buyer the originals of the Development Material and all files, plans, notes and papers relating to the Development Material. Special Condition 12 must also be construed to take account of the surrounding circumstances known to the parties at 2 October 2003 and the purpose and object of the sale and purchase transaction. By the end of July, the Development Project based on the Cornucopia drawings or any other plans and drawings for the construction of the staged structures had been abandoned. Australand was not interested in those project plans. Special Condition 12 is to be construed as an obligation assumed by the seller to deliver at settlement all of the engineering, geotechnical and hydraulic plans and drawings (and any other technical drawings) related to the completion of the Annexure C works, and no more. That was the material required by Australand as the basis for determining its satisfaction with the completion of the works so as to enable it to pursue its development with a maximum footprint pressure of 15kPa. I find that Aurora (and the other sellers) delivered that documentation to the buyer on or before settlement of the contracts.

244. I find as facts those matters described at [180] to [189].

245. Aurora however contends that it continued to "develop the [Aurora] Land" by undertaking earthworks that were required by the existing approvals thus engaging the definition of "Development Material".

246. Secondly, Aurora contends that it is entirely uncontroversial that a property development might change in emphasis, content or direction according to changes in market circumstances. Changes had occurred from February 2000 to December 2002 and further changes to the development occurred when Aurora and the related companies elected to abandon the Aurora Adult Community development and prepare the lands for an en globo sale. That decision involved, it is said, a continuation of the development of the land by reference to engineering and geotechnical drawings and relevant approvals and permits and resulted in Aurora undertaking the collection of activities constituted by the physical work on the site coupled with other obligations in the contract.

247. Those obligations are said to include the obligations at 6.3 (the transfer of property in all documentation in relation to the Annexure C works); 6.5 (the obligation to keep the property safe, secure, tidy and fenced and protect the works); 6.6 (the provision of drawings of the Annexure C works "as constructed" to the buyer); 6.7 (to keep the land free from contamination); 6.8 (remedying defective works); 6.12 (indemnity against all claims arising out of the carrying out of the works); and Special Condition 12 (which provides for an assignment to the buyer of Aurora's full right, title and interest in and to the Development Material).

248. Thirdly, Aurora contends that it had been undertaking a residential development on its lands (relevantly related to an extension of the development to the lands of Atmeygor, Sickle and AGG) according to a particular staged development and Australand, at the date of contract, proposed to also undertake a residential development, although different in design, layout and emphasis. Australand sought and obtained, it is said, from Aurora all that was necessary to enable it to pursue and carry on its chosen method of residential development.

249. Fourthly, Aurora contends that the critical matter as conceded by Mr Fulcher (at [178]) is that the object of the exercise in undertaking property development is to achieve the highest and best use of the site so as to maximise the profit to the developer and although a site might be acquired with the intention of undertaking one form of development, the ultimate development might take a quite different form in response to emerging market circumstances.

250. Aurora says that so it is in this case.

251. Aurora says that the highest and best use of the land (and the lands of the related companies) was an en globo sale of the lands coupled with the suite of obligations in the contract assumed by the seller to complete the bulk earthworks, remove the construction works and internal infrastructure services to those sites, perform the other Special Condition 6 and Special Condition 12 obligations and thus effect a sale of the adapted enterprise by the contract, giving rise to an agreed supply of a going concern of the adapted enterprise.

252. There is no doubt that Aurora (and presumably each related company) was engaged in the business of property development as broadly described at [60]. So much is agreed. Aurora had acquired the 19 partially completed Portofino townhouses and had completed and sold them to raise revenue. Aurora was conducting a property development project in a staged way to develop Aurora's land according to a particular Community Title Scheme and had sold many interests in the Scheme land and structures to end users.

253. The reference to the object of undertaking property development so as to achieve the highest and best use of the land or so as to maximise the profit to the developer provides an underlying business rationale or incentive for a company to undertake a particular project. However, the content of the particular enterprise or project cannot be reduced or abstracted to doing whatever achieves the objective or satisfies the incentive. Section 38-325(2) (at [32]) can only operate in circumstances where an "enterprise" has been identified comprised of particular activities (or a particular activity). An enterprise has content not just an objective. Once the content of the enterprise is isolated, a supply of a going concern arises if an arrangement is shown to subsist under which Aurora supplies to Australand all of the things that are necessary for the continued operation of that enterprise as forensically isolated and Aurora carries on or will carry on that enterprise until the day of the supply.

254. Until the content of the enterprise is isolated, it is not possible to say whether all of the things necessary for its continued operation have been supplied. Section 38-325(2)(a) calls for the identification of an enterprise the subject of the supply and s 38-325(b) calls for the supplier to carry on that enterprise until the day of the supply. The integers of the section are not satisfied by demonstrating that the recipient has selected or been supplied with only those things the recipient regards as necessary to enable it to undertake its enterprise. Although Australand also proposed to conduct a residential property development project on Aurora's land, it was a fundamentally different residential development that did not require any access to or use of the architectural plans for the structures the subject of the sales to the end users or access to the drawings for the structures to be built over the life of the many stages of the project (see [95]).

255. Section 38-325(2) also contemplates, as the contract does, a day described as "the day of the supply" and a supplier carrying on the enterprise until that day from an earlier day. By Special Condition 4.4(b) Aurora acknowledges and warrants that it is currently carrying on the enterprise and will continue to carry it on until the day of supply. Upon signing the contract the seller assumed obligations to be performed or satisfied (Special Conditions 5 and 6, for example) upon which either the contract or settlement of the contract was conditioned (Special Conditions 11, 17). Settlement was to occur 60 days from the date the seller gave notice of the satisfaction or occurrence of the five nominated matters or, alternatively, at a date earlier than 60 days upon the nomination of the buyer after receipt of the seller's notice. Plainly enough, under the contract, settlement was treated by the parties as the day of supply by which time the seller's works would have been completed; indefeasible title obtained; and, other seller's obligations discharged. That treatment of a contract date and a later supply date is entirely consistent with the language of s 38-325(2) which contemplates "an arrangement" under which a supply date occurs (by which time all things necessary for the continued operation of the enterprise had been supplied) and, that until the supply date, the supplier continues to carry on the enterprise.

256. On that day, supply to the recipient occurs.

257. The relevant arrangement is that which is described at [241], [242] and [243].

258. Accordingly, the day of the supply for the purposes of s 38-325(2) was 2 July 2004. The decision of the Full Court in
Brady King Pty Ltd v Federal Commissioner of Taxation 2008 ATC ¶20-034; [2008] FCAFC 118; (2008) 168 FCR 558 in relation to the proper construction to be adopted concerning s 75-10 of the GST Act does not assist in the determination of the construction of s 38-325(2).

259. Section 38-325 also recognises that a supplier might carry on an enterprise, described as a "larger enterprise" (s 38-325(b)) within which the enterprise contemplated by s 38-325(a) and (b) forms a part. An example in the context of property development would be the conduct of the business of property development by a company by reference to the criteria agreed at [60] within which a portfolio of projects (or one or more projects) are undertaken by which a specific development project on particular land adapted to the features of that land; its permitted use; approvals obtained; and the relevant architectural plans, drawings and engineering plans, is undertaken.

260. A supply of the project enterprise within the business enterprise to a recipient together with an assignment of all contracts with end buyers off-the-plan, an assignment of the drawings and plans, the supply of all things necessary to continue the project enterprise and the carrying on by the supplier of the project enterprise until settlement or the day of supply, would be likely to satisfy the notion of a supply of a going concern. If so, the supply of the project enterprise would be GST-free without the necessity of showing a supply of the larger business enterprise as a going concern. If the project enterprise is supplied in circumstances where the integers of s 38-325(2) are not satisfied thus depriving the supply of the project enterprise of GST-free status, the supply (falling within the larger business enterprise of the company), would be a taxable supply under s 9-5 of the GST Act.

261. By the date of the contract Aurora was no longer engaged in the development of the land according to the "Development Material" as defined. It was engaged in an en globo sale of the land as part of its general business undertaking and it assumed a contractual obligation to undertake the Annexure C works required to be done by Australand. It accepted an obligation to undertake those things required by Special Condition 6 more broadly and provide the buyer with those rights contemplated by Special Condition 12. Aurora entered into the en globo sale of the land and assumed the obligations of the Special Conditions as an incident of that sale. The disposal of the lands fell within the business undertaking of Aurora.

262. It was a supply for the purposes of s 9-10 of the GST Act and a taxable supply for the purposes of s 9-5 of the GST Act.

263. Because Aurora had withdrawn from the project in favour of an aggregated sale of the land on terms that it would take the steps and do the things Australand required (in order that Aurora might secure the sale to Australand) those works and the other obligations are not properly regarded as an adaptation of the continuing project enterprise under the reductionist rubric of the "highest and best use of the land" or "maximising the profit to the developer". The sale of the land and the assumption of works and obligations as an incident of the sale represents the continuing withdrawal from the development of the land according to the Development Material and is simply the final form of Aurora's expression of its decision to withdraw from the staged project enterprise and sell the land.

264. Section 9-20 of the GST Act provides (among other things) that an "enterprise" is an activity or series of activities done: (a) in the form of a business; or (b) in the form of an adventure or concern in the nature of trade; or (c) on a regular or continuous basis in the form of a lease, licence or other grant of an interest in property.

265. Aurora was in the business of property development. It had embarked upon a particular project, within that business activity, of development of the Aurora land according to the bundle of project activities characterising the "Aurora Adult Community" by reference to all of the documentation embodying the content of that development later defined in the contract as the "Development Material".

266. That project was abandoned and in its place Aurora decided to sell the land. To sell the land it agreed (and became contractually bound) to undertake particular works (physical activities) and assume some non-physical obligations. It is true that those works and obligations are or involve a "series of activities" but they do not constitute activities that mutate into an independent enterprise of conducting "earthworks" as the Commissioner contends. They are activities undertaken as essential elements of the sale of the land once the project enterprise came to an end and the seller elected to make an out and out disposition of its lands.

267. The final question of fact is this.

268. Aurora gave notice to the buyer on 30 April 2004 of the completion of the Special Condition 6 works. Mr Cameron accepted, as the contractor doing the works, that those works were complete, apart from maintenance works, when Aurora gave the buyer the notice of completion. It is true however, that the buyer did not accept that the seller was entitled to give a notice under Special Condition 11 of the contract for all the reasons mentioned in the correspondence from AAR. Those matters were finally resolved on 22 June 2004 and aspects of the settlement were performed on 2 July 2004 (that is, the provision of the agreed topsoil). If, as the Commissioner contends (which I do not accept) that Aurora was engaged in a new "enterprise" of undertaking "bulk earthworks", elements of the final resolution of the issues as to completion continued up to 2 July 2004.

269. In any event, quite apart from whether the physical works were completed or not, the non-physical broader governance obligations set out in the contract over and in relation to the land continued up until settlement and completion of the transaction with the transfer of possession, control and title to the buyer. Aurora retained responsibility for the land until then. I find as facts those matters set out at [190] to [214].

270. I find that the supply by Aurora to the buyer was not a GST-free supply.

271. The respondent at para 52 of the submissions of 22 September 2009 accepts that should the Court find that the going concern exemption does not apply, the applicant may rely on the Margin Scheme provisions of the GST Act. The Commissioner contends that prior to the institution of this appeal, Aurora had produced no approved valuation of the land within the terms of s 75-10 of the GST Act. The Commissioner accepts that should Aurora now seek to apply the Margin Scheme, the matter should be remitted for further consideration in accordance with the reasons of the Court in the determination of these proceedings.

272. The matter will be so remitted.

Part V

Penalty considerations

273. The resolution of the questions in controversy in relation to Aurora's challenge to the Commissioner's decision concerning the objection to the imposition of an administrative penalty is the subject of separate proceedings (QUD252 of 2008). Further directions orders have been made in that proceeding requesting the parties to submit further submissions on a question which was not argued by the parties. The directions orders in that proceeding are to be made at the same date as publication of the orders in this proceeding (QUD251 of 2008) together with reasons for judgment in support of those orders.

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