Case: Commissioner of Taxation v Chubb Australia Ltd (1995) 56 FCR 557
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. 82 Secondly, it is preferable to pose the statutory question (ie the question whether the goods in issue in the particular case are goods of a kind ordinarily acquired for personal, domestic or household use or consumption) as a single composite question: see Clean Investments at 273 [91]-[93] per Lindgren J; Diethelm at 472 per Hill J; and Chubb at 559[F] per Burchett J. This can be contrasted with a two-stage inquiry as to, first, the genus of goods in question, and secondly, whether that kind of goods is ordinarily acquired for personal, domestic or household use or consumption. As Lindgren J pointed out in Clean Investments , posing the genus question separately as a threshold one runs the risk of prejudging the answer to the statutory question. His Honour said at 273 [92] [93]: 'In some cases it may be misleading to address separately the question of identification of the "genus" to which the particular goods in question belong, and the question whether that genus meets the description "ordinarily used for household purposes". The problem can be indicated by the question "What kind of goods is the Item speaking of?" Answering the genus question separately as a threshold one will assume, without making explicit, an answer to this question. Goods and purposes can be equally correctly described in different ways, in particular, broadly or narrowly, yet the description selected may dictate the answer to the statutory question. For example, an architect's stool, an office chair and a kitchen stool or chair may be described as "stools" or "chairs" and their purpose as being "to provide seating". Yet it would be wrong to conclude that the architect's stool or the office chair is of a kind ordinarily used for household purposes for no other reason than that, like the kitchen chair, it is ordinarily used for the purpose of providing seating.' French J drew attention to the same risk in Diethelm at 465: 'It cannot be enough to say that because some goods fall into a genus wide enough to encompass goods ordinarily used for household purposes, they are therefore "goods of a kind ordinarily used for household purposes". The mere fact that office chairs and domestic chairs both provide "seating", which in some applications is a household purpose, is not sufficient to establish that office chairs are of a kind ordinarily used for household purposes.' To my mind, the risk to which their Honours draw attention is a real one. I agree that it is preferable to pose the statutory question as a single composite question. On my reading, that was the course adopted by French J in Diethelm and, I think, by both Hill J and Tamberlin J in Chubb. 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. 87 Fourthly, the question posed by s 74A(2)(a) is ultimately a question of fact and degree. In Chubb at 559, Burchett J described the question which arose under Item 1 of the Third Schedule of the Sales Tax (Exemptions and Classifications) Act 1935 (Cth) in the following way: 'That is a question of fact into which degree and impression must enter largely, but I do not think its resolution is assisted much by turning back to the essential character of the article. Rather, attention must be focused on the statutory question whether goods of that kind are ordinarily used for household purposes.' In the same case, Hill J said at 572 that the trial judge's finding that certain safes were of a kind ordinarily used for household purposes involved: '... a question of judgment based upon a consideration of the description and in some cases photos or drawings of the relevant safe. No error is apparent in her Honour's judgment, although it is possible that minds could differ as to the outcome in a particular case.' These assessments are borne out by the actual decisions in Diethelm and Chubb . Both cases ultimately turned on the sufficiency of the evidence to discharge the burden of proof which rested on the applicant for sales tax exemption. 103 The Court in Chubb considered whether any and which of the freestanding, wall-mounted or floor-mounted safes manufactured by Chubb fell within the same sales tax exemption. In the course of his judgment, Hill J returned to the question of what evidence is relevant in determining the statutory question. His Honour concluded, at 571: 'It is clear that, in determining whether a particular safe is of a kind ordinarily used for household purposes, it could be relevant to take into account the intended contents of the safe, its security rating, its size or capacity and, related to these matters, its cost. The answer in a particular case may well be one on which minds may differ, for ultimately the determination whether a particular safe or cabinet falls within the Item is a matter of impression. A matter of degree is involved.' 104 Counsel for the respondent argued that this statement can be reconciled with the apparently more restrictive view which Hill J explained in Diethelm . Counsel pointed out that in Chubb, Hill J maintained the same two stage analysis that he adopted in Diethelm . The first stage involves the determination of the genus to which the goods belong, which is to be made in a common sense way and which may involve a consideration of evidence in borderline cases. The second stage requires a determination of whether the relevant kind of goods is ordinarily used for household purposes: see 569[G]-570[A]. Counsel submitted that Hill J's statement in Diethelm concerning the limited role of evidence was directed to the first stage of the inquiry, whereas his Honour's reference in Chubb to a broader range of evidence was directed towards the second stage of the inquiry. 105 I am not persuaded that the two passages can be reconciled in this way. The passage in Chubb is not seeking to distinguish between different steps or stages in the inquiry; rather it is addressing the composite statutory question whether a particular good is of a kind ordinarily used for household purposes. 106 In Chubb , Tamberlin J took broad view of the categories of evidence that might be relevant to the determination of the statutory question, at 576: 'In making a determination it is clearly permissible to take into account matters such as intended contents, security rating, strength, materials, weight, height, breadth and depth, capacity, price and the value in a monetary sense of the items to be protected. None of these matters is determinative but they are matters against which the classification ought to be made. In particular instances of doubt it will be necessary to give greater weight to one or more of these considerations. Because the exemption is concerned with the "kind" of goods it is not appropriate or necessary to limit the evidentiary material to that which relates solely to the particular products of a single manufacturer. It is permissible to consider products of a similar type made by other manufacturers in respect of size, dimensions, cost, capacity and security rating, for example. It will often be helpful to take into account the segment of the safe and security market at which the goods are targeted in advertising and promotional material.' The determination to which Tamberlin J was referring in this passage was, I think, the determination of the question posed by the statutory language, and not merely the determination of the relevant kind or genus of goods to which the particular goods belong. 107 There is an obvious difference between these sales tax cases and s 74A(2)(a) of the TPA. Section 74A(2)(a) refers to 'goods of a kind ordinarily acquired for personal, domestic or household use or consumption' (my emphasis). Even more clearly than the words 'ordinarily used for', this language invites attention to design features and purposes, cost quality and pricing considerations, and the range of uses and applications for the goods which have been targeted in advertising and promotional material. I see no reason why the permissible range of evidence should not extend to what French J called 'the commercial realities of [the] manufacture and sale' of the relevant goods and, as Tamberlin J suggested, similar goods made by other manufacturers. Nor do I see any reason why the use of this evidence is to be confined to the 'genus' question (assuming it is to be addressed separately), rather than being used to assist more broadly in determining the composite statutory question. 108 I therefore accept that a broad range of evidence may be relevant and potentially useful in answering the statutory question. At the same time, I recognise the importance of bearing constantly in mind that the statutory question is whether the goods are of a kind ordinarily acquired for personal, domestic or household use or consumption. Care must be taken to ensure that the detail of the evidence does not blur this question, or distract the Court from the appropriate inquiry. It would, for example, be a mistake to become so focused on the properties, attributes and intended and advertised uses of the particular goods that the Court fails to address the statutory question. This risk would materialise if the kind of goods were to be identified so narrowly that it amounted to little more than a description of the particular goods.