• The impact of this case on ATO policy is discussed in Decision Impact Statement: Dreamtech International Pty Ltd v Commissioner of Taxation (Published 22 December 2010).

DREAMTECH INTERNATIONAL PTY LTD v FC of T (No 2)

Judges:
Stone J
Gordon J
McKerracher J

Court:
Full Federal Court, Melbourne

MEDIA NEUTRAL CITATION: [2010] FCAFC 103

Judgment date: 11 August 2010

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Stone, Gordon & McKerracher JJ

1. Dreamtech International Pty Ltd (the Appellant ) is a licensed motor vehicle dealer which imports, modifies and then on-sells vehicles to businesses within Australia. The dispute concerns whether a Krystal Hummer H2 motor vehicle, stretched to carry 14 passengers, (the Hummer ) and imported by the Appellant, is a "limousine" for the purposes of subparagraph (b) of the definition of "car" in s 27-1 of the A New Tax System (Luxury Car Tax) Act 1999 (the LCT Act ).

Statutory context

2. Under s 7-5 of the LCT Act, luxury car tax is payable on all taxable importations of luxury cars. Section 7-10(1) provides you make a "taxable importation of a luxury car" if the luxury car is imported and you enter the car for home consumption. So far as is presently relevant, "luxury car" is defined in s 25-1(1) of the LCT Act as a "car whose luxury car tax value exceeds the luxury car tax threshold" (Emphasis added).

3. Section 27-1 defines "car" as:

"… a motor vehicle … that is:

• (a) designed to carry a load of less than 2 tonnes or fewer than 9 passengers; or
• (b) a limousine (regardless of the number of passengers it is designed to carry). "

  (emphasis added).

4. There was no dispute that the Hummer was imported and it exceeded the luxury car tax threshold. The issue was whether the Hummer fell within the definition of "car" in s 27-1 of the LCT Act and, in particular, whether it was a "limousine". "Limousine" is not defined in the LCT Act.

Proceedings below

5. The Administrative Appeals Tribunal (the Tribunal ) affirmed the decision of the Commissioner of Taxation (the Commissioner ) to disallow the Appellant's objection to the imposition of luxury car tax on the Hummer. The Appellant submitted the Hummer was not a vehicle to which the LCT Act applied because it was not a "limousine" and therefore not a "car" for the purposes of s 27-1 of the LCT Act. The Tribunal said the Hummer was a "limousine" for the purposes of the LCT Act.

6. The Appellant appealed to the Federal Court pursuant to s 44 of the Administrative Appeals Tribunal Act 1975 (Cth) (the AAT Act ). The Appellant submitted the Tribunal wrongly disregarded the ordinary meaning of the word "car", had regard to an irrelevant consideration in finding that the Hummer was luxurious and failed to take a purposive approach to statutory interpretation when construing the term "limousine". The Commissioner submitted that the Appellant's "appeal" did no more than impermissibly seek to challenge the Tribunal's findings of fact and the appeal was incompetent. Further, the Commissioner submitted that none of the Appellant's complaints about the Tribunal's decision were sustainable. The primary judge dismissed the appeal and ordered the Appellant to pay the Commissioner's costs of the appeal. The Appellant now appeals to the Full Court.

Appellant's preliminary applications

7. The Appellant made two applications on the morning of the hearing.

Fourth Amended Notice of Appeal

8. The first application sought leave to file a proposed Fourth Amended Notice of Appeal. The Court granted the Appellant the leave that it sought and these reasons explain why that leave was granted. During the course of argument, the Appellant's Counsel conceded that the Fourth Amended Notice of Appeal was for clarification only and did not seek to raise any new ground of appeal. In light of that concession and the fact that the Commissioner had been provided with a copy of the proposed Fourth Amended Notice of Appeal on 6 August 2010 and had prepared his submissions by reference to that form of Notice of Appeal, there was no prejudice to the Commissioner and the hearing of the substantive appeal proceeded by reference to the Fourth Amended Notice of Appeal.

Further evidence on appeal

9. The second preliminary application was to tender further evidence to be received by the Court on appeal. For the following reasons, the Court refused the Appellant leave to adduce the further evidence.

10. The circumstances in which further evidence may be received on appeal in this Court are well established: see
Sobey v Nicol and Davies (2007) 245 ALR 389 at [68]-[72] and the authorities cited. Against the background of the matters raised in Sobey 245 ALR 389, we turn to consider the further evidence sought to be adduced by the Appellant.

11. The further evidence was received on 10 August 2010, the day before the hearing of the appeal, and comprised an affidavit sworn by the Appellant's solicitor (the Solicitor's Affidavit ). The affidavit was not filed in accordance with the Federal Court Rules: see O 52 r 36(6). Given the lateness in filing of this material, the Commissioner was not provided with any sufficient opportunity to respond to it.

12. The Solicitor's Affidavit sought to explain why the further evidence was filed late and exhibited two further affidavits which sought to adduce evidence not adduced before the Tribunal or before the primary judge. The explanation proffered for the delay in adducing the evidence was that despite the Appellant's solicitors being engaged in February 2010, it was not until July 2010 that it became apparent that other importers of Hummers would not seek leave to be joined as parties to this appeal. That explanation for why the evidence was not adduced prior to the day preceding the hearing in this Court is less than satisfactory.

13. The first affidavit exhibited to the Solicitor's Affidavit was sworn by a director of another company (not the Appellant) that had also imported stretched Hummers into Australia. The first affidavit included a paragraph about the severe financial consequences it faced if it had to pay luxury car tax on stretched Hummers. The second affidavit was sworn by a director of the Appellant to the effect that the Appellant had conducted its business on the basis that these vehicles were not subject to luxury car tax and it had not included a luxury car tax component in its price when it on-sold the vehicles.

14. This further evidence is not fresh evidence. It was available at the time of the hearing before the Tribunal and at the time of the hearing before the primary judge. Next, some aspects of the further evidence were contested by the Commissioner. The Court cannot now resolve that disputed factual issue. If the Appellant wanted to raise the further material, it could have, and should have, done so before the Tribunal.

15. Thirdly, and no less importantly, the further evidence was irrelevant to the issues determined by the Tribunal and the primary judge and was irrelevant to any issue raised by the appeal. In particular, whether the Appellant ordered its affairs in the past on the basis that stretched versions of the Hummer were not subject to luxury car tax was and is irrelevant to the ultimate issue - whether the assessment issued by the Commissioner to the Appellant for the tax year ended 30 June 2007 was excessive: see ss 14ZZK and 14ZZO of the Taxation Administration Act 1953 (Cth) (the TAA ) and generally Pt IVC of the TAA; see also
Commissioner of Taxation v Trail Bros Steel & Plastics Pty Ltd [2010] FCAFC 94 at [57],
Commissioner of Taxation v Futuris Corporation Limited (2008) 237 CLR 146 at [24] and
Commissioner of Taxation v Sleight (2004) 136 FCR 211 at [104]. A fortiori, how another taxpayer or group of taxpayers ordered their affairs in any tax year was and is irrelevant:
Bellinz v Commissioner of Taxation (1998) 84 FCR 154 at 167-168;
MLC Investments Ltd v Commissioner of Taxation (2003) 137 FCR 288 at [105] and
Brown v Commissioner of Taxation (1999) 99 ATC 4516; (1999) 42 ATR 118 at [57]. Any rights each may have to object to the imposition of luxury car tax are independent of the Appellant: Bellinz 84 FCR 154.

Appellant's grounds of appeal before the primary judge and the question of law

16. Section 44(1) of the AAT Act provides for an appeal to the Court from any decision of the AAT on a "question of law". Before the primary judge, the question of law identified in the Notice of Appeal was:

"Whether the Tribunal erred in law by misconstruing the meaning of 'limousine' in paragraph (b) of the definition of 'car' in section 27-1 of the [LCT Act]."

17. It was common ground that the question of whether the Hummer fell within the definition of "car" in s 27-1 of the LCT Act is a question of law:
Hope v The Council of the City of Bathurst (1980) 144 CLR 1 at 7 and
Federal Commissioner of Taxation v Broken Hill South Limited (1941) 65 CLR 150 at 154. However, the dispute between the parties concerned whether construction of the word "limousine" was a question of fact or on a question of law. Contrary to the Appellant's submissions, it was a question of fact. That requires some explanation.

18. The process by which the question of whether the Hummer fell within the definition of "car" in s 27-1 of the LCT Act (a question of law) was explained by Kitto J in
NSW Associated Blue-Metal Quarries Limited v Federal Commissioner of Taxation (1956) 94 CLR 509 at 511-512 (and adopted by Mason J in Hope 144 CLR 1 at 7-8):

• 1. It is necessary to decide, as a matter of law, whether the LCT Act uses the word "limousine" in any other sense than that which it has in ordinary speech: NSW Associated Blue-Metal 94 CLR 509 at 511-512; Hope 144 CLR 1 at 7-8 and
  Collector of Customs v Pozzolanic Enterprises Pty Ltd (1993) 43 FCR 280 at 287;
• 2. If the word "limousine" is to be given its ordinary meaning, the common understanding of the word has to be determined and that is a question of fact: NSW Associated Blue-Metal 94 CLR 509 at 512; Broken Hill South Ltd 65 CLR 150 at 155;
• 3. Having ascertained the ordinary meaning of the word "limousine", it is necessary to ask whether the material before the Tribunal reasonably admits of different conclusions as to whether the Hummer fell within the ordinary meaning of the word and that is a question of law:
  Australian Slate Quarries Limited v Federal Commissioner of Taxation (1923) 33 CLR 416 at 419; NSW Associated Blue-Metal 94 CLR 509 at 512; Hope 144 CLR 1 at 8; Pozzolanic 43 FCR 280 at 287; and
• 4. If different conclusions are reasonably possible, it is necessary to decide which is the correct conclusion and that is a question of fact:
  Australian Gas Light Co v Valuer-General (1940) 40 SR (NSW) 126 at 136; NSW Associated Blue-Metal 94 CLR 509 at 512; Hope 144 CLR 1 at 10;
  Attorney-General for the State of New South Wales v X (2000) 49 NSWLR 653 at [126].

19. As the Commissioner submitted, in the present case, the Court's jurisdiction was therefore limited to the extent that the Appellant sought to assert:

• 1. the LCT Act uses the word "limousine" in a sense other than that which it has in ordinary speech: see [18(1)] above;
• 2. there was no material before the Tribunal which would justify the meaning the Tribunal gave to the word "limousine": see [18(2) and 18(3)] above; and
• 3. the finding of the Tribunal was otherwise not open to it on the available evidence: see [18(3)] above;

20. In respect of the findings of fact, it was of course open to the Appellant to assert that the Tribunal failed to provide procedural fairness, failed to take into account a relevant consideration, had regard to an irrelevant matter or that the decision was so unreasonable that no reasonable decision maker could have come to it:
Sharp Corporation of Australia Pty Ltd v Collector of Customs (1995) 59 FCR 6 at 12.

21. We now turn to consider the Appeal Grounds raised by the Appellant in this appeal.

Appeal Ground 1 - The Federal Court erred by finding that ground 4.2 of the Appellant's notice of appeal raised a question of fact, not law

22. Ground 4.2 of the Appellant's Notice of Appeal before the primary judge was:

"The Tribunal should have held that the vehicle was not a car within the ordinary meaning of that word and therefore it was not a 'limousine'."

23. The primary judge found that Ground 4.2 did not advance the Appellant's case as it was merely a challenge to the Tribunal's finding of fact that the Hummer fitted within the ordinary meaning of "limousine": para [21] of the primary judge's reasons for decision. The primary judge was correct.

24. First, the Tribunal found that the word "limousine" was to be given its ordinary meaning. As noted earlier, the word "limousine" is not defined in the LCT Act and it has no technical legal meaning. The Appellant referred to
Peacock v Zyfert (1983) 48 ALR 549 and
Baxter Healthcare Pty Limited v Comptroller-General of Customs (1997) 72 FCR 467 in support of the proposition that the word "limousine" was imprecise and that resolution of its meaning was a question of law. Neither case assists. The question for the Court in each case was "the construction of the relevant provision of the tariff" under the Customs Tariff Act in force at the relevant time (Baxter at 474) described by Fox J in Zyfert (at 555) as "complex … with many divisions and sub-divisions and many definitions, or descriptions" so that "shades of meaning [were] bound to arise and to effect conclusions". Here, it cannot be said that the word "limousine" in the definition of "car" in s 27-1(b) of the LCT Act is a "statutory expression [that] has several ordinary senses" when used in ordinary speech: Baxter at 473. In fact, the Appellant not only accepted in its oral and written submissions that the word "limousine" was to be given its ordinary meaning but Ground 4.2 proceeded on that basis.

25. As the word "limousine" was to be given its ordinary meaning, the next task for the Tribunal was to determine the common understanding of the word. Contrary to the well established principle that such a determination is a question of fact (see for example, NSW Associated Blue-Metal 94 CLR 509 at 512 and Broken Hill South Ltd 65 CLR 150 at 155), the Appellant submitted that it can be a question of law. In particular, the Appellant submitted that there was a distinction to be drawn between ordinary words that have no particular relevance beyond the circumstances of the case and those which determine the range of the Act. In the latter case, the Appellant submitted the evolution of a test capable of general application is a question of law. In support of this contention, the Appellant referred to
Brutus v Cozens [1973] AC 854 and
Commissioner of Taxation v Murray (1990) 21 FCR 436. We would reject the Appellant's submission. Neither case provides support for the distinction the Appellant seeks to draw. In each case, the words in the statute were to be given their ordinary meaning. In Murray, the phrase in issue was "works of art" and the tribunal found as a fact that the articles in question fell within the applicable item: 21 FCR 436 at 465. In Brutus, the phrase in issue was "insulting behaviour". The House of Lords held that the decision whether a person had used insulting behaviour was one of fact: [1973] AC 854 at 862-3 and at 865-6.

26. Secondly, and no less importantly, the task urged upon us by the Appellant was a legislative function, not a judicial function:
Marshall v Watson (1972) 124 CLR 640 at 649 per Stephen J citing
Magor and St Mellons Rural District Council v Newport Corporation [1952] AC 189 at 191. Parliament chose the word "limousine". If it had intended to define the word to have a meaning different from its ordinary meaning, it would have. It did not.

27. Each of the "tests" propounded by the Appellant which it urged the Court to adopt as a test for "limousine" ((1) a limousine sedan, (2) a bus for hire with more than 12 seats or (3) a vehicle which would satisfy the category of light omnibus under the Australian Design Rules (the ADRs )) was inconsistent with the express words of s 27-1(b) of the LCT Act and would have required the rewriting of s 27-1(b) by the insertion of additional words, the deletion of existing words, or both. Section 27-1(b) refers to "a limousine (regardless of the number of passengers it is designed to carry)". It does not refer to a "limousine sedan". Section 27-1(b) does not limit the number of passengers to a vehicle designed to carry more than 12 passengers. On the contrary, it states that a vehicle may be a limousine "regardless of the number of passengers it is designed to carry".

28. Finally, in relation to the third proposed test, s 27-1(b) of the LCT Act does not define a limousine by reference to weight or the ADRs. In particular, contrary to the Appellant's submissions, none of the materials support the contention that the LCT Act was confined to "light vehicles", "limousine sedans" or "light omnibuses". The definition of "car" in the LCT Act as originally passed and in its amended form makes no reference to the weight of the vehicle: see [3] above. As the Commissioner submitted, if Parliament had intended to make such a distinction, it would have done so by express words:
Adams v Rau (1931) 46 CLR 572 at 578. The LCT Act expressly excludes certain vehicles from the definition of luxury car in s 25-1 of the LCT Act: see s 25-1(2). The exclusions are not by reference to weight. The exclusions are specific. Stretched hummers are not specifically excluded. Moreover, the Explanatory Memorandum that accompanied the introduction of s 27-1(b) of the LCT Act stated that "the definition of car [was] intended to include all passenger cars (including station wagons), all 4 wheel drive vehicles, light trucks, motor homes, campervans and hearses": Explanatory Memorandum, A New Tax System (Indirect Tax and Consequential Amendments) Bill (No 2) 1999, para 1.70 (the Explanatory Memorandum ). The list does not differentiate on the basis of weight.

29. The ADRs and the elaborate classifications adopted in those rules including such categories as Omnibuses, Passenger Cars (other than Omnibuses), Goods Vehicles and then sub-categories of those general categories such as light omnibuses, light goods vehicles and heavy goods vehicles are not relevant to the present issues. As the primary judge stated at [46], the LCT Act does not refer to or in any way seek to pick up the ADRs and there is no textual footing on which it could be said that the word "car" or the word "limousine" in the LCT Act should be understood by reference to the ADRs. The fact that a "car" is defined in the LCT Act as it is and that "limousine" is within the extended reach of that definition denies any basis to adopt or incorporate the ADRs.

30. For those reasons, we would reject the Appellant's contention that Ground 4.2 of the Appellant's Notice of Appeal before the primary judge raised a question of law. It did not.

Appeal Ground 2 - The Appellant's objection should be allowed in full because the Hummer … was not a "limousine" within s 27-1 of the LCT Act

31. The Appellant submitted that the Tribunal should have held that the Hummer was not a "car" because it was not a "limousine" within the ordinary meaning of that word. It referred the Court to the legislative history of the LCT Act including the Explanatory Memorandum and the LCT Act itself in support of that proposition.

32. First, those materials confirm the word "limousine" has its ordinary meaning: s 15AB(1) of the Acts Interpretation Act 1901 (Cth). Nothing in the LCT Act, its legislative history or the Explanatory Memorandum suggests Parliament intended the word "limousine" be given anything other than its ordinary meaning.

33. Secondly, contrary to the Appellant's submission, the Explanatory Memorandum made it clear that the purpose for amending the definition of "car" in the LCT Act was because:

:… some luxury passenger vehicles, such as stretched limousines, are designed to carry more than 9 passengers. Therefore, these limousines do not fall within the LCT Act. This is contrary to the Government's original intention."

(emphasis in the original).

34. So for example, if a Hummer was imported and it was not stretched, it would be caught by the LCT Act because it was a motor car whose luxury car tax value exceeded the luxury car tax threshold. Until the amendment, if the imported Hummer was stretched to allow it to seat more than 9 passengers, it would have not been caught by the LCT Act. The amendment was intended to remedy that result. The remedy would be to no avail if the Appellant's arguments were to be accepted.

35. Finally, determining the ordinary meaning of the word "limousine" is a question of fact: see [18(2)] above. In Ground 4.2 before the primary judge, the Appellant stated the Tribunal ought to have reached a different finding of fact - that the Hummer was not a "limousine". Fact finding is a task for the Tribunal, not the Court: see
Osland v Secretary to the Department of Justice (2010) 267 ALR 231 at [19] per French CJ, Gummow and Bell JJ citing
Repatriation Commission v O'Brien (1985) 155 CLR 422 at 430. Consistent with that principle, the role of the Court is not to decide whether the Tribunal's findings of fact are correct, but whether there was material upon which the Tribunal could reasonably make such a finding: Broken Hill South Ltd 65 CLR 150 at 155.

36. Here, the Tribunal undertook that fact finding exercise and found that the word "limousine" "incorporate[d] the fact that a limousine is usually considerably larger than a standard road vehicle, conveying a sense of luxurious motor transport driven by a chauffeur": see [29] of the Tribunal's reasons for decision. There was material upon which the Tribunal could reasonably make such a finding including starting with the text (see [2]-[4] above) and then having regard to dictionary definitions of "limousine" (see paragraph [24] of the primary judge's reasons for decision), the legislative history of the LCT Act (see [31]-[34] above) and the words as they are commonly used in colloquial speech. All of those were materials upon which the Tribunal could reasonably make a finding that the Hummer was a limousine for the purposes of s 27-1(b) of the LCT Act.

37. This appeal ground must fail.

Appeal Ground 3 - The Tribunal did not give the word "limousine" its ordinary meaning and this was an error of law. Alternatively, the Tribunal failed to give genuine consideration to relevant factors

38. This appeal ground must also fail. It is based on a false premise. The Tribunal did give the word "limousine" its ordinary meaning. The Tribunal correctly stated that for the purposes of the LCT Act, a "car" must be a "motor vehicle" (which is a defined term) and may be a limousine (see [2] and [3] above). There are two tests. The Tribunal considered whether the Hummer was a "motor vehicle" and then separately considered whether it was a "limousine".

39. Two further arguments advanced in relation to this ground should be noted. The Appellant submitted that the Tribunal did not compare the Hummer with a bus and failed to pay due regard to the Hummer's technical specifications. The Tribunal had a view of a vehicle similar to that the subject of the assessment. It compared the Hummer to a bus. The Tribunal said that "unlike a bus, [the Hummer's] profile is low and it is not possible to walk around in the Hummer in an upright position" and "even in the seated position, headroom is limited": see [9] and [30] of the Tribunal's reasons for decision. And it considered, at length, the technical specifications of the Hummer: see [6] to [12] of the Tribunal's reasons for decision. This further argument is rejected.

40. Secondly, the Appellant referred to the ADRs and submitted that because the ADRs are a binding federal legislative instrument that all car importers and modifiers must apply on a day-to-day basis, and the ADRs apply on the basis of weight, a vehicle's size and weight are relevant considerations. So, for example, the Appellant submitted that because the Hummer is classified as a heavy omnibus under the ADRs, it has no nexus with a passenger car (a separate category under the ADRs) and such a distinction would compel the conclusion that the Hummer falls outside the class of liability created by the LCT Act. For the reasons set out in [27] - [29] above, that contention is rejected.

41. This ground of appeal also fails.

Appeal Ground 4 - The Tribunal failed to adopt the correct approach to construction of s 27-1 or, alternatively, it failed to give genuine consideration to relevant factors

42. As developed in oral argument, it was evident that this appeal ground raised no separate or distinct question apart from those already considered above. This ground fails for the reasons given in connection with the earlier grounds.