ANI Corporation Ltd. v. Commissioner of State Taxation (W.A.)

Judges:
Wallace J

Court:
Supreme Court of Western Australia

Judgment date: Judgment handed down 27 July 1990.

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Wallace J.

This is an appeal pursuant to the provisions of sec. 33 of the Stamp Act (the Act), the appellant, being dissatisfied with an assessment of duty made by the respondent relating to the appellant's business of hiring out goods. As such, the appellant is a registered person under Pt IVB of the Act, sec. 112J. Stamp duty is payable under that Part with respect to ``the total amount received by [the taxpayer]... in respect of his rental business...'', sec. 112K(1)(a)(i). The definition of ``rental business'' in sec. 112I(1) means:

``the business of granting to any person rights to use any goods other than books...''

The appellant's business involves the letting, on hire, of plant and equipment, one of the conditions therefore being:

``2 Hire is charged for the time the plant is out of the possession of the owner at the hirer's request... not only the time the plant is hired.''

Further conditions of hire provide for the hirer to pay the owner all hire and related charges and other costs and to be responsible for the theft, loss and damage to plant. Loss or damage during transport by other than the owner was also to be paid by the hirer.

Section 112K of the Act provides:

``(1) A registered person -

• (a) shall lodge with the Commissioner each month a statement in such form as the Commissioner requires in writing within 15 days after the end of the month to which the statement relates showing -
• (i) the total amount received by him during the last preceding month in respect of his rental business...''

The scheme of the Act provides that once the total amount received by the taxpayer in respect of his rental business has been ascertained, 40% thereof is deducted as representing service costs and duty is then assessed at 1.8% upon the remaining 60%.

The nature of the appellant's business involves the hiring out of equipment ranging from domestic hardware for a day to large generators and compressors hired in relation to major construction contracts continuously for a number of months. A sample invoice, therefore, shows the appellant's charges for the hire of a diesel air compressor, a charge for 546 litres of diesel fuel and a further charge for stamp duty calculated at 1.8% of the hire amount. The invoice also shows the appellant's charge for insurance loss and damage insurance being 8% of the hire charge. Further examples of the appellant's charges to hirers involve cartage costs, maintenance and cleaning, repairs and damages. With the exception of the hire charge, separately set out on the appellant's invoices, all the remaining charges to which I have referred are identified on each invoice but have not been returned to the respondent as part of the appellant's rental business.

In the opinion of the respondent such items as cartage, insurance, fuel and stamp duty are considered part of the total amount received in respect of the appellant's rental business and are required to be included in statements lodged under sec. 112K(1). Accordingly, therefore, pursuant to sec. 31A(1), the respondent has created memoranda of statements of return

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ATC 4716

covering a period from 1 November 1982 to 27 October 1988 reassessing the appellant for each month within that period. It is the appellant's contention that the aforesaid items do not form part of the appellant's business of granting to any person rights to use any goods. Nor, so far as sec. 112K(1)(a)(i) is concerned, participate in the total amount received by the appellant in respect of its rental business.

The appellant's argument is that having regard to the definition of rental business, the legislative intention to be gathered from the words ``in respect of his rental business'' does not refer to the overall operations of the taxpayer's business. For example, I have been told that business involves the sale across the counter of items incidental to the plant hired but not unassociated therewith. The hirer of a floor-sanding machine may require additional abrasive material for the purpose of the use of that machine and in addition, a pair of protective glasses. Furthermore, the appellant sells fuel to hirers to enable the plant hired to be operated. The respondent seeks to charge the fuel involved but not the ancillary items such as the abrasive paper and industrial glasses. So where does one draw the line when one speaks in terms of the total amount received by the appellant in respect of its rental business?

Mr Pullin Q.C. has referred to the history of the legislation commencing with the 1976 reprint of the Act. Therein, rental business was relevantly defined in the same terms as today's legislation. On the other hand, sec. 112K(1)(x) then provided that the sum of the total amount received by the hirer during the last preceding month ``in respect of his rental business for or in relation to the use of goods...'' was the sum required to be returned. Certainly a much wider scope was envisaged.

Act No. 37 of 1979 however, removed the words ``for or in relation to the use of goods...'' from the aforesaid definition. To complete the historical picture, Act No. 41 of 1989 added subsec. (1b) to sec. 112K(1) so as to provide:

``A reference in subsection (1) to the total amount received in respect of rental business includes a reference to all amounts received in respect of that business including, without limiting the generality of the foregoing, any amount received on account of duty under this Act.''

(emphasis added)

Of course the question immediately arises as to why the 1989 amendment was found necessary. Does it mean that the inclusion of duty therein excluded that item from the pre-November 1989 calculations? Or does it mean that the new subsection was added to clarify the ambiguity which pre-existed? If that be the case, then the appellant's argument must succeed:
F.C. of T. v. McComas (1923) 31 C.L.R. 479 at p. 487;
S.A. Crate Pty. Ltd. v. State of S.A. 83 ATC 4587; (1983) S.A.S.R. 92.

Mr Pullin Q.C. has further drawn my attention to the decision of the Full Court of Queensland,
Cyclone Scaffolding Pty. Ltd. v. Commr of Stamp Duties (Qld) 84 ATC 4812; (1985) 2 Qd.R. 435. Therein the identical definition of rental business was subjected to scrutiny when considering charges levied by the owner of scaffold made available to hirers. By a majority, the Court held that charges for insurance, cleaning and repair were not charges for or in relation to the use of hired goods and by all three Judges neither were the charges for cartage, erection and stamp duty. I hasten to add, as Mr Scott Q.C. has pointed out, that the Queensland legislation does not contain a provision relating to the deduction of 40% of all revenue received as service costs. Nevertheless I regard the decision in question as strong persuasive authority. The manner in which the learned Chief Justice reached his opinion was to rule that charges made to the owner of the scaffold in relation to the use thereof by the hirer, came within the definition. That, therefore, excluded insurance, cleaning and repair of the scaffold. On the other hand, charges for cartage and erection did have regard to the use of the hired scaffold. Sheahan J. agreed with MacPherson J. That learned Judge said at ATC p. 4819; Qd.R. p. 445:

``The real question on this appeal is whether the amounts received by the appellant on account of the additional charges can be described as so received `for or in relation to the use of the goods'. `Use' is not a word of precise meaning but one that has been said `in general' to convey `the idea of enjoyment derived by the user from the corpus of the object enjoyed'... In the present case I do not think that the hirer can

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ATC 4717

be said to be using the scaffolding when he, or the appellant, is simply transporting or erecting, insuring or cleaning it, whether before and for the purpose of use, or after such use. Prima facie, therefore, sums received by the appellant in payment of charges for services of that kind are not received `for... the use' of the scaffolding.

The matter does not rest there, however, because sec. 35(1)(a)(xi) also speaks of the total amount received `in relation to' the use of the goods. That expression resembles the phrase `in respect of', which has been held to have `the widest possible meaning of any expression intended to convey some connection or relation between two subject-matters to which the words refer':
McDowell v. Baker (1979) 144 C.L.R. 413 at p. 419...''

Of course the words ``in relation to'' were removed from our legislation in 1979.

Mr Scott Q.C. has correctly emphasised the wide meaning to be attributed to the words ``in respect of''. Not without some doubt, however, I have concluded that the appellant should succeed. I do that because of the very width of the expression upon which the respondent relies and yet his concession that clearly some items of cost may not be shown to be in respect of the appellant's rental business and I cite the examples I have set out at the commencement of these reasons. That therefore places the taxpayer in an area of uncertainty which should not be the case. Hence, the 1989 amendment to the legislation. The statute under review is a taxing statute and in my opinion, should operate with certainty. The only manner in which that objective can be obtained is to look at the statutory definition of ``rental business'', that being the business of granting to any person rights to the use of any goods and then apply that definition to the business referred to in sec. 112K(1)(a)(i) as being the subject of the total amount to be returned.

For these reasons, therefore, I would allow the appeal and set aside the Commissioner's assessments. The respondent will have the privilege of paying the appellant's tax costs with certificate for two counsel.