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NEW SOUTH WALES SUPREME COURT - EQUITY DIVISION

Walter Construction Group Ltd v Walker Corporation Ltd and Ors

Hunter J

20 April 2001 - Sydney

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Hunter J   473  By a further amendment to the summons, CCG sought an additional form of relief, namely:

   

A declaration that the First Defendant is liable to indemnify the Plaintiff in respect of the Goods and Services Tax, if any, which may be payable by the Plaintiff on any amount paid to it by the First Defendant pursuant to the orders of the Court herein.

  474  The relief relates to the provisions of the legislation referred to as A New Tax System (Goods and Services Tax) Act 1999 (Cth) (the GST Act) which took effect from 1 July 2000. The tax (GST) is payable on a "supply" within the meaning of s 9.10(2) of the GST Act which includes the following:

   

 (2)  Without limiting subsection (1), supply includes any of these:

 (a)  a supply of goods;

 (b)  a supply of services;

 (c)  a supply of advice or information;

 (d)  a grant, assignment or surrender of real property;

 (e)  a creation, grant, transfer, assignment or surrender of any right;

 (f)  a financial supply;

 (g)  an entry into, or release from, an obligation:

 (i)  to do anything; or

 (ii)  to refrain from any act; or

 (ii)  to tolerate an act or situation;

 (h)  any combination of any 2 or more of the matters referred to in paragraphs (a) to (g).

  475  CCG bases its claim for this relief on the "real possibility" that GST will be payable upon a judgment of the court delivered after 1 July 2000. For this contention, reliance has been placed upon the affidavit of Alison Chappell sworn 22 August 2000 in which she deposes to the expectation that a draft and final ruling on this matter will be published by the Australian Taxation Office (ATO) and evidences some views expressed within the ATO on the subject. The test of there being a "real possibility" of the imposition of the GST comes from the approach of the South Australian Supreme Court in Duke Group Ltd (In Liq) v Pilmer (1999) 73 SASR 64.

  476  I am not prepared to approach consideration of the relief sought on that basis. The court is seized of the relevant facts. I regard the task as one requiring me to decide whether GST is payable in respect of the judgment given in these proceedings.

  477  In my view, it is not.

  478  Section 9-5 of the GST Act defines a taxable supply as follows:

   

You make a taxable supply if:

 (a)  you make the supply for consideration ; and

 (b)  the supply is made in the course or furtherance of an enterprise that you carry on; and

 (c)  the supply is connected with Australia ; and

 (d)  you are registered, or required to be registered

However, the supply is not a taxable supply to the extent that it is GST-free or input taxed .

  479  In my view, the imposition by the court upon WCL to pay the judgment debt as ordered in these proceedings does not constitute a supply by CCG in the form of a supply of goods or services, of advice or information, of a grant, assignment, surrender or release of any kind, nor is it a financial supply.

  480  Further, in order to make the supply a "taxable supply", it must be one which "you make … for consideration". I have been unable to see any room for "consideration" in the supply said to be, or arise out of, the judgment in these proceedings.

  481  To the extent that there has been a merger in the judgment of CCG's causes of action relating to the project, that does not involve any release grant, assignment, surrender, transfer or creation of a right by CCG. It is a merger by operation of law. Payment of the judgment debt is in no different category. It operates to satisfy the court's judgment, without creation of a right, release, assignment or the like by CCG.

  482  For those reasons, I decline to make the declaration sought.

  484  Since the hearing of these proceedings, a draft ruling has issued from the ATO relating to the possible application of GST to judgments. I have not had regard to that ruling, nor have the parties applied to address me further on the issue as a consequence of that publication.