Dawson (trading as Goodvibes Yachts) v. Deputy Commissioner of Taxation.
Members:King CJ
Legoe J
Cox J
Tribunal:
Supreme Court of South Australia (Full Court)
King C.J.
The appellant carried on business at all material times as a boatbuilder. On 3 December 1979 the appellant lodged a Sales Tax Return for ``Labour and Use of Plant and Equipment' - Content of Yachts constructed as per List attached''. The figure shown in the column with the heading ``Value of Goods Sold'' was $63,625. The attached list bore a heading ``Labour and Use of Plant and Equipment' Content of `Duncanson' Yachts constructed during 1976-1979''. On the basis of this return, the Commissioner assessed sales tax to an amount of $8,299. On 20 March 1981 the Deputy Commissioner of Taxation instituted these proceedings in the District Court of Adelaide for the recovery of $9,365, being the above amount of sales tax plus ``additional tax for late payment''. A defence filed by solicitors for the appellant denied liability for the said sum or any sum. The appellant alleged that ``the defendant at no material time entered into a transaction rendering the defendant liable for sales tax''.
The action came on for trial on 15 March 1982 before Senior Judge Ligertwood. Mr. Mancini appeared for the appellant when the action was called on and applied for an adjournment. There were affidavits by the appellant and Mr. Mancini before this Court seeking to explain the reasons for the application for the adjournment. The effect of the affidavits was that the appellant instructed solicitors when he was served with the summons; those solicitors advised that he did not have a defence; he decided to instruct his present solicitors but could not afford to pay his previous solicitors in order to obtain the file; by the time he was able to borrow the necessary money and obtain the file, it was too late to prepare the case. These matters were put to the trial Judge by Mr. Mancini. His Honour refused
ATC 4754
the adjournment. Mr. Mancini withdrew and the appellant conducted his own case.At the commencement of the trial counsel for the Deputy Commissioner tendered a certificate pursuant to sec. 10 of the Sales Tax Procedure Act 1934, as amended, certifying the amount of $9,365.36 sales tax and additional tax to be due by the appellant. By reason of that section the Deputy Commissioner thereby became entitled to judgment for the amount stated in the certificate ``except in so far as the defendant proves that the sales tax so stated or any portion thereof is not payable''. The appellant gave evidence that his business in the relevant years consisted of ``moulding'' hulls and decks for clients who themselves hired the moulds and purchased the materials. The clients paid the appellant for his labour in constructing the hulls and decks. At the conclusion of his evidence, he again applied for an adjournment to enable him to produce documents and to call witnesses to substantiate his version of his system of operating and ``the way it was actually organised''. This application was opposed on the ground that such evidence could not avail the appellant as on his own version he was liable to tax under sec. 17A of the Sales Tax Assessment Act (No. 1). The learned trial Judge agreed and refused the adjournment. He gave judgment for the Deputy Commissioner for the amount claimed. The appellant appeals to this Court against that judgment and seeks a new trial to enable him to present his defence.
The basic contention on the appeal was that the appellant ought to have been granted an adjournment by the trial Judge to enable him to prepare his case and to present his defence fully and adequately. The action came on for trial almost a year after it had been instituted. There is no doubt that the appellant received notice of trial and was aware of the date for trial. Mr. Mancini's affidavit shows that he was aware in February that the trial of the action was pending. The relevant principles are set out in the judgment of
Deane
J., with which the other members of the Court agreed, in
Squire
v.
Rogers
(1979) 39 F.L.R. 106
at p. 113
:
``The question whether an application for adjournment of a matter should be granted or refused is a matter within the discretion of the trial judge to be resolved according to the overall requirements of justice in the particular circumstances ( Conroy v. Conroy ). Its resolution may involve the assessment of competing claims by litigants in other cases awaiting hearing in the list of the particular judge or the particular court and may require knowledge of the working of the listing system of the particular court or judge and the importance in the proper working of that system of adherence to dates fixed for hearing. A court of appeal will not, as a general rule, interfere with the decision of a judge of first instance on that question unless it is satisfied that the exercise of his discretion has miscarried in the sense that it had been affected by wrongful application of principle or misunderstanding or erroneous assessment of the factual material before him.''
In
Sarunic Bros. Pty. Ltd.
v.
A.F.G. Insurances Limited
(delivered 12 March 1984 unreported)
this Full Court also emphasised the discretionary character of the decision by a trial Judge of an application for the postponement or adjournment of a trial. The Full Court in that case referred to the general considerations involved in such a decision. The Chief Justice, with whose judgment the other members of the Court agreed, said:
``The date for the commencement of this trial was fixed in accordance with the ordinary procedures of the Court. It is essential to the orderly conduct of the business of the Court that trial dates be adhered to... When a case comes before the trial Judge on the date fixed for trial, the parties are entitled to come to Court with an assurance that the trial will commence and will proceed, so far as possible, without interruption, to its conclusion. The Court, which is in this respect the protector of the public interest, is also entitled to that assurance. Judicial time is set aside for the trial. If the trial does not proceed, there may be loss of judicial time with a consequent effect upon the list of cases awaiting trial and detriment to those involved in them.''
The District Court, like the other Courts of the State, is subject to great pressure from the volume of cases to be tried. The Judges of that Court, like the Judges and magistrates of the other Courts, have a responsibility to ensure, so far as possible and subject to overriding considerations of justice, that the limited resources which the State commits to the administration of justice are not wasted by failure of parties to adhere to trial dates of which
ATC 4755
they have had proper notice. Moreover, the Deputy Commissioner of Taxation, like other plaintiffs, is entitled to have his claim adjudicated upon and enforced without unnecessary delay. Judges must also bear in mind the possibility that a defendant who is justly liable in respect of a claim may endeavour to postpone his obligation. There is no evidence that that is the motive of the present appellant, but it is right that Judges should be alert, as a general consideration when considering applications for an adjournment or postponement of trial, to the risk of persons endeavouring to manipulate the legal process as the means of escaping or deferring their just obligations. These were all relevant considerations for the trial Judge. There is no reason to suppose that he overlooked the countervailing consideration that the appellant was unable to obtain his solicitors' file and obtain other representation by reason of lack of funds. It must be said, however, that that consideration was considerably weakened by a number of factors. No attempt was made, so far as we were told, to provide details of the appellant's financial position, nor of the factors which enabled him to borrow money on the eve of trial but not before. Nor was any detail vouchsafed of whatever efforts might have been made to overcome the problem in the light of the approaching trial. It is not known whether the possibility of legal aid was investigated and with what result. What is known, and was known to the trial Judge, is that it was not a case of a party who had been advised that there was merit in his case but who lacked the funds to present it; it was a case of a party who had been advised by his solicitors that he did not have a good defence and was nevertheless seeking an adjournment to present the defence which had been the subject of that advice.It is seldom that an appellate Court will feel justified in reviewing a trial Judge's decision on an adjournment application, but it may do so if satisfied that in all the circumstances there has been an injustice,
Bloch
v.
Bloch
(1981) 55 A.L.J.R. 701
at p. 703
.
If the issue of the adjournment were confined to the rejection of the application at the commencement of the trial, I do not think that there could be any question of this Court interfering with the Judge's exercise of his discretion. There were ample grounds upon which he could exercise the discretion in the way in which he did exercise it. But the matter did not stop there. At the conclusion of his evidence the appellant renewed the application. The learned Judge then took into account the view which he had formed that the evidence which the appellant sought to obtain could not affect the outcome, because the facts which the appellant sought to establish would not affect his liability to tax under sec. 17A of the Sales Tax Assessment Act (No. 1). At that stage, his Honour's view of the law was clearly an important factor in his exercise of the discretion to refuse the adjournment. If his Honour's view of the law is incorrect, his exercise of the discretion must be regarded as having miscarried, and it would then be necessary for this Court to consider the relevant factors, unimpeded by the Judge's exercise of discretion, for the purpose of deciding whether there should be a new trial to enable the appellant to call his evidence. It is therefore necessary to consider whether the version of the facts which the appellant seeks to establish can affect his liability to tax.
The Court admitted, with the consent of Mr. Robertson for the respondent, an affidavit of the appellant deposing to the manner in which the business was carried on in the relevant years. He deposed that he was engaged in ``making fibreglass boat decks and hulls''. He says that he ``worked from premises owned by Duncanson''. The affidavit continues:
``I contracted my labour to an owner/builder who hired those premises from Duncanson. The owner/builder hired the moulds from Duncanson. I would enter into an agreement in writing with the owner/builder.''
There was exhibited to the affidavit a letter from the appellant to the customer which was said to be ``One of the agreements, the subject of the proceedings''. The affidavit went on:
``The form and substance of each and every agreement was essentially the same in all cases and the only variation would be in respect of price, type and quantity of materials used.''
The letter which was exhibited began:
``Further to our previous discussions I have pleasure in submitting a costing outline of your constructing as Builder/Owner a `Duncanson' Yacht Hull and Deck.''
ATC 4756
The costs are then set out separately for two stages of construction and the costs of materials and labour are specified separately. There is the following paragraph regarding materials:
``Please note that all materials are quoted as estimates only based on current prices and will be subject to adjustment at the conclusion of each stage to cover any increases in costs, quantities required and Sales Tax as applicable. All purchases made on your behalf as they apply to Stage 1 will be on a COD basis.''
There is a stipulation for progress payments, the figures for materials and labour being specified separately. Paragraph 6 of the affidavit describes the process carried out by the appellant as follows:
``I would commence work on the premises rented by the owner/builder. The mould was prepared by waxing and polishing. A material, gelcoat, is sprayed onto the mould to give the hull a colour finish. Fibreglass was then laminated onto the gelcoat at varying thickness according to strength requirements. Standard specifications were generally agreed upon with the owner/builder. I proceeded to lay up the hull and deck and then bolt and bond the two together. The yacht would then be completed to a basic stage. Then, depending on the extent of the work to be done in any particular agreement I would proceed to fit the keel, chain plates, rudder, water tank and other fittings.''
Paragraph 7 of the affidavit describes the procedure followed with respect to the procurement of the materials as follows:
``The materials namely: gelcoat, resin and fibreglass were always purchased after the agreement was made. I never had any materials used on hand. All materials were purchased from trade suppliers. For example, gelcoat was obtained from Synthetic Resins. In some cases, I would place an order by telephone for the quantity of material to be used in any one particular job. The owner/builder would then be invoiced and pay for the materials. In other instances I would place the order and if I had funds on hand I would pay for the materials. In these cases a progress payment or commencement made would be made by the owner/builder in anticipation and on the basis of the estimated cost and quantity of materials to be used. In a few instances Duncanson would order the materials.''
The relevant taxing provisions are sec. 17 and 17A of the Sales Tax Assessment Act (No. 1). I set out those sections as they stood prior to 20 September 1978:
``17(1) Subject to, and in accordance with, the provisions of this Act, the sales tax imposed by the Sales Tax Act (No. 1) 1930 shall be levied and paid upon the sale value of goods manufactured in Australia, either before or after the commencement of this Act, by a taxpayer and on or after the first day of August One thousand nine hundred and thirty sold by him or treated by him as stock for sale by retail or applied to his own use.
(2) For the purposes of this section goods manufactured in Australia by a taxpayer and applied to his own use means goods manufactured in Australia in the course of carrying on a business and applied by the taxpayer to his own use whether for the purpose of that business or for any other purpose and whether or not those goods are of a class manufactured by that person for sale.
17A. Where goods are manufactured for a person wholly or in part out of materials supplied by him, the manufacturer of the goods, whether he manufactures those goods himself or procures their manufacture by another person, shall, for the purposes of this Act, be deemed to have sold the goods to the first-mentioned person, at the time of their delivery to him, for the amount charged to him by the manufacturer in respect of those goods.''
``Manufacturer'' is defined in sec. 3 as follows:
``Manufacturer' means a person who engages, whether exclusively or not, in the manufacture of goods, and includes a printer, publisher, lithographer or engraver, and a person (not being an employee) who manufactures goods, whether or not the materials out of which the goods are manufactured are owned by him, but, where one person manufactures goods for another, wholly or in part out of materials supplied by that other, and the goods are not for the use of, but are for sale by, that other, the person
ATC 4757
supplying the materials shall be deemed to be the manufacturer, and the person who so manufactures the goods shall be deemed not to be the manufacturer.''
``Manufacture'' is defined as including:
``(a) production;
(b) the combination of parts or ingredients whereby an article or substance is formed which is commercially distinct from those parts or ingredients, except such combination (not being a combination whereby concrete, cement mortar, lime mortar or any similar preparation of a kind used in the construction, repair or maintenance of buildings or other structures is formed, or whereby any other prescribed article or substance is formed) as, in the opinion of the Commissioner, it is customary or reasonably practicable for users or consumers of those articles or substances to undertake; and
(c)... (not material).''
In his affidavit the appellant puts forward the following contention:
``Furthermore, I have always considered I was not the builder of the boats or the manufacturer for the purposes of the Sales Tax Assessment Act because by virtue of my agreements with owner/builders they procured my labour and plant and equipment and so they were manufacturers.''
This contention is clearly untenable on the information given in the appellant's affidavit. It is clear from the description of his business functions in the affidavit quoted above and from the typical ``agreement'' exhibited thereto, that the appellant was no mere artisan or labourer, nor was he a contractor of labour to a manufacturer. He was the organiser of the construction project. He determined what materials were needed and ordered them or arranged for them to be ordered. He provided the knowledge, skill, experience and organising services, as well as the labour, which resulted in the materials being converted into a yacht hull and deck. The hull and deck constituted an ``article... which is commercially distinct'' from the materials which were combined to form the hull and deck. The process therefore falls within the words of the definition of manufacture as well as within the ordinary concept of manufacture. By means of his knowledge, labour, skills, and organising services, he was responsible for ``the combination of parts... whereby an article... is formed which is commercially distinct from those parts''. The process in which the appellant engaged therefore answers the description of ``manufacture''. The appellant therefore answers the description of ``manufacture'' in the definition unless the hull and deck is not for the use of the customer but for sale by him. No evidence was produced to suggest that the customers were other than persons who desired the yachts for their own use. There was nothing to suggest that any customer was engaged in commercial activity in relation to yachts.
An argument was put to us that sec. 17A does not operate so as to render the appellant liable to tax because the materials were not supplied by the customer but by the merchants from whom the materials were purchased. The argument sought to restrict the meaning of ``supplied'' in the section to the physical delivery of the material. The consequence of this argument is, as counsel was forced to concede, that if the customer were to take delivery of the materials purchased and physically deliver them to the manufacturer, the manufacturer would be liable to tax under sec. 17A in respect of the amount charged by him to the customer for manufacturing the product; if, however, the customer, or the manufacturer on his behalf, were to arrange for the materials to be delivered by the merchant direct to the manufacturer, the manufacturer would escape sales tax on the amount charged by him to the customer for the manufacture. Such a result would be plainly contrary to the scheme of the Act. When sec. 17 and 17A are read together the taxing scheme is plain. Where the manufacturer provides the materials which are converted into the manufactured product, he is liable to tax under sec. 17 upon the sale value of the product. Where the manufacturer does not provide the materials, or some of the materials, but they are provided by the customer, the manufacturer is liable to sales tax, not on the sale value of the finished product, but only on the amount charged to the customer ``by the manufacturer in respect of those goods''.
It was argued that the Court should not give effect to what seems to me to be the evident intention of the section because the word ``supplied'' is capable of being understood in the narrow sense referred to above, and that, the
ATC 4758
statute being a taxing statute, the Court is bound to adopt the narrow construction. But ``the fundamental object of statutory construction in every case is to ascertain the legislative intention by reference to the language of the instrument viewed as a whole''Cooper Brookes (Wollongong) Pty. Ltd. v. F.C. of T. 81 ATC 4292 ; (1981) 147 C.L.R. 297 per Mason and Wilson JJ., at ATC p. 4305; C.L.R. p. 320. ``The rules'', as their Honours observe, ``are no more than rules of common sense, designed to achieve this object''. There is no rule of construction which requires a Court to select a particular meaning from alternative meanings of a word, whether the word appears in a taxing or any other type of statute, if the adoption of that meaning will defeat the evident intention of the statutory provision.
The meaning of the word ``supply'' varies with the context,
Bennett
v.
Cooper
(1948) 76 C.L.R. 570
per
Latham
C.J. at p. 577. The sense of physical delivery is the narrowest sense in which the word can be used. It is by no means its typical sense. The notion of physical delivery has no relevance to the purpose of sec. 17A. That section contemplates the arrangements between manufacturer and customer as to the provision of materials needed for manufacture. The distinction made is that between a business arrangement in which the manufacturer manufactures the product out of his own materials and that in which he manufactures the product out of the customer's materials. Physical possession and delivery are irrelevant to that distinction. I have no doubt that under the arrangements deposed to by the appellant, the materials were supplied by the customer.
In my opinion, therefore, the appellant was rendered liable to the tax assessed by sec. 17A as it stood prior to 20 September 1978. On that date the Sales Tax Assessment (No. 1) Amendment Act 1978 came into force. This amending Act repealed sec. 17A and replaced it with a new sec. 17A as follows:
``17A(1) Where -
- (a) goods have been manufactured in Australia by a person for another person (in this sub-section referred to as the `customer') under an agreement entered into after 20 September 1978; and
- (b) the goods were manufactured in whole or in part out of materials supplied by the customer,
the manufacturer of the goods shall, for the purposes of this Act, be deemed to have sold the goods to the customer at the time when the goods were delivered to the customer, or were delivered under an agreement with the customer to some other person, and the customer shall, for the purposes of this Act, be deemed to be the purchaser of the goods.
(2) For the purposes of this section, where a person has procured the manufacture of goods for a person (in this sub-section referred to as the `customer') by another person (in this sub-section referred to as the `third person') in whole or in part out of materials supplied by the customer, the person who so procured the manufacture of the goods shall be deemed to have been the manufacturer of the goods and the third person shall be deemed not to have been the manufacturer of the goods.
(3) For the purposes of this section, goods manufactured for a person (in this sub-section referred to as the `customer') shall be taken to be manufactured in whole or in part out of materials supplied by the customer if the goods are manufactured in whole or in part out of materials -
- (a) which are supplied by the customer or by another person at the request of, or under an agreement with, the customer; or
- (b) which the customer has purchased, or agreed to purchase, from the manufacturer.
(4) In this section, `agreement' means any agreement, arrangement or understanding -
- (a) whether formal or informal;
- (b) whether express or implied; or
- (c) whether or not enforceable, or intended to be enforceable, by legal proceedings.''
Perhaps subsec. (3) was intended to make the true meaning even plainer against the sort of argument which was addressed to us. However that may be, the appellant's liability to tax is at least equally clear under the new section.
The learned trial Judge was, in my opinion, correct in taking the view that the evidence, in order to call which the appellant sought the adjournment, could not have assisted his case. He is clearly liable to the tax claimed on the
ATC 4759
version of the facts which he sought to establish. No injustice has resulted from the refusal of the adjournment. No mistake has been demonstrated in the view of the facts or the law upon which the learned Judge based the exercise of his discretion to refuse the adjournment. The judgment was fully justified by the material before the Judge. The appeal should be dismissed.This information is provided by CCH Australia Limited Link opens in new window. View the disclaimer and notice of copyright.