Revlon Manufacturing Ltd v Commissioner of Taxation [1997] FCA 28 (6 February 1997)

CATCHWORDS

TAXATION AND REVENUE - sales tax - cosmetics used as testers, samples and other selling aids to promote merchandise - whether goods were applied by the taxpayer for its own use.

CONTRACTS - construction and interpretation of contracts - uncertainty - abandonment - whether condition was void for uncertainty - whether contract reflected the parties' common intention.

Sales Tax Assessment Act 1992 (No 1) 1930: s. 17

Sales Tax Assessment Act (No 4) 1930: s. 3

Sales Tax Assessment Act (No 6) 1930: s. 3

Sales Tax Assessment Act

Con-Stan Industries of Australia Pty Limited v Norwich Winterthur Insurance (Australia) Limited [1986] HCA 14; (1986) 160 CLR 226

Commonwealth v Verwayen (1990) 170 CLR 394

David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48; (1992) 175 CLR 353

Deputy Federal Commissioner of Taxation (SA) v Ellis & Clark Ltd [1934] HCA 54; (1934) 52 CLR 85

Deputy Federal Commissioner of Taxation v Taubmans (NSW) Pty Ltd [1966] HCA 18; (1966) 115 CLR 570

Davies Coop & Co Limited v Commissioner of Taxation [1948] HCA 50; (1948) 77 CLR 299

FAI Traders Insurance Co Ltd v Savoy Plaza Pty Ltd (1993) Aust Contract Reports 90-025

Genex Corporation Pty Limited v Commonwealth of Australia (1991) 30 FCR at 196-201

Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Limited (1990) 20 NSWLR 310

Hillas & Co Limited v Arcos Limited [1932] UKHL 2; (1932) 147 LT 503

Marac Finance Ltd v Virtue [1981] 1 NZLR 586

Max Factor & Co Inc v Commonwealth of Australia [1971] HCA 36; (1971) 124 CLR 353

Milnes v Gery [1807] EngR 448; (1807) 14 Ves Jun 400; 33 ER 574

Revlon Manufacturing Limited v Federal Commissioner of Taxation (1995) 134 ALR 23

Scammell & Nephew Limited v Ouston [1941] AC 251

Spunwill Pty Limited v BAB Pty Limited (1994) 36 NSWLR 290

The Council of the Upper Hunter County District v Australian Chilling and Freezing Co Limited [1968] HCA 8; (1968) 118 CLR 429Waltons Stores (Interstate) Ltd v Naher [1988] HCA 7; (1988) 164 CLR 387

York Air Conditioning & Refrigeration (Australasia) Pty Limited v The Commonwealth [1949] HCA 23; (1949) 80 CLR 11

REVLON MANUFACTURING LIMITED v COMMISSIONER OF TAXATION

G118 of 1994, G119 of 1994, G120 of 1994, G121 of 1994

LOCKHART J.

6 February 1997

Sydney

IN THE FEDERAL COURT OF AUSTRALIA ) No. G118 of 1994

) G119 of 1994

NEW SOUTH WALES DISTRICT REGISTRY ) G120 of 1994

) G121 of 1994

GENERAL DIVISION )

BETWEEN: REVLON MANUFACTURING LIMITED

Applicant

AND: COMMISSIONER OF TAXATION

Respondent

JUDGE MAKING ORDER: LOCKHART J.

WHERE ORDER MADE: SYDNEY

DATE ORDER MADE: 6 FEBRUARY 1997

MINUTE OF ORDER

QUESTION

The following question was ordered, pursuant to Order 29 rule 2 of the Federal Court Rules to be decided separately:

'Whether the goods described by the Applicant as "testers", "merchandisers", "selling aids" and "promotional aids", supplied by the Applicant to its customers with the goods the subject of the invoices copies of which are exhibited to the affidavits of:

(a) Jennifer Marce South sworn herein 22 June 1994;

(b) Martin Susskind sworn herein on 21 June 1994;

(c) Christopher Arthur Carse Egan sworn herein on 21 June 1994;

(d) Malcolm Leonard Corbett sworn herein on 17 June 1994;

(e) Paul Robert Sidhom sworn herein on 17 June 1994;

(f) Donald Joseph Gardiner sworn herein on 31 May 1994;

(g) Richard Gerard Malouf sworn herein on 20 June 1994;

(h) Catherine Anne Leslie sworn herein on 14 October 1994 (but excluding the transactions dealt with in Exhibits CAL-1, CAL-2, CAL-6, CAL-9, CAL-19, CAL-25, AND CAL-26)

- 2 -

are goods which were for the purposes of the Sales Tax Assessment Acts:

(i) applied by the Applicant to its own use, or

(ii) sold by the Applicant, and if so for what price; or

(iii) dealt with by the Applicant in some other and if so what manner'.

ANSWER

1. The goods were not applied by the applicant to its own use. They were sold by the applicant to its customers as part of a composite price for all goods included in the relevant order forms and invoices and under the relevant merchandising franchise plan.

2. The respondent pay the applicant's costs of the proceeding concerning determination of the separate question.

NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA ) No. G118 of 1994

) G119 of 1994

NEW SOUTH WALES DISTRICT REGISTRY ) G120 of 1994

) G121 of 1994

GENERAL DIVISION )

BETWEEN: REVLON MANUFACTURING LIMITED

Applicant

AND: COMMISSIONER OF TAXATION

Respondent

6 February 1997

REASONS FOR JUDGMENT

LOCKHART J.

Introduction

Revlon Manufacturing Limited ('Revlon') manufactures cosmetics, fragrances and toiletries ('the products') and sells them by wholesale to pharmacies, pharmacy wholesalers, department stores, variety stores, food wholesalers and supermarkets ('the retailers').

The case turns on the fact that retailers need, not only articles for sale to customers, but also 'testers' and samples. In the case of makeup, the tester is generally a little pan that is open and from which a customer may take a small scoop with a cotton tip. In the case of fragrances, a very small bottle is available as a tester from which customers can shake a drop or two for inhaling. Related to testers and samples are 'merchandisers'. For some years Revlon has purchased, from either local or overseas manufacturers, promotional displays comprising bases, backcards, permanent merchandising updates, posters, referrals, counter talkers and newsletters, which are collectively referred to as merchandisers. Also, Revlon supplies gifts to retailers for distribution with purchases, meaning that on occasion two items are in fact purchased as one.

Revlon therefore supplies to retailers, in addition to the underlying product, some gifts, testers, samples and merchandisers collectively referred to as 'selling aids'.

Testers and samples are a vital part of Revlon's business and the business of the retailers for the obvious reason that customers of the retailers wish to test or sample products before deciding whether to purchase them.

Revlon was the subject of an audit by the respondent, the Commissioner of Taxation, which gave rise to six sales tax assessments. Two of them have become irrelevant, one of which was the subject of proceedings in the Administrative Appeals Tribunal and an appeal to a Full Court of this Court: Revlon Manufacturing Limited v Federal Commissioner of Taxation (1995) 134 ALR 23. This case is concerned with the four remaining assessments of sales tax made by the Commissioner over the period 1 December 1987 to 31 May 1992.

The relevant legislation consists of the Sales Tax Assessment Act (No 1) (1930) ('Act (No 1)'), the Sales Tax Assessment Act (No 4) (1930) ('Act (No 4)') and the Sales Tax Assessment Act (No 6) (1930) ('Act (No 6)'). Act (No 1) relates to sales tax concerning goods manufactured in Australia and sold by the manufacturer or applied to his own use. Act (No 4) is concerned with sales tax upon goods manufactured in Australia and applied by the purchaser to his own use. Act (No 6) is directed to sales tax concerning goods imported into Australia and sold by the importer or applied to his own use. The relevant provisions of each of the three Acts are: s. 17 of Act (No 1), and s. 3 of each of Acts (No 4) and (No 6).

The scheme of Australian sales tax legislation was discussed by Hill J. in Genex Corporation Pty Limited v Commonwealth of Australia (1991) 30 FCR 193 at 196-201; so I need not pause to discuss it myself.

A new regulatory Sales Tax regime was introduced in 1992 by the Sales Tax Assessment Act 1992 which relates, inter alia, to sales tax on dealings with goods that have been manufactured in Australia, or imported into Australia. The scheme of separate assessment Acts has now been abandoned because the doubts that previously existed about the constitutional validity of the legislation have been resolved. The new legislative regime commenced on 28 October 1992, but it proceeds essentially upon the same philosophy as did the earlier legislation with which this case is concerned.

There are four matters before the Court: matter G118 concerns cosmetics, fragrances, and toiletries packaged as 'testers' in Australia by Revlon and sold by it or applied to its own use; s. 17 of Act (No 1) is the relevant statutory provision. Matter G119 is concerned with cosmetics, fragrances and toiletries manufactured in Australia by Revlon, set aside and treated as 'promotional products', and sold by it or applied to its own use; s. 17 of Act (No 1) is again the relevant provision. Matter G120 concerns cosmetics, fragrances and toiletries imported into Australia by Revlon, intended to be distributed to customers as 'promotional gifts', and either sold by it or applied to its own use; s. 3 of Act (No 6) is the relevant provision. Matter G121 relates to 'merchandisers' manufactured in Australia, purchased by Revlon and either sold by it or applied to its own use; s. 3 of Act (No 4) applies. It was common ground between the parties that it was sufficient for all purposes of the case to refer to s. 17 of Act (No 1), because in all relevant respects the three statutory provisions are to the same effect. Section 17 is in the following terms:

'17. (1) Subject to, and in accordance with, the provisions of this Act, the sales tax imposed by the Sales Tax Act, Act (No 1) 1930 shall be levied and paid upon the sale value of goods manufactured in Australia by a taxpayer and sold by him or treated by him as stock for sale by retail or applied to his own use.

(1A) The reference in subsection (1) to goods manufactured in Australia by a taxpayer and applied to the taxpayer's own use does not include a reference to goods that would be taken to be manufactured in Australia by the taxpayer by reason only of paragraph (e) of the definition of "Manufacture" in subsection 3(1) and applied by the taxpayer to the taxpayer's own use.

(2) Subject to subsection (1A), the reference in subsection (1) to goods manufactured in Australia by a taxpayer and applied to his own use shall be read as a reference:

(a) to goods manufactured in Australia by a manufacturer in the course of carrying on a business and applied to his own use, whether for the purposes of that business or for any other purpose and whether or not the goods are of a class manufactured by the manufacturer for sale; and

(b) to goods manufactured in Australia by a manufacturer as provided in subsection (3) and applied to his own use.

(3) For the purposes of paragraph (2)(b) where:

(a) goods (in this subsection referred to as the "relevant goods") have been manufactured in Australia by a manufacturer, otherwise than in the course of carrying on a business;

(b) the manufacture of the relevant goods commenced after 16 November 1978;

(c) the manufacture of the relevant goods was carried out in whole or in part on premises made available to the manufacturer, under an agreement entered into after 16 November 1978, for the purpose of, or for purposes which included the purpose of, manufacturing the relevant goods;

(d) the premises so made available to the manufacturer were premises ordinarily used by a person in the course of carrying on a business in the ordinary course of the carrying on of which goods identical in all material respects with the relevant goods could reasonably be expected to be manufactured; and

(e) the whole, or the principal part, of the labour used in the manufacture of the relevant goods was provided by persons who provided their labour otherwise than voluntarily and without remuneration;

the relevant goods are goods manufactured in Australia by the manufacturer as provided in this subsection.

(4) For the purposes of subsection (3):

(a) where:

(i) the manufacture of goods has been carried out in whole or in part on premises, being land, a building or a part of a building; and

(ii) under an agreement entered into after 16 November 1978, the manufacturer acquired an estate or interest in, or obtained permission to use or occupy, the land, the building or the part of the building, as the case may be, for the purpose of, or for purposes which included the purpose of, manufacturing the goods on the land, or in the building or the part of the building;

the premises shall be deemed to have been made available to the manufacturer for the purpose of manufacturing those goods; and

(b) where goods have been manufactured in Australia by a manufacturer and the manufacturer himself worked on the manufacture of the goods, the manufacturer shall be deemed to have provided his labour voluntarily and without remuneration.

(5) In this section "agreement" means any agreement, arrangement or understanding:

(a) whether formal or informal;

(b) whether express or implied; or

(c) whether or not enforceable, or intended to be enforceable, by legal proceedings.'

A judge of the Court ordered, pursuant to Order 29 rule 2 of the Court's Rules, that the following question be decided separately from all other questions in the proceeding. It is this question only with which the Court is presently concerned:

'Whether the goods described by the Applicant as "testers", "merchandisers", "selling aids" and "promotional aids", supplied by the Applicant to its customers with the goods the subject of the invoices copies of which are exhibited to the affidavits of:

(a) Jennifer Marce South sworn herein 22 June 1994;

(b) Martin Susskind sworn herein on 21 June 1994;

(c) Christopher Arthur Carse Egan sworn herein on 21 June 1994;

(d) Malcolm Leonard Corbett sworn herein on 17 June 1994;

(e) Paul Robert Sidhom sworn herein on 17 June 1994;

(f) Donald Joseph Gardiner sworn herein on 31 May 1994;

(g) Richard Gerard Malouf sworn herein on 20 June 1994;

(h) Catherine Anne Leslie sworn herein on 14 October 1994 (but excluding the transactions dealt with in Exhibits CAL-1, CAL-2, CAL-6, CAL-9, CAL-19, CAL-25, AND CAL-26)

are goods which were for the purposes of the Sales Tax Assessment Acts:

(i) applied by the Applicant to its own use, or

(ii) sold by the Applicant, and if so for what price; or

(iii) dealt with by the Applicant in some other and if so what manner'.

By consent of the parties, the references above to (e) the affidavit of Paul Robert Sidhom sworn on 17 June 1994 and to (g) the affidavit of Richard Gerard Malouf sworn on 20 June 1994 have been deleted.

By consent, the matters concerning the question referred for separate determination were heard together.

Facts

It is not necessary to distinguish between promotional products, promotional gifts, merchandisers or selling aids because the parties and counsel treated them as if the same considerations under the sales tax legislation applied to all of them. The evidence and the submissions of counsel were directed primarily to testers because their value comprises most of the sales tax in dispute. I shall therefore give attention principally to testers.

Revlon's case is that the testers which it supplied and invoiced in response to either basic, promotional or concentration orders were sold together with other products ordered by its customers, so that those testers were part of a composite sale.

Revlon places great weight upon the terms of the contracts under which it sold the products to its retailers which, it was submitted, included the testers as part of the composite price charged by it to retailers. The composite price included the price for the products themselves and the price for the testers, although no particular price was specified in the relevant contractual documents for the testers themselves.

Revlon asserts that the testers were sold by it to the retailers, together with the products with which they were supplied, on the terms set out in the order forms and invoices; and that the sale value of both products and testers was the invoice price, upon the whole of which sales tax has been paid by it at the appropriate rate.

The Commissioner's case is, not that there was a sham transaction, but that the evidence discloses (it was submitted) that the relevant terms of the contractual documents relating to the testers had no contractual force; or, in the alternative, if they did, the terms were abandoned. The issues are quite narrow both in fact and law, but their ramifications in financial terms are considerable.

Revlon sells its cosmetics and fragrances to pharmacies under a merchandising franchise plan, which is in writing. The merchandising franchise plan does not cover the sales of cosmetics and fragrances to department stores or fragrances to variety stores and non-franchise pharmacies. Non-franchise pharmacies are pharmacies which do not carry cosmetics but do carry fragrances. Pharmacies or any other stores which carry cosmetics must be franchised. The sales by Revlon of all other products, including toiletries, are not covered by the merchandising franchise plan.

Revlon sells its cosmetics and fragrances to customers other than pharmacies, as is evidenced by documents, being order forms and invoices.

In 1987 Revlon sought advice from senior counsel to overcome the effect of the judgment of the High Court in Max Factor & Co Inc v Commonwealth of Australia (1971) 12 CLR 353; which stated that cosmetics given by Max Factor to its employees, retailers and members of the public to promote sales were 'applied to' Max Factor's 'own use' within the meaning of s. 17 of Act (No 1), and accordingly were liable to sales tax.

Revlon received advice from senior counsel in connection with its terms and conditions of sale and its merchandising franchise plan. Senior counsel settled fresh terms and conditions of sale and the merchandising franchise plan. Consequently, a new merchandising franchise plan was printed and used to govern the contractual relations between Revlon and pharmacies. The redrafted terms and conditions of sale were to be used on all basic and promotional order forms and on all invoices concerning sales to Revlon's customers.

All of Revlon's senior executives were aware of the importance of ensuring that selling aids should not be given away, but sold as part of composite parcels, if additional sales tax were not to be payable. Accordingly, Revlon used all reasonable endeavours as a matter of corporate policy to ensure that personnel were aware of the changes to the terms and conditions of sale and to the merchandising franchise plan.

Following the advice of senior counsel and the subsequent adoption of new standard terms and conditions of sale and of the new merchandising franchise plan, these were explained to all Revlon sales personnel during the regular sales meetings held about four to five times a year. The personnel were instructed that testers, promotional aids and other selling aids which formed part of an order were not given away, but were the subject of a composite sale. The personnel were further instructed to explain that situation to the retailers with whom they dealt if and when the subject arose.

Since the adoption of the policy of using the standard terms and conditions as settled by senior counsel, they have been printed on the reverse of all order forms, invoices and applications for a credit account (used by new customers); and they have been incorporated in other correspondence with customers dealing with Revlon's terms of business, and incorporated in the merchandising franchise plan.

The order is a printed form provided by Revlon to the customer. A typical form of order lodged by Revlon's customers asks Revlon to supply the goods indicated therein in accordance with the terms and conditions of sale and conditions of service set out on the back of the form. The form consists of a list of all relevant Revlon products with appropriate code numbers which states the 'trade plus tax' price, retail price and quantity to be ordered. The form lists not only the goods to be ordered which are the basic goods comprising the order, but also testers, even though the testers do not have a trade plus tax, or retail, or indeed any price specified.

Various forms that support each of the kinds of sales are in evidence. The conditions of sale and of service which are printed on the reverse of Revlon's order forms and invoices contain the following relevant conditions:

'Revlon Manufacturing Ltd

Conditions of Sale

1. Property in the goods shall pass to the Customer at the time when the goods are placed on the vehicle which is to effect delivery from the store or warehouse of Revlon Manufacturing Ltd ("R.M.L.") or any other store or warehouse from which the goods are despatched to the customer and shall thereafter be at the customers' risk.

2. R.M.L. reserves the right to make part deliveries of the order and each part delivery shall constitute a separate contract and failure to make delivery of the total order shall not invalidate the contract as regards other deliveries. Orders are accepted subject to these Conditions of Sale and are not accepted until accepted by our Head Office.

3. Any claim for shortages, loss or damage made more than seven (7) days after receipt by the Customer will not be recognised by R.M.L.

4. R.M.L. reserves the right to accept in whole or in part any order or decline any order.

5. Where authorised by R.M.L. the goods may be returned but will be subject to count and inspection upon request and before a credit is passed. ONLY RETURNS BEARING A REVLON AUTHORISATION LABEL WILL BE ACCEPTED FOR CREDIT.

Depending on the circumstances and the condition of the returned goods, a credit may be subject to a handling charge, varying from ten percent (10%) to fifty percent (50%) of the trade price including Sales Tax.

FREIGHT ON RETURNED GOODS SHALL BE PREPAID BY THE CUSTOMER.

Responsibility will not be accepted for returns lost or damages in transit.

6. Payment for the goods shall be made within thirty (30) days and cheques made payable to "Revlon".

7. Any settlement discount is allowed on a pro rata basis between the price of goods and the service fee. Any other discount however calculated is allowed entirely against the price of the goods.

8. The following services shall be provided by the Customer:

(a) Despatch and delivery of goods to the Customer's premises; and insurance thereon, and

(b) Adequate advertising and promotional support to assist the generation of sales at the retail level.

9. Where the order form requires the sale of merchandising units, testers and other promotional aids, Revlon shall supply such goods and the purchase price payable for the goods shall be applicable to all of the products and the merchandising units, testers and other promotional aids so that the consideration applicable to products is determined by multiplying the invoice price by the trade plus sales tax price of products as stated upon the applicable Revlon order form divided by the sum of the trade plus sales tax price and the full absorption cost to Revlon of the merchandising units, testers and other promotional aids. The consideration applicable to the merchandising units, testers and other promotional aids ("the applicable consideration") shall be the difference between the total invoice price and the consideration applicable to the products. The consideration applicable to each of merchandising units, testers and promotional aids shall be determined by multiplying the applicable consideration by the full absorption cost of each particular merchandising unit, tester or other promotional aid divided by the sum of the full absorption cost of each of the items which are referrable to the applicable consideration.

10. Invoices shall be issued by Revlon showing a composite price for the products, merchandising units, testers and other promotional aids and there is no requirement for Revlon to itemise separately the consideration for the products, merchandising units, testers and other promotional aids.

11. If the value of the goods ordered is less than one hundred and fifty dollars ($150.00) (including sales tax), a delivery surcharge is payable by the customer and if the trade price of the goods ordered is less than forty dollars ($40.00) (including sales tax), a handling charge of six dollars ($6.00) is also payable by the customer.

12. Testers are sold only with product.

13. Merchandising units, testers and other promotional aids are sold in the quantities specified with each separate order of a promotional package. The cost of the merchandising units, testers and other promotional aids shall be included in the selling price of the promotional goods in accordance with the conditions of sale contained in this order form.

14. Irrespective of any terms and/or conditions in a customer's order form, acceptance (by retaining the goods or any other method) of the goods ordered by the customer will be conclusive acceptance of the terms and conditions of sale contained in this order form.'

The conditions which are most relevant to this case are conditions 1, 5, 9, 10, 12 and 13.

The clauses of the revised merchandising franchise plan which specifically relate to selling aids are clauses 2(1)(c) and (f), 3(a) to (d), 4 and 5, which provide as follows.

'2.(1) The Retailer shall:

...

(c) participate with Revlon in promotional campaigns by utilising display material and other merchandising aids sold by Revlon;

...

(f) accept delivery of all shipments ordered or authorised by the Retailer.

...

3. Revlon shall:

(a) make reasonable efforts to fill the Retailer's normal requirements of Products, merchandising units, testers and other promotional aids (collectively referred to here in as "the goods"), limited always by labour or material shortages, conditions of supply and demand, and other circumstances beyond its control.

(b) where the retailer orders merchandising units, testers and other promotional aids, sell such goods and in this event the consideration paid for the totality of the goods sold under that order ("the invoice price") shall be apportioned between Products, merchandising units, testers and other promotional aids so that the consideration applicable to Products is determined by multiplying the invoice price by the trade plus sales tax price of Products as stated on the applicable Revlon order form divided by the sum of that trade plus sales tax price and the full absorption cost to Revlon of the merchandising units, testers and on the promotional aids. The consideration applicable to the merchandising units, testers and other promotional aids ("the applicable consideration") shall be the difference between the total invoice price and the consideration applicable to the Products. The consideration applicable to each of the merchandising units, testers and other promotional aids shall be determined by multiplying the applicable consideration by the full absorption cost of each particular merchandising unit, tester or other promotional aid divided by the sum of the full absorption cost of each of the items which are referable to the applicable consideration.

(c) Issue invoices to the Retailer showing a composite price for the goods.

(d) take reasonable steps as Revlon determines to advertise and promote the Products to the ultimate consumer and in doing so emphasise the advantages of shopping in accredited Revlon stores.

4. This agreement shall apply only to the goods specified in the Schedule hereof. Revlon may from time to time alter the range of goods by notice in writing to the Retailer.

5. The terms of all orders for goods by the Retailer to Revlon shall be as set forth on the then current order and/or invoice forms of Revlon. No orders for goods will be binding on Revlon until shipped. No change, termination or waiver of any of the terms, conditions or prices set forth on Revlon's then current order and/or invoice form shall bind Revlon with respect to any purchase by the Retailer unless such change is acknowledged in writing and duly authorised by Revlon.'

The goods forming the subject of the four sets of proceedings were all selling aids as described above and were all the subject of composite orders of the kind mentioned earlier.

During the relevant period with which this case is concerned Revlon sold goods to the following classes of customers:

(a) pharmacies;

(b) department stores (eg. David Jones);

(c) variety stores (eg. Kmart);

(d) pharmacy wholesalers (eg. Fauldings);

(e) food wholesalers (eg. Davids Holdings); and

(f) supermarkets (eg. Woolworths, Coles).

The manner in which Revlon markets its products is dependent upon the sales classification. The sales classification used by Revlon was as follows:

(a) basic sales;

(b) promotional sales;

(c) concentration sales (ie. gifts with purchase or purchase where two items are supplied together);

(d) close-out sales (discontinued lines); and

(e) A & M sales (advertising and merchandising).

When a new product is launched by Revlon the launch sales are treated for internal purposes and for marketing to customers as promotional sales. Sales achieved following a launch are then treated as basic sales until the product is discontinued. A basic sale covers items which are to be purchased from the normal Revlon product range - Revlon's basic stock. When the product is discontinued sales of residual stock are treated as close-out sales. Any sales made after the launch, but before discontinuance, which are the result of a special marketing effort are treated as either promotional sales or concentration sales. Items covered by a promotional sale can only be ordered as part of a specific promotional activity and are only on offer by Revlon during the relevant promotional period.

Evidence was given for Revlon by senior Revlon representatives: Mr G V Howard, deputy managing director of the Australian branch of Revlon; and Mr N Contos, general manager, finance and administration, of Revlon's Australian branch. Mr P J Hunt, a partner of KPMG Peat Marwick, Sydney office ('KPMG'), who has given professional advice concerning sales tax matters to Revlon, also gave evidence. Other witnesses for Revlon were Mr D J Gardiner, a pharmacist; Mr M L Corbett, a pharmacist; Mr G Nikolaov, the Sales Tax Manager for the Coles Myer Limited group of companies; Mr M Susskind, Managing Director of Priceline Pty Limited, which is a retail chain of 45 stores selling primarily cosmetics, toiletries and gifts, and which conducts its business in each of the eastern States; Mr C A C Egan, the Merchandise Planning Manager of Myer/Grace Bros, which forms part of the Coles Myer Limited group of companies; and Ms J M South, the cosmetics buyer for David Jones Limited stores located in New South Wales and the Australian Capital Territory. One witness gave evidence for the Commissioner - Ms Leslie, a solicitor acting for the Commissioner.

Nothing turns on the credibility or reliability of any witness. The evidence was not in dispute.

A considerable amount of evidence was given in affidavit form designed to establish the procedures adopted by Revlon for sale of its products to its various classes of purchasers. In the end, the relevant documents are the form of the merchandising franchise plan which was adopted after senior counsel gave advice in 1987; the order form, particularly the conditions of sale; and the invoice, which also included the conditions of sale.

Revlon always invoices the retailer whom it supplies. It sells by wholesale and the amount to be paid is stated in the bottom right-hand corner of the invoice. The retailer pays Revlon that amount, which is the amount used by Revlon as the basis for accounting for sales tax purposes. The bottom right-hand figure is actually an amount which includes the service fee which, in turn, has a component for delivery and insurance. Testers are shown, but without an amount opposite them. Revlon claims that all the products, including the testers, are sold as a composite price shown on the invoice. The actual amount for the goods themselves is a figure which appears on the bottom line in the middle of the page.

I set out earlier the relevant conditions of sale including conditions 9 and 10 which specifically refer in the case of condition 9, to the order form and, in the case of condition 10, to the invoices, by saying that they shall be issued by Revlon showing the composite price for the products, merchandising units, testers and other promotional aids.

Revlon and the retailers have a common interest that the retailer possess the various selling aids in order to achieve sales, thus promoting both his business and that of Revlon.

Once he has the testers the retailer can do what he likes with them. It is not entirely clear from the evidence whether the retailer is able to sell them. One witness gave evidence that this was not possible, but counsel for Revlon submitted that it was. Mr Howard gave evidence that it would not be practical or ethical to onsell the testers to consumers because of issues of hygiene when using lipstick testers or eye shadow testers or face makeup testers. In my opinion, doing the best I can on the material before me, there is no bar to the retailer selling the testers and other promotional aids, but it is an event that is unlikely to occur. There is no evidence that it has occurred in practice.

Revlon has its manufacturing plant at Rydalmere in Sydney. It also imports finished goods and has a distribution centre in Canberra. The process by which goods are sold is that representatives of Revlon approach the pharmacies and department stores. They are account managers. They take order forms with them and they complete a stock control book, calculate the order, and the order is then transferred from the stock control book to the order form (terms and conditions are set out on the last page of the order form). The order is received in the distribution centre in Canberra or perhaps by the Sales Manager at the North Sydney administration offices. The order form then generates the invoice. The invoice also has terms and conditions printed on the back. The invoice is packed and sent with the goods. Goods can be returned by customers, but they do not represent a significant proportion of Revlon's business. The ratio of the number of testers to the number of products sold depends largely upon the turnover of the store and the frequency of the orders.

Mr Susskind (Priceline) said in evidence that he never considered the full absorption costs of the merchandising units, testers and promotional aids supplied by Revlon, nor did he ever make enquiry about it. He never took into account the operation of condition 9 when calculating the amount of payment for goods supplied on an order form, and he never regarded it as relevant to the ascertainment of his company's liability to Revlon or Revlon's liability to it. As far as he was concerned the obligation of Revlon in the case of short orders or refunds was an obligation entirely untrammelled, not being limited or inhibited by clause 9.

Revlon will not accept orders just for testers. Under the existing system, Revlon will only allow retailers to order testers with products included on the invoice. Revlon has never actually performed a calculation of full absorption costs in relation to condition 9 and no customer has ever asked for the calculation to be done. When there was a short delivery of goods - that is, short delivery from the order form - no attention was paid by the customers to the fraction referred to in condition 9.

The components of costs recorded and kept by Revlon are material, labour and overheads. Material costs comprise the costs of all the individual components that make up the product. Labour costs are calculated on the time taken to produce the product. The calculation of overhead costs is based on an allocation of labour costs. Finally, Revlon derives a composite total cost of the product. In Mr Susskind's view the method of compiling a total cost by totalling these three categories comes within the concept of either direct cost or absorption cost.

In the view of customers - Mr Egan (Coles Myer), for example - the price of the testers or material supplied is incorporated within the total charge on the invoice. Nothing is added to the invoice price on account of the supply of testers because it is already included in the price. No price of any product is diminished because of the supply of the testers. When asked by counsel for the Commissioner whether he understood condition 9 to affect Revlon's obligations to him in respect of goods being returned, and for which a refund was payable, Mr Egan replied that it would generally, but that perhaps the situation does not arise in practice. He explained that Coles Myer acts on the basis that the price for the goods supplied is the price shown as the unit sale price including tax on the order form and as the trade plus tax total on the invoice. It is his understanding that the relations between Revlon and Coles Myer were also governed by the Revlon terms and conditions in the manner described in paragraph 12 of his affidavit: namely, that the Revlon terms and conditions of sale governed the nature of transactions between Myer/Grace Bros and Revlon from early 1988 to the present; that those terms regulated the legal relationship; and that, in summary they covered in all respects the contractual obligations of the parties subject to any other documentation that Myer/Grace Bros may have adopted and which are associated with those terms and conditions. Mr Egan confirmed this in re-examination. He recalled no occasion when he was with Myer/Grace Bros when any of the branches or stores needed testers without the actual commodity being supplied - that is, ran out of testers. He understood that he could not get the testers other than with the goods which they accompanied.

Ms South, a cosmetics buyer with David Jones, said that she commonly placed telephone orders to Revlon rather than putting them in hard copy, and that she did not send order forms to Revlon. Rather, the orders were written up at Revlon, returned to Ms South to either approve or disapprove, and then sent back. No particular regard was paid to condition 9: it had no bearing on the amount which David Jones paid for products. While Ms South said that returns of Revlon products were uncommon at David Jones, sometimes goods are returned to Revlon. She first looked at clause 9 about ten years ago, and then just recently. She thought it meant simply that if the goods arrived and were not fully delivered then David Jones simply reordered the goods. Then it became apparent she was talking about condition 9 on a different document - the previous clause, before the tax advice. Looking at it now, she says she thinks it means that the cost given on the order form or the promotional order form includes all of the above costs, such as the merchandising units, the testers and so forth, and that the cost is spread over the product - the goods and the merchandising. She regarded condition 9 as irrelevant to her dealings with Revlon. She didn't think about condition 9, and simply paid for what was received including testers and merchandisers. She thought the position was that the testers were stated on the invoice as being simply part of the cost of the goods. They were not goods for which a distinct or additional amount was paid apart from the trade plus tax price shown for the products that were supplied.

Mr Corbett (a pharmacist) gave evidence that he did not recall ever returning goods. The terms and conditions were set out on the back page of the order forms with which he dealt. As to condition 9, he understood that when he purchased Revlon products the purchase price included the cost of testers, advertising materials, posters, stands etc. This price also included the right to replace the testers or sale aids as they became depleted and damaged. He did not understand that the price of the goods was reduced by the price of testers, nor that he paid anything additional for the testers. Condition 9, which purports to apportion the purchase price between testers and lipsticks, for example, would not accord with the reality of his dealings with Revlon on a single invoice, but would in terms of total business. That is, he expected Revlon to supply the testers when they were needed in order to sell the product.

Arguments of the parties

Counsel for Revlon submitted that whether one can in fact apportion the costs of products and peripherals does not matter. The fact is that the goods are all sold together and the parties know what the price is. Sales tax is paid on the price of the two together. Price as a whole is applicable to the goods as a whole and property passes on the whole. Revlon knew that the terms and conditions existed and simply had no occasion to examine them in practice; no problem arose in any particular transaction because, commercially speaking, costs all balanced out in their due proportions over time. It was argued that condition 9 is not void for uncertainty, nor are the other conditions. In any case, the other conditions are not dependent upon condition 9. Each stands alone, that is, is perfectly comprehensible alone. None of the customers said that condition 9 was not part of the contractual terms because efforts were made to bring the clauses to the attention of the retailers, and they did in fact know about them, as all the retailers agreed. The contract expressed this commercial reality.

Condition 9 is concerned with allocating the total invoice price between the products and the peripherals. If necessary, the full absorption costs of the products must be ascertained on the one hand, and those of the peripherals on the other. It is Revlon's method of determining the full absorption costs that is relevant. Failing all else, there is, in any event, a composite sale. It is of no consequence that the parties never actually had to ascertain precisely how condition 9 operated. It was only there if a problem arose, as several of the witnesses said, but problems did not arise. There is no respect in which the conduct of the parties was inconsistent with the agreement. This sufficiently summarizes the arguments of counsel for Revlon.

The Commissioner made two primary submissions. The first was that the terms of condition 9, upon which conditions 10, 12 and 13 are dependent or from which they are derivatives, are void for uncertainty in that the allocation of total consideration which they seek to make is dependent upon a formula which includes an amount that is unascertainable. That amount is the amount described as the 'full absorption cost' to Revlon. The reason why it is unascertainable is not that it is too complicated to work it out; but that, like the hire purchase contracts referred to in G Scammel & Nephew Limited v Ouston [1941] AC 251 it is a term with a multiplicity of denotations. There are various ways in which with equal propriety the amount called 'full absorption cost' could be worked out; for example, reference was made by counsel for the Commissioner to certain accounting standards.

The second point made is that, although the terms are in the merchandising franchise plan, in the order form and in the invoice, the parties in fact acted as if the conditions were not there.

Counsel for the Commissioner argued that condition 9 was treated by the parties as not being part of their contract and either was never intended to be a contractual term or falls within the description of Richardson J. in Marac Finance Limited v Virtue [1981] 1 NZLR 586 at 588 as a case where 'the parties have departed from their initial agreement and yet have allowed its shadow to mask their new arrangement'. This reliance by counsel for the Commissioner on Marac is puzzling because the passage cited above from Richardson J.'s judgment was in the context of his Honour's findings that there was a sham transaction, yet the Commissioner expressly eschewed the argument that there was a sham.

Counsel for the Commissioner relied upon two principal cases to support the proposition that extra-contractual conduct may be taken into account on this issue. First, Spunwill Pty Ltd v BAB Pty Ltd (1994) 36 NSWLR 290 per Santow J. at 304-312, where his Honour discussed post-contractual conduct as an aid to construction of the contract, holding that evidence of conduct of the parties to a contract subsequent to the time the contract was made may be used as an aid to construction of the contract where it is probative of a clear and mutual subjective intention as to what the contract meant at the time it was made. His Honour declined to follow a decision of the Supreme Court of Victoria to the contrary in FAI Traders Insurance Co Ltd v Savoy Plaza Pty Ltd (1993) Aust Contract Reports 90-025. Secondly, counsel for the Commissioner relied on Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Limited (1990) 20 NSWLR 310. There, the Court of Appeal of New South Wales considered the relevance of extra-contractual conduct subsequent to a contract.

These cases are distinct from the point being made here. Obviously, if a case concerns the question whether or not a contract has been abandoned, it is based on the assumption that the contract was in contemplation and was in fact made, but was subsequently abandoned either absolutely or by the making of a new contract. Plainly the evidence of post-contractual circumstances and conduct may be given; in fact, it is difficult to see what other evidence could be given.

Finally, counsel for the Commissioner sought to raise some form of argument of estoppel by conduct. It was argued that estoppel by conduct is a form of estoppel founded, not on representation of fact made by a representor and acted upon by a representee to his detriment, but rather on the conduct of relations between the parties on the basis of an agreed or assumed state of facts which both will be estopped from denying; reliance was placed on the judgment of the High Court in Con-Stan Industries of Australia Pty Limited v Norwich Winterthur Insurance (Australia) Limited [1986] HCA 14; (1986) 160 CLR 226 at 244. Counsel sought to argue that, although the parties contracted in the terms they did in the relevant conditions of sale, they in fact went on after senior counsel's advice as they had gone on before, and in some way they are estopped from denying this.

Counsel for the Commissioner submitted that the High Court has departed from the notion that estoppel is confined to matters of fact, and reliance was placed upon Waltons Stores (Interstate) Limited v Maher [1988] HCA 7; (1988) 164 CLR 387 and Commonwealth v Verwayen (1990) 170 CLR 394. Reference was also made to the more recent case, David Securities Pty Limited v Commonwealth Bank of Australia [1992] HCA 48; (1992) 175 CLR 353 where the Court said that mistakes of law do not prevent equitable relief.

Findings

If it were not for the terms and conditions of the merchandising franchise plan and those appearing on Revlon's order forms and invoices the case would not be indistinguishable in any material respects from Max Factor. Max Factor carried on the business of manufacturing and selling cosmetics. During the relevant year of income it gave cosmetics to its employees, both for use in demonstration and for their own personal use; to retailers, for the purpose of promoting sales; and to members of the public, for the purpose of increasing or maintaining goodwill or for certain other purposes. It was held by the High Court that the phrase 'applied to his own use' in s. 17 is of broad import and is equivalent in meaning to 'employed for his own purposes'. It was held that all of the material goods had been so applied by Max Factor, some for the purposes of advertisement and promoting sales of goods, and others for the purpose of preserving the goodwill of employees and of purchasers. Accordingly, Max Factor was liable to pay sales tax upon them.

The submission that a person who gives away an article which he has manufactured cannot be said to have applied it to his own use, even if he has given it for the purpose of promoting the sale of his products, was made to Windeyer J. in Deputy Federal Commissioner of Taxation v Taubmans (NSW) Pty Ltd [1966] HCA 18; (1966) 115 CLR 570 and, as Owen J. observed in Max Factor at 359, rightly rejected by his Honour. Owen J. said that goods are applied to his own use if the manufacturer in the course of carrying on his business applies the goods for the purpose of that business. In the leading judgment, Gibbs J. stated that the goods were given by Max Factor with a view to achieving and maintaining a satisfactory volume of sales of cosmetics, and thus for Max Factor's own purposes. He said that this was sufficient to answer the description of 'applied to his own use'; and rejected the submission that the expression refers to the physical use or consumption of the goods by the person on whom the tax is imposed. Rather, his Honour found (at 362) that the phrase is of broad import and is equivalent in meaning to 'employed for his own purposes'. His Honour applied Deputy Federal CoT (SA) v Ellis & Clark Ltd [1934] HCA 54; (1934) 52 CLR 85 per Dixon J., who explained why the general policy of taxing the last sale by wholesale did not admit of universal application. And at 363 Gibbs J. also referred to the judgment of Starke J. in Davies Coop & Co Limited v Commissioner of Taxation [1948] HCA 50; (1948) 77 CLR 299, particularly at 301 where his Honour said that the expression 'applied to his own use' points to some use of the goods by the taxpayer himself and not to the use, by some other manufacturer or person, of those goods unaltered in form and condition, but prepared by use for that other manufacturer or person in weaving and knitting operations as by winding yarn around them. Gibbs J. further referred to Taubmans, where a wholesale merchant, which carried on the business of selling paint, supplied retailers who sold its wares with colourcards which were made available to intending buyers or enquirers for the purpose of assisting them in choosing the colour of the paint they required. There, Windeyer J. held that the wholesaler had applied the colourcards to its own use within s. 3 of the Act (No 4). Gibbs J. said (at 364) that it is not necessarily the case that every gratuitous disposition of goods will be an application of those goods to the use of the person who disposes of them. The question is for what purpose they are given. They may form the subject of a true gift prompted, for example, by charitable motives and not given to serve any end of the donor. He cited as an example a manufacturer of food stuffs who donated some of his products for the purpose of a children's picnic or to an organisation holding a garden party in aid of charity; unless it could be shown that the purpose of the gift was not to aid others but to benefit himself by securing an advertisement for his products or in some other way.

It is true that the purpose of Revlon, in altering the relevant conditions of sale and the relevant clauses concerning its responsibilities in the merchandising franchise plan with pharmacies, was to minimize its sales tax. It sought to ensure that the testers and other merchandisers were included with the fundamental products sold by it to its customers in the calculation of a composite price, so passing title in all the goods - products and peripherals - to the customers. It is also true that Revlon's customers have never had occasion to refer to condition 9 in the renovated conditions of sale; and nor, in effect, has Revlon. But it remains that the conditions were altered; and since their insertion in 1987 they have been part of all orders and invoices and regulated all commercial transactions between Revlon and its customers (similarly, concerning merchandising franchise plans with pharmacists). It is not suggested that those conditions in some way constitute a sham; and nor could such a suggestion be made, because they were inserted for the express purpose of ensuring that the contracts operated according to their terms.

The legal structure of the merchandising franchise plan and the orders and invoices which incorporate the amendments recommended by senior counsel reflect the commercial reality of the business arrangements between the parties. Revlon dealt with its customers by supplying them with goods, including selling aids, and Revlon received payment from them for those goods. Revlon's staff were aware of the fact that selling aids should not be given away but sold as part of a composite price for the primary goods and the testers and the selling aids. Revlon did all it reasonably could as a matter of corporate policy to ensure that its staff were aware of the changes to the terms and conditions of sale and to the merchandising franchise plan. The new standard terms and conditions of sale and the new merchandising franchise plan were explained to all Revlon sales personnel during regular sales meetings held about four to five times a year. Those personnel were instructed that testers, promotional aids and other selling aids which formed part of an order were not given away but were the subject of a composite sale. The personnel were also instructed to explain that situation to the retailers with whom they dealt if and when the subject arose; and this they did.

The relevant terms and conditions have been inserted on the reverse of all order forms, invoices and applications by new customers for a credit account and they have been incorporated in other correspondence with customers dealing with Revlon's terms of business, and have been incorporated in the merchandising franchise plan.

Condition 1 appearing on the order forms and invoices deals with the passing of property in the goods from Revlon to the customer, namely, at the time when the goods are placed on the vehicle which is to effect delivery from the store or warehouse of Revlon or other store or warehouse from which the goods are dispatched to the customer.

Condition 10 ensures that the invoices to be issued by Revlon show a composite price for the products and selling aids and that there is no requirement for Revlon to itemise separately the consideration for products or the selling aids. Condition 9 in its opening words provides that the purchase price shall be applicable to all of the products sold including selling aids.

The merchandising franchise plan contains substantially the same provisions, see in particular clause 3(b).

It was argued on behalf of the Commissioner that the invoice contains nothing relevant to the contract under which the goods are sold because the offer constituted by the order form is an offer by the retailer to Revlon to purchase the goods nominated on the order form at the prices there stipulated. The offer is accepted when the goods are appropriated to the order; and title passes to the customer when the goods are loaded at the relevant warehouses. As the invoice is not dispatched to the retailer until the goods have been loaded, it forms no part of the contractual terms.

I reject this argument. The invoice accompanies the goods themselves when they arrive at the purchaser's place of business. Indeed, the conditions of sale which attach to the order form (condition 9 in particular) expressly state that the consideration applicable to the merchandising units, testers and other selling aids shall be the difference between the total invoice price and the consideration applicable to the product. Thus, the invoice is expressly incorporated as part of the contract. See also condition 10. See clauses 3(b), (c) and clause 5 of the merchandising franchise plan.

Even if it were correct (and I do not think it is) that the part of condition 9 that deals with the question of apportionment of price is void for uncertainty it would still follow in my view that under the terms of the contract between Revlon and its customers (also the franchise merchandising plan), property in the selling aids passes to the customer as part of the composite price, albeit that no particular price is assigned to them. They are, as it were, thrown in with the goods that are the primary subject of the purchase. But the property in the selling aids nevertheless passes to the customer; it is auxiliary or an adjunct to the goods which constitute the subject of the purchase. In my opinion effect must be given to the conditions of sale and the merchandising franchise plan which achieved the purpose of sale of the selling aids, notwithstanding that they were inserted for sales tax purposes.

Condition 9 is concerned with allocating the total invoice price between the products and the selling aids. I do not find it easy to construe. The fact that more than one possible construction may be available does not lead to the conclusion that the clause is uncertain. The reported cases are replete with instances of courts upholding the certainty of provisions in contracts where more than one construction is available. Indeed a number of the principles of construction of documents have evolved to provide for this very circumstance, in particular in the case of commercial contracts.

It is of no consequence that the parties never actually had to ascertain precisely how clause 9 operated; it was only there if a problem arose, as indeed several of the witnesses said, but problems did not arise. I accept the correctness of the argument of counsel for Revlon concerning this question.

The following passage from the speech of Lord Wright in Scammell v Ouston at 268-9 is apt:

'... The object of the Court is to do justice between the parties, and the Court will do its best, if satisfied that there was an ascertainable and determinate intention to contract, to give effect to that intention, looking at substance and not mere form. It will not be deterred by mere difficulties of interpretation ... It is a necessary requirement that an agreement in order to be binding must be sufficiently definite to enable the Court to give it a practical meaning. Its terms must be so definite, or capable of being made definite without further agreement of the parties, that the promises and performances to be rendered by each party are reasonably certain.'

In York Air Conditioning & Refrigeration (Australasia) Pty Limited v The Commonwealth [1949] HCA 23; (1949) 80 CLR 11 Williams J. referred to that passage from Lord Wright's speech with approval at 26.

Williams J. also observed at 26 that if the court comes to the conclusion that parties intended to make a certain contract, it would, if possible, give effect to their intention no matter what difficulties of construction arise. Williams J. also referred with approval to the speech of Lord Wright in Hillas & Co Limited v Arcos Limited [1932] UKHL 2; (1932) 147 LT 503 where his Lordship said at 517:

'The legal implication in contracts of what is reasonable ... runs throughout the whole of modern English law in relation to business contracts ... it is unnecessary, in my judgment, to multiply illustrations of this principle, which goes far beyond matters of price. After all, the parties being business men ought to be left to decide what degree of precision it is essential to express in their contracts, if no legal principle is violated'.

Williams J. went on to say at 27 that there is no objection to parties agreeing that the ascertainment of some fact in the performance of the contract shall be a matter of 'estimation, approximation and apportionment', citing in support Milnes v Gery [1807] EngR 448; (1807) 14 Ves Jun 400; 33 ER 574, where Sir W Grant M.R. said:

'the case of an agreement to sell at a fair valuation is essentially different. In that case no particular means of ascertaining the value are pointed out: there is nothing therefore, precluding the Court from adopting any means, adapted to that purpose.'

See also the judgment of Dixon J. at 60.

The Council of the Upper Hunter County District v Australian Chilling and Freezing Co Limited [1968] HCA 8; (1968) 118 CLR 429 concerned clause 5 of an agreement for the supply of bulk electricity by a supplier which itself obtained its electricity in bulk from generating sources. Clause 5 said:

'It is agreed that during the term of this agreement if the supplier's costs shall vary in other respects than as have been hereinbefore provided the supplier shall have the right to vary the maximum demand charge and energy charge by notice in writing to the purchaser.'

It was held that this clause was not void for uncertainty. It could not be said that the words 'supplier's costs' were meaningless however wide might be the area of possible disagreement as to its denotation in a particular case. Barwick CJ said at 436-7:

'But a contract of which there can be more than one possible meaning or which when construed can produce in its application more than one result is not therefore void for uncertainty. As long as it is capable of a meaning it will ultimately bear that meaning which the courts, or in an appropriate case, an arbitrator, decides is its proper construction: and the court or arbitrator will decide its application. The question becomes one of construction, on ascertaining the intention of the parties, and of applying it.'

His Honour then cited Lord Tomlin's words in Hilas v Arcos at 512 in support of his view and also referred to Lord Wright's speech in Scammel v Ouston where his Lordship said that the cantract cannot be held to be void or uncertain or meaningless so long as the language employed by the parties is not:

'so obscure and so incapable of any definite or precise meaning that the court is unable to contribute to the parties any particular contractual intention'.

Barwick C.J. went on to say at 437 that in the search for that intention no narrow or pedantic approach is warranted, particularly in the case of commercial arrangements. Thus, uncertainty of meaning is distinguished from absence of meaning or of intention. McTiernan and Kitto JJ. agreed with the Chief Justice, as did Windeyer J.

The application of these principles leads to the conclusion, difficult though the interpretation of condition 9 may be, that it is not so elusive as to be incapable of construction. Even if so much of condition 9 as concerns the apportionment of price were uncertain, it is clear from the conditions of the orders and invoices and from the terms of the merchandising franchise plan that the selling aids are part of the composite price for the primary goods and the selling aids. Property passes in all of them at the same time from Revlon to the purchasers; that is the evident intent of the parties.

If the sales tax legislation contained a provision equivalent to s. 260 of the Income Tax Assessment Act 1936 then the position might be different, but no such provision existed at the relevant time. If there is a lacuna in the legislation then it is for the Parliament, not the courts, to plug the hole.

What was described in argument by counsel for the Commissioner as the 'abandonment point' fails for substantially the same reason. The relevant conditions in the order forms and invoices and the merchandising franchise plan do reflect the true agreement between the parties and form part of their contractual arrangements throughout the relevant period. It is not a case 'where the parties have departed from their initial agreement and yet have allowed its shadow to mask their new arrangement': and is thus distinguishable from Marac Finance Limited v Virtue [1981] 1 NZLR 586 especially per Richardson J. at 588.

The Commissioner's submissions concerning estoppel fail. The argument is misconceived. Revlon acted upon senior counsel's advice. It inserted conditions into its contracts for the very purpose of helping it with sales tax. What is more, Revlon intended the new conditions to constitute the basis of its contracts; and all persons with whom it acted, acted on the faith of the conditions, whether they referred to them in fact or not. Further, even if the facts established a case of estoppel as between Revlon and its customers, the Commissioner could not assert estoppel against Revlon.

Conclusion

I answer the question which is to be decided separately from all other questions in the proceeding as follows:

Question

'Whether the goods described by the Applicant as "testers", "merchandisers", "selling aids" and "promotional aids", supplied by the Applicant to its customers with the goods the subject of the invoices copies of which are exhibited to the affidavits of:

(a) Jennifer Marce South sworn herein 22 June 1994;

(b) Martin Susskind sworn herein on 21 June 1994;

(c) Christopher Arthur Carse Egan sworn herein on 21 June 1994;

(d) Malcolm Leonard Corbett sworn herein on 17 June 1994;

(e) Paul Robert Sidhom sworn herein on 17 June 1994;

(f) Donald Joseph Gardiner sworn herein on 31 May 1994;

(g) Richard Gerard Malouf sworn herein on 20 June 1994;

(h) Catherine Anne Leslie sworn herein on 14 October 1994 (but excluding the transactions dealt with in Exhibits CAL-1, CAL-2, CAL-6, CAL-9, CAL-19, CAL-25, AND CAL-26)

are goods which were for the purposes of the Sales Tax Assessment Acts:

(i) applied by the Applicant to its own use, or

(ii) sold by the Applicant, and if so for what price; or

(iii) dealt with by the Applicant in some other and if so what manner'.

Answer

The goods were not applied by Revlon to its own use. They were sold by Revlon to its customers as part of a composite price for all goods included in the relevant order forms and invoices under the relevant merchandising franchise plan.

Revlon's costs of the proceeding concerning determination of the separate question shall be paid by the Commissioner.

I certify that this and the preceding forty-two (42) pages are a true copy of the reasons for judgment herein of the Honourable Justice Lockhart.

Associate

Dated: 6 February 1997

Counsel for the Applicant : N H M Forsyth QC

B J Sullivan

Solicitors for the Applicant : Abbott Tout

Counsel for the Respondent : A H Slater QC

S J McMillan

Solicitors for the Respondent : Australian Government Solicitor

Date of Hearing : 2 September 1996

Date of Judgment : 6 February 1997