S.A. Crate Pty. Ltd. v. The State of South Australia.

Judges:
Walters J

Court:
Supreme Court of South Australia

Judgment date: Judgment handed down 30 September 1983.

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Walters J.

The plaintiff S.A. Crate Pty. Ltd. (hereinafter called ``the company'') was incorporated on 15th November 1977 under the Companies Act 1962, as amended, having as its principal objects the carrying on of the business of a crate exchange and the supply of crates for use by primary producers engaged in the growing, packaging and sale of fruit and vegetables. Speaking in broad terms, from the date of its incorporation, the company promoted and managed a scheme of crate exchange by entering into agreements in writing with various primary producers, in the form of a document called ``Crate Exchange Scheme Growers' Agreement'', for the supply of plastic crates for use by them. One such agreement was that entered into by the company with A.A. Magarey & Sons on 15th May 1979; the agreement was tendered in evidence at the trial.

The issues falling for decision in the action depend upon much that is common ground between the parties. In the first place, it is admitted on the pleadings that:

``(a) The said form of agreement [`Crate Exchange Scheme Growers' Agreement'] (whereby the hirer as therein defined agrees to hire from the plaintiff crates for a period as therein mentioned, but subject to the conditions of the agreement) includes the following provisions:

• `1. The total fee for such period is $ (sic) payable on or before the signing of this agreement. This amount is not rebatable or refundable in any circumstances.'

At all material times the `total fee' in each agreement was the amount of $5 in respect of each of the individual crates for which the grower had requested the use in terms of the said agreement. The fee so charged is hereinafter referred to as `the initial fee', and in the case of the agreement between the plaintiff and A.A. Magarey and Sons amounted to $2,530 in respect of 506 crates.

(b) The said form of agreement also includes the following provisions to which the hirer as therein mentioned expressed agreement as follows:

• `5. On each occasion when I draw crates from the crate exchange I agree to pay a fill charge of 23c per crate (being a service charge covering collection, washing, administration costs and other like matters) or of such other amount as may for the time being be prescribed by the company as the fill charge.'

The fee so charged is hereinafter referred to as `the fill charge'.''

It is also admitted on the pleadings that the company ``from time to time since May 1979, has received the initial fee and the fill charge from various primary producers (including the said A.A. Magarey and Sons) in accordance with the said form of agreement''.

On the oral and documentary evidence presented at the trial, there can be no doubt that at all material times, the company carried on a ``rental business'', within the meaning of the definition contained in sec. 31b(1) of the Stamp Duties Act 1923, as amended. The company's business clearly fell within the purview of sec. 31b(1) which defines a ``rental business'' to mean, among other things, the business of ``letting, bailing or otherwise giving rights to use goods, other than books''. Section 31d provides that a person shall not carry on a rental business in South Australia, unless he is a registered person. Thus the company applied for, and

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ATC 4589

was granted, registration as a ``registered person'' pursuant to sec. 31e of the Act.

Pursuant to sec. 31f of the Act, a registered person is required to lodge with the Commissioner of Stamps, not later than the twenty-first day in each month, a statement in the prescribed form and verified in the prescribed manner setting out, among other things, ``the total amount received by him as rent during the last preceding month in respect of his rental business'' (subpara. (x) of sec. 31f(1)), and an amount equal to $1.80 per centum of the total amount referred to in subpara. (x) of sec. 31f(1) (subpara. (xi) of sec. 31f(1)).

It is further admitted on the pleadings that:

``(a) The Commissioner of Stamps asserts that the plaintiff is liable to include in its monthly statement as `rent', pursuant to sec. 31f(1)(a)(x), the initial fees and the fill charges as aforesaid, or some portion thereof.

(b) The plaintiff asserts that it is not so liable as set forth in [the preceding] paragraph... and the parties are in dispute in this regard.''

Furthermore, the company claims that by reason of its obligations under the various agreements with primary producers, during the financial year ended 30th June 1980, it incurred certain costs - more particularly those set forth in the statement of claim - in ``an amount equivalent to the cost of servicing'' crates supplied to various primary producers, that the cost of servicing the crates are a continuing cost from month to month, and that such costs ``are properly attributable, and/or are apportionable to the cost of the [company's] operations for the said period''. The defendant has refused to acknowledge that those costs ``are costs of servicing the goods within the meaning of sec. 31i(1)(f) of the Act''. Alternatively, the company asserts that by reason of the provisions of sec. 31i(1)(f), it is exempt from including in any statement required under sec. 31f(1) the ``fill charges'', or any portion thereof, ``upon the ground that such charges comprise `an amount equivalent to the cost of servicing the crates'''. The defendant denies the company's assertion in this respect. In the present case, the relevance of the provisions in sec. 31i(1)(f) is that they exempt a ``registered person'' from including in the statement required to be lodged pursuant to sec. 31f(1):

``an amount not exceeding forty per centum of the amount received for or in relation to the use of goods under a lease, bailment, licence or other agreement providing for the registered person to be responsible for servicing the goods under such lease, bailment, licence or agreement, being an amount equivalent to the cost of servicing such goods, or such higher amount in respect of any particular goods as is fixed by the Commissioner, on the application of the registered person, where in the opinion of the Commissioner or some person nominated by him in that behalf, such higher amount is properly attributable to the cost of servicing such goods.''

In passing, it is to be observed that at no time has the company sought to obtain the benefit of sec. 31i(1)(f), by claiming an exemption in respect of forty per centum of the amount received by it in relation to crates supplied to growers, as being properly attributable to the servicing of those crates. Moreover, the company admits that it ``has not at any time made application to the Commissioner of Stamps for an amount higher than forty per centum to be fixed by the Commissioner pursuant to sec. 31i(1)(f) of the Stamp Duties Act in respect of any goods''.

In the light of the matters either admitted or contested on the pleadings, the company seeks:

``(1) A declaration that the fees provided for in the said agreement (namely the initial fee and the fill charge) do not, respectively, constitute `rent' within the meaning of sec. 31f(1) of the said Stamp Duties Act.

(2) In the alternative to the declaration sought in para. (1)... if the said charges, or either of them, do constitute `rent', a declaration that each of the items of expenditure incurred by the plaintiff during the financial year ended 30th June 1980 and set out in subpara. 8(a)(iii) [of the statement of claim] are costs which, within the meaning of sec. 31i(1)(f), form part of the costs of servicing the crates.''

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On the evidence, there can be little doubt that the business of a crate exchange carried on by the company relies on the maintenance of proper accounts and records and close contact with the primary producers, so as to enable it to conduct its operations effectively. This becomes evident when it is recognized that the company owns and distributes approximately 127,000 plastic crates. Each crate bears the company's name and a label to the effect that it remains the company's property. A grower who wishes to take advantage of the company's crate exchange scheme is first provided by the company with an information sheet, in the form of Exhibit P2, which is explanatory of the operation and the advantages of the scheme. It is not without significance that the information sheet explains ``the reasons for the [company's] selling the right to use the crate rather than seeling the crate itself'' (italics added). The document gives an explanation in the following terms:

``The taxation benefits to be gained from a `hiring' system by far outweigh a direct `purchase' deal.

Selling the right to use the container protects every user from those who may wish to operate outside of the scheme, the dangers of which need no explanation.

All crates remain the property of the company and will carry the company's name. However, any person entering into a `hiring' arrangement is protected by an agreement permitting him to sell the balance of such an agreement in the event of a valid reason being presented.''

(Italics added.)

If after having been supplied with the information sheet, a grower desires to join the crate exchange scheme, he is then required to enter into the formal ``Crate Exchange Scheme Growers' Agreement''. The agreement between the company and A.A. Magarey and Sons is typical of the sort of agreement into which a grower enters with the company, and the document exemplifies the nature of the business carried on by the company and of the hiring or bailment of the crates to growers. In the case of the agreement with A.A. Magarey and Sons, it provides that they are entitled to the use of 506 crates for a period of three years, commencing 1st June 1978, upon payment on or before the signing of the agreement of $2,530 - a sum described in the pleadings and evidence as the ``initial fee''. The evidence shows that this fee is calculated on the manufacturing cost of approximately $5 per crate; the fee is payable once only and is not rebatable or refundable. The common form of agreement further provides, inter alia, (1) that the grower is entitled ``to have the use during the said period stated of such number of crates as [he] may from time to time require not exceeding at any one time the number specified''; (2) that he ``may draw crates (not exceeding [his] entitlement) from the crate exchange from time to time as [he] requires them''; (3) that he ``may return crates to the crate exchange at any time for credit against [his] entitlement''; and (4) that ``on each occasion when [he] draw[s] crates from the crate exchange [he] agree[s] to pay a fill charge of $0.23 per crate (being a service charge covering collection, washing, administration costs and other like matters) or such other amount as may for the time being be prescribed by the company as the fill charge''.

According to the evidence, when a grower sells his produce, in crates supplied by the company, to a market outlet in South Australia, he is obliged to obtain from the purchaser a signed receipt, acknowledging and recording the transfer of the crates by him to the purchaser. When a grower desires to draw more crates from the company, he is required to present this receipt, whereupon he is credited with the number of crates shown on the receipt as having been transferred, and he then becomes entitled to redraw additional crates up to the number specified in receipt, but not exceeding the number of his initial entitlement. The company uses the receipt as a record of the destination of the crates. In terms of the ``Growers' Agreement'', the responsibility for the collection of the crates rests with the company and not with the grower. In the case of a sale by a grower to a wholesaler who then conducts further sales in the market, the company relies upon the wholesaler to compile a list recording the transfer of crates by him. The company engages a contractor to collect the crates and to return them to the company's premises, where they are washed, repaired (if necessary) and prepared for re-issue to

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ATC 4591

growers. What has been described in the pleadings and in the evidence as the ``fill charge'' is designed to cover the cost of collecting, washing and repairing the crates, and other expenses associated with the administration of the crate exchange. As it happened, in May 1979, the ``fill charge'' was 23 cents per crate, but by the time the matter had come to trial, the ``fill charge'' had been increased to 40 cents per crate.

On the materials before me, there can be no doubt, and I find, that at all relevant times, the ``fill charge'' has been calculated by reference to the costs of running the company, and that over and above the expenditure involved in and about the collecting, washing and repairing of crates, the ``fill charge'' has included what has been described as ``administration costs'' associated with the general running of the crate exchange. So much plainly appears from the evidence of Mr. Lockyer, the company's manager, who said that ``the fill charges are used to cover the general running and administration costs of the company''; that they have to cover ``all expenses for the company''. It also appears from the evidence of Mr. Davies, the accountant employed by the company, that before the ``fill charge'' is fixed for any one financial year, he and Mr. Lockyer first examine ``all the anticipated costs in running the business as a whole''; that they then attempt ``to forecast the turnover of crates, and for that, of course, the number of crates that will go through the exchange in that particular twelve months period''. Having made such an examination of the anticipated costs of running the company's business and an attempted forecoast of the number of crates likely to pass through the crate exchange in the financial year ahead, Mr. Lockyer and Mr. Davies then fix the ``fill charge'', upon the basis that the amount so calculated will ``ensure that with a margin for safety, the fill charges received in any year will meet the total running expenses of the company''. So it was that the ``fill charge'' for the financial year ended 30th June 1980 was fixed in the light of the results of the company's financial operations for the year ended 30th June 1979.

It would appear from the evidence of Mr. Lockyer and Mr. Davies that the ``initial fee'' is appropriated in the company's books of account as capital, and that once this is done, the funds are employed to enable the company to operate its business. Out of the amount of the initial fees so received, there are met the costs of acquiring new crates for supply to growers and of the replacement of crates that have become unserviceable.

The primary argument of the company is that neither the ``initial fee'', nor the ``fill charge'', is comprehended by the word ``rent'', as it is used in subpara. (x) of sec. 31f(1) of the Act. It is contended for the company that the ``initial fee'' is received as a payment of capital; that it is not strictly income at all, but a payment in the nature of a premium. It seems to me, however, the words of sec. 31f(1)(x) are concerned not with the manner in which the amount received is appropriated or treated by a registered person, but with the nature of the payment received. With regard to the ``fill charge'', it is submitted that since this fee is payable only on occasions when crates happen to be redrawn, and not as a periodic sum, it is not caught by the word ``rent'' as it appears in sec. 31f(1)(x). While there is no definition of the word ``rent'' in the Act, and though there are definitions for many other expressions used in that part of the statute relating to ``credit and rental business'' (see sec. 31b(1)), to my mind it cannot be supposed that the word ``rent'', as it is used in sec. 31f(1)(x), is employed in its strict, common law sense, that is, as meaning a periodic payment due by a tenant of land, as something issuing out of the land as a compensation for his possession during the term and recoverable by distress. In the context of a rental business of ``letting, bailing or otherwise giving rights to use goods'', it seems to me that the notion that there must necessarily be a periodic payment of an amount received by a registered person, in order to constitute ``rent... in respect of his rental business'', is unacceptable.

It is my view that in enacting sec. 31f(1)(x), Parliament was not limiting the word ``rent'' to its strict signification, and that the sense in which the word is employed in relation to a credit and rental business has an expanded connotation. It is what the parties have done, and not the way in which they have described the transaction in their agreement, which must be the determining consideration, and it is for the Court to decide on the effect of the

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agreement and what payments made in pursuance of it can be said to constitute ``rent''. In other words, the Court is not concerned with what the parties have chosen to call the payments. Its concern is with the nature of the payments and whether they are ``rent'' within the meaning of sec. 31f(1)(x). In my opinion, a mere label, such as ``initial fee'', or ``fill charge'', is not sufficient to deny the quality of ``rent'' to payments received by a registered person in respect of his business of ``letting, bailing or otherwise giving rights to use goods'' (sec. 31b(1)). Whatever may be the words used, they must bear the same construction in a taxing case as in any other. In
Earl Fitzwilliam's Colleries Co. v. Phillips (1943) A.C. 570, Lord Wright said (at p. 581):

``The Crown's right to tax cannot be affected by the mere words which the parties have chosen to use. The word `rent' is itself a word of very wide import, not always correctly employed in ordinary current user, particularly in taxing provisions.''

Having considered the nature of the transaction effected under a ``Growers' Agreement'' and the nature of the payments made by a grower to the company in pursuance of the agreement, I am left in no doubt that the word ``rent'' is not used in any technical sense in sec. 31f(1)(x). It is my opinion that both the ``initial fee'' and the ``fill charge'' received by the company from a grower pursuant to the agreement are not deprived of the quality of ``rent'' and that they are fairly within the scope of sec. 31f(1)(x).

The conclusion to which I have just come seems to me to be confirmed by the provisions of sec. 31g(d) of the Act. The section provides that the amounts to be shown in any statement required to be lodged by a registered person under sec. 31f(1) of the Act shall include:

``(a)... (not material)

(b)... (not material)

(c)... (not material)

(d) in relation to rental business, amounts received by or on behalf of the registered person in respect of the use of goods where -

• (i) the right to use the goods was granted in South Australia;
• (ii) any of the negotiations by or on behalf of the registered person with respect to the grant of the right to use the goods were undertaken in South Australia; or
• (iii) the goods were delivered in South Australia to the person to whom the right to use those goods was granted.''

In my view, the language of subpara. (d) of sec. 31g is complementary to, and interlocks with, the word ``rent'', as it is used in subpara. (x) of sec. 31f(1), and it broadens the meaning of that word. Further, it is to be observed that the phrase ``in respect of'', as it is used in subpara. (d) of sec. 31g, is an expression of wide application. To adopt the words of Mann C.J. in
Trustees Executors & Agencies Co. Ltd. v. Reilly (1941) V.L.R. 110 at p. 111:

``they [the words `in respect of'] have the widest possible meaning of any expression intended to convey some connection or relation between the two subject matters to which the words refer.''

In the present case, I have no doubt that there was a connection or relation between amounts received, by way of the ``initial fee'' and the ``fill charge'', and the right to use the crates supplied by the company to a grower. Payment of the ``initial fee'' was a prerequisite to the right to use the crates in the first place. On every occasion on which a grower redrew crates from the exchange, his right to use them depended upon payment of the ``fill charge''. Both types of payment were made in consideration of the getting of the right to use the crates. Thus I conclude that in relation to the company's rental business, both amounts, the ``initial fee'' and the ``fill charge'' were amounts received in respect of the use of crates, or the right to use the crates, and that on such account both amounts must be shown in the statement required to be lodged by the company in accordance with sec. 31f(1) of the Act.

I have given full weight to the numerous decisions relating to the interpretation of a taxing statute. I recognize that in the case of such a statute, the intention to impose a charge upon the subject must be shown by clear and unambiguous language (
Oriental

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Bank v. Wright (1880) 5 A.C. 842 at p. 856), and that where there is serious doubt as to the construction of the statute, all ambiguity should be resolved in favour of the person sought to be taxed (
F.C. of T. v. McComas (1923) 31 C.L.R. 479 at p. 487). But while these rules are to be treated as valuable cautions in the interpretation of a taxing statute, it is only in the case of there being real difficulty in ascertaining the meaning and intent of a taxing statute, that any question of liberality of construction arises. At all events, a taxing statute is not to be construed any differently from any other Act. In
A.G. v. Carlton Bank (1899) 2 Q.B. 158, Lord Russell L.C.J. said, at p. 164:

``I can see no reason why any special canons of construction should be applied to any Act of Parliament and I know of no authority for saying that a taxing Act is to be construed differently from any other Act. The duty of the Court is, in my opinion, in all cases the same, whether the Act to be construed relates to taxation or to any other subject, viz., to give effect to the intention of the legislature, as that intention is to be gathered from the language employed, having regard to the context in connection with which it is employed. The Court must no doubt ascertain the subject matter to which the particular tax is by the statute intended to be applied, but when once that is ascertained, it is not open to the Court to narrow or whittle down the operator of the Act by considerations of hardship or business convenience, or the like.''

Bearing in mind the substance, rather than the form, of the transactions entered into between the company and the various growers, and having regard to what I consider to be the intention of the language employed in the statute, I find no difficulty in construing the relevant provisions of the Act in such a way as to hold that the amounts received by the company from a grower, either as ``initial fees'' or ``fill charges'', constitute ``rent'', within the meaning of sec. 31f(1)(x) of the Act. I am fortified in this conclusion since I think that the amounts received by the company were clearly received ``in respect of the use of goods... where the right to use goods was granted in South Australia''. Thus I adhere to the opinion earlier expressed that such amounts must be included in the statement required to be lodged by the company with the Commissioner of Stamps pursuant to sec. 31f(1) of the Act.

I do not state any concluded view on the question whether the company was responsible, under its agreement with a grower, for the servicing of the crates, although on the evidence before me - meagre as it is - I am disposed to think that it was so responsible. At all events, I am quite unable to indicate, as counsel for the company asked me to do, whether any, and what, part of the ``fill charge'' can rightly be said to be attributable to the ``cost of servicing'' the crates supplied by the company to a grower. Because the ``fill charge'' was calculated primarily on the estimated ``costs of the running of the [company's] business as a whole'', I cannot therefore think that the entire ``fill charge'' can be described as an ``amount equivalent to the cost of servicing'' the crates, so as to entitle the company to claim the deduction allowed by sec. 31i(1)(f) of the Act. It seems to me that it is now a matter for the company to assert its entitlement to the appropriate deduction, and that it is for the Commissioner of Stamps, after considering any representations on behalf of the company, to decide what proportion, if any, of the ``fill charge'' may properly be attributable to the cost of servicing the crates.

Finally, I may say that I have not found the quotation of dictionary meanings of the words ``rent'' and ``servicing'' of any aid in resolving the issues before me. ``Dictionaries... are sometimes delusive guides'' (
A.G. for N.S.W. v. Brewery Employees Union of N.S.W. (1908) 6 C.L.R. 469, per Higgins J. at pp. 606-607). With all respect to the submissions of counsel, I do not think the dictionary meanings cited to me are of any help, in the context in which the words in question are used in the statute. In this connection, it is not out of place to quote the dictum of Lord Upjohn in
Customs and Excise Commrs. v. Top Ten Promotions Ltd. (1969) 3 All E.R. 39 at p. 90; (1969) 1 W.L.R. 1163 at p. 1171, where his Lordship said:

``It is highly dangerous, if not impossible, to attempt to place an accurate definition

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upon a word in common use; you can look up examples of its many uses if you want to in the Oxford Dictionary but that does not help on definition; in fact it probably only shows that the word normally defies definition. The task of the court in construing statutory language such as that which is before your Lordships is to look at the mischief at which the Act is directed and then, in that light, to consider whether as a matter of common sense and everyday usage the known, proved or admitted or properly inferred facts of the particular case bring the case within the ordinary meaning of the words used by Parliament.''

For the foregoing reasons, I have come to the conclusion that the company is not entitled to either of the declarations sought in its statement of claim and that judgment in the action should be entered for the defendant. There will be judgment of dismissal of the action accordingly.