THE NEW SOUTH WALES CANCER COUNCIL v FC of T & ANOR

Judges:
Sackville J

Court:
Federal Court

Judgment date: 14 April 1999

Sackville J

The proceedings

1. The applicant (``the Council'') seeks declarations that three models of sunglasses sold by it are exempt from sales tax pursuant to Item 20 of Schedule 1 to the Sales Tax (Exemptions and Classifications) Act 1992 (Cth) (``Exemptions Act'') and s 24 of the Sales Tax Assessment Act 1992 (Cth) (``STA Act''). 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 respondents are, respectively, the Commissioner of Taxation (``the Commissioner'') and the Commonwealth.

2. The legislation works in the following way (see
Airovent Pty Ltd v FC of T 98 ATC 4800 (Sackville J), at 4801). 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). The assessable dealings specified in Table 1 include, for example, a wholesale sale by a person who is not the manufacturer of the goods (Item AD1b) and a retail sale by a person who is not the manufacturer of the goods, but who obtained the goods under quote (Item AD2b). In each of these cases, Column 3 specifies that the seller is the person liable to pay the tax on the normal taxable value of the goods as defined in Column 5.

3. 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 sunglasses in respect of which

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declarations are sought are within Item 20 of Schedule 1 of the Exemptions Act, the sale of those goods by the Council is not a taxable dealing.

The Council

4. The Council was established by the New South Wales State Cancer Council Act 1955 (NSW) and its activities are now governed by the New South Wales Cancer Council Act 1995 (NSW) (``1995 Act''). The objects of the Council under the 1995 Act include fostering research into the causation, prevention, diagnosis and treatment of cancer; collecting and disseminating information relating to the causes, incidence and treatment of cancer; and promoting education and training, and the education of the public, in relation to cancer (s 5(1)).

5. The Council sells a variety of products designed to prevent cancer, by providing protection from exposure to the sun. These products include sunglasses, which account for approximately thirty-eight per cent of the Council's annual sales revenue. The Council sells sunglasses in four ways:

6. All sunglasses sold by the Council comply with Australian Standard AS 1067.1-1990, to which I refer in more detail later. The sunglasses sold by the Council include the three models in respect of which declarations are sought. These are:

I refer to these three models, collectively, as ``the Council's AS sunglasses''.

The Council's case

7. The Council's case rests on the proposition that there are numerous industrial operations which must be conducted outdoors and which expose workers to ultraviolet radiation (that is, in the wavelength below 400 nanometres (``nm'') and to visible light (that is, in the band of wavelength range 400 nm to 760 nm).

8. This exposure creates severe health risks in Australia, since solar radiation in this country contains high levels of ultraviolet radiation and visible light. The health risks include eye diseases, such as cataracts, corneal disorders, acute photokeratitis and intraocular malignant melanoma. Exposure to ultraviolet radiation and visible light also increases the risk of contracting diseases of the skin in the vicinity of the eyes, especially certain types of skin cancer such as basal cell carcinoma.

9. The Council says that it is now widely, if not universally, recognised, both in legislation and industrial practice, that employees who work outdoors must be protected against solar radiation. It is also widely, if not universally, acknowledged (not least because of the activities of the Council itself), that employees will receive appropriate protection against damage to the eyes or the skin in the vicinity of the eyes if they wear sunglasses complying with Australian Standard AS 1067.1-1990 (``complying sunglasses''). The Council relies on evidence suggesting that it is common practice for outdoor workers, such as construction workers and local government field staff, to be issued with and to wear complying sunglasses. The Council's AS sunglasses are complying sunglasses.

10. The applicant contends that, in view of the evidence, the Council's AS sunglasses are within Item 20, since they answer the description of

``[e]quipment of a kind ordinarily used in the course of industrial operations to protect persons engaged in those operations.''

AS 1067.1

11. AS 1067, entitled ``Sunglasses and fashion spectacles'' was published by Standards Australia in 1990. Part 1 (AS 1067.1) deals with safety requirements. It sets out safety requirements for sunglasses and fashion spectacles having plano lenses of nominally zero refractive power. The sunglasses described in AS 1067.1 are not intended to provide

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protection against sources of radiation other than natural sunlight.

12. Paragraph 1.4 of AS 1067.1 deals with the classification of sunglasses and fashion spectacles as follows:

``For the purpose of labelling, sunglasses and fashion spectacles shall be classified according to the luminous transmittance properties of their lenses (as given in Table 2.1). The classifications are as follows:

  • (1) Fashion spectacles.
  • (2) General-purpose sunglasses.
  • (3) Specific-purpose sunglasses.
    • Type (a) For protection against very intense sun glare.
    • Type (b) For protection against ultraviolet radiation in sunlight for specified environments.''

AS 1067.1, par 1.3.7, provides the following definitions of the expressions used in par 1.4:

``1.3.7.1 Fashion spectacles - glasses that do not substantially reduce sun glare and are worn primarily for their fashion properties.

1.3.7.2 General-purpose sunglasses - sunglasses intended to reduce sun glare in ordinary circumstances (which includes driving of motor vehicles in daylight).

1.3.7.3 Specific-purpose sunglasses - sunglasses for occupational and recreational purposes intended to reduce sun glare in those occupations or environmental conditions where general-purpose sunglasses may prove inadequate or unsuitable. These conditions include circumstances where glare is very intense, or where the wearer incurs regular or long-term exposure to glare.''

13. Table 2.1, referred to in par 1.4, sets out several kinds of transmittance properties. It is necessary only to refer to the ``maximum mean transmittance values'' for erythemal ultraviolet radiation (that is, ultraviolet radiation wavelength of 325 nm that elicits, after sufficient exposure, a delayed response of inflammation or reddening of the human skin). Fashion spectacles are those which permit transmittance of a maximum of five per cent of erythemal ultraviolet rays. In other words, fashion spectacles must screen out at least ninety-five per cent of those rays. General purpose sunglasses are those which permit transmittance of a maximum of one per cent of erythemal ultraviolet rays. The maximum figure for specific purpose sunglasses is 0.5 per cent in the case of category (a), and 0.2 per cent in the case of category (b).

14. Each of the Council's AS sunglasses complies with AS 1067.1:

The genus

15. In
FC of T v Chubb Australia Ltd 95 ATC 4186; (1995) 56 FCR 557 (FC), the question was whether safes were within Item 1(a) of the Third Schedule to the Sales Tax (Exemptions and Classifications) Act 1935 (Cth). Item 1(a) exempted ``[g]oods... of a kind ordinarily used for household purposes, namely:- (a) furniture...''. Hill J, with whose reasoning Tamberlin J agreed, said (at ATC 4195; FCR 569) that the first question which arises under Item 1(a) is one of classification which

``... 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.''

The parties accepted that it was appropriate to apply this approach to Item 20 in the present cases, as was done in Airovent, at 4805.

16. Mr Bloom QC, who appeared with Ms Pepper for the Council, identified the genus upon which the Council relied in this case as

``sunglasses complying with AS 1067.1, but excluding fashion spectacles.''

In other words, Mr Bloom identified the genus as comprising sunglasses within pars (2) and (3) of cl 1.4 of AS 1067.1. As has been

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seen, each of the Council's AS sunglasses falls within the genus so defined. I shall return to the genus later.

Findings

17. The accuracy of the evidence adduced by the Council was not contested, although a question arose concerning apparent ambiguities in the use of the word ``sunglasses'' in certain affidavits. However, Mr Slater QC, who appeared with Mr Hamilton for the respondents, accepted that the word, in context, should be taken as intended to refer to general and specific purposes sunglasses conforming with pars (2) and (3) of cl 1.4 of AS 1067.1 (that is, sunglasses within the genus identified by Mr Bloom).

18. On this basis, I make the following findings, none of which I understood Mr Slater to dispute:

The submissions

19. Not only was there no significant dispute as to the facts, there was a substantial measure of agreement as to the construction of Item 20. Indeed, there was only one point at which the submissions joined issue. Mr Slater, on behalf of the respondents, submitted that Item 20, read as a whole, required that there be a ``direct connection between the industrial operations and the protective function of the kind of equipment in issue''. On this argument, equipment is within Item 20 only if it protects against some risk which arises out of the very operations in which they are used. It is not enough that the particular equipment is designed to be used, and is used, to protect against health risks, such as solar radiation created by the natural environment.

20. The respondents relied on the fact that each of the illustrative items of equipment referred to in Item 20 is (so Mr Slater contended) designed to afford protection against risks arising out of the industrial operations. Thus, masks and respirators protect against airborne contaminants produced by or encountered in the course of industrial operations; shields, goggles and visors protect against heat, flying particles and the like encountered in industrial operations; helmets and belts protect against harm from debris or site-specific risks; and machine guards protect against the danger of injury created by the machines themselves. While Mr Slater specifically eschewed any ejusdem generis argument derived from the concluding words of Item 20, he said that they could be invoked to give ``colour and content'' to the construction of the Item.

21. I have already outlined the Council's case. Mr Bloom contended that the evidence made it inevitable that the declarations it sought should be made and that there was no basis for an implied limitation of the kind propounded by Mr Slater to be read into Item 20.

Reasoning

22. Before addressing the particular argument relied on by the respondents, it is convenient to refer some well-established principles relating to the construction of Item 20 and to consider their application to the present case.

23. It follows from this analysis, subject to the particular argument relied on by the respondents, that the Council appears to have satisfied the language of Item 20, as it has been construed in the authorities. Complying sunglasses, including the Council's AS sunglasses, would therefore seem to answer the description of ``equipment of a kind used in the course of industrial operations to protect persons engaged in those operations'', unless some limitation is read into the scope of Item 20.

24. Mr Slater sought to counter this conclusion by arguing that the language of Item 20 ought not to be construed simply by taking the individual words or phrases in isolation and asking whether each is satisfied. He contended that the whole of the statutory language must be considered in its context, pointing to the words of Learned Hand CJ in
Helvering v Gregory 69 F 2d 809 (1934) at 810-811, cited by Tamberlin J in
Lo v Minister for Immigration & Ethnic Affairs (1995) 61 FCR 221 at 226:

``... the meaning of a sentence may be more than that of separate words, as a melody is more than the notes, and no degree of particularity can ever obviate recourse to the setting in which all appear, and which all collectively create.''

To similar effect are the observations of Lord Hoffman in
R v Brown [1996] 1 AC 543 at 561, quoted by the Court in
Collector of Customs v Agfa-Gevaert Limited 96 ATC 5240 at 5245; (1996) 186 CLR 389 at 397:

``The fallacy in the Crown's argument is, I think, one common among lawyers, namely

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to treat the words of an English sentence as building blocks whose meaning cannot be affected by the rest of the sentence... This is not the way language works. The unit of communication by means of language is the sentence and not the parts of which it is composed. The significance of individual words is affected by other words and the syntax of the whole.''

See also
CIC Insurance Limited v Bankstown Football Club Limited (1997) 9 ANZ Insurance Cases ¶61-348 at 76,853; (1995-1997) 187 CLR 384 at 408 (stressing the importance of ``context'' in statutory interpretation).

25. That these observations provide useful general guides to the task of statutory construction cannot be doubted. But it remains necessary to take into account other well settled principles of construction applicable to Item 20. In construing the exemption provisions of the sales tax legislation, the task of the judge is ``to apply the ordinary meaning of the language Parliament has chosen'':
Telstra Corporation Ltd v FC of T 96 ATC 4805 at 4809; (1996) 68 FCR 566 at 571-572 (FC), per Heerey J. Further, the Items in legislation setting out exemptions and classifications are not to be given any narrow or rigid meaning. Rather, they must be understood in a

``flexible and elastic sense capable of accommodating the individual variations, unforeseen by the draftsman, which reality is certain to produce.''

Chubb, at ATC 4187; FCR 559, per Burchett J;
Woolworths Ltd v FC of T 99 ATC 4187 (Hely J), at 4194.

26. In my view, the ordinary language of Item 20, when read in context, does not suggest that it should be read so as to exclude equipment used in the course of industrial operations to protect against natural hazards inherent in the environment. Item 20 speaks of ``equipment... used in the course of industrial operations to protect persons engaged in those operations''. The language does not specify the nature of the risks or hazards against which the equipment is to protect and, in particular, does not suggest that it is only equipment which protects against hazards created by the very industrial operations themselves that can be within the exemption.

27. As I have noted, Mr Slater did not dispute the expression that ``industrial operations'' should be interpreted as extending to work performed by outdoor workers. Once that is accepted, it is difficult to see why equipment which protects against hazards to which outdoor workers are necessarily exposed, should be excluded from Item 20 simply because the hazards are ``natural''. It is the worker's prolonged exposure to ultraviolet radiation and visible light necessitated by his or her employment that creates the risk to health: cf
Treloar v Australian Telecommunications Commission (1990) 26 FCR 316 at 316 (FC). It can hardly be said that the risk to health created by such exposure is any less significant than the risk, say, of breathing in harmful substances generated by manufacturing activities. In Airovent, at 4809, I expressed reservations about construing Item 20 by reference to the notion, derived from an explanatory memorandum relating to the legislation in a different form, that the Item is concerned only with ``safety equipment''. But even if it is so confined on the evidence in this case, that expression is entirely apt to describe complying sunglasses as used by outdoor workers.

28. The respondents contended that sunglasses do not perform a function particularly concerned with workplace safety. Rather, they perform a protective function applicable to the population generally. However, the critical question posed by Item 20 is whether the particular goods answer the description of ``equipment of a kind ordinarily used in the course of industrial operations to protect persons engaged in those operations''. Given the construction of the words ``ordinarily used'', there will be cases when equipment is within Item 20, even though the same equipment is regularly used by members of the general population. In any event, as I have pointed out, outdoor workers face special risks by reason of the fact that their work requires them to be exposed, often for long periods, to ultraviolet radiation and visible light.

29. Mr Slater relied on the concluding words of Item 20 to give ``colour and content'' to the preceding language. He submitted that each of the items of equipment specifically identified in Item 20, including visors and goggles, has the common characteristic of providing protection against artificial hazards created by the industrial operations themselves and that Item 20 should be construed with this in mind. I do not think that this submission is correct. The

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Macquarie Dictionary, for example, includes among the meanings of ``visor'':

``4. a small shield attached to the inside roof of the car, which may be swung down to protect the driver's eyes from glare or sunlight .''

(Emphasis added)

The word ``goggle'' is defined to include

``1. spectacles often with special rims, lenses, or sidepieces, so devised as to protect the eyes from wind , dust, water, or glare .''

(Emphasis added)

Thus at least two of the items of equipment specifically identified in Item 20 may protect against ``natural'' hazards such as glare, sunlight or wind.

30. In any event, even if all the items of equipment specifically listed in Item 20 had the characteristic identified by Mr Slater, I do not think that would provide a reason for departing from the ordinary meaning of the language used in the first part of Item 20. It must be remembered that the concluding words of Item 20 are introduced by the word ``including''. As Kitto J said of the word ``includes'' in
YZ Finance Company Pty Ltd v Cummings (1964) 109 CLR 395 at 401-402, ``including''

``has no exclusive force of its own. It indicates that the whole of its object is within the subject, but not that its object is the whole of its subject. Whether its object is the whole of its subject is a question of the true construction of the entire provision....''

31. In Airovent, after considering Mayne Nickless, I expressed agreement (at 4808) with the judgment of Fullagar J in that case that

``... the word `including' [in Item 20] 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.''

The usual use of the complying sunglasses by outdoor workers is to protect against an acknowledged and serious health risk to workers, to which they are exposed by reason of their employment. In my opinion, complying sunglasses are within Item 20.

32. The respondents also made what Mr Bloom rather unkindly characterised as a ``floodgates'' argument. Mr Slater gave a number of instances of products that might fall within Item 20 if it were not to be read in the restrictive manner suggested by his submissions, and he pointed out that the revenue might be adversely affected. Courts tend not to be sympathetic to ``floodgates'' arguments, particularly in the context of giving effect to the ordinary meaning of words used by Parliament:
Phelps v Western Mining Corporation Limited (1978) ATPR ¶40-077 at 17,770; (1978) 33 FLR 327 at 333 (FC), per Deane J;
Radnedge v Government Insurance Office of New South Wales (1987) 9 NSWLR 235 at 244-245 (CA), per Kirby P. In any case, the answer to the Commissioner's contention is that each case must be considered on its merits to determine whether the terms of Item 20 are satisfied. The answer is likely to depend on the evidence adduced in a particular case. It is also to be borne in mind that the scope of Item 20, as its language implies, is likely to change as workplace safety practices change. Furthermore, some of the examples given by Mr Slater, such as sun-screen lotions, present questions of statutory construction not raised in this case.

33. Finally, the respondents relied on the exclusion of sunglasses from Item 85 of Schedule 1 to the Exemptions Act, which is as follows:

``ITEM 85: [Spectacles etc.]

  • (1) Spectacles and eye-glasses, but not including goggles, sun glasses, binoculars or similar optical goods.''

Mr Slater argued that, since Item 85 specifically excludes ``sun glasses'', it is not to be expected that the legislative intention was to allow an excluded item to be included in another exemption by an expansive process of construction.

34. Item 85 was first introduced to the legislative scheme, in almost identical form, by the Sales Tax (Exemption and Classifications) Act 1942 (Cth), which added the relevant paragraph to Item 42 (``Surgical appliances... and surgical materials''). The forerunner to the present Item 20 was introduced, as Item 113G, by the Sales Tax (Exemptions and

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Classifications) Act 1954 (Cth): see Airovent, at 4808.

35. In my view, Item 85 should not be read as creating an implied qualification to Item 20. As Mr Bloom pointed out, it is difficult to read the Items in Schedule 1 to the Exemptions Act in the manner suggested by Mr Slater. For example, Chapter 14 of Schedule 1 provides exemptions for goods for use by certain bodies, such as municipal councils (Item 127), museums (Item 128) and various statutory authorities (Item 130). It is hardly likely that Parliament intended that goods for the use of these bodies are not exempt if they are excluded from some other exemption. As the legislative histories of Items 85 and 20 show, exemptions can be introduced into the legislation at different times, and for quite different purposes. The exclusion of sunglasses from Item 85 reflects the origins of that Item as an exemption for spectacles within the general category of surgical appliances.

36. Moreover, the effect of construing complying sunglasses within Item 20 is not to confer an exemption on all sunglasses. Only a limited category of sunglasses attracts the exemption, since on the evidence in this case it is only a limited category that conforms with the language used in Item 20.

37. I therefore reject the respondents' argument based on Item 85.

Conclusion

38. The Council has made out its case that the Council's AS sunglasses are within Item 20 in Schedule 1 to the Exemptions Act. The respondents did not suggest that the form of relief sought by the Council was inappropriate. Accordingly, I think that it should have declaratory relief substantially in the form it seeks. However, if either party files written submissions within seven days suggesting that relief in this form is inappropriate, I shall give consideration to whether the form of the declarations should be amended.

39. My present view is that the respondents should pay the Council's costs. However, I shall give the respondents an opportunity to file written submissions on costs, should they wish to adopt that course. If written submissions are filed within seven days of this judgment, the costs order will be stayed until further order. The Council will have a further seven days to reply to any submissions made by the respondents.

THE COURT ORDERS THAT:

1. The following items are exempt from sales tax pursuant to Item 20 of the First Schedule to the Sales Tax (Exemptions and Classifications) Act 1992 (Cth) and s 24 of the Sales Tax Assessment Act 1992 (Cth):

2. The respondents pay the applicant's costs.

3. Order 2 be stayed until further order, if the respondents file and serve written submissions in support of a different costs order within seven days from the date of these orders.

4. Should the respondents serve written submissions within seven days of these orders, pursuant to Order 3, the applicant file and serve its written submissions as to costs within seven days of the respondents filing and serving their submissions.

 

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