Biga Nominees Pty. Ltd. v. Federal Commissioner of Taxation.

Judges:
Nathan J

Court:
Supreme Court of Victoria

Judgment date: Judgment handed down 15 October 1987.

---

Nathan J.

The plaintiff (Biga) operates a railway. It intends to purchase a forklift truck (the forklift) to use for marshalling cargo which it will load on to railway wagons. It seeks declarations that the forklift is "good for use in connection with the operation of a railway", and as such it is "exempted from liability for sales tax" by virtue of the Sales Tax (Exemptions and Classifications) Act 1935 (the Act). Section 5 exempts from tax items covered by the First Schedule Div. XV 119B of the Act. The defendant (the Commissioner) contends that Biga has no standing to obtain these declarations. The matter has been remitted to me by a Master for adjudication as a question of law (RSC r. 47.04).

The Act, sec. 5 as appropriately truncated, reads:

"sales tax shall not... be payable upon... any item in the Schedule..."

The Schedule item 119B reads, again as appropriately truncated:

"goods for use... by a person exclusively in connection with the... operation... of a railway... for use by the public..."

The Commissioner, in response to a written request by Biga for a definition of his attitude, has asserted in an open letter that the proposed purchase of the forklift would not be exempted from sales tax. A thorough examination of the sales taxing mechanism is not necessary (it is to be found in
SSAU Nominees Pty. Limited v. F.C. of T. 85 ATC 4632), sufficient to say that the tax is paid by the ultimate retailer, but in most cases finds its way into the price paid by the ultimate consumer. In this case Biga is the proposed consumer, as such it will not have to pay the Commissioner, although it is plainly in its interest to buy the forklift as cheaply as possible. This is more likely occur if it can buy without the retailer having to meet a sales tax commitment. The mechanism was set out in the Treasurer's Explanatory Memorandum which introduced amendments to the Act in 1981. I am permitted to refer to this paper by the Interpretation of Legislation Act 1984 No. 10096 (Vic.) sec. 35(iii) and the Acts Interpretation Act 1901 (Cth) sec. 15AB(2)(e). The Treasurer said:

"Reflecting the fact that sales tax payers are obliged to pay tax to the Taxation Office in this way they in turn, when selling goods to a retailer or other customer charge to the customer an amount equal to the tax that they are liable to remit when forwarding a sales tax return for the month. In that way the tax is passed on to the consumer."

However, Biga is neither an actual or potential taxpayer.

I now come to deal with the sole issue, that is whether Biga possesses the locus standi (legal capacity) to obtain the declarations sought.

Firstly, it must be noted that a person seeking declaratory relief stands in the same position as a person seeking an injunction. The rules as to standing are the same. See
Australian Conservation Foundation v. The Commonwealth (1978-1979) 146 C.L.R. 493 per Gibbs J. at p. 526.

Secondly, the requirements in Australia to establish sufficient standing or interest to proceed have diverged from those in England, although both spring from the seminal test as stated in
Boyce v. Paddington Borough Council (1903) 1 Ch. 109 per Buckley J. at p. 114:

"A plaintiff can sue without joining the Attorney General in two cases: first, where the interference with the public right is such that some private right of his is at the same time interfered with... and secondly where no private right is interfered with, but the plaintiff in respect of his public right, suffers special damage peculiar to himself from the interference with the public right."

This formulation of the law has often been considered, most authoritatively so in England in
Gouriet v. Attorney General (1978) A.C. 345 where the position stated by Lord Edmund Davies (p. 508) is:

"No citizen can of his own initiative sue in our courts on his own behalf save to assert and protect his private rights, or to repel a right asserted against him by another."

In that case it was held that the public interest does not require private citizens to be invested with the right to obtain declarations. It was from this broad proposition that Australian law commenced to diverge, and in the Conservation case already referred to, Gibbs J. has said (supra p. 527):

"Although the general rule is clear the formulation of the exceptions to it (in Boyce's Case) is not altogether

---

ATC 4915

satisfactory. Indeed the words which he used are apt to be misleading."

Gibbs J. was of the view the plaintiff needed to show that he had a special interest in the subject matter of the action, and that such an interest was something more than a mere intellectual or emotional concern. Stephen J. (supra p. 539) put the negative side of the right to be heard as:

"An individual does not suffer such damage as gives rise to standing to sue merely because he voices a particular concern and regards the actions of another as injurious to the object of that concern."

Put positively, Mason J. said (supra p. 547):

"Depending on the nature of the relief which he seeks a plaintiff will in general have a locus standi when he can show actual or apprehended injury or damage to his property or proprietorial rights to his business or economic interests... and perhaps to his social or political interests."

Reciting a previous decision of his own in
Robinson v. Western Australian Museum (1977) 138 C.L.R. 283 at p. 327, he continued:

"The cases are infinitely various and so much depends in a given case on the nature of the relief which is sought that what is a sufficient interest in one case may be less than sufficient in another."

The Conservation case was re-examined by the High Court itself in
Onus v. Alcoa of Australia Limited (1981) 149 C.L.R. 27. Brennan J., in a judgment which was consistent with other members of the Court, said (p. 73):

"The development in this country and by this Court of criteria governing standing to sue to enforce public statutory duties suggests caution in seeking assistance from judgments in the United Kingdom... the adherence by His Lordship (referring to Lord Diplock in
Lonrho Limited v. Shell Petroleum Co. Ltd. No. 2 (1982) A.C. 173) and the other members of the House of Lords to the test of particular direct and substantial damage marks a divergence from the criteria of special interest adopted in the Conservation case but His Lordship's distinction between statutes which create public rights and mere statutory prohibitions against doing what would otherwise be lawful is reflected in the distinction between a special interest which gives standing and a mere intellectual or emotional interest which does not."

At p. 74 he said:

"A plaintiff must show that he has been specially affected, that is, in comparison with the public at large he has been affected to a substantially greater degree or in a significantly different manner. It is not necessary to show that the plaintiff is uniquely affected; there may be some others whose interest may be affected in like manner... whether a plaintiff has shown a sufficient interest in a particular case must be a question of degree, but not a question of discretion."

When reconsidering the first limb of Boyce's case, that is where the interference is with a public right to an extent which interferes with the private right of the proposed plaintiff, Brennan J., in approving Stephen J.'s judgment in the Conservation case, said (p. 66):

"The first limb of the proposition involves no more than that a plaintiff may without joining the Attorney-General sue for interference to some private right of his own and it would be surprising if the law were otherwise. There are of course a multitude of instances where the same act or omission at once violates both a private and a public right or at once breaches a public duty and a duty owed to an individual... any protection of the public interest which results from the prosecution of a plaintiff's action in cases of these kinds is incidental to the vindication of the plaintiff's own right or the enforcement of the performance of a duty owed to him."

In this case Biga contends that its private right to purchase the forklift for the least expense is infringed if the Commissioner insists upon levying a tax, albeit directed at another party, which adds a cost which will be passed on to it (Biga). It further contends that its public right as a taxpayer will be infringed if the Commissioner insists upon levying a sales tax to which he is not entitled. This contention is amplified as follows. The purpose of sec. 5 of the Act is to exempt from sales tax enterprises which fulfil a useful public purpose, such as the operation of railways for public use. To fulfil that purpose the Parliament has exempted railway operators from sales tax

---

ATC 4916

liability. Biga asserts it has a peculiar pecuniary interest in purchasing the forklift free of a sales tax component. It has standing to enforce this interest because there is a public right to benefit from less expensive goods and services which are statutorily enunciated in the exemption provisions of the Act. I agree, for the following reasons but will first consider some authorities which bear indirectly upon the assertion.

The standing of one taxpayer to object to the taxation burden of another was considered in England in
I.R. Commrs v. National Federation of Self-Employed and Small Businesses Limited (1982) A.C. 617, a House of Lords decision which dealt with a complaint by small business proprietors against an agreement entered into by the Commissioners to forgive underpayment of income tax by workers involved in newspaper production, the reason being to obtain industrial peace. Lord Wilberforce (p. 632) with whom Lord Fraser and Lord Roskill concurred on this point, held that one taxpayer does not have a sufficient interest in asking the Court to investigate the tax affairs of another taxpayer, or to complain that the latter has been under- or over-assessed, but that even so, it was not possible to rule that the acts or abstentions of taxing authorities could never be brought before a court, but this was not a case for intervention. Lord Diplock considered this proviso more closely and was of the view that it would be a grave lacuna, as a matter of public law, if a single taxpayer, or even a group, were prevented by outdated technical rules of locus standi from bringing matters to the attention of the court which indicated a breach of public rights and duties or of unlawful conduct.

The avenue left open by their Lordships is one which Biga may tread. They envisaged circumstances where a taxpayer could have standing against a taxing authority where the authority was allegedly breaching a public right. I am of the view that this case falls within those circumstances, so that although the authority does not bind me, it is highly persuasive being both recent and pronounced by a court of great eminence dealing with a subject matter familiar to this jurisdiction.

As I have already noted, Biga is neither the actual nor potential taxpayer. However, the structure of the sales tax legislation (this Act and the Assessments Acts) is such that Biga does not possess and will never have any right to challenge the assessment of the sales tax levied upon the retailer. That is a right restricted to that retailer. However, it is Biga and not the retailer which must carry the burden. That being so, the interference with Biga's proprietary rights becomes manifest. Unless it has standing to bring this action, it would be left without remedy in respect of a financial and tax imposition which it in reality has to bear, and for which it says it has a specific statutory exemption. The issue is not abstract. The financial consequences, not limited to the purchase of a single forklift, are obvious. Material may be available to Biga which could indicate the price of the forklift with or without a sales tax ingredient, but I make no further observations on those facts.

To this degree, the case before me is readily distinguishable from
Pye v. Renshaw (1951) 84 C.L.R. 58;
Fishwick v. Cleland (1960) 106 C.L.R. 186 and
Attorney General (Vic.) (Ex rel Black) v. Commonwealth (1981) 33 A.L.R. 321 which, although not dealing directly with the point, are oblique authority for a proposition that a taxpayer probably lacks sufficient locus standi to challenge a taxing Act. However, a person such as a primary producer upon whom a special tax is levied because of the nature of the goods he produces, does have sufficient locus standi to challenge the taxing Act. See
Logan Downes Pty. Ltd. v. F.C. of T. (1965) 112 C.L.R. 177. Here, however, Biga does not challenge the validity of the Act or any part of it. It merely contends it is entitled to the benefit of a provision. It is a matter of construction upon facts which are not yet settled. That is whether the forklift is used in connection with the railway or whether Biga's railway is itself within the scope of the exemption.

I am of the view the case before me should be distinguished from
Bennett Honda Pty. Ltd v. Borg Warner Acceptance Corp & Anor 85 ATC 4364, in so far as it cannot, then I find I cannot concur with that decision. That case is a sequel to
Bennett Honda Pty. Ltd. v. D.F.C. of T. (N.S.W.) (1984) 58 A.L.R. 177 which dealt with the standing of Bennett Honda to review a decision of the Commissioner under the terms of the Administrative Decisions (Judicial Review) Act 1977. In the first case, the Commissioner demanded from Borg Warner Acceptance Corporation (the financier of Bennett Honda, a retailer of motor cars) additional sales tax which the Commissioner says was due by virtue of understating the value

---

ATC 4917

of motor cars initially bailed and subsequently sold to Bennett Honda by Borg Warner. Bennett Honda sought to review that decision. Morling J. held it had no competency under the Administrative Decisions (Judicial Review) Act to review the Commissioner's decision to demand the additional sales tax. In the later case, Bennett Honda sought to enjoin Borg Warner from claiming against it the increased sales tax levied by the Commissioner. Bennett Honda had indemnified Borg Warner in respect of sales tax liability. It also sought to enjoin the Commissioner from continuing to apply the provisions of the Sales Tax Act, which permitted him to levy an increased tax on the basis of what was alleged to be an original undervaluation of the motor cars bailed and then sold by Borg Warner. Morling J. dismissed the applications, and in relation to the injunction sought against the Commissioner, held that Bennett Honda lacked locus standi under the sales tax legislation to obtain injunctive relief against the Commissioner. He said (p. 4370):

"The claim for injunctive relief against the Commissioner is beset by different, but equally formidable, difficulties... the applicant (Bennett Honda) claims that it is adversely affected albeit indirectly by the demand made upon Borg Warner by the Commissioner. But in law the assessment was made against Borg Warner alone... This is not a case of the type of which
Onus v. Alcoa of Australia Ltd. (1981) 149 C.L.R. 27 is an example, where a member of the public sues to prevent the violation of a public right or to enforce the performance of a public duty... The present case is one in which there is no violation of a public right and in which no private right of Bennett Honda Retail is interfered with. This being so, and no standing being conferred upon it by the sales tax legislation, it has no standing to obtain injunctive relief against the Commissioner..."

After referring to cases in which taxpayers had sought declarations as to the meaning and effect of sales tax legislation, he said:

"I do not think the case can be taken as authority for the proposition that when one person is assessed to sales tax, another person may seek a declaration that the assessment is erroneous."

However, there are several significant factors which distinguish these cases from the issues before me. Firstly, here no assessment has been levied. As yet there is no liability upon either Biga or the ultimate retailer to meet a sales tax impost. The exemption to such an impost can only be claimed if the forklift is to be used exclusively in connection with the operation of a railway. That is a question of fact which requires adjudication, either subsequently in this Court or at another place. Secondly, the Bennett Honda case revolved around a dispute between the ultimate retailer and consumer, in particular whether their dealings were at arm's length. Thirdly, the facts there concerned an increase in sales tax rather than whether the same could be imposed at all. Here I am concerned with a potential liability to carry the burden of a sales tax liability if the same is validly imposed. Bennett Honda concerned an acknowledged liability to increased sales tax and where it should fall.

I conclude that Biga has an interest over and above that of ordinary sales taxpayers to ensure that the exemptions to sales tax liability are properly applied. The Act, sec. 5, imposes a wideranging, total and absolute liability to pay sales tax. The benefit of the exemptions set up under Item 119 enure for the benefit of those persons who purchase goods for the purposes set out in the Schedule. In this case they are operators of railways for public purposes. Biga has both the public interest in securing the proper and fair operation of the sales tax exemption provisions, and a particular and special interest in ensuring that the statutory exemptions available enure to it, being a person whom those exemptions were designed to benefit. The proposition can be tested by considering the converse. If the beneficiary of a taxation exemption provision lacks sufficient locus standi to establish the parameters of that exemption, who could? The answer could be no one, in which case the scope of the exemption would be left to be defined by the ultimate retailer, or by the Commissioner with such goodwill or knowledge as he may have. An ultimate retailer cannot and should not be expected to know or enquire into the scope and function of his customer's business to ascertain whether the goods are exempt. Whoever may be the retailer of the forklift to Biga, it should not be expected to enquire and make judgments as to the nature of Biga's business or the

---

ATC 4918

proposed use to which it intends to put the forklift. This is whether the good is for exclusive use in connection with a railway, which is itself for public use. There will be many cases in which an ultimate retailer should not be expected to accept the burden of defining the limits of sales tax exemption. Of course there will be many commercial transactions in which that may occur, as the taxpayer involved, the ultimate retailer may avail itself of the Sales Tax Assessment Act 1930 to challenge the making or quantum of the assessment. However, the ultimate consumer should not be in a position of relying upon the retailer to claim his exemption for him. Many such retailers would either refuse or be reluctant to do so, and for a multitude of good reasons.

It follows that Biga has an interest uncommon to other persons who bear the burden of sales tax and that its interests are proximately affected by a decision not to exempt goods which it alleges are to be purchased in furtherance of its railway operations. The public rights attached to taxation liability are inextricably involved in its action and I hold that it has sufficient locus standi (legal capacity) to proceed. I will hear counsel as to the further conduct of this action in accordance with the substance of this judgment and also on the issue of costs.