AIROVENT PTY LTD v FC of T

Judges:
Sackville J

Court:
Federal Court

Judgment date: Judgment delivered 7 August 1998

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Sackville J

The proceedings

The question agitated in this case is whether exhaust fans sold by the applicant to McDonald's Australia (``McDonald's'') in November 1995 were within Item 20 of Schedule 1 to the Sales Tax (Exemptions and Classifications) Act 1992 (Cth) (``Exemptions Act''). If so, the sale of the fans, which otherwise would be an assessable dealing under

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the Sales Tax Assessment Act 1992 (Cth) (``STA Act''), was not taxable. Item 20 is as follows:

``Equipment of a kind ordinarily used in the course of industrial operations to protect persons engaged in those operations, including masks, respirators, shields, goggles, visors, helmets, belts and machine guards.''

The circumstances giving rise to these proceedings can be stated briefly. On 14 August 1995, the applicant provided a quotation to McDonald's for the supply, among other things, of two Model AV-400-R4 roof mounting centrifugal fans, at a quoted price of $2,550 plus 22 per cent sales tax. McDonald's, its subsidiaries and franchisees own and operate about 650 restaurants in Australia in which hot and cold foods are cooked and otherwise prepared for sale to the public. The exhaust fans (as they were described in argument) were duly delivered in November 1995 and, on 24 November 1995, the applicant raised an invoice in respect of the sale.

On 20 December 1995, the applicant made a request to the Commissioner for an assessment pursuant to s 102(1) of the STA Act in relation to the sale of the fans. By a notice of assessment dated 15 February 1996, the Commissioner gave the applicant notice that it had been assessed as liable to pay sales tax in respect of the sale. The applicant objected to the assessment but, on 3 June 1997, the Commissioner notified the applicant that its objection, in substance, had been disallowed. The present appeal is brought by the applicant against the Commissioner's decision, pursuant to s 14ZZ of the Taxation Administration Act 1953 (Cth).

Brief reference was made in the applicant's written submissions to a contention that the exhaust fans were within Item 39(1)(f) in Schedule 1 to the Exemptions Act. However, the applicant put forward no argument to support the contention. Accordingly, I do not address the contention in these reasons.

The legislation

Table 1 in Schedule 1 to the STA Act sets out assessable dealings that can be subject to sales tax: STA Act, s 16(1). If no exemption applies, the dealing is a taxable dealing and the person specified in Column 3 of the Table is liable to the tax: STA Act, s 16(2). Item AD1a in Table 1 specifies as an assessable dealing a ``wholesale sale by a person who manufactured the goods in the course of any business''. The seller is liable to pay sales tax in respect of the dealing on ``the price (excluding sales tax) for which the goods were sold''.

An assessable dealing is not taxable if the goods are covered by an exemption Item that is in force at the time of the dealing and all the requirements of that Item have been met at or before the time of the dealing: STA Act, s 24. An ``exemption Item'' includes an Item in Schedule 1 to the Exemptions Act: STA Act, s 5. Thus if the exhaust fans are within Item 20 in Schedule 1, the sale of those goods is not a taxable dealing.

The exhaust fans

Since 1972, the applicant has provided McDonald's with more than 1,500 of the Type ``R'' centrifugal upblast roof ventilators. The fans are designed to eject contaminated air into the atmosphere, away from the roof where it is mounted. As Mr Glick, who appeared for the applicant, put it, the fans are part of a system which ``purifies and ejects contaminated air''. The unit is of aluminium construction and is weatherproof, with the motor drive compartment shielded from the airstream and provided with an integral wiring conduit.

Each of the exhaust fans supplied by the applicant to McDonald's had the following characteristics. The fan

• • was of a ``vertical discharge'' design;
• • had a 400 mm diameter air impeller;
• • was driven directly by a 0.55 kw, 4 pole electric motor mounted out of the exhaust airstream and in a ventilated enclosure;
• • was suitable for use with a 415 volt, three phase, 50 hertz electric power supply;
• • comprised a fan assembly ``hinged'' from a sub-base to make maintenance and cleaning easier to perform; and
• • was fitted with a removable tank to collect oil and grease deposited on and in the fan by the contaminated air passing through it.

The applicant began manufacturing and selling its Type ``R'' centrifugal upblast roof ventilators in about 1968. They have been sold for use in ventilating a variety of industrial workplaces. These include zinc electroplating works; metal fabrication and welding shops; factories manufacturing paints and solvents;

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factories manufacturing asbestos, reinforced cement sheeting, steel and aluminium; ferrous and non-ferrous foundries; automotive panel beating and spray painting shops; and commercial kitchens.

Mr Davis, a consulting engineer, explained the role of the exhaust fans in McDonald's commercial kitchens. McDonald's kitchens have no windows or natural ventilation, for health and sanitation reasons. The exhaust fans are connected to ventilation ducts which, in turn, are connected to kitchen hoods located above the kitchen cooking appliances. Where the cooking appliances are powered by electricity, the ventilation fans and the cooking appliances are electrically ``interlocked''. If, for any reason, a fan motor ceases to function so, too, do the cooking appliances which generate the heat and contaminated air which the fan is designed and intended to extract. The interlocking is a safety measure, since if the fan ceases to operate the kitchen becomes filled with fumes and grease and, of course, the temperature rises very sharply to oppressive and dangerous levels. (In a typical McDonald's kitchen there are about eight cooking appliances. When operating, they radiate approximately 20 kw of energy in the form of heat.)

Mr Davis had supervised the installation of a large number of mechanical ventilation systems in a variety of factories, workshops, laboratories and institutions. All of the systems to which he referred specifically had as an essential component roof-mounted fans of centrifugal design. Each of the systems comprised an exhaust pick up point in the form of some kind of hood, together with duct work terminating in a roof-mounted ventilation fan of centrifugal design. Roof-mounted fans, as distinct from other kinds of fans, are commonly used because access for cleaning, maintenance and repair is easier and because noise within the building is minimised. Fans of centrifugal design, as distinct from other designs, are commonly used for three reasons. They are appropriate for use with lengthy, convoluted or filtered duct work (such duct work increases the fan's workload, because the passage of the hot or contaminated air is impeded); their design is such that their motors are not exposed to exhaust air-streams (the motors are protected from the hot or contaminated exhaust air drawn through the fan); and, when fitted with flame-proof motors, they are suitable for use where the contaminated air includes flammable vapours.

The submissions

The matters in dispute were narrowed by concessions made by Mr Hamilton on behalf of the Commissioner. The Commissioner accepted that the exhaust fans were ``equipment'' and that they were ``used in the course of industrial operations'' within Item 20. The area of dispute was whether the equipment was ``of a kind ordinarily used in the course of industrial operations to protect persons engaged in those operations''.

Mr Glick made the following submissions on behalf of the applicant:

• • The question posed by Item 20 is not whether the exhaust fans are ordinarily used in the course of industrial operations to protect workers engaged in those operations. The question is whether equipment of the kind, class or genus into which the exhaust fans fall are ordinarily used in the course of industrial operations for that purpose.
• • The relevant genus is constituted by fans used in systems involving ducting and filters to extract and purify contaminated air so as to provide a safe working environment.
• • The requirement is that equipment of the relevant class or genus be commonly or regularly used in the course of industrial operations. There is no requirement, in order to come within Item 20, that the equipment be of a class or genus which is exclusively or principally so used.
• • The language of Item 20 is clear and unambiguous and should be given its ordinary meaning. The word ``protect'' means to cover or shield from injury or danger, or to keep safe.
• • The evidence overwhelmingly demon-strated that equipment of the genus identified protected workers from heat and airborne contaminant generated by industrial processes.
• • This conclusion is not affected by the examples of equipment given in Item 20. They do not constitute an exhaustive list of the kind of equipment to which Item 20 refers. They merely provide examples of the kind of equipment within Item 20.

Mr Hamilton, on behalf of the Commissioner, submitted that the language of

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Item 20, specifically the expression ``ordinarily used in the course of industrial operations to protect persons engaged in those operations'', is to be treated as applying a composite test. That test is to be applied by reference to common experience and the eight examples set out in Item 20. The examples showed that Item 20 is concerned with safety equipment, rather than equipment which plays a central role in the conduct of industrial operations, even though the equipment may also perform a protective function. In support of this submission, Mr Hamilton relied on the decision of the Full Court of the Supreme Court of Victoria in
Mayne Nickless Ltd v FC of T 91 ATC 4621.

According to Mr Hamilton, the exhaust fans formed an integral part of the McDonald's food cooking system (that is, the industrial operation itself). The safety features of the fan were merely incidental, in the same way as adequate lighting in a factory has an incidental safety function. Mr Hamilton contended that the purpose of Item 20 is to exempt industrial safety equipment, that is, equipment which is either worn by persons engaged in industrial operations, or which acts as a guard for dangerous machinery. It is not intended to cover equipment that has an incidental safety function, but is an integral part of the industrial operations themselves.

Reasoning

In construing the exemption provisions of the sales tax legislation, a judge must apply the ordinary meaning of those provisions. In
Telstra Corporation Ltd v FC of T 96 ATC 4805; (1996) 68 FCR 566 (FC), Heerey J expressed the general principle this way (at ATC 4809; FCR 571-572):

``This country does not have a comprehensive tax at uniform rate on all goods and services. Instead, sales tax applies at differing rates to a multitude of goods legislatively specified and an equally multitudinous range of goods is exempt. As suggested earlier in this judgment, to apply conventional techniques of statutory interpretation in search of some underlying coherent philosophy - or sub-philosophies - is likely to be unrewarding. This view is not some form of interpretational nihilism, still less a suggestion that sales tax legislation is arbitrary and capricious. Rather it recognises that there are all sorts of political, fiscal, social and economic factors at work, including, amongst other things, perceptions as to the intrinsic social usefulness of particular goods or the importance to society (and political power) of people who sell or use them: see Diethelm Manufacturing Pty Ltd v FC of T 93 ATC 4703 at 4713 per French J. All a judge can do is to endeavour to apply the ordinary meaning of the language Parliament has chosen.''

The language of Item 20

It is appropriate to start with the language of Item 20, the terms of which have already been set out. I shall then refer to the principal authorities.

First, Item 20 is concerned with ``equipment of a kind'' ordinarily used in a particular manner. The question posed by Item 20 is therefore not whether the exhaust fans supplied by the applicant to McDonald's were used by the purchaser in the course of its industrial operations, to protect persons engaged in those operations. Rather, it is whether the exhaust fans constitute ``equipment of a kind '' which is used in the manner described by Item 20. It follows that, in applying Item 20 to the facts of a particular case, it is necessary to consider the ``kind of equipment'' to which the goods involved in the case belong.

Secondly, Item 20 requires that equipment of the relevant kind be `` ordinarily used in the course of industrial operations to protect persons engaged in those operations''. This language differs from the predecessor to Item 20, namely Item 113G of the First Schedule to the Sales Tax (Exemptions and Classifications) Act 1935 (Cth) (``Exemptions Act 1935''). Paragraph (1) of Item 113G provided as follows:

• ``(1) Equipment of a kind used exclusively, or primarily and principally, in the course of industrial operations to protect persons engaged in those operations, including masks, respirators, shields, goggles, vizors, helmets, belts and machine guards.'' [ emphasis added]

The dictionary meaning of ``ordinarily'' is ``usually'' or ``in ordinary cases''. Thus, on the face of it, Item 20 sets a different test from that laid down in Item 113G. Equipment of the relevant kind need only be usually or in ordinary cases used in the course of industrial operations to protect persons engaged in those

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ATC 4804

operations. It is not necessary, in order that equipment come within Item 20 that it be of a kind that is used exclusively, or primarily and principally in the requisite manner.

Thirdly, the dictionary meaning of ``protect'' is ``to cover or shield from injury or danger''. The parties accepted that the expression ``ordinarily used'' qualifies both ``used in the course of industrial operations'' and ``to protect persons engaged in those operations''. (As will be seen, this proposition is supported by Mayne Nickless, a case construing Item 113G.) Thus, it is necessary to consider whether the relevant kind of equipment is ordinarily used in the course of industrial operations and is ordinarily used to protect (in the sense of shield from injury or danger) persons engaged in those operations.

Fourthly, the list of what might be described as safety equipment, set out in the last part of Item 20, is prefaced by the word ``including''. Item 20 does not use words such as ``comprising'' or ``namely''. This suggests that the list is not intended to be exhaustive of the equipment capable of coming within Item 20. However, that leaves open the question of how far the list should influence the scope of the remaining language in Item 20.

The principal authorities

The Commissioner's argument focused on the significance of the concluding words of Item 20. Nonetheless, brief reference should be made to the principal authorities bearing on the other aspects of the language used in Item 20.

In
Diethelm Manufacturing Pty Ltd v FC of T 93 ATC 4703; (1993) 44 FCR 450 (FC), the issue was whether office chairs fall within Item 1(a) in the Third Schedule to the Exemptions Act 1935 which referred to ``[g]oods... of a kind... ordinarily used for household purposes, namely- (a) furniture''. Hill J, with whom Whitlam J agreed, said (at ATC 4718; FCR 470) that the question posed by Item 1(a) was not whether the particular goods were ordinarily used for household purposes, but whether the goods were of a particular kind ordinarily used for household purposes . Hill J held (at ATC 4720; FCR 472) that it was necessary to consider each of the chairs in question to determine whether they were of a kind ordinarily used for household purposes. In some cases, the answer was clearly in the negative, as with high back executive office chairs. In other cases, such as smaller chairs sometimes used in offices and sometimes sold in retail outlets, the position was less clear. His Honour held that the evidence adduced in the case did not enable him to be satisfied that the smaller chairs were of a kind ordinarily used for household purposes.

In
FC of T v Chubb Australia Ltd 95 ATC 4186; (1995) 56 FCR 557 (FC), the question was whether safes, of varying dimensions and specifications, were within the same Item 1(a). Hill J, with whose reasoning Tamberlin J agreed, said this (at ATC 4195; FCR 569-570):

``Where a question arises under Item 1(a) two issues will arise. The first, which is one of classification, requires the determination of the kind of goods to which the particular goods belong. This is sometimes spoken of as defining the genus to which the goods belong. The determination will be made in a commonsense way. In many cases mere observation of the item will enable the classification to be made. In some borderline cases the task of classification may involve a consideration of evidence.''

This passage was quoted with apparent approval by the Full Court in
K Mart Australia Limited v FC of T 96 ATC 4155 at 4161 (FCA/ FC).

The meaning of the expression ``ordinarily used'' has been considered in several cases. In
Hygenic Lily Limited v DFC of T 87 ATC 4327; (1987) 13 FCR 396, Gummow J expressed the view (at ATC 4330; FCR 399) that ``goods are `ordinarily used for household purposes' within Item 1 [in the Third Schedule] even though they are not exclusively or principally so used''. His Honour supported this construction by pointing out that Item 1 also employed the phrase ``goods of a kind used exclusively or principally'' in a particular way. Thus the expression ``ordinarily used'' had been selected as something distinct from use ``exclusively or principally'' for a particular activity. His Honour applied this approach to conclude that cups manufactured from paper and coated with wax were ordinarily used for household purposes, notwithstanding that the particular cups had been sold to McDonald's for use in its restaurants.

Subsequent cases have adopted a similar approach to the expression ``ordinarily used''. In Chubb, Hill J said (at ATC 4195; FCR 570) that the

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``... word `ordinarily', in the collocation `ordinarily used' probably means no more than `commonly'. This was the meaning given to it by Davies J in
OR Cormack Pty Limited v FC of T 92 ATC 4121.''

Hill J, while noting that the point had not been fully argued, was prepared to accept that the word ``ordinarily'' in Item 1 did not mean that the kind of items was used predominantly for household purposes.

Burchett J in the same case said this (at ATC 4188; FCR 560):

``Also, `ordinarily', used idiomatically in the sense of `commonly', is not equivalent to `exclusively', nor I think (and the Commissioner's argument accepted this) to `predominantly'... It is possible, and it happens frequently, that something is ordinarily used for one purpose, and is also ordinarily used for a quite different purpose. German Shepherd dogs are not the less ordinarily kept as guard dogs because they are also ordinarily kept by dog lovers as companions. An axe is ordinarily used in country households in which wood is burnt to fuel a stove or heater, or where encroaching trees must from time to time be cut back. The very same type and brand of axe may also ordinarily be found in use wherever trees must be felled, or bush timber utilised, in operations having nothing to do with households. There is no suggestion, when the word `ordinary' is applied to each of these uses, that the particular use is the most common use, only that it is a common use. At the same time, the identification of the ordinary use of many items will regulate other uses to a subsidiary role which could not be described as an ordinary use. The recognition of this fact emphasises the importance of degree and impression in the application of Item 1(a).''

The genus

For the moment, I leave to one side the significance of the concluding words of Item 20. Following the approach of Hill J in Chubb, the first question is to define the kind of goods to which the particular goods (roof mounted exhaust fans of centrifugal design) belong. Mr Glick suggested that the genus was constituted by fans used in a system involving ducting and filters to extract hot and contaminated air from the site of an industrial operation and to expel the contaminated air ``so as to provide a safe working system''. Mr Hamilton said that he did not dispute this characterisation of the genus, although I doubt that he intended to accept the words I have placed in quotation marks.

A good deal of the evidence adduced by the applicant was of limited value to the resolution of the issues in the case. This is because much of it was directed to the actual use made by McDonald's of the exhaust fans supplied to it. As Hill J said in Diethelm (at ATC 4719; FCR 470)

``[o]nce it is appreciated that the question [ in] issue is concerned with the kind of goods in question rather than the actual goods, it is clear that evidence... as to the market into which the actual goods are sold will be of little relevance.''

[Emphasis in original]

However, there was also a body of evidence about the use of roof-mounted fans of centrifugal design, of the kind supplied by the applicant to McDonald's. The evidence showed that

• • exhaust fans of this type are suitable for use and are used not only in commercial kitchens, but in a variety of industrial workplaces, such as fabricating and welding shops, factories manufacturing paints and solvents and foundries;
• • exhaust fans of this type are commonly used in ducted mechanical ventilation systems designed to extract and expel hot or contaminated air from the workplaces often (but not always) after purifying the air;
• • when exhaust fans of this type are used in this way, they constitute an integral part of the mechanical ventilation systems;
• • legislation and regulations of the States and Territories require specific ventilation measures to be adopted in particular factories and in respect of particular industrial processes, such as electroplating works, foundries or processes using asbestos;
• • the mechanical ventilation systems reduce the risk of heat stress (which can lead to illness and injury) in workers operating in an environment with high levels of thermal radiation, humidity or temperatures, and also reduce the risk of fire;
• • the ventilation systems prevent or reduce the inhalation by workers of smoke, fumes or

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  other airborne contaminants, such as grease or fibres, arising from the particular industrial operations; and
• • the ventilation systems are used in industrial operations to reduce these risks to the health and well-being of workers.

In my view, this evidence justifies a finding that the fans form part of a genus comprising roof mounted ventilation fans of centrifugal design, intended for use in systems involving ducting and designed to extract and expel hot and contaminated air from a variety of industrial workplaces, the operations of which generate heat and airborne contaminants.

Are the fans ordinarily used in the manner required by Item 20?

The next question is whether exhaust fans of this genus are ordinarily used in industrial operations to protect persons engaged in those operations. I did not understand Mr Hamilton to dispute that exhaust fans of the relevant kind were ordinarily used in the course of industrial operations. In any event, the evidence plainly establishes that that was the use to which they were ordinarily put.

The disputed question is whether exhaust fans of the relevant kind were ordinarily used to protect workers engaged in industrial operations. I think it is clear that the principal reason for installing in workplaces ventilation systems, of which exhaust fans are an integral part, is to protect the workers engaged in industrial operations in those workplaces against threats to their health or well-being posed by heat stress, airborne contaminants and fire. The evidence clearly establishes that the ventilation systems are used to reduce or minimise the risks to workers posed by those consequences of industrial operations. It is true that ventilation systems may have other uses in particular workplaces. For example, in commercial kitchens preparing food for retail sale to the public, the ventilation systems play a role (along with conventional air conditioning) in making conditions safer and more comfortable for customers. But as Mr Davis said in his evidence, this is a by-product of the job being performed by the system. Moreover, not all workplaces which have in place ventilation systems, incorporating exhaust fans of centrifugal design, deal with the public. In any event, equipment used to protect workers engaged in industrial operations will often have other benefits, such as making the immediate environment safer and more comfortable for visitors. In my opinion, benefits of this nature can be characterised as incidental in nature. They do not detract from the conclusion that fans of the relevant kind are used in the course of industrial operations to protect workers engaged in those operations.

Of course, the question posed by Item 20 is whether the equipment of the relevant kind (that is, fans of the class I have identified) is ordinarily used in the course of industrial operations to protect persons engaged in those operations. The question is not whether mechanical ventilation systems incorporating exhaust fans are used in this way. But exhaust fans of the relevant kind are an integral part of the ventilation systems. Moreover, the evidence establishes that the incorporation of such fans in ventilation systems designed to extract hot or contaminated air is a common or usual use for them. In this respect they may well be different from other components of the ventilation systems, such as the ducting, which may have many other more usual or common uses.

As I have explained, the expression ``ordinarily used'' in Item 20 means commonly or usually used, not exclusively or principally used. Subject to the effect of the concluding words of Item 20, exhaust fans of the genus I have described are ordinarily used in the course of a variety of industrial operations to protect persons engaged in those operations from injury to their health or well-being.

The concluding words of Item 20

Mr Hamilton submitted that Item 20 is to be construed more narrowly than the reasoning thus far might suggest. He argued that the meaning of Item 20 should be ascertained having regard to the list contained in the last portion of the Item. That list showed that the Item was concerned with particular safety equipment, which could either be worn by persons engaged in industrial operations or which took the form of guards for machines. Alternatively, the examples showed that Item 20 was not intended to apply to equipment which was an integral part of industrial operations such as McDonald's commercial kitchens. Mr Hamilton relied on the reasoning of the Full Court of the Supreme Court of Victoria in Mayne Nickless to support the Commissioner's contention. The issue in that case was whether armoured vehicles manufactured in Australia for the appellant

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were exempt from sales tax by reason of Item 113G in the Exemptions Act 1935.

Fullagar J noted that the expression ``used exclusively, or primarily and principally'' (which he described as the ``adverbial phrase'') had been inserted in Item 113G in 1981. His Honour considered that the adverbial phrase modified not only the word ``used'' but the expression ``to protect persons engaged in those operations''. In reaching this conclusion, Fullagar J said (at 4623) that the final words of Item 113G were

``... no more than a cautious addition to the general description preceding these words, added in an attempt to make clearer the ambit of the general description by giving some examples. So construed these final words do not imply that the preceding words might, in the absence of the final words, exclude masks etc but on the contrary supply examples of goods which must be treated as included in the general words provided that they meet the whole of the description.''

(Emphasis in original.)

Fullagar J thought it plain that the armoured car could not satisfy the words of Item 113G (at 4624). The primary use of vehicles of this kind was the safe pick-up and transfer and delivery of valuable consignments, not the protection of the crew of the vehicle. The high degree of protection of the crew was an ``inevitable by- product'' of providing the service of reliable transportation of the goods from pick-up to delivery. The last words of Item 113G lent strength to this construction (at 4625)

``... because each enumerated piece of equipment is not something the use of which itself constitutes the industry in which protection is given.''

O'Bryan J agreed (at 4626) that the evidence fell short of showing that armoured vehicles were used exclusively, or primarily and principally, to protect persons who used them to transport cash and valuables. His Honour then addressed the further question of whether an armoured vehicle was ``equipment'' within the meaning of Item 113G. In this context, he dealt with the significance of the eight specified examples in Item 113G (at 4627).

``In determining the meaning of `equipment' are the eight specified items significant? In my opinion, they are. The eight specified items are kinds of protective equipment commonly used in the course of industry to protect workers. Such items are either worn by a worker for protection or are placed over bells or machines to protect workers from moving or dangerous parts of the machine. In my opinion, the eight specified items form a genus or class of equipment and govern the construction of Item 113G. In the context of Item 113G, the word `including' means `comprising' or `embracing', in my judgment. When read in this way it is impossible to construe `equipment' in Item 113G as meaning armoured motor vehicle.''

Ashley J noted (at 4629) that the explanatory memorandum of 18 August 1954, accompanying the introduction of Item 113G in its original form, stated that

``Exemption is being granted in respect of safety equipment for use in industrial operations...''

The 1981 amendment was the result of Parliament's concern that the exemption was being applied to safety equipment which lacked a requisitely close connection with industrial operations.

In Ashley J's view, there were three questions: whether it was sufficient that the words ``used... to protect persons'' required only that the use be applicable or significant; whether the vehicles could be regarded as ``equipment''; and whether the vehicles should be regarded as ``equipment'' within Item 113G. Since Ashley J answered the first question in the affirmative, he had to consider the second and third questions.

His Honour acknowledged that in some contexts ``equipment'' might embrace the entirety of the effective workplace (the armoured car being the relevant workplace). In the context of Item 113G, it was necessary to take into account the list of particular items in determining the meaning of ``equipment''. His Honour accepted (at 4631) that the word ``including'' in Item 113G showed that the listed items ``were not exhaustive of equipment benefiting from the exemptions''. However, none of the listed items was ``central to the conduct of the industrial operations which are in contemplation'', since each item was either designed for personal protection by being worn or protected employees from the danger of machines. Most of the items were small and portable. The armoured trucks, by contrast, were central to the taxpayer's operations.

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Ashley J was not satisfied that the ejusdem generis principle would be applied to the list in Item 20. But the concept of ``equipment of a kind used... in the course of industrial operations to protect persons engaged in those operations'' carried with it the flavour of safety equipment. His Honour continued (at 4633):

``... The listed items of equipment which are exempt fit in with that contextual impression. The impression is reinforced by harking back to the second reading speech in 1954, where the reference was to `safety equipment for use in industrial operations'. See also the reference to `industrial safety equipment' in the 1981 explanatory memorandum. It appears to me that the appellation `safety equipment' is not properly descriptive of equipment which, whilst it has an important protective function, at the same time plays a central role in the conduct of the industrial operations in respect of which the protection is given.''

In my view, Mayne Nickless does not control the circumstances of the present case. In particular, it does not compel the conclusion that the exhaust fans of the class I have identified cannot be said to be equipment of a kind ordinarily used in the course of industrial operations to protect persons engaged in those operations. Not only did the reasoning of the members of the Court differ, but the issue confronting the Court and the facts were materially different from the present case.

Mayne Nickless concerned armoured vehicles, described by Ashley J as ``the entirety of the effective workplace''. The present case concerns exhaust fans, which are essential components of mechanical ventilation systems used to extract and expel hot or contaminated air from workplaces, thereby avoiding or minimising specific risks to the health of workers. The Full Court had to construe Item 113G, which applied to equipment of a kind ``used exclusively, or primarily and principally'' in the course of industrial operations to protect persons engaged in those operations. The present case involves the quite different language of Item 20.

The three judgments differ in their approaches to the construction question. Only O'Bryan J expressed the view that the word ``including'' should be read as meaning ``comprising''. Fullagar and Ashley JJ did not accept that construction. As I have already said, in my respectful opinion, the approach taken by O'Bryan J is not consistent with the statutory language employed in both Items 113G and 20. I agree with Fullagar J that the word ``including'' was intended to indicate that the list merely provided examples of a larger class of equipment within each of the items. The list was not intended, in either case, to constitute an exhaustive statement of the equipment capable of coming within the particular Item. It follows, in my view, that Item 20 is not confined to the eight kinds of safety equipment listed in the Item. Nor is the scope of Item 20 limited to protective clothing or equipment in the nature of guards for machinery.

Ashley J relied on the list in Item 113G to support the conclusion that the word ``equipment'' could not extend to equipment ``which plays a central role in the conduct of the industrial operations in respect of which the protection is given''. Mr Hamilton invoked these observations to support the submission that the fans in the present case formed an integral part of the McDonald's cooking system, so that their safety features were merely incidental. But there is a considerable difference between an armoured vehicle, which is the means by which valuable consignments are delivered, and the exhaust fans in the present case. The usual use of the exhaust fans was to form an essential component of systems designed and used to avoid or minimise specific risks to the health of workers.

It is true that in McDonald's outlets, the cooking appliances and the ventilation systems are ``interlocked'', so that if, for any reason, a fan motor ceases to function, so, too, will the cooking appliances which generate the hot and contaminated air. The evidence did not address whether the same interlocking mechanisms exist in other workplaces (which is the more relevant question). In any event, as Mr Davis' evidence makes clear, interlocking is a safety measure, designed to ensure that if the fan ceases to operate for any reason, the kitchen area will not continue to produce fumes and contaminants such as grease, thereby creating a serious hazard for workers and customers. Doubtless, the entire operation will stop if the mechanical ventilation system ceases to operate. But machinery will also stop, or be made to stop, for safety reasons if appropriate guards are not in place. That does not mean that

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ATC 4809

the safety equipment plays a central role in the conduct of the industrial operations, in the sense in which Ashley J used that language. Nor does it mean that the equipment is not ordinarily used to protect workers engaged in industrial operations.

I do not dispute that it may be appropriate to take into account the list set out in Item 20 in construing the language as a whole. In a case like Mayne Nickless, it may be helpful to do so, although there was perhaps no need to go further than Fullagar J did in order to resolve the particular question arising in that case. I think, however, that there are dangers in attempting to construe Item 20 (as Ashley J suggested in relation to Item 113G) by reference to the notion that it is concerned only with ``safety equipment''. The danger is that this phrase, which presents its own problems of construction, will become a substitute for the statutory language.

Ultimately, the question must be determined by inquiring whether the statutory language is satisfied. On the evidence, exhaust fans of the kind I have identified were commonly or usually to safeguard the health and well-being of workers engaged in a range of industrial operations. The terms of Item 20 were satisfied.

Other authorities

I should mention that Mr Hamilton also relied on
GKN Australia Ltd v FC of T 94 ATC 4417 (FCA/Foster J) and
Plessey Australia Pty Ltd v FC of T 89 ATC 5163; (1989) 89 ALR 395 (FCA/Sheppard J). In GKN, Foster J held that pieces of equipment which formed part of scaffolding and others which were used to enable workers to ascend or descend the scaffolding did not come within Item 113G. That case turned on Foster J's finding that the ``primary and principal'' role of the various pieces of equipment was to play an integral part in the structure of the building or to provide access to workers. In the present case the ordinary use of the exhaust fans was to protect workers. Plessey involved other provisions of the legislation and, in my view, does not assist in the present case.

Conclusion

The applicant has established that the exhaust fans, the subject of the Commissioner's decision notified on 3 June 1997, are within Item 20 of Schedule 1 to the Exemptions Act. I direct the applicant to bring in short minutes of order to give effect to these reasons. The Commissioner should pay the applicant's costs.

THE COURT DIRECTS THAT:

1. The applicant bring in short minutes of order giving effect to this judgment.