CHUBB AUSTRALIA LTD v FC of T

Judges:
Beazley J

Court:
Federal Court

Judgment date: Judgment handed down 26 August 1994

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Beazley J

The applicant, who is an importer and manufacturer of safes and fire protection cabinets challenges certain sales tax assessments which have been issued by the respondent in respect of sales of its free standing safes and its wall and floor safes on the basis that its free standing safes and cabinets fall within Item 1(a) of the Third Schedule to the Sales Tax (Exemptions and Classifications) Act 1935 (the Exemptions and Classifications Act) and that its wall and floor safes fall within Item 84(1) of the First Schedule or alternatively that the doors of the wall and floor safes fall within Item 84(3) of the said schedule of the Exemptions and Classifications Act. Item 1(a) of the Third Schedule provides:

``1 Goods... of a kind ordinarily used for household purposes, namely:-

• (a) furniture...''

Item 84 of the First Schedule provides:

``84(1) Metal building materials (including girders, rods, bars, wire, sheets, mesh, lathing and fabricated units composed of any of those goods, and attachments for such units) for use in the construction or repair of, and to be wrought into, or attached to, so as to form part of, buildings or other fixtures...

...

(3) Metal window frames and sashes, metal fanlight frames and sashes, metal window screens, metal louvre frames and shutters, metal doors and door frames, of a kind used in the construction or repair of, and wrought into or attached to, so as to form part of, buildings or other fixtures.''

During the course of the hearing I ordered that the following questions be determined separately:

• in proceedings G952 of 1992:

``Whether all or any, and if so which, of the safes and cabinets listed in paragraph (i) of the Attachment and sold by the applicant in the period 1 April 1989 to 31 December 1990 were goods covered by item 1(a) of the Third Schedule to the Sales Tax (Exemptions & Classifications) Act 1935.''

The Attachment listed the following items:

``(i) FREESTANDING SAFES AND CABINETS

• A. Crado
• B. Servisafe
• C. Lynx
• D. Carlton (57, 131, 184 and 410 litre models)
• E. Brunswick (57, 131, 184 litre models)
• F. Oxley (50, 57, 88, 100, 131, 145, 237, 342 and 410 litre models)
• G. Pacific (35, 50, 57, 88, 100, 131, 145, 184, 190, 237, 300 and 410 litre models)
• H. Botany (57, 88, 100, 131, 145, 184, 190, 237 and 410 litre models)
• I. Wentworth High Security safe (237, 410 and 510 litre models)
• J. Series 1 and Series 2 Anti-Arc safes:
  • (i) 3120 model (195 litres)
  • (ii) 4220 model (261 litres)
  • (iii) 5220 model (329 litres)
  • (iv) 6320 model (394 litres)
  • (v) 6320E model (477 litres)
• K. Record Protection Files (1, 2, 3 and 4 drawer models)
• L. Fire Protection Cabinets (or record protection cabinets):
  • (i) 62-48 (1086 litres)
  • (ii) 62-24 (543 litres)
  • (iii) 43-24 (374 litres)
• M. Computer Cabinets:
  • (i) DSC3
  • (ii) DSC2
  • (iii) DSC1
  • (iv) Maxi-cabinet (150 litres)
  • (v) Super mini-cabinet (70 litres)
  • (vi) Mini-cabinet (40 litres)
  • (vii) Micro-cabinet (13 litres)
• N. Canberra (sizes 1, 2 and 3) being approximately 32, 45 and 70 litre models
• O. Castle (sizes 3 and 4) being approximate 180 litre and 460 litre models
• P. Drug cabinets (24-inch and 14-inch)
• Q. Gun cabinets (400 litre and 260 litre)
• R. Security cupboards (4, 5 and 6 door)

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  ATC 4628

• S. Heavy duty filing cabinets (2 and 4 drawer).''

• in proceedings G957 and G958 of 1992:

``Whether all or any, and if so which, of the safes and cabinets listed in paragraph (i) of the Attachment and sold by the applicant in the period 21 August 1986 to 24 April 1989 were goods covered by item 1(a) of the Third Schedule to the Sales Tax (Exemptions & Classifications) Act 1935.''

The goods specified in paragraph (i) of the Attachment are the same as the list of goods referred to in the Attachment in the separate question in proceedings G952 of 1992.

• in proceedings G956 of 1992:

``Whether all or any, and if so which, of the safes and cabinets listed in paragraph (ii) of the Attachment and sold by the applicant in the period 21 May 1988 to 21 March 1991 were goods covered by item 84(1) or item 84(3) of the First Schedule to the Sales Tax (Exemptions & Classifications) Act 1935.

• (ii) WALL AND FLOOR SAFES
  • A. Underfloor Safes
    • (i) the TDR High Security Underfloor Safe
    • (ii) the Security Underfloor Safe
    • (iii) Macquarie Major
    • (iv) Macquarie Minor
    • (v) Down Under
    • (vi) Richmond Mark I
    • (vii) Richmond Mark II
    • (viii) Myaree 200
    • (ix) Myaree 300
    • (x) Melville 140
    • (xi) Melville 190.
  • B. Wall Safes
    • (i) model 1A (one brick)
    • (ii) model 2A (two brick)
    • (iii) model 3A (four brick).''

Background Facts

The purpose and function of a safe is to protect the contents from loss or destruction by theft or other unauthorised access and from physical damage such as from water and fire. In the early 1980's, the applicant identified a resurgent market for safes in domestic dwellings and decided to take commercial advantage of this. The factors which led to the identification of the demand were an increase in the number of customer enquiries for safes in domestic dwellings, an increased availability of safes sold by competitors for use in domestic dwellings, an increased concern on the part of insurance companies that higher levels of security be offered in domestic dwellings and a concern expressed on the part of the police that domestic dwellings carry increased security. These factors coincided with an increase in burglaries of residential properties. Statistics from the New South Wales Police Statistician showed a 60% increase in private residence burglaries between 1980 and 1984. It was at this time that the neighbourhood watch programme was implemented in New South Wales - a reaction to the substantial increase in the burglaries of private homes. The same factors, as well as an increased need for protection of computer diskettes, caused the applicant to develop and market fire resisting products for use in domestic dwellings.

The evidence revealed that safes of all different sizes are used in homes, including safes of similar size and type as safes used in shops, small businesses and for commercial and industrial purposes. The applicant recommends that the contents placed in any particular safe should not exceed a specified value, depending upon the design and size of the safe. This recommendation is based upon the average of the values nominated in the policies of major insurance companies.

The applicant's General Manager, Marketing and Sales, Mr Powditch, gave evidence that he has been advised by customers that the types of goods they intend keeping in safes or in fire resisting products in their home are: cash, jewellery and gems, stamp collections, wills, tax returns, passports, antiques and silverware, guns and pistols, trophies, precious metals, computer diskettes, important papers such as title deeds, loan papers, mortgage papers, insurance policies, share certificates and birth and marriage certificates, photographs, drugs and firearms. Mr Givens, a loss adjuster with 30 years experience in the insurance industry as a loss assessor and later as a loss adjuster, gave evidence that he had seen hundreds of safes, both free standing and wall and floor safes in private homes, and that he has observed a wide variety of items stored in such safes, including:

``... passports, collectors items such as stamps and coins, an almost infinite variety of documents (such as property deeds, wills,

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ATC 4629

bank notes, bills of exchange, promissory notes, stocks, shares, birth and other certificates, accolades, cash), computer disks, cash books and journals from businesses, fire arms and ammunition.

... works of art, precious books, cash, jewellery, stamp collections, passports, wills, tax returns, guns, silverware, trophies, computer diskettes...''

The Applicant's Freestanding Safes and Cabinets

The applicant imported or manufactured and sold safes and cabinets (which I shall refer to generally as safes) of different models or designs which are specified in paragraph 1(a) of the Attachment to the separate questions, which I have set out earlier.

The applicant's Crado, Lynx and Servisafe safes retail for between $300 and $1,000 each, and are designed to secure a ``risk [which] would not exceed $10,000 in cash''. These safes are increasingly used in hotels and hospitals to secure guests' or patients' valuables. The applicant submitted that the items stored in these safes by hotel guests and hospital patients are of a type which might also be secured in a safe in the home. The Chubb Carlton safe, which comes in a number of sizes and ranges in price between $450 and $2,500, is a very low grade safe recommended to hold no more than $7,000 cash. The Chubb Brunswick safe is also described as a lower grade safe recommended to hold no more than $15,000 cash. There are three different sizes of this model, which retail for between $1,500 and $3,200. The Chubb Oxley safe mark II is also described as a lower grade safe which comes in a number of different sizes, priced at between $2,500 and $5,700. This safe is recommended to hold no more than $30,000 cash.

The Chubb Pacific safe is described as a medium grade safe, coming in a number of sizes, selling for between $3,000 and $7,000. These safes are recommended for risks not exceeding $80,000 cash, assuming that a back- to-base 24 hour monitoring system is utilised. The Chubb Botany safe is also a medium grade safe with a number of sizes available with a selling price of between $4,800 to $9,500. These safes are recommended for risks not exceeding $100,000 cash, assuming a back-to- base 24 hour monitoring system is utilised.

The Chubb Wentworth High Security safe is, as its name indicates, a high security safe which sells for between $12,000 and $15,000 depending upon the particular model size. It is recommended for the storage of $150,000 cash or more, or jewellery with a retail value of $25,000. It is also designed to be augmented with an alarm system. The Chubb Anti-Arc safe is the top of the applicant's range of safes and sells for between $20,000 and $25,000, depending upon the size of the unit. Banks are the main purchasers of this safe. The Anti-Arc safe was said to have no peer on a world wide basis, but is being phased out by banks with the introduction of increasingly sophisticated surveillance systems. Mr Powditch gave evidence that all of these safes have been sold into domestic dwellings.

The applicant also sold the following safes in the period under review: the Canberra safe; the Castle safe; a Security Drug Cabinet; the Chubb Gun Cabinet; and the Chubb Security Cupboard, and the two and four drawer heavy duty filing cabinets. There was no evidence that all or any of these models have been sold into domestic dwellings. The Canberra safe comes in three sizes, of approximately 32, 45 and 70 litre storage capacity. It is marketed as being ideally suited for safeguarding small amounts of cash, valuable documents, debtor's ledgers and vital records kept in a general office. The Castle safe comes in two sizes of approximately 180 and 460 litre capacity. It is marketed as giving a high degree of protection against fire and burglary and as being ideal for shopkeepers, branches of chain stores and small businesses. The marketing of the Castle safe focuses upon the need to protect cash, valuable documents and business records.

The Security Drug Cabinet is designed to protect dangerous and addictive drugs in dispensaries. It also comes in two sizes, the larger being 610mm high, 458 mm wide and 158 mm deep; the smaller one being 356 mm high, 239 mm wide and 166 mm deep. The Chubb Gun Cabinet was released to meet the needs of firearm enthusiasts. The advertising brochure promoting this product states: ``Insecure firearms are a potential danger to you and your family. The safe custody of firearms will reduce the unfortunate consequences that may result from loss or theft. The problems of replacement and insurance complications should not be an issue when you have

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ATC 4630

purchased your Chubb gun cabinet.'' The promotional material further states that the cabinet is finished in ``... warm grey to complement any decor''. Regulation 42A of the Firearms and Dangerous Weapons Regulations (NSW) requires that firearms be locked in a secure storage cabinet. Counsel for the applicant submitted that the Regulation of itself created a considerable demand for secure cabinets for the storage of guns and pistols and that there was evidence that safes were used for the storage of guns and pistols.

The Chubb Security Cupboard comes in a 4, 5 or 6 door model and is designed to provide internal security for the storage of cash, securities, deeds and any other documents requiring segregation under locked control inside a vault. Its external dimensions are 1523 mm high, 762 mm wide and 451 mm deep.

The heavy duty filing cabinet comes in two and four drawer models. The two drawer model is 872 mm high, 679 mm wide and 913 mm deep. The four drawer model is 1478 mm high, 679 mm wide and 913 mm deep.

The applicant has a range of one and two hour protection files, each coming in two, three and four drawer models, priced at between $1,500 and $2,800. The files have the appearance of light steel filing cabinets but are fire resistant to protect ``vital paper records such as warehouse stock lists, customer list [sic], debtors lists, patents, circuit diagrams, formulae for drug manufacturing companies, and home photos, passports, wills, mortgages and financial records.''

The applicant's fire protection cabinets perform the same function as the fire protection files. The cabinets have the appearance of freestanding refrigerators with one or two locks, and are manufactured in 3 sizes of 374 litre, 543 litre and 1086 litre capacity. Their prices range from $4,100 to $8,325.

The applicant also manufactures 7 types of computer cabinets either in Australia or New Zealand ranging in size from 13 litre capacity to 613 litre capacity with a price range of $1,000 to $15,800. These units utilise fire protection cabinets into which is fitted additional barrier protection to give security to very sensitive floppy disks, hard disks, microfilm and stamp collections.

There was evidence of the sale of the second hand fire resistant cabinets for household use. In addition, as I have set out earlier, Mr Powditch, in general terms referred to the use to which he had been advised customers intend to put the applicant's fire resistant cabinet.

Do the applicant's freestanding safes fall within Item 1(a) of the Third Schedule?

It was common ground between the parties that in order to come within the exemption provided for by Item 1 of the Third Schedule, the subject goods must fall within the description of goods ``of a kind ordinarily used for household purposes'' as well as within one of the subclauses of Item 1, in this case ``furniture'' in subclause (a). See
Diethelm Manufacturing Pty Ltd v FC of T 93 ATC 4703; (1993) 44 FCR 450. The respondent conceded that the goods in question were furniture, so that subclause (a) is satisfied. It was also common ground that the determination of whether goods fall within the exemption does not require a consideration of each of the goods subject of the assessment but a determination whether the goods are of a class or genus of goods which satisfy the description in the exemption. As Hill J stated in Diethelm at ATC 4718; FCR 470:

``It must be noted that the question to be asked is not whether these particular goods are ordinarily used for domestic purposes. Clearly Parliament was at pains to ensure that the actual destination of the goods the subject of a taxable sale would be irrelevant to the question whether they fell within the exception.''

Counsel for the applicant submitted that safes comprise a single class or genus, namely safes, and that safes are goods of a kind ordinarily used for household purposes. The classification as a single genus is of course advantageous to the applicant's case as, as Hill J commented in Diethelm at ATC 4719; FCR 471:

``The use of the words `goods of a kind' entails the determination of a relevant genus. Therein lies an initial difficulty. The wider the genus is stated, the more likely it will be that it will be found that that class of goods is commonly used for a particular household function.''

Counsel for the respondent submitted, on the other hand, that the genus of each model of safe, and perhaps each size of each model had to be considered to determine whether the goods fall within the opening words of Item 1.

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ATC 4631

As to the approach to be adopted in determining the relevant genus, Hill J stated at ATC 4718-4719; FCR 470-471:

``Because sales tax is a tax ordinarily imposed upon the last wholesale sale in the course of the flow of commerce between manufacture (or importation) and consumption, it may be said that generally the task of classification to determine whether particular goods fall within a particular Item is one which looks at the essential character of the goods themselves rather than the purpose of the purchaser or the proposed destination of the goods in the mind of the manufacturer or importer:
DFC of T v Lincoln Industrial Cleaners Pty Ltd 75 ATC 4208; (1975) 7 ALR 118...

In each case, however, the precise language of the item must be borne in mind. If the item, as here, calls for a determination of whether the goods themselves are of a particular kind, that issue must, no doubt, be determined objectively but, with respect to what French J has said, is little assisted by consideration of the particular `realities of their manufacture and sale'.

Once it is appreciated that the question for issue is concerned with the kind of goods in question rather than the actual goods, it is clear that evidence such as was given in the case as to the market into which the actual goods are sold will be of little relevance. The fact that a high proportion of the chairs in question were bought for office use would tell little as to the use of the kind of goods, the genus, of which the particular goods in question form a part. Similarly, it seems to me that a finding that the goods are of a high quality making them too expensive for general sale for use in households will be of little or no significance. This will be particularly so if the class of goods in question is capable of encompassing goods of high quality as well as goods of lesser quality.''

In the passage in the judgment of French J, to which Hill J referred, French J stated at ATC 4711; FCR 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 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.''

French J then discussed the authorities where the meaning of ``essential character'' had been considered. See 462-463 of his Honour's judgment. His Honour concluded at ATC 4741; FCR 464 that:

``The statutory classification of goods to define exemptions or particular liabilities under revenue laws requires the determination, by reference to objective criteria, of the `essential character' of such goods. Where design purposes are referred to in the classification by such phrases as `for use as', the subjective intention of the manufacturer and purchaser and actual uses to which the goods are put may be taken into account in the process of characterisation.''

The difference of approach between Hill J (with whom Whitlam J agreed) and French J is demonstrated by their respective conclusions. Hill J stated at ATC 4720; FCR 472-473:

``The evidence shows no more than this:

• 1. Some persons purchase chairs from Diethelm for use in their own homes.
• 2. Chairs similar in appearance to those sold by Diethelm are sold by Freedom Furniture, Ikea and Harvey Norman to customers who, it can be inferred, ordinarily purchase them for use in the home.
• 3. Chairs manufactured by Diethelm and other manufacturers of office furniture are mainly sold to purchasers for use in offices.
• 4. Nine out of ten homes where there is a computer or where there are student children have chairs of a kind similar to some of the models sold by Diethelm. There is not evidence of the number of homes using such chairs or the ratio of chairs used in such situations to chairs used in an office environment.

The evidence does not, it seems to me, permit a conclusion on the balance of probabilities that any of the types of chairs sold by Diethelm is of a kind ordinarily used for household purposes. That may not be surprising, as the case was apparently run on the basis that either all of the chairs were within the Item or none were. It is quite

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ATC 4632

possible, given that some of the chairs in question are of the same kind as those sold by Ikea and Freedom Furniture, that if it had adduced further evidence the appellant might have established that some of the chairs at issue in the present proceedings were of a kind ordinarily used for household purposes. However, Diethelm had the burden of proof. To the extent that it has not established on the evidence that a particular chair was of a kind ordinarily used for household purposes, it must fail.''

The decision of Hill J reflects the majority view of the court. Whilst his Honour did not determine the genus of the subject goods, he considered at ATC 4718; FCR 470 that the appropriate genus was determined by ascertaining: ``whether, having regard to all the facts, the subject goods should be described as goods of a kind ordinarily used for domestic purposes''. I will return to this question shortly.

French J's conclusion focussed upon the essential character of the goods. His Honour stated at ATC 4714; FCR 465:

``In the present case the essential character of the chairs in issue was correctly identified as office furniture. That characterisation reflects the market in which the chairs were manufactured and sold having regard, inter alia, to their quality, cost, design, and intended and actual purchasers. While they were chairs sometimes used for household purposes, and performing physical functions similar to such chairs, they were not of a kind ordinarily so used. Having regard to the purpose of Item 1 and applying the canons of popular usage and objective characterisation with due regard to the market purposes to which I have referred, the chairs in question fell outside Item 1.''

Before turning to the classification issue in this case, it is convenient to refer to certain of the other relevant authorities.

In
DFC of T v Stewart & Anor 84 ATC 4146; (1984) 154 CLR 385 Deane J considered that the subjective intention of the manufacturer was a relevant factor in relation to the question whether lottery ticket vending machines supplied free of charge on a non-exclusive basis to public benevolent institutions were exempt under Item 81(1)(c) of the First Schedule as ``[g]oods for use... and not for sale, by... a public benevolent institution''. His Honour stated at ATC 4155; CLR 401 that:

``While the subjective intentions of manufacturer or purchaser are relevant and may well be conclusive, what is required is an objective characterization of the goods themselves in the light of all the relevant circumstances. That characterization must be made as at the time when liability to sales tax would otherwise attach. It will, in an appropriate case, be made with the benefit and in the context of knowledge of the actual use which was subsequently made of the goods.''

Although Stewart's case was concerned with the classification of goods by reference to use, as is the case with Item 1, Deane J's statement was made in the context of a different exemption provision. In the case of an Item 1(a) classification, as Hill J said, little assistance is to be gained by having regard to factors such as ``the commercial realities of... manufacture'', of which the subjective intention of a manufacturer could be seen to be part. Gummow J in
Hygienic Lily Ltd v DFC of T 87 ATC 4327; (1987) 13 FCR 396 also considered the intention of the manufacturer to be irrelevant for an Item 1(a) classification. Further, care is to be taken in using the construction of one exemption provision to assist in the construction of another. In
Thomson Australian Holdings Pty Ltd & Ors v FC of T 88 ATC 4916; (1988) 20 FCR 85 Davies J accepted that composition and function are relevant to a determination of the essential character of goods, when his Honour stated at ATC 4917; FCR 86 that the ``essential character of goods'' is ``... what... the goods are, not some characteristic that the goods might have. Essential character drives from the basic nature of the goods, from what they are, though composition, function and other factors necessarily play a part''.

In
FC of T v Sherwood Overseas Pty Ltd 85 ATC 4267; (1985) 75 FLR 474, Olney J accepted that a swimming-pool cleaning device known as the ``Kreepy Krauly'' fell within paragraph (g) of Item 1 of the Third Schedule namely ``vacuum cleaners, carpet sweepers, floor polishers and other appliances for use for cleaning purposes.'' His Honour stated at ATC 4270; FLR 477 that:

``... insofar as the item refers to furniture it is to furniture of a kind ordinarily used for household purposes and likewise with refrigerators, washing machines, vacuum

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ATC 4633

cleaners and indeed all of the other goods mentioned. Many, if not most, of the goods that are described have an application in industrial or commercial contexts as well as within the household. The item clearly does not refer to office furniture, commercial refrigerators, industrial vacuum cleaners or air conditioners designed for use in a public hall.''

His Honour further stated at ATC 4271; FLR 478-9:

``The use of the adjective `household' suggests that the intention has been to distinguish the particular goods in question from similar goods that have uses outside a domestic establishment. I have already made reference to commercial and industrial uses to which goods of a similar description can be put and I think that in broad terms this is the intention of using the words `ordinarily used for household purposes'.''

Kentucky Fried Chicken Pty Ltd & Ors v FC of T 86 ATC 4701; (1986) 17 ATR 1039 was concerned with the question whether the paper napkins distributed for use by customers purchasing products from Kentucky Fried Chicken qualified as ``household drapery and soft furnishings''. At first instance, Yeldham J held that the napkins fell within Item 8(1)(p) of the Third Schedule which exempted ``household drapery and soft furnishing... namely table napkins.'' Yeldham J adopted Olney J's approach in Sherwood Overseas Pty Ltd namely that the adjective ``household'', described articles ordinarily used in or about a dwelling house for household purposes. This approach was not disturbed on appeal: see (1988) 12 NSWLR 643.

The question whether goods were ``of a kind ordinarily used for household purposes'' was considered in Hygienic Lily Ltd v DFC of T. Gummow J held that three sizes of wax coated paper cups bearing designs including the trade mark ``McDonalds'' fell within Item 1, the goods being of the genus ``cups'' and that class of goods was of a kind ordinarily used for household purposes. As Gummow J said at ATC 4330; FCR 399:

``... goods are `ordinarily used for household purposes' within Item 1 even though they are not exclusively or principally so used: cf.
Nomad Industries of Aust. Pty. Ltd. & Anor v. F.C. of T. 86 ATC 4036 at p. 4042. Further, the setting in which the phrase `goods of a kind' appears suggests it is directed not to the use for which the particular goods in question were designed or manufactured, nor to the purpose to which it is intended those particular goods shall be put, but rather to the nature, quality and adaptation of goods in the class or genus in question. Thus, goods are `of a kind ordinarily used for household purposes' if they are to be recognised as members of a class or genus which commonly or regularly (albeit not necessarily exclusively or principally) is used for household purposes: cf.
Customs and Excise Commrs v. Mechanical Services (Trailer Engineers) Ltd. [1979] 1 W.L.R. 305 at pp. 312-313, 315, 316-317.''

(emphasis added)

It will be recalled that Hill J questioned the utility of searching for the essential character of goods in all cases, and Gummow J did not approach the determination of the relevant genus in Hygienic Lily on that basis. Although no point of principle is apparent in these cases as to when it is or is not appropriate to so approach the matter, it seems to me that at least in the case of Item 1(a), there is little utility in so doing. Rather, the matter is best approached by responding to the question posed by Hill J in Diethelm at ATC 4718; FCR 470 which I have set out earlier, namely: ``Whether, having regard to all the facts, the subject goods should be described as goods of a kind ordinarily used for domestic purposes''. In answering that question, it is relevant to consider evidence of the use to which goods of the kind in question are put. It is also relevant to consider questions of design, to the extent that design is known to affect use, or as Gummow J would say the ``the adaptation'' of goods of the class or genus in question. To approach the matter otherwise would be to decide the matter in a vacuum. An example of where design may be relevant in the present case is in relation to the security of bulky documents. Whilst a safe designed to secure such items may well be adapted to securing many other types of items, a safe designed to secure small items may not be able to be adapted, because of size and internal structure, to secure bulky documents.

Counsel for the respondent submitted that in this case there was no evidence as to the ordinary use of safes, and that the only evidence was as to the use to which various of the safes could be put. He submitted that the fact that any

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ATC 4634

particular safe might be designed for use in households did not assist the applicant's case if safes, or particular models of safes were not ordinarily so used, and thus the applicant's case must fail for lack of evidence on this issue. Counsel for the applicant conceded that, if it was necessary to treat the safes and cabinets product by product, the largest and most expensive of the applicant's safes may not fall within Item 1(a), but that the other safes were of a class of goods which were ordinarily used for household purposes. In support of this submission, counsel referred to the concluding statement in Hill J's judgment to which I referred earlier.

The first question to determine is the genus of the goods. The initial step in that assessment is to determine whether safes are a single genus or whether there is more than one genus of goods to which different models of safe belong. There was no dispute that the purpose of all safes is to secure goods. The evidence disclosed that safes are capable of securing goods of different types, shapes and sizes, depending upon the size and, to some extent, upon the design of the safe. The evidence also revealed that individual models of the applicant's safes are designed to secure goods or cash of a particular value, depending in large measure upon the degree of security offered by the design of the safe in question and in some cases upon whether back-up security was available. It seems to me that where, a range of goods of differing designs and sizes might normally be described by a common name, such as safes, it cannot be said that such goods constitute a single genus. Rather, it must be determined, in respect of the various models, whether they are goods of a kind ordinarily used for household purposes.

In my opinion, the evidence reveals that the uses to which safes can be put can be divided into a number of categories, namely for securing: (1) valuables, such as jewellery, coins, stamp collections, cash and the like, and important documents such as passports, title deeds and wills; (2) business records; (3) drugs and pharmaceuticals; (4) guns; (5) goods which themselves are to be separately secured within vaults; and (6) high value items such as large sums of cash, such as are secured by banks. I will return to this categorisation shortly.

There was evidence that safes of all different sizes, including those similar in size and type to those used for business and industrial purposes are used in homes. There was also evidence as to the use to which safes were put in homes, and that some of the models of safe subject of the assessment had been purchased for use in homes. One would not expect to find a safe in every home. This is clearly to be inferred from the evidence and accords with one's normal experience of households. As the Hygienic Lily and Diethelm cases make clear however, that factor does not necessarily exclude safes, or some categories of safes, from falling within the phrase ``goods of a kind ordinarily used for household purposes''. For example, assuming for the purposes of the argument that heaters are furniture, the fact that no or few homes in the tropical regions of Australia had heaters would not deprive heaters of the quality of being ``ordinarily used for household purposes''. On the other hand, the fact that safes are found in some homes does not mean that safes are ordinarily used for household purposes. Rather, one has to look at the purpose for which safes or categories of safes are used and determine whether that purpose is ordinarily a household one.

In my opinion, it is a common or usual household purpose to secure valuables, such as jewellery, coins, stamp collections, guns, private papers and cash, within the home. Not only was there evidence that safes were used in the home for that household purpose, the proper inference to be drawn from the evidence of Mr Powditch and Mr Givens is that they were usual or common purposes for which safes are used. It is clear, both on the evidence and as a matter of common sense, that all of the applicant's safes for which exemption is sought under Item 1(a) are not goods of a kind ordinarily used for such purposes. The applicant's two largest safes and the dispensary cabinet are obvious examples. The question to be determined therefore is which of the applicant's safes are goods ``of a kind ordinarily used for household purposes''. In my opinion, to the extent that safes can be classified as a cabinet or unit for securing valuables such as jewellery, coins, stamp collections, private papers and cash (save for large sums as might ordinarily be expected to be found in a bank or kept by a business or other institution) they may properly be described as goods ``of a kind ordinarily used for household purposes''. To the extent that safes are not ordinarily so used, I am of the

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ATC 4635

opinion that they do not fall within the exemption.

I have earlier set out details of the models of safe which are subject of the assessments. In my opinion, those models which fall within the category of safes which are of a type normally used for the household purpose which I have identified are: the Crado, Lynx, Servisafe, Carlton, Brunswick Oxley (mark II), Pacific, Botany and Wentworth High Security safes and the Gun Cabinet. I have come to this opinion in relation to the Crado, Lynx and Servisafe safes notwithstanding that these models were mostly sold to motels and hospitals, as they belong to that class or type of good which normally has a household purpose, namely the securing of valuables ordinarily found in a household. As the authorities clearly show, the actual use to which the particular goods are put is not relevant, rather it is their ``nature, quality and adaptation which is relevant to their classification'': Hygienic Lily per Gummow J at ATC 4717; FCR 399.

I consider that the other models do not fall within Item 1 (a). It is appropriate that I set out briefly my reasoning in this regard:

• (a) The Anti-Arc safe is used principally by banks although there is evidence that this safe has been sold to households. However, it is not a usual or common or regular household purpose to store large sums of money or other goods of the volume or value stored by banks.
• (b) The Canberra and Castle safes are designed principally for the storage of documents and relatively large sums of cash. There was no evidence as to the use to which these goods were usually put, nor could any inference be drawn from the evidence generally as to the usual or common use of these goods. That is sufficient for the claim to fail in respect of these models. In any event, the securing of business records is not a household purpose, notwithstanding that that may sometimes occur in households.
• (c) The Security Drug Cabinet is designed to protect dangerous and addictive drugs in dispensaries. This is not a household purpose.
• (d) The Chubb Security Cupboard is designed to provide internal security for the storage of cash, securities, deeds and any other documents requiring segregation under locked control inside a vault. In my opinion, safes, the purpose of which is to provide segregated security within a vault, do not fall within the category of goods of a kind ordinarily used for household purposes.
• (e) The heavy duty filing cabinet comes in two and four drawer models. They are large cabinets and there was no evidence that they were ordinarily used for household purposes. Accordingly, I am of the opinion that these cabinets do not fall within Item 1(a).
• (f) As to the record protection files, fire protection cabinets and computer cabinets there was only very general evidence that these have been sold into domestic dwellings, which was not sufficient to permit the inference that they were usually or commonly used for household purposes. Such evidence as there is relates only to the purpose for which they are designed, which, overall, appears to be related to business purposes. Whilst, as I have said, design may in some circumstances be relevant, the manufacturer's purpose, as such, is not. As there is no evidence here of the adaptation of these models for household purposes, there is no evidence upon which I can be satisfied that these goods are ordinarily used for household purposes.

Floor and wall safes

The next question is whether the wall and floor safes fall within Item 84(1) of the First Schedule to the Exemptions and Classifications Act.

The floor and wall safes have two main components. There is the body of the safe which was described as ``a sheet metal box'', which is either let into the floor or the wall. The other main component is the door. In contrast to the walls or body of the safes, the door is more elaborately fabricated so as to provide a higher level of security, the security for the other sides of the safes being provided by the surrounding wall or floor. The body of the wall safes are constructed of steel, designed to match the size of brick or modelable brick wall cavities. The door is constructed of heavy steel and is generally fitted with a locking mechanism controlled by a single key lock or combination lock. The body of the wall safe is usually of lighter gauge than the door, as the wall is intended to provide the security barrier to the

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ATC 4636

unit. The door is the primary means of protection against burglary attack.

The upper face of the container of the floor safe consists of a heavy duty steel top frame, generally recessed back into the body to receive the door so that the outer face of the door is flush with the upper edge of the body. The door of the floor safes may be either circular or rectangular and designed to meet different levels of security, the construction material ranging from heavy steel plate to a steel cavity type door filled with highly resistant barrier protection. Generally, the locking mechanism for a floor safe is activated by the action of the lock rather than a separate throw handle. As is the case with a wall safe, the door provides the primary method of protection. The major advantage of these built-in safes over free standing safes, apart from cost, is their ability to be installed in concealed locations. Overall, however, these safes offer a lower level of security than free standing safes.

The applicant uses mild steel plate with a gauge of between 3 mm to 6 mm in both its floor and wall safes. This is the same type of steel plate used in the construction of ballistic walls and doors. It is also widely used in the building industry in many applications including the fabrication of trusses and beams and columns to hold up ceilings and bulkheads in buildings.

Counsel for the applicant submitted that the wall and floor units are unquestionably fabricated, that they are made from metal, primarily sheet metal, their construction may include rods or bars and there may be locks which are attachments for such units. He further submitted that the wall safes, when installed, become fixtures. Alternatively, he submitted that the wall safes in the form sold, are for use in the construction of the building itself so as to become wrought into the building. In this regard, counsel for the applicant relied upon the statement by Lockhart J in
Feltex Commercial Interiors Pty Ltd t/as Co Design v FC of T 90 ATC 4925 at 4934 that:

``... the applicant's panels... are goods of a kind used principally in the construction of the Coles Myer building. They are also wrought into or attached to so as to form part of that building. The panels and accessories are fixed with the intention that they should remain in position either permanently or for an indefinite or certainly a substantial period.''

Alternatively, it was submitted that if the wall and floor safe units did not fall within Item 84(1), the doors fell within Item 84(3), being inverted ``metal doors of a kind used in construction or repair of and wrought into or attached to so as to form part of, buildings or other fixtures''.

The word ``fixture'' in Item 84 has its usual common law meaning: see Feltex, where Lockhart J applied Sir Frederick Jordan's classic formulation in
Australian Provincial Assurance Co Ltd v Coroneo (1938) 38 SR (NSW) 700 at 712 as follows:

``The question whether a chattel has become a fixture depends upon whether it has been fixed to land, and if so for what purpose. If a chattel is actually fixed to land to any extent, by any means other than its own weight, then prima facie it is a fixture;... the test of whether a chattel which has been to some extent fixed to land as a fixture is whether it has been fixed with the intention that it shall remain in position permanently or for an indefinite or substantial period... or whether it has been fixed with the intent that it shall remain in position only for some temporary purpose...''

See also
Precision Measures Ltd v FC of T 92 ATC 4099.

In this case, there was no real dispute that the wall and floor safes, once installed, became fixtures. They are cemented or otherwise fixed into position, and intended to be in place permanently or at least for a substantial period of time. There is no evidence as to how easy or difficult they would be to remove. However, it stands to reason, by the very nature of what the goods are, that they would not be easy to remove. Having regard to these factors, I am satisfied that the wall and floor safes, once installed, become fixtures. However, the question of whether the items became fixtures once installed is not the question to be determined. Rather, to fall within Item 84(1) the goods must be ``[m]etal building materials (including girders, rods, bars, wire, sheets, mesh, lathing and fabricated units composed of any of those goods...) for use in the construction... of, and to be wrought into... so as to form part of, buildings or other fixtures...''.

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ATC 4637

In
Jetmaster Fireplaces Pty Ltd v FC of T 89 ATC 4464, the court was required to determine whether the taxpayer's fireboxes, which were fabricated from mild steel and which were manufactured for use in the construction of domestic fireplaces, were exempt from sales tax pursuant to Item 82A or Items 84(1) or (2) of Schedule 1. Einfeld J noted at 4469 that a common feature of these Items was a requirement that the goods be ``wrought into or attached so as to form parts of buildings or other fixtures''. It was argued by the Commissioner that the goods did not fall within Item 84(1) as they had a clear identity as fireplaces and were so described in the applicant's advertising. Einfeld J said that that factor could not be determinative one way or the other. The Commissioner also argued that the goods did not form a necessary part of the structure of a building or fixture and that unlike girders, steel frames, window frames and the like, the goods could be added after a building had been constructed in the sense that they do not support or brace the structure itself. Einfeld J also rejected that argument, holding that that factor did not appear to be entirely relevant, given the wording of the specific exemption provisions. His Honour concluded at 4473, that it was clear that the goods in question had ``... no being in themselves. They are and are intended to be an irremovable part of a house...''.

In Case Z26,
92 ATC 250, Barry J was required to determine whether certain anchors and chains which formed part of a single point mooring system which secured in position the Floating Hotel on the Great Barrier Reef were exempted from sales tax under Item 84(1). His Honour considered that four questions arose in determining whether the goods fell within the item, namely: (1) are the anchors and chain building materials? (2) if yes, were they ``for use in the construction'' of buildings and fixtures? (3) were they, in the construction process, wrought into or attached to, so as to form part of the building or other fixture? (4) can the structure, either the single point mooring system or the whole hotel complex, including its mooring system be considered a building or fixture?

His Honour accepted that building materials were ``... anything which becomes an integral part of the structure into which it goes''. That is an acceptable definition and was not challenged by counsel for the respondent. It is to be remembered, of course, that Item 84(1) is concerned with ``metal building materials''. Next, his Honour considered that the words ``for use in the construction'' in Item 84(1) needed to be interpreted by reference to the intended use to which the goods were to be put. As to question 3, his Honour stated that it was difficult to conceive of any situation where building materials were attached to a structure but did not form part of it. His Honour found as a question of fact that the anchors and chains were attached to the structure so as to form part of it and also concluded that they were wrought into the single point mooring system so as to form an integral part of it. Finally, in determining whether the anchors and chains became a fixture, his Honour applied the traditional common law meaning, adopting the definition in R.M Stoneham's text The Law of Vendor and Purchaser (1964), which is to the same effect as Sir Frederick Jordan's statement, which is set out earlier. His Honour held therefore that the anchors and chains were an integral part of the single point mooring system designed to secure the hotel to the ocean floor.

Counsel for the applicant submitted that this case is indistinguishable from
Jetmaster Fireplaces Pty Ltd v FC of T 89 ATC 4464. He further submitted that each of the three cases referred to above demonstrated that it did not matter that raw material has been used to make products which have their own identity and are sold as discrete units, such as fireplaces and anchors or chains. The test was whether the purpose of their construction was to become a fixture to go into a building and whether they were made of ``metal building material'' as specified in Item 84(1). It was submitted that the floor and wall safes fell precisely into such category.

The respondent contended that the wall and floor safes are not fabricated units within Item 84(1), but that they are prefabricated goods which are sold as a discrete unit and have an independent identity as wall and floor safes. Counsel for the respondent submitted that the distinguishing feature of the authorities relied upon by the applicant was that in those cases what was sold by the taxpayer was not the completed item nor an independent, integral item of goods, but rather distinct components to make up something. For example, in the Feltex case, it was held that there was a ``... contract to

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ATC 4638

supply and install a large number of specific items of equipment'' and the court specifically rejected the proposition that the subject of the sale was the supply of completed partitions (see 4929-4930). Similarly, it was submitted that Jetmaster involved the sale of products for use in the construction of domestic fireplaces, namely fireboxes, flanges, gathers and flue pipes which, when assembled made up a fireplace and it was in that context, it was submitted, that the court dealt with the question of whether they were exempt from sales tax.

Whilst counsel for the respondent is correct in his submission in relation to Feltex, that case was relied upon by counsel for the applicant in relation to the meaning of fixture. As I have stated, I do not consider that to be an issue here. There is nothing else in that case which affects the facts of this case. In Jetmaster, the items in respect of which exemption was sought under Item 84(1) were certain of the applicant's fireboxes, gathers, and flues. These items had to be installed together into a building so as to form a fireplace, and accordingly His Honour was not dealing with discrete items for which exemption was sought as is the case here. To that extent it is distinguishable. However, Jetmaster does not stand as authority for a proposition that a complete, discrete, fabricated unit, as is the case with the wall and floor safes, cannot fall within Item 84(1). It is thus necessary to determine whether the applicant's wall and floor safes fall within the exemption.

I have set out above what I consider to be the test under that Item. In the present case, the floor and wall safes are constructed of metal building material. They are also fabricated units. Whilst they are sold as discrete units, they have no effective function or operation as safes unless and until they are installed, and Item 84(1) specifically includes fabricated units.

The question remains therefore whether the wall and floor safes are for use in the construction of, and to be wrought into, or attached to, so as to form part of buildings or other fixtures. It is clear on the evidence that they are wrought into so as to form part of buildings. They would have no effective function if they were not. There was no evidence that they were wrought into, so as to form part of, fixtures, and that matter is not an issue for determination in the case. Nor do I consider that Item 84(1) requires that, of necessity, goods be installed at the time of the original construction of the building. In my opinion, it does not. To so require would be to draw a distinction between buildings and fixtures which the provision does not warrant. Nor is it necessary that, to fall within Item 84(1), goods form a necessary part of the construction in the sense of having a structural function. It seems to me that goods could fall within Item 84(1) even if their function within a building was merely aesthetic or decorative. In the case of wall and floor safes, whilst they may not have any structural function within a building, and there was no evidence that they did, there is no doubt that they form part of the structure once installed. Accordingly, in my opinion, the floor and wall safes fall within Item 84(1).

Counsel for the applicant conceded that, at least on one view, the doors were less clearly within Item 84(1) than the body, given that they were more elaborately manufactured and had locks and bolts attached to them. He submitted however, that the doors are made from steel plate and there was no reason to distinguish them from the body of the wall safe. It follows from what I have said above that I agree with this submission. The wall and floor safes are complete units. Once having found that as such they fall within Item 84(1), it is not necessary to distinguish amongst their various component parts.

Having regard to my determination in respect of Item 84(1), it is not necessary to determine whether the doors fall within Item 84(3). However, it is appropriate that I briefly express my views on that issue.

Counsel for the respondent submitted that the doors did not fall within Item 84(3). In the first place it was submitted that some of the doors had carborundum in them and thus did not fall within the description of ``metal doors''. It was further submitted that the evidence did not reveal what doors had carborundum in them and which doors were manufactured of mild steel. There was no evidence what number of doors were manufactured according to which method, or which of the safes subject of the relevant assessment had doors manufactured of mild steel and which had doors manufactured with carborundum as a component. Further, it was submitted that it could not be said of the doors that they were wrought into or attached to or formed part of a building. Indeed the opposite was the case. Counsel for the

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ATC 4639

respondent relied upon the statement of Kitto J in
DFC of T v Academy Plastics Pty Ltd (unreported, High Court, 22 March 1956), dealing with the phrase ``goods of a kind used in the construction or repair of and wrought into or attached to so as to form part of buildings or other fixtures'':

``these words cannot properly be applied to every article which is intended to be affixed to the fabric of the building so as to be held in a position which is suitable for its convenient use.''

The evidence in this case is that the wall and floor safes are manufactured as discrete units. As such the doors are attached to the sides of the unit. There was no evidence that the doors were ``of a kind used in the construction or repair by and wrought into or attached, so as to form part of, buildings''. Accordingly, I reject the applicant's submission that the doors of the wall and floor safes fall within Item 84(3).

THE COURT ORDERS THAT:

Answers to separate questions in matters numbered NG952, NG957, NG958 of 1992:

As to the freestanding safes and cabinets known as the:

Crado

Servisafe

Lynx

Carlton (57, 131, 184 and 410 litre models)

Brunswick (57, 131, 184 litre models)

Oxley (50, 57, 88, 100, 131, 145, 237, 342 and 410 litre models)

Pacific (35, 50, 57, 88, 100, 131, 145, 184, 190, 237, 300 and 410 litre models)

Botany (57, 88, 100, 131, 145, 184, 190, 237 and 410 litre models)

Wentworth High Security safe (237, 410 and 510 litre models)

Gun cabinets (400 litre and 260 litre)

Yes.

As to:

Series 1 and Series 2 Anti-Arc safes:-

• (i) 3120 model (195 litres)
• (ii) 4220 model (261 litres)
• (iii) 5220 model (329 litres)
• (iv) 6320 model (394 litres)
• (v) 6320E model (477 litres)

Record Protection Files (1, 2, 3 and 4 drawer models)

Fire Protection Cabinets (or record protection cabinets):-

• (i) 62-48 (1086 litres)
• (ii) 62-24 (543 litres)
• (iii) 43-24 (374 litres)

Computer Cabinets:-

• (i) DSC3
• (ii) DSC2
• (iii) DSC1
• (iv) Maxi-cabinet (150 litres)
• (v) Super mini-cabinet (70 litres)
• (vi) Mini-cabinet (40 litres)
• (vii) Micro-cabinet (13 litres)

Canberra (sizes 1, 2 and 3) being approximately 32, 45 and 70 litre models

Castle (sizes 3 and 4) being approximately 180 litre and 460 litre models

Drug cabinets (24-inch and 14-inch)

Security cupboards (4, 5 and 6 door)

Heavy duty filing cabinets (2 and 4 drawer)

No.

Answer to separate question in matter NG956 of 1992:

The goods listed in paragraphs (ii) of the Attachment are goods covered by Item 84(1) of the First Schedule to the Sales Tax (Exemptions and Classifications) Act 1935

The goods listed in paragraph (ii) of the Attachment are not goods covered by Item 84(3) of the First Schedule of the Sales Tax (Exemptions and Classifications) Act 1935.