OR CORMACK PTY LIMITED v FC of T
Judges:Davies J
Court:
Federal Court
Davies J
These proceedings were commenced in the High Court of Australia but were remitted to this Court by order of his Honour, M.H. McHugh J., made on 21 March 1991. The issue which arises between the plaintiff, O.R. Cormack Pty Limited, which is a manufacturer of painters' equipment, and the defendant, the Commissioner of Taxation of the Common- wealth of Australia, is the classification for sales tax purposes of certain goods manufactured by the plaintiff.
The plaintiff alleges that the goods fall within Items 1 and 2 of the Third Schedule to the Sales Tax (Exemptions and Classifications) Act 1935 (Cth). Item 1 reads inter alia:-
``1 Goods (not being goods covered by an item in the Second Schedule, goods of a kind used exclusively or principally in sport or games or goods designed for use exclusively or principally in, or in connection with, swimming pools or spa baths) of a kind ordinarily used for household purposes, namely:-
(a) furniture, but not including pictures, picture frames, statuary, sculptures, plaques, medallions, medals, inlays, mosaics, tapestries, cameos or representations of mottoes, proverbs or verses;
(b) crockery and articles of a material other than earthenware used for purposes similar to the purposes for which crockery is used;
(ba) jardinieres and vases;
(c) glassware and articles that are made of a material other than glass and are used for purposes similar to the purposes for which glassware is used;
(d) cutlery and cutlery sharpeners;
(e) refrigerators, ice chests and other appliances used for the cooling or freezing of food;
(f) washing machines, wringers and other appliances used for or in connexion with laundering;
(g) vacuum cleaners, carpet sweepers, floor polishers and other appliances for use for cleaning purposes;
(ga) space heaters, radiators and other appliances for use for room heating;
(h) grillers, stoves, ranges, ovens, cookers, toasters, mixing machines, immersion heaters, hot water jugs and kettles, percolators and other appliances for use for culinary purposes;
(ha) electric fans;
(hb) air conditioners of a kind used exclusively, or primarily and principally, for air cooling;
(i) kitchen utensils and hardware;
(j) brooms, mops, dusters, brushes, buckets, dippers and basins;
(ja) incinerators, compost bins, garbage cans and stands and holders for garbage sacks;
...'' (the emphasis is mine).
Item 2 specifies ``Parts, fittings and accessories for goods covered by item 1...''.
The plaintiff manufactures painting equipment under the trade name ``Rota Cota''. The goods with which we are concerned are principally goods used for painting. They are paint brushes of various sizes and quality ranging from those described as tradesmen's or professional quality to the Aussie brush described as ``an excellent handy brush for odd jobs around the house''. Other goods consist of paint rollers or applicators, roller covers, trays for use with rollers and associated equipment such as long handles to assist painting with rollers on a ceiling. Other goods comprise stiff wire brushes used for the preparation of surfaces before painting. One brush, Exhibit OC1, has been conceded by the Commissioner to be a pastry or kitchenware brush and therefore to be within Item 1. The Commissioner has conceded that Exhibit OC6, which is a four-knot duster, is within Item 1 being commonly used for dusting venetian blinds. But the other equipment would be used for painting purposes.
The case put by Mr D.H. Bloom Q.C., with whom Mr B. Sullivan appeared for O.R. Cormack Pty Limited, was that the brushes were goods of a kind which were ordinarily to be found in households and used for the purposes of the household and that the paint rollers and associated equipment came within the term ``brushes'' for they were contemporary
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equipment which served the same purpose as, in the past, paint brushes have done.Much turns on the effect to be given to the word ``namely''. It is not in dispute that the term does not mean ``including'', that is to say as an adverb of connotation so that the specific paragraphs which follow merely illustrate the sense in which the opening words of the item are to be read by giving examples thereof. The term ``namely'' is used in the Schedules to the Sales Tax (Exemptions and Classifications) Act, in contrast to the terms ``including'' and ``not including''. See
DFC of T v. Polaroid Australia Pty Limited 71 ATC 4249 at 4251; (1971) 46 A.L.J.R. 32 at 33-34.
The ordinary meaning of ``namely'' is: ``that is to say, videlicet, viz., to wit''. See, e.g., the Shorter Oxford Dictionary and the Macquarie Dictionary. The adverb is used to specify in detail goods which, having the general character earlier described, fall within the item. Thus, the impression gained from the item as a whole is that the legislature has specified in detail the goods which are to fall within the classification provided that they are ``of a kind ordinarily used for household purposes''.
Mr Bloom submitted, however, that goods falling within one of the paragraphs of Item 1 were exempted by the item whether or not they also met the opening description ``of a kind ordinarily used for household purposes''. Mr Bloom relied, by way of example, on the view adopted by the majority of the Justices in
FC of T v. Newbound & Co Pty Limited (1952) 10 A.T.D. 59, a view which was applied by Gummow J. in
Hygienic Lily Limited v. DFC of T 87 ATC 4327. In Newbound's case, Item 90D in the First Schedule to the Sales Tax (Exemptions and Classifications) Act commenced with the words ``Household fittings and sanitary ware...'' followed by a specification of goods in four categories, with the term ``pedestal lavatory basins'' appearing in paragraph (1). Williams, Fullagar and Webb JJ. held that a ``wash fountain'', designed for use in factories, hospitals and the like so as to enable a number of persons employed therein to wash at the same time, was within the classification as it was a pedestal lavatory basin. At p. 62, Fullagar J. said:-
``The collocation of general and specific descriptions is of an unsatisfactory character and such as is likely to lead to difficulty. But the word which connects the general description, `household fittings,' with the series of specified articles is the word `namely.' Prima facie, therefore, every one of the specified articles is to be regarded as falling within the generic description of household fittings. Prima facie any article which falls within one of the specific descriptions is an article which falls within the generic description. Prima facie it must be right to regard the specific descriptions as limiting the generic description, and it must be wrong to regard the generic description as limiting the specific descriptions.''
On the other hand, Dixon C.J., with whom McTiernan J. was in the minority, said at p. 60:-
``I take it to be evident that this is not a `household fitting,' and yet it seems reasonably certain that the pedestal lavatory basin to which the words refer is the ordinary household fitting which would fall under that compound description. No doubt, the words `household fittings' are descriptive of the character of the things that follow and do not require that the sale of the article shall be to a person who intends to use it for household purposes. It means rather to describe the general character of the things listed, independently of the actual use intended in any particular instance. It is also true that if a thing clearly came within any one of the descriptions in the list, the fact that it was placed under the general title of `household fittings' ought not to be used to restrict the primary meaning of the description. But in the case of terms like `pedestal lavatory basin,' `baths,' `wash troughs,' `draining boards' and the like, the introductory expression `household fittings' shows in what context words, which are possibly capable of various applications, are used and gives them a definite application. It was not, for example, intended to include a wash trough in a wool scour, or a draining board in a dye works.''
For my own part, I prefer the approach taken by Dixon C.J. and believe that it expresses the correct approach to classifications of this type. The decision does not, of course, bind me in this case for an entirely different item was under consideration and the words were different.
Item 1 commences by expressing a general description of the class or genus of goods to
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which the item applies. That class or genus is ``Goods... of a kind ordinarily used for household purposes''. The class is somewhat imprecise, as I shall later discuss, but the description conveys a readily understood concept. With respect to most goods, it would not be difficult to decide as a matter of fact whether they fall within or without the description. Though the following paragraphs (a) to (p) are not comprehensive of household goods, it is noticeable that all the descriptions of goods in the paragraphs readily bring to mind goods which are ordinarily used for household purposes. They impose no strain on the ordinary meaning of that genus.Thus, the description of the genus, when read together with each description in the individual paragraphs assists in the identification of the goods to which the item applies. As Dixon C.J. said in Newbound's case, in the passage cited above, ``the introductory expression... shows in what context words, which are possibly capable of various applications, are used and gives them a definite application''. So to read an item such as Item 1 gives appropriate force and effect to all the words used, for the words are used in combination, as the legislature intended.
Because the words are intended to be read together, it can be helpful to combine them when describing the category which the goods must satisfy. Thus, in the present case, it is helpful to ask whether the goods are ``brushes of a kind ordinarily used for household purposes'' rather than to ask separately whether the goods are ``brushes'' and, if so, whether they are ``goods of a kind ordinarily used for household purposes''. The opening description of the genus does and is intended to throw light upon the nature of the goods which are individually described.
Mr Bloom next submitted that all the goods in dispute were, within the ordinary meaning of the words, goods ``of a kind ordinarily used for household purposes''. He submitted that the term ``household purposes'' was wide enough to comprehend activities carried on in and about the household. Painting the house or household equipment is such an activity. It is common for households to possess a paint brush or brushes, including a wire brush. And whether a particular household might possess a handy Aussie brush or a professional quality brush would seem to depend not so much on the nature of the brush but on the influence which the quality and the cost of the brush had for the householder. Mr Bloom submitted that all the plaintiff's goods were ``ordinarily'' used for household purposes even though they or some of them may also or even more commonly be used by tradesmen in the course of their trade.
The adverb ``ordinarily'' does not have a precise denotation. It requires a use of the goods which lies between ``primarily or principally'' on the one hand and mere ``use by'' on the other. The adverb conveys the meaning of ``generally'' or ``customarily'' or ``usually''. Sometimes the term ``commonly'' is used as an analogue, but only, I think in the same way that the adjective ``common'' is used in the term ``common parlance'' as referring to customary or usual speech. In
Levene v. Commissioner of Inland Revenue [1928] A.C. 217 at 222-225, Viscount Cave L.C. said that the terms ``residence'' and ``ordinary residence'' referred to the place of ``settled or usual abode''. The words ``ordinarily used'' likewise seem to refer to settled or usual use. But I would accept that the adverb must be applied in relation to the goods described and may have a somewhat different application with respect to some goods than with respect to others. In each case, the task is merely to determine as a matter of fact whether goods in issue fall within the description used by Item 1.
The expression ``brushes of a kind ordinarily used for household purposes'' does not immediately bring to mind paint brushes. Therefore, it is significant that the many individual paragraphs in Item 1 do not include a category for tools such as gardening, carpentry, painting, plumbing tools and the like. Most households would possess and use tools to some extent.
Tools may have been omitted because the legislature recognised the difficulty that there would be in deciding what tools were ordinarily used for household purposes. That description is not well suited to distinguishing between tools which may be used both for trade and for household purposes. Items such as a hammer or an axe may be used as readily in a household or in trade or in industry or on a farm. No doubt some tools are not trade quality. But many good quality tools have no characteristic which particularly distinguishes them for trade or household purposes. Indeed, the evidence in the present case does not provide any factor which clearly differentiates for the purposes of Item 1
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between one paint brush and another. Evidence as to what may be sold by Big W or what BBC Hardware sells to the ``do-it-yourself'' trade is hardly sufficient.Mr O.R. Cormack gave evidence as to which of the goods were suitable for use by professional painters. However, although it may be difficult to classify within the expression ``goods of a kind ordinarily used for household purposes'' goods which are usually used in and have been designed for use in trade, such goods may often be used for household purposes. Thus, all the goods with which we are concerned would be possessed by many households. Many households would use and possess best quality paint brushes. And, likewise, the use of the cheaper brushes, such as the Aussie brush, would not be confined to households. The smaller, cheaper brushes could be used for many purposes, and though not manufactured for use by the painting trade, would have many applications in business and trade concerns.
It is usual for households to possess and use tools for gardening, carpentry, plumbing, painting or like purposes. The fact that such goods may be ordinarily kept in a garage or shed rather than in a house itself would not preclude them from being household goods. The concept of a household encompasses the ordinary household environs. But these items are not mentioned in Item 1, although so many other items are specified in detail, eg, ``cutlery and cutlery sharpeners'' and ``incinerators, compost bins, garbage cans''. It seems to me that the failure to specify ``tools'' shows that Parliament intended that generally they not be included within the Item. Tools form such a unified category that one would expect that, if Parliament had intended to comprehend them, it would have said so. There is no paragraph which brings tools to mind.
Another factor which points in the same direction is that the Sales Tax (Exemptions and Classifications) Act 1954 (Cth), which introduced the Third Schedule into the principal Act and in which Item 1 was similar to the present item, also introduced Item 105 into the First Schedule which read, inter alia:-
``105(1) Hand tools of the kinds used for industrial purposes, including power-driven tools, but not including -
(a) tools of the kinds ordinarily attached to benches, stands or fixtures;
...
(c) goods covered by an item in any other Schedule [to this Act]
(2) Hand tools of the kinds used for gardening, but not including power-driven tools...
...
(4) Parts and accessories for goods covered by sub-item (1), (2) or (3) [of this item].''
The reference to hand tools in Item 105 and the complete absence of a reference to them in Item 1 seems to show that Parliament intended that in general tools would not fall within Item 1 of the Third Schedule.
Tools form a clearly identifiable class of goods possessed by households. Because no such category is expressed, it seems to me that the specific descriptions in the separate paragraphs in Item 1 should be interpreted in that context.
Therefore, while I would not read a term such as ``brushes'' in para (j) of Item 1 restrictively, I would not read it as referring to tools such as paint brushes. In my opinion, the term combined with the opening words of Item 1 can be given a satisfactory and ordinary meaning in common parlance if one excludes from its context paint brushes. Indeed, paint brushes and wire brushes would be the last, or close to the last types of brush which one would contemplate for inclusion in the description.
This reading is supported by the collocation of the words used. The words are:
``Goods... of a kind ordinarily used for household purposes, namely:-
...
(j) brooms, mops, dusters, brushes, buckets, dippers and basins.''
It seems to me that a person reading the words and giving reasonable effect to them all would not call to mind paint brushes or wire brushes. That is not to say, however, that I would accept the submission of Mr A.H. Slater, counsel for the Commissioner of Taxation, that para (j) is limited to goods used for cleaning. But in the context in which the term ``brushes'' is used, the term does not comprehend paint brushes.
It follows, in my opinion, that the plaintiff's brushes including wire brushes are not within the classification. The evidence suggests that exhibit OC7 has many uses other than for
ATC 4126
painting, and is a brush having general use for households. Mr Slater submitted, by way of example, that the wire brush which Mr Bloom QC uses on his barbecue should be classified as ``gardening equipment''. Be that as it may, I regard a wire brush as a tool and, as tools are not specified in Item 1, it seems to me that the description ``brushes'' in para (j) is not strong enough to include wire brushes.I am also of the view that the plaintiff's paint rollers are not brushes in any sense in which that term is used. See
Wilson & Anor v. Commr of Stamp Duties (NSW) 88 ATC 4307. I need not refer to the many authorities which were cited. A roller is not a brush and a paint roller is not a paint brush.
The classification of the accessories necessarily follows that of the principal items.
For these reasons, I shall declare that the pastry brush, Exhibit OC1 and the duster brush Exhibit OC6 fall within Item 1 of the Third Schedule to the Sales Tax (Exemptions and Classifications) Act. I shall declare that Exhibits OC2, OC3, OC4, OC5, OC7, OC8, OC9, OC10 and OC11 do not fall within Item 1 or within Item 2 of the Third Schedule. I shall reserve the question of costs and reserve liberty to the parties to apply for any further order as may seem meet.
Counsel should bring in within 14 days short minutes of the orders sought.
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