BHP Billiton Limited v Commissioner of Taxation

This case concerned an appeal by BHP Billiton Limited ("Ltd") against a decision of the Commissioner of Taxation. The dispute revolved around whether income derived by a controlled foreign company, BHP Billiton Marketing AG ("BMAG"), should be included in Ltd's assessable income under Part X of the *Income Tax Assessment Act 1936* (Cth). Specifically, the issue was whether certain Australian entities of BHP Billiton Plc ("Plc") were "associates" of BMAG, which would lead to the attribution of BMAG's income to Ltd. The matter was heard by the High Court of Australia.

The central legal questions before the court were whether the Australian entities of Plc were "associates" of BMAG for the purposes of the Act, and whether Ltd was "sufficiently influenced" by Plc, or Plc was "sufficiently influenced" by Ltd, or whether BMAG was "sufficiently influenced" by Plc and Ltd. These questions hinged on the interpretation of the "associate" provisions in section 318 of the Act, particularly the meaning of "sufficiently influenced" under section 318(6)(b), which requires a company to be accustomed, under obligation, or reasonably expected to act in accordance with the directions, instructions, or wishes of another entity.

The High Court reasoned that for a company to be "sufficiently influenced" by another, it is not necessary for the influencing entity to have "effective control." Instead, the test is whether, as a matter of past or present fact, or future expectation, the company or its directors are accustomed, or under a formal or informal obligation, or might reasonably be expected, to act in accordance with the directions, instructions, or wishes of the other entity. The court found that the dual-listed company arrangement between Ltd and Plc, established by a DLC Structure Sharing Agreement, required them to operate as a "single unified economic entity" with common boards and unified senior executive management. Directors were obliged to consider the interests of shareholders of both companies as if they were a single entity, and their constitutions expressly permitted them to act in accordance with the terms of the arrangement, even if solely in the interests of the other company. This arrangement demonstrated that the companies were accustomed and reasonably expected to act in accordance with each other's wishes.

The appeal was dismissed with costs.