Case: Hygienic Lily Ltd v Deputy Commissioner of Taxation (1987) 13 FCR 396
Outcome: considered
The decisions in Diethelm Manufacturing Pty Ltd v Commissioner of Taxation (1993) 44 FCR 450 (' Diethelm '), Commissioner of Taxation v Chubb Australia Ltd (1995) 56 FCR 557 (' Chubb '), Clean Investments Pty Ltd v Commissioner of Taxation [2001] FCA 80 ; (2001) 105 FCR 248 ( 'Clean Investments ') and Hygienic Lily Ltd v Deputy Commissioner of Taxation (1987) 13 FCR 396 (' Hygienic Lily ') all involved the construction and application of an expression found in Item 1 of the Third Schedule of the Sales Tax (Exemptions and Classifications) Act 1935 (Cth), namely 'goods ... of a kind ordinarily used for household purposes ...'. I will not attempt to discuss every relevant aspect of these cases because they were reviewed at length by Lindgren J in Clean Investments at 260-274 [35]-[103]. 81 First, the word 'ordinarily' means 'commonly' or 'regularly', not 'principally', 'exclusively' or 'predominately': see Clean Investments at 273 [97] per Lindgren J; Chubb at 560 per Burchett J, and at 57 per Hill J; Hygienic Lily at 399-400 per Gummow J. Counsel for the respondent invited me to depart from these authorities, and to hold that the word 'ordinarily' as used in s 74A(2)(a) means 'predominately'. In view of the authorities to which I was referred, I doubt that I am free to adopt such a construction. In any event, I am not persuaded that the word 'ordinarily' in s 74A(2)(a) means 'predominately' rather than 'commonly' or 'regularly'. On the contrary, I consider that the meaning which best accords with the policy and the purposes of the TPA is that of 'commonly' or 'regularly'. I am conscious that the Full Court of the Victorian Supreme Court in ICI Australia Operations Pty Ltd v Deputy Commissioner of Taxation (Vic) (1987) 82 ATC 5110 said at 5112 that the concept of 'ordinarily used for' equals 'whose primary but not necessarily exclusive purpose and customary use is'. However, I do not agree that the word 'ordinarily' should be given such a connotation in s 74A(2)(a) or elsewhere in the TPA. 83 Thirdly, depending on the precise statutory question and the circumstances of the particular case, it will be relevant to inquire as to the essential character of the goods in question. In Diethelm , French J thought that the answer to the statutory inquiry depended critically on the essential character of the goods. Adopting what had been said by Gummow J in Hygienic Lily at 399, Hill J said that the question whether goods are of a particular kind was to be determined objectively, by reference to the nature, quality and adaptation of the goods in the class or genus in question. However, Hill J also expressed reservations about the essential character test, saying that the inquiry may be useful in some cases but in other cases it may suffer from a lack of precision: at 470. In Chubb , Burchett J doubted the usefulness of the essential character test: at 559. Hill J in Chubb looked beyond the essential character of the goods and took into account evidence that explained the attributes, the intended use and the cost of the goods; Tamberlin J adopted much the same approach as Hill J. In Clean Investments , Lindgren J said that the essential character test lacked sufficient precision to assist in answering the question whether the coin-operated washing machines under consideration in that case constituted goods of a kind ordinarily used for household purposes: at 273 [96]. Lindgren J added that there is a danger that the essential character test may serve simply to give an undeserved legitimacy to first impressions. 96 French J drew attention to the statutory context and the general principles that the classification of goods attracting exemptions or beneficial rates of tax should be liberally construed unless the text or context requires a narrower construction, and that words or phrases should be construed according to their popular meaning unless the evidence establishes that they carry a special commercial or trade meaning in their context: at 457 and 464. His Honour also noted that generalisations about the construction of statutory classifications are to be undertaken with caution, and that subtle changes in language can significantly alter the meaning and operation of a particular provision. French J contrasted the construction given by the authorities to the expression 'ordinarily used for household purposes' with the construction given to the expression 'goods for use' in some specified activity or by some specified person or entity. The former expression has attracted an objective test for characterisation of the goods said to fall within it: see Commissioner of Taxation (Cth) v Newbound &amp; Co Pty Ltd (1952) 10 ATD 59; 26 ALJR 386 at 387 per Dixon CJ; Commissioner of Taxation (Cth) v Sherwood Overseas Pty Ltd (1985) 75 FLR 474 at 477; O R Cormack Pty Ltd v Commissioner of Taxation (Cth) (1992) 92 ATC 4121 at 4123; and Hygienic Lily at 399. In the light of these authorities, French J expressed the test as follows, at 460: 'The question whether goods are "ordinarily used for household purposes" does not depend critically upon the use to which they are in fact put but on an assessment of their "essential character". That assessment does not involve fine semantic distinctions but a judgment which pays regard to the commercial realities of their manufacture and sale.' 100 In Diethelm , Hill J observed that Gummow J adopted a similarly restricted approach to the characterisation of the goods in question in Hygienic Lily. However, the decision in Hygienic Lily reflects the very narrow basis on which the case was argued. The case concerned paper cups of different sizes that were manufactured for various customers and which were marked by the manufacturer with the various trade marks or designs employed by the relevant customers in their particular businesses. The applicant mounted its case by reference to evidence concerning cups ordered by one particular customer, McDonalds Restaurants. The sole argument advanced by the Commissioner of Taxation was that, as the cups in question were manufactured solely or substantially for the purpose of use in McDonalds Restaurants, they were not goods of a kind ordinarily used for household purposes within the meaning of the sales tax exemption: at 399.