Mayne Nickless Limited v. Federal Commissioner of Taxation
Judges:Marks J
Court:
Supreme Court of Victoria
Marks J.
The issue in this proceeding is whether 19 armoured vehicles (``the armoured vehicles'') manufactured between 1 August 1987 and 30 April 1988 at the request of and to the specifications of the plaintiff are exempt from sales tax.
The defendant has not issued an assessment but has defined its stand adversely to the plaintiff who seeks determination of the matter by a declaration from this Court.
The parties agree in the circumstances that this Court has jurisdiction and, although the matter has not been argued, it seems that it has.
The relevant statutory provisions are sec. 5 and item 113G of the First Schedule to the Sales Tax (Exemptions and Classifications) Act 1935 (``the Act'').
The provisions are to be understood against the background of the Sales Tax Assessment Act (No. 1) 1930 which provides for liability to pay sales tax. Section 5(1) of the Act states:
``Notwithstanding anything contained in any Sales Tax Assessment Act, sales tax shall not, subject to this section, be payable upon the sale value of any goods covered by any item or sub-item in the first column of the First Schedule, under any Act specified in
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the second column of that Schedule opposite that item or sub-item.''
The relevant exemption item under the First Schedule is 113G which is expressed as follows:
``(1) Equipment of a kind used exclusively, or primarily and principally, in the course of industrial operations to protect persons engaged in those operations, including masks, respirators, shields, goggles, vizors, helmets, belts and machine guards.
(2) Parts for goods covered by sub-item (1).''
The words ``exclusively, or primarily and principally'' were inserted by cl. 26 of amending Act No. 142 of 1981 after the word ``used''.
Without recourse to the parliamentary debates, the position of similar words in other items of the Schedule and the submissions of Mr Shaw Q.C. for the plaintiff on the rules of grammar, I had at first read the additional words as governing ``to protect''. However, I am persuaded that, although one would expect a comma after the word ``operations'', the better view is that they govern the ``course of industrial operations''.
The explanatory memorandum circulated with the Sales Tax (Exemptions and Classifications) Amendment Bill 1981 stated in respect of cl. 26 which proposed amendment to item 113G by adding the words ``exclusively, or primarily and principally'':
``The intention of the item was to exempt industrial safety equipment but as presently expressed, goods which are not in the nature of industrial safety equipment may qualify for exemption. The amendment will restore the original intention of the exemption by declaring that exemption will apply only where the equipment is of a kind used exclusively or primarily and principally for industrial safety purposes.''
(emphasis added)
It would seem therefore that the concern of the legislature was not to express the degree to which the designated equipment is used to protect persons engaged in industrial operations but the degree to which the equipment, although to protect the safety of persons, is used in industrial operations. Take respirators for example. It may be that respirators are used outside industry to protect the safety of persons perhaps with asthma or of others doing domestic work which might expose them to fumes. These uses (although to protect persons) would render the exemption inapplicable.
The item is I think expressed ambiguously particularly in the absence of a comma after the word ``operations'' so that it is appropriate to have recourse to the explanatory memorandum. (See Acts Interpretation Act 1901 (Cth) sec. 15AB(1)(b)(i) and (2)(e).)
The armoured vehicles were custom-built for the plaintiff by Chariot (Australia) Pty. Ltd. (``Chariot''), who named them ``Charioteers'', for provision of security services by the plaintiff to its clients in the delivery of cash and valuables to banks, financial institutions, employers and other corporations.
It was submitted by Mr Graham Q.C. for the defendant that the services provided by the plaintiff were not ``industrial operations'' within the meaning of the item. There is, I think, a foundation for this submission both in the nature of the items mentioned in 113G and in the parliamentary debates which appear to assume a distinction between operations of the kind performed in factories and other operations. However it is virtually impossible to draw a line around ``industrial operations'' so that the exemption might apply to some operations in the workplace and not others. I am disposed to think that the expression ``industrial operations'' is to be understood to apply generally to tasks performed in the course of employment and that the exemption is intended to apply to safety equipment used in the performance of those tasks. In any case, I assume that the services provided by the plaintiff in picking up and delivering cash and valuables are ``industrial operations'' within the meaning of item 113G.
The question then, in essence, is whether the armoured vehicles were ``equipment of a kind used'' ``to protect persons'' engaged in the provision of the relevant services of the plaintiff.
The submissions on behalf of the plaintiff turned substantially, if not entirely, on the construction and design of the armoured vehicles. These are unique.
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The manufacturing process commenced with the purchase by Chariot of a base vehicle unit from International Harvester Corporation which produces a ``Nissan'' truck. The unit is basic, being a chassis on wheels fitted with an engine and a lift-up cabin over it. Chariot paid for it $21,650 including $3,707 sales tax making a net figure without sales tax of $17,943.
The construction of the armoured vehicle then involved the removal of the original cabin and relocation of the front axle, steering box and rear axle. The effect was to shorten the overall length and provide suitable axle loading, turning circle and layout. The front axle was moved back about eight inches and the engine moved forward so as to be in front of, instead of underneath, the cabin in which the driver of the armoured vehicle sits. This has two purposes; one to provide protection in front of the driver, the other to permit access by the driver to the rear without getting out of the vehicle. The purpose of the ``walk-thru'' concept allows the driver to be protected from attack by having access to the rear of the vehicle without having to leave it.
Modifications to the engine were made by replacing manual with automatic transmission and by fitting a new sump.
Extra cross-members were fitted to the chassis to strengthen it and facilitate provision of the automatic transmission.
Other modifications included provision of four instead of two batteries to maintain increased supply to service air-conditioning, internal and external lighting and to provide emergency back-up for engine starting.
Air-conditioning must be capable of remaining operative for long periods whilst the vehicle is stationary. This is because exit doors remain closed at all stages of operation and all windows sealed.
The entirely new cabin comprised fibreglass with an inner support frame of bullet-resistant steel in critical areas.
The body was constructed of tubular steel frames which incorporated window apertures, door pillars, floor bearers and the like. A bullet-resistant outer skin of steel was welded to the frames which, when assembled, formed the sub-unit of the body.
The armoured vehicle in its completed state is, I find, a unique item uniquely fitted out. The construction and layout serve the purpose of diminishing the chance of robbery of items carried by the vehicles. The materials used, the layout and provision of a pneumatic sliding door between the driver and members of the crew and interlocking doors resulted from many years of experience and information from overseas.
The windows are of bullet-resistant material and the bonnet of the engine is lined and shaped to give further protection to the crew.
At the centre of the rear frame is a door for quick loading and unloading. In the left-hand rear corner there is a compartment of ballistic steel with a hinged door on the inside and a lift-up door on the outside. These doors are mechanically interlocked so as to prevent both doors being opened simultaneously. This means that a package can be placed between the two doors so that when the outside door is opened no access to any part of the vehicle can be obtained other than to the small compartment into which the package has been placed by opening the internal door whilst the external door is closed and locked.
The external skin of the vehicle is also fitted with a payout slot which allows the crew to deliver pay envelopes without exposure to risks from the outside.
The vehicle is fitted with a radio system allowing contact with an external base. All the door locks, door handles and other fittings are specially made to comply with the overall concept.
The salient feature is the achievement of a vehicle which allows pick-up and delivery of cash and valuables without the driver at any time being compelled to leave his seat or being exposed to an external influence. This means that he is protected, as also is his load, at all times when the vehicle is most vulnerable to attack. No protection, of course, can be absolute but the armoured vehicles achieve a degree of security not previously reached. For practical purposes, robbery of the contents of an armoured vehicle, at least before any discharge in the course of delivery, is made an unrealistic proposition for robbers.
The armoured vehicles were purchased by the plaintiff for $99,000 exclusive of sales tax. The breakup of manufacturing costs is roughly
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25% for the chassis and 75% for the modifications.Whilst emphasis is to be placed on the modifications directed to protection of the crew the concept includes provision of shelving and other space for a substantial load.
Mr Shaw Q.C. submitted that the essential question is whether an armoured vehicle is ``equipment'' of a kind used exclusively or primarily and principally in the course of industrial operations.
I have already indicated that I think that the armoured vehicle is used to the required degree in the course of the operations of the plaintiff. But I think that the question is whether it is equipment to protect the persons involved, within the meaning of the item.
An early question is whether the armoured vehicle is ``equipment''.
Mr Shaw referred to
Coltman v. Bibby Tankers Ltd; The Derbyshire (1988) A.C. 276; (1987) 3 All E.R. 1068; (1987) 3 W.L.R. 1181 where the House of Lords held that a 90,000 ton bulk carrier which sank off the coast of Japan with the loss of all hands was ``equipment''.
He submitted that their Lordships held that the decision rested on what their Lordships regarded as the ordinary meaning of ``equipment''.
It is necessary to take a closer look at Coltman. In the upshot, I am not persuaded that the decision rested other than on the meaning given to the word in the context of the legislation which the House was there required to interpret.
In Coltman the claim was by a widow of a seaman who had lost his life. There was admitted negligence in the manufacture of the tanker which was the cause of the sinking but none was sought to be established against the employer which owned the tanker. The claim of the widow was pursued in reliance on the Employers Liability (Defective Equipment) Act 1969 which was introduced to rectify the possible hardship to an employee resulting from the decision of the House of Lords in
Davie v. New Merton Board Mills Ltd. (1959) 1 All E.R. 346; (1959) A.C. 604 (see (1987) 3 All E.R. 1068 at p. 1070). The statute imposed strict liability on an employer where injury resulted from a defect in equipment provided by him ``for the purposes of the employer's business'' notwithstanding that there was no negligence on his part. The word ``equipment'' was defined by the statute to include ``any plant and machinery, vehicle, aircraft and clothing''. It was held that the word ``vehicle'' did not include a bulk tanker so that the problem was perceived to have been posed by the absence in the definition of any reference to a ship.
The House held that having regard to the purpose of the legislation and the context of the Act the word ``equipment'' was to be understood as including the bulk tanker.
The principal speech was given by Lord Oliver of Aylmerton who said ((1987) 3 All E.R. 1068 at p. 1071):
``I do not doubt that the word [`equipment'] is frequently and quite properly used to describe the appurtenances of some larger entity, but I can see no reason either in logic or as a matter of language why its use should be so confined.''
His Lordship referred to the Oxford English Dictionary definition of ``equipment'' and to the judgment of O'Connor L.J. in the Court of Appeal that the word necessarily imported a restriction to parts of a larger whole. Lord Oliver went on to say (at p. 1071):
``your Lordships are concerned not with the meaning of `equipment' simpliciter but of the composite phrase `equipment provided by his employer for the purposes of the employer's business'.''
An analogous observation is to be made here. I am not concerned with the meaning of the word ``equipment'' simpliciter but of the expression ``equipment of a kind... to protect persons...''.
These words in my opinion, are readily seen as apt to describe what is ordinarily spoken of as ``safety equipment''.
Whilst many things might well be ``equipment'', as in the given context the bulk tanker was held to be, not all equipment is ``safety equipment'' or ``equipment of a kind to protect persons'' in the course of industrial operations.
Circumstances, not easily contemplated, might demonstrate that there is a distinction between ``safety equipment'' and ``equipment
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to protect persons'', but it is not readily apparent to me. In the present context, ``equipment of a kind to protect'' is analogous to, if not the same as, ``safety equipment''. The words ``of a kind'', in my opinion, make it clear that the equipment (which is exempt) is that which is to protect persons in the course of industrial operations.The ``equipment'' contemplated is not difficult to identify in a particular case if the ``use'' of it referred to in item 113G is ancillary to the industrial operations rather than a ``use'' to perform the operations themselves. If not, identification of an exempt item would be very difficult indeed. I must confess that as language is ordinarily used I cannot think of any ``safety equipment'' which itself is used to perform an industrial operation. It seems to me to be a contradiction in terms.
The bulk tanker in Coltman, for example, is hardly to be described as ``equipment of a kind'' to protect the crew from drowning (which when afloat it certainly does) rather than a container in which to carry oil across the sea.
Similarly, one might ask whether a truck manufactured with a specially insulated skin, built-in refrigeration machinery and designed to carry meat carcasses is ``equipment'' to protect meat during transport or a vehicle to transport meat safely.
In the present case the armoured vehicle, in my opinion, is used to transport cash and valuables. For that use, it is constructed and designed so as to reduce the risk of loss of the cash and valuables, and this necessarily involves construction and design to protect the persons performing the services from the risk of injury or death. Essentially, the design and construction of the vehicle is to promote use of the service at a fee by clients of the plaintiff. The safety measures emphasised on behalf of the plaintiff go to the operation itself, that is, the provision of the service. The construction, design and method which relate to protection of persons are incapable of isolation as ``equipment''.
The policy of the sales tax legislation is to impose a once only tax on goods manufactured in or imported into Australia. It may well be that justice would be better served if some allowance was capable of being made in a case like the present. But this is the concern of the legislature. It is true that the armoured vehicle involves protection of persons but that protection is a necessary by-product of making the service attractive to clients of the plaintiff. Such protection or added protection does not mean that the entire vehicle (which alone can be the subject of the exemption) is ``used'' to protect those persons within the meaning of the exemption as expressed in item 113G.
It was submitted on behalf of the plaintiff that equipment such as the armoured vehicle might properly be regarded as having more than one use. It was submitted that a use, even if not the only use, is to protect the crew comprising the driver and one or two armed guards. Counsel referred to
D.F.C. of T. v. Lincoln Industrial Cleaners Pty. Ltd. 75 ATC 4208; (1975) 7 A.L.R. 118 where Sheppard J. provided a test of ``appreciable use'' in relation to a carpet cleaner which also could be used as an insecticide, the latter being exempt under item 139.
In
Ready Mixed Concrete (Vic.) Pty. Ltd. v. F.C. of T. 69 ATC 4038; (1968) 118 C.L.R. 177 Kitto J. discussed the meaning of the word ``use'' in another context. In
F.C. of T. v. Hamersley Iron Pty. Ltd. 81 ATC 4582; (1981) 37 A.L.R. 595 the Full Court considered whether stacking equipment used at mines and shipping installations was ``used'' ``in the mining industry in carrying out mining operations and in the treatment of the products of those operations'' within the meaning of exemption item 14 of the First Schedule to the Act. That case, in my opinion, turned on questions of fact. Members of the court there did not say anything at variance with the approach I favour here.
In
I.C.I. Australia Operations Pty. Ltd. v. D.F.C. of T. 87 ATC 5110 the Full Court held that the expression ``road vehicles of the kind ordinarily used'' gave rise to consideration of the ``primary purpose'' or ``use''.
In
D.F.C. of T. v. Stewart & Anor 84 ATC 4146 the High Court took into account the actual use to which the subject machines were put.
It seems to me that each case turns on its own facts and that it is impossible to extract from the authorities any principle or test which would govern the meaning of the word ``use'' in item 113G.
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In particular I am not persuaded that the test applied by Sheppard J. in Lincoln is appropriate in the present case.
In order to determine whether the exemption applies it is unnecessary, in my opinion, to do more than pose the question whether the equipment under consideration is of a kind used exclusively or primarily etc. in the course of industrial operations to protect persons engaged in those operations.
The equipment envisaged ought not to be difficult to identify. The examples in item 113G provide a good guide to the intention of the legislature. They have effectively the one function namely protection of some kind by apparatus, mechanism or device for use ancillary to the operations. Such things might coincidentally provide other benefits or perform other functions so as to be regarded as having another purpose. For example, a helmet on a building site, as counsel suggested, might keep a person's head warm in winter but this hardly describes the ``use'' in a meaningful way, to which the helmet is put.
It is difficult to think of an instance where equipment used to protect persons at work might be used for some other purpose (except, of course, to protect persons doing something other than in the workplace). Counsel were unable to provide me with any satisfactory example.
For these reasons, I am not satisfied that the armoured vehicles are exempt items within item 113G of the First Schedule to the Act.
The proceeding is dismissed with costs.
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