TAXIWAY PTY LTD v COMMISSIONER OF STATE REVENUE (VIC)

Judges:
Byrne J

Court:
Supreme Court of Victoria

Judgment date: Judgment handed down 4 October 1995

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Byrne J

The appellant, Taxiway Pty. Ltd., has appealed pursuant to the Administrative Appeals Tribunal Act 1984 s. 53 against the decision of the Administrative Appeals Tribunal made on 12 May 1995 which confirmed a default assessment of stamp duty made pursuant to the Stamps Act 1958 s. 33. The assessment was made under Part II Division 3 Sub-division 13A which imposes duty upon rental businesses. The scheme of the Sub-division is that a person carrying on a rental business must be registered: s. 131AB, and must lodge a periodic statement of certain money received from that business: s. 131AC(1)(a). Duty is then imposed on a portion of these periodical sums: s. 131AC(1)(b). The issues before the Court on this appeal are as follows:

• 1. Did Taxiway, at the relevant time, conduct a rental business within the definition of that term in s. 131A?
• 2. Was the amount on which the Commissioner has made the assessment money ``received... in respect of rental business for or in relation to the use of goods'', within the meaning of s. 131AC(1)(a)?
• 3. Is the assessment bad having regard to the fact that Taxiway was not registered under s. 131AB, or otherwise?

Rental Business

Rental Business is defined in s. 131AA in the following terms:

```Rental business' means the business of-

• (a) letting, bailing or otherwise giving rights to use goods;
• (b) acquiring the rights of the lessor, bailor or other disponer under any agreement or arrangement for the letting, bailing or hiring of goods or under any other similar agreement or arrangement with respect to the use of goods-

but does not include the business of giving to any person the right to use goods in conjunction with a lease of, or licence to occupy or use, any real property.''

``Goods'' is also the subject of definition in the same section:

```Goods' includes all chattels personal and fixtures severable from the realty but does not include money, livestock or things in action.''

Taxiway is the owner of a number of licensed taxis. It enters into agreements with licensed taxi drivers pursuant to which they are entitled to use its taxis and, in exchange, it derives income in the form of a share of the fares received by the taxi drivers. Pursuant to the Transport Act 1983, a person may not operate a commercial passenger vehicle, in this case a taxi, unless it is licensed under Division 5 of that Act. A licence is granted to the owner or the intending owner of a taxi: s. 143A(2). The holder of the licence may assign it to another person pursuant to s. 150. Nevertheless, the licence is granted with respect to a specific vehicle: s. 139(2), subject to the power of the Licensing Authority to permit a substitution for that vehicle, either temporarily: s. 151, or generally: s. 152.

The agreement pursuant to which Taxiway permits the taxi driver to use the taxi is in a standard form and is called ``Driver Leasing Agreement''. The document adopts conventional leasing terminology, not only in the title but also in its description of the parties and in its principal clause:

``1. The Lessor leases the vehicle during such hours and for such periods as the parties shall mutually agree upon until this Agreement is determined as hereinafter provided.''

and in the consideration clauses:

``3. The Lessee agrees with the Lessor as follows:-

• (a)...
• ...

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• (d) to pay to the Lessor as rent for the leasing of the vehicle and of the licences upon which the vehicle operates fifty per cent (50%) of the gross revenue (excluding any gratuities) received by the Lessee from the hiring of the vehicle pursuant to hiring rates and fares from time to time determined by the Authority. The said fifty per centum (50%) of the gross revenue payable to the Lessor shall be appropriated as to twenty per centum (20%) for rental of the vehicle and eighty per centum (80%) for rental of the said licence.
• (e) to pay to the Lessor the rent provided in the preceding sub-clause in such manner and at such intervals as the Lessor may reasonably require PROVIDED that not more than one rental payment shall be required by the Lessor in any period of twenty-four consecutive hours.''

The first submission put on behalf of Taxiway is that its business is not that of ``letting, bailing or otherwise giving rights to use the [taxis]'' but rather that of conducting a taxi business. This is because the taxi driver is Taxiway's agent or, alternatively, it is conducting a common enterprise of taxi business with the taxi driver concerned. Support for this proposition was sought from the recent decision of Hedigan, J. in
Emjay Motors Pty. Ltd. v. Armstrong (unreported, Supreme Court (Vic), 5426/1995, 24 August 1995). That case raised the issue whether the owner of a taxi who had permitted a taxi driver to use it as such was vicariously liable to a third party for damage caused by the negligence of a taxi driver. The agreement between the owner and the taxi driver was, for practical purposes, the same as the one used by Taxiway in this case. In that case his Honour declined to overturn the finding of a Magistrate that the owner was vicariously liable for the acts of the driver on the basis that it should be treated as his principal. Such a finding, his Honour said, was open to the Magistrate on the evidence, including and perhaps notwithstanding, the Driver Leasing Agreement. To my mind such a conclusion is not determinative of the legal issue before me. My task is to characterise the business conducted by Taxiway, not to determine what its legal position was with respect to third parties. Accepting that I had before me all the facts which confronted the Magistrate in the Emjay case (which I do not), it would not follow that the terms of the Driver Leasing Agreement lead to the conclusion that the business was other than that of letting, bailing or otherwise giving rights to the taxi driver to use the taxi in question. Clause 4(a) of the Driver Leasing Agreement puts the matter beyond argument:

``4. The Lessor agrees with the Lessee as follows:-

• (a) to permit the Lessee (without giving him any proprietary interest in the vehicle) to have exclusive use and possession of the vehicle during the hours and periods provided in Clause 1.''

See also cl. 5. It is for this that the driver pays a share of the takings. This is the business of Taxiway.

It is put, then, that the two, Taxiway and the driver, are engaged in a common enterprise. In a sense this is true since the combination of their activities produces income which they share. But this, I think, is likewise beside the point. The systematic practice of Taxiway in bailing the taxis to the drivers or in giving them rights to use the taxis is its business.

It was then submitted that what Taxiway was letting or permitting to be used was, first, a vehicle and second, a licence. It will be recalled that the statutory definition is concerned with goods only and that these do not include choses in action. It was accepted on behalf of the Commissioner that a licence was a chose in action. Under cl. 3(d) the share of the driver's takings which is payable to Taxiway is apportioned as to 80% for the use of the licence and 20% for the use of the taxi, the goods. This argument bears upon the issue under consideration and also upon the second issue to which I will turn in due course.

I start from the position that the parties may agree what they like and they apportion the fee as they choose. The Court, however, must concentrate on the substance of the arrangement rather than its form.
S.A. Crate Pty. Ltd. v. The State of South Australia 83 ATC 4587 at 4593; (1983) 35 S.A.S.R. 92 at 99, 14 A.T.R. 687 at 694, per Walters, J. See also
Esanda Finance Corporation Ltd. v. Commr of Stamps (unreported SC (SA), Perry, J., SCGRG - 91 - 2554, 7th August 1992). My present task, however, is to characterise the business of

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ATC 4670

Taxiway. Its argument is that, since the hiring of the licence represents 80% of its income, its business should be characterised as that of renting choses in action, the car being merely an incidental adjunct to this business. In principle, I would have no difficulty in accepting this submission in the appropriate case. In
A.N.I. Corporation Ltd. v Commr of State Taxation (WA) 90 ATC 4714; (1990) 21 A.T.R. 697, it was not and could not have been suggested that the business of a hirer of plant and equipment would be transformed into that of a retailer of petrol or other goods simply because these items were sold, as it were, as a by-product to its rental activity. As McPherson, J. said in
Cyclone Scaffolding Pty. Ltd. v. Commr of Stamp Duties (Qld) 84 ATC 4812 at 4818; (1984) 15 A.T.R. 1134 at 1141:

``... the word `business' used in a context such as this ordinarily refers not to a particular activity but to a series of activities all of which, when taken together, go to make up a single occupation or trade, to which some general description can be or is applied. In the present case that activity can fairly be described as the business of hiring out scaffolding. The process or activity of carting to and delivering the scaffolding on site, of insuring it, and of cleaning or repairing it on its return, are simply incidents of the appellant's business of hiring out scaffolding. They all form part of that single business, and are not capable of being regarded as separate or independent businesses carried on by the appellants.''

To my mind the true nature of the business of Taxiway is that of letting or bailing to taxi drivers, or giving rights to them to use licensed vehicles. This may be tested by asking what would happen if it sought to deliver to taxi drivers vehicles without an appropriate taxi licence. It would, of course, be, practically speaking, impossible to lease to them the licence without the taxi to which it relates. Counsel for Taxiway responded to this question by saying that the driver would then be obliged to pass on as rental only 20% of the lessor's share of takings. Without expressing any view as to the legal correctness of such a solution, I suspect that it would be a surprising one for both the parties to the Driver Leasing Agreement. The truth is that the subject matter of this agreement and that which the driver is permitted to use is not a car, but a car with a particularly valuable characteristic attached to it. The taxi licence is an important appurtenant to the taxi. The business of Taxiway is that of leasing or bailing licensed taxis to taxi drivers or giving them rights to use licensed taxis for reward.

Money Received for the use of Goods

The argument here fastened upon the terms of s. 131AC(1)(a)(i) which imposes a duty upon a registered person to lodge a statement as to certain receipts. These are:

``... the total amount received... in respect of rental business for or in relation to the use of goods...''

There are, relevantly, two qualifications on the money received. The first, that it be received in respect of rental business, is answered by identifying the nature of the business (if any) from which the money was received. In this case I have determined that the business conducted by Taxiway is a rental business. It is clear that the money received from a taxi driver is a receipt of that business and not of some other business.

The second qualification is that the money has been received for or in relation to the use of goods. In this case, the goods in question are licensed taxis. The argument of Taxiway is that the money, or part of it, was not received for or in relation to the use of goods, but rather for or in relation to the use of the taxi licence. I have indicated my reasons for concluding that it is not realistic to sever the licence from the taxi. This conclusion also means that Taxiway's submission on this issue must fail. The money was received for or in relation to the use of licensed taxis.

The Assessment

This submission was that the obligation to lodge a statement under s. 131AC(1)(a) and that to pay duty under s. 131AC(1)(b) lies only on a registered person. Since Taxiway was not a registered person no obligation arises. This conclusion follows, it was said, notwithstanding that Taxiway ought to have been licensed having regard to s. 131AB. The Comm- issioner's answer to this is to refer to s. 33(1)(d). Under this provision the Commissioner may issue a default assessment where there is reason to believe that a person, Taxiway, is required to be registered and, if so registered, would be liable to pay duty. This

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ATC 4671

was plainly the case. This is what the Commissioner did.

In the result, therefore, the appeal will be dismissed with costs.