Chubb Australia Ltd v Federal Commissioner of Taxation

[1994] FCA 592

CATCHWORDS

L' .L < SALES TAX - Sales Tar .(Exempriom and C1assifiarion.s) Act 1935 (the Act) -

+ '(I whether free standing safes imported or manufactured by the applicant fall within
Item l(a) of the Third Schedule of the Act - whether such goods fall within the
desaiption of "goods of a kind ordinarily used for household purposes" -
determination of genus of goods - whether safes comprise more than one genus -
whether safes or classes of safes "goods of a kind ordinarily used for household

-, pwposessL securingvaluables a common-or-usual household .purpose -whether floor

and wall safes fall within Item 84(1) of the First Schedule of the Act - whether floor and wall safes are manufactured from "metal building materials" - whether they are

I& L in "construction and repair" - whether they are "wrought into, or attached to, so

BB to form part of, buildings or other fixtures" - whether a discrete unit or item of goods falls within 84(1) - discrete fabricated units held to fall within Item 84(1) in this

care - doors of the floor and wall safes do not fall within Item 84(3) of the First

Schedule of the Act.

Snlu Tax (Ewmptiom and Classifiari0n.s) Act 1935

v FCT (1993) 44 FCR 450

PCr v Steya$ (1984) 154 CLR 385

Overseas Ptv Ltd (1985) 75 FLR 474

(1990) 90 An: 4925

(1938) 38 SR (NSW) 700

M (1992) 92 ATC 250

Ptv Ltd v F a (1989) 89 ATC 4464

f T e v ~cademv w t i c s Ptv J .a (unreported, High Court,

22 March 1956)

PRINCIPAL

NG 956 of 1992 NG 957 of 1992 NG 958 of 1992

W e y J

syamy 26 August 1994

c RECEIVED

3 0 AUG 1994

AUSTRALIA

)VEw SOUTH wALPs.ImmmP*GIsw ) No. NG 952 of 1992 NG 956 of 1992

Applicant

A u k I0NF.R OF T -

Respondent

GQMc	Beazley J
EIaCG	Sydney
Jhk:	26 August 1994

P

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

As to the freestanding safes and cabinets known as the:

Crado

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)
Wcntworth High Security safe (237,410	and 510	litre models)
Gun cabinets (400 litre and 260 litre)

Yes.

Series 1 and Series 2 Anti-Arc safes:-

(i)        3120 model (195 litres)

(U)	4220 model (261 litres)
(iii)	5220 model (329 litres)
.	(iv) -6320-model (394 litres)
(v) 6320E model (477 litres)

Rccord 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) --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 (%inch and lhinch)

Security cupboards (4,s and 6 door)

Heavy duty filing cabinets (2 and 4 drawer)

A m r	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 Tar (Exemptions and Classifiahns) 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 Tar (Exemptions and Classi&atMns) Act 1935.

M: Settlement and entry of orders is dealt with in Order 36 of the Federal Court

Rules.

1	No.	NG 952 of 1992
NG 956 of 1992

-	1	NG 957 of 1992
NG 958 of 1992

-BEm'% - . -

Applicant

m C O W S I O N E R OF TAXATION
Respondent

!=QU%	Beazley J
PlaEC;:	Sydney
m	26 August 1994

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

reapondent 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 l(a) of the Third Schedule to the Sales Tax (Exemptions and Classijications) Act, 1935 (the Exemptions

Md C&s@cations Act) and that its wall and floor safes fall witbin Item 84(1) of the	Firat Schedule or alternatively that the doors of the wall and floor safes fall within
Item 84(3) of the said schedule of the Eremptions and ClassifiatiOns Act. Item l(a) of the Third Schedule provides:

"I	Coo& ... of a M oniinarily used for household pupses, namely:-
(a) fumh.. ."

Item 84 of the First Schedule provides:

"&4(1) Metal building materiak (including @tiers, mak, bars, wire, sheets, mesh, lathing and fabricated units composed of any of those goods, and attachments for such units) for ure in the construction or repair of; and to be wrought into, or attached to, so as to form part of; buildings or other

fblwes...

(3)	Metal window fnrmes and sashes, metal fanlight frames and sashes, na&l window s c m , metal louvre frames and shutters, metal doon and door
jkrnes, of a kind used in the construction or repair of; and wmught into or attached to, so as to form part of; buildings or other jiaimd.

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

- in proceedings G952 of 1992:

"Whcther all or any, and if so which, of the safes and cabinets listed in pamgmph (i) of the Aaachment and sold by the applicant in the period I April 1989 to 31 December 1990 were gooak covered by item l (a) of the i%ird Schedule to the Sales Tax (Exemptions & Classifiations) Act 1935."

The Attachment listed the following items:

c.	Lynx
D.	C d o n (57, 131, 184 and 410 litre modek)
E.	B m i c k (57, 131, 184 litre modek)
F.	Oxley (50, 57, 88,100,131,145, 237,342 and 410 litre models)
G.	Pacific (35, 54 57, 88, 100, 131, 145, 184, 190, 237, 300 and 410

litre mode&)

H. Botany (57, 88, 100, 131, 145, 184, 190, 237 and 410 Iitre modek)

I.          Wentworth High Security safe (237, 410 and 510 ldre modeh)

J.

S&	I and Series 2 Anti-Arc safex-
(i)	3120 model (195 litres)
(ii)	4220 model (261 litres)
(iii)	5220 model (329 litres)

I	(iv) .	.6320 model (394 1 h )
(v)	6320E model (477 litres)

K

Record Protection Files (I, 2 3 and 4 a'rawer nuniek)

L.

Fire Rutection Cabinets (or record protection cabinets:-

(i)	62-48 (1086 litres)
(U)	62-24 (543 l h )
(iii)	43-24 (374 litres)

M.

Computer Cabinets:-

(i)	DSc3
(U)	DSc2

(iii) DSc1

(iv)	Maxicabinet (150 l h )
(V)	Super mini-cabinet (70 l h )
(vi)	Minicabinet (40 l h )

(vii) Microcabinet (13 litres)

N.

Canbenu (sizes 1, 2 and 3) being appmimately 32, 45 and 70 l& modeh

0.

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

modeh

P.

Dtug cabinets (24-inch and 14-inch)

Q.

Gun cabinetr (400 litre and 260 litre)

R

Sec* cupboards (4, 5 and 6 door)

S.

Heavy duty jZng cabinets (2 and 4 a'rawer)."

- in proceedings G957 and G958 of 1992:

"Whethu all or any, and if so which, of the safes and cabinets listed in pamgmph (i) of the Attachment and sold by the applicant in the period 21 Augwt 1986 to 24 April 1989 were goods covered by item I(a) of the l%Ld Schedule to the Sales Tax. ( E x e e n s & Classificaiions) 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

- in proceedings G956 of 1992.

"Whether all or any, and if so which, of the safes and cabinets lkted in paragraph (U) of the Attachment and sold by the applicant in the period 21 May 1988 to 21 March 1991 were goodr covered by item 84(1) or item 84(3) of the First Schedule

to the Sales Tax (,!ibn@ns & Classifiaiions) Act 1935.

the lDR High Secwiry Underfroor Safe

the Sec* Underfroor Safe

Macqunrie Major Macquarie Minor Down Under

Richmond Mark I Richmond Mark II Myaree 200

Myaree 300 MelviUe 140

Melville 1 W.

(i) model 1 4 . (one brick)

(U) &I 2A (two brick)

(iii)     model 3A Cfour brick)."

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 factor8

which led to the identification of the demand were an increase in the number of curtomer 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 hurance 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 incrcaacd security. These factors coincided with an increase in burglaries of

residential properties. Statistics h m 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 f i e resisting products for use in domestic dwellings.

The evidence revealed that safes of all different sizes are used in homes, including d c s of similar size and type as safes used in shops, small businesses and for

placed in any particular safe should not exceed a specified value, depending upon the	commercial and industrial purposes. The applicant recommends that the contents
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 c e ~ c a t e s , 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:

"...pasrpMs, collectors items such as stamps and wins, an almost infinire variety of documents (such as property deeds, wills, bank notes, bilk of erchange, pmmkory notes, stocks, shares, birth and other certifiates, accolades, cash),

computer disks, cash books and journals from businesses, jh a m and . .

ammmtmn.

... wonks of art, precious books, cash, jewellery, stamp collections, passpassports, wwiUs,

tar mums, guns, silverware, trophies, computer dkkttes ...l8.

The applicant imported or manufactured and sold safes and cabinets (which I shall

paragraph l(a) of the Attachment to the separate questions, which I have set out	refer to generally as safes) of different models or designs which are speciiied in
earlier.
The applicant's Crado, Lynx and S e ~ s a f e safes retail for between $300 and $1,000
each, and are designed to secure a "rirk [which] would not aceed $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 arc three different sizes of tbir model, which retail for between $1,500 and $3,200. The Chubb Oxley safe mark
I1 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
which sells for between $12,000 and $15,000 depending upon the particular model The Chubb Wentworth High Security safe is, as its name indicates, a high security safe monitoring system is utilised. b. 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 slze 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 sFtems. 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
dwtIlinp. 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.
dispensaries. It also comes in two sizes, the larger being 610mm high, 458 mm wide The Security Drug Cabinet is designed to protect dangerous and addictive drugs in
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 f i r e m
are a potential danger to you and your family. The safe custody of+m will reduce
the unfottwwte consequences that may result from loss or thefr. l%e problems of replacement and innuance complicarions should not be an issue when you have
p c h a d your Chubb gun cabinet." The promotional material further states that the cabinet is finished in "...warm grey to complement any decoI". Regulation 42A of the
FircMnr and Dangerour Weapons Regulnhns (NSW) requires that firearms be locked
in a secure storage cabinet. Counsel for the applicant submitted that the Regulation
of itreIf 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 Cbubb 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 wide, 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 "vitalpaper raanls such as w m h o ~ ( ~ e stock lists, customer list [sic], debtors l&, patents, Circuit dhpms, formulae for dnrg manufacturing companies, and home photos, passports, wi&,
mottgages and financial reconis."
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
raagc 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
refemd to the use to which he had been advised customers intend to put the
It was common ground between the parties that in order to come within the applicant's fire resistant cabinet. 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 househoki purposes" as
well as within one of the subclauses of Item 1, in this case ' )h iwe ' ' in subclause (a).
See J&JJ& v F a (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 m at 470:

"It murt be noted that the question to be asked is not whether these pankular goods are oniinarily used for domestic purposes. Clearly Parliament was at paim to onnvc that the a w l destination of the goods the subject of a taxable sale

would be tnlevanr to the question whether they fell within the exception"

Coulucl for the applicant submitted that safes comprise a single class or genus,

namely &a, and that safes are goods of a kind ordhmily used for household

The classification as a single genus is of course advantageous to the

.	p	-
applicant's caac as, as Hill J commented in m at 471:

"The use of the wonis "gwds of a kind" entails the detemination of a relevant gatur. Therein lia an initial diBulty. m e wider the genus is stated, the more

likcly it will be that it will be found	that the class of gwds k commonly used for a
ponicular 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

detwmine whether the goods fall within the opening words of Item 1.

As to the approach to be adopted in determining the relevant genus, Hill J stated at

"Because sales tax is a tax ordinarily imposed upon the losr wholesale sale in the m e of the flow of commerce between manufacziue (or importation) and

connunpion, it may be said that genera& the task of classification to determine

whether particular goods fall within a particular Item is one which looks at the mmtial character of the gooak themselves mther than the putpose of the

pur:haser or the pmped destination of the g& in the mind of the

manufachKer or importer: DCT v Lincoln Industriul Cleaners Ply Ltd (1975) 7

ALR 11LX..

In each case, however, the precise language of the Item must be born in mind if

the Item, as here, c a b for a determination of whether the goods themselves are of a p a w kind, that issue must, no doubt, be determined objectively but, with respect to what French J has said, k little assisted by consideration of the

parrinclnr "realities of their-manufactmand 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 nbance. 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 pikular goods in question form a pm. Similarty, it seems to me that a finding that the goods are of a high quality making them too expensive for genaal sale for use in householdr will be of little or no signijicance. This will be pldcuhrty so if the class of goods in question is capable of encompassing goods of high qualiry as well as goods of lesser qualiiy".

In the passage in the judgment of French J, to which Hill J referred, French J stated

"% q d n whether goods are "ordinarily used for household purposes" does not

de.pend critical& upon the use to which they are in fact put but an assessment of

their "mmtial chamctef! That assessment does not involve f i e semantic

dhhctbns 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 chamctef' had

been considered. See 462-463 of his Honour's judgment.	His Honour concluded at
464 that:

"[tlhe statutory ch~jication of goods to dejine eremptions or particular liabilities

wtder menue laws requires that determination, by refeence to objective criteria,

of the "essmtial character" of such gooak. Where design purposes are raferred to in the clam'ficntion by such phmses as ''for use as'', the subjective intention of the lMnyfadwer and purchaser and actual uses to which the goods are put may be

takm into account in the process of chamctehation."

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 472473:

"% evidence shows no more than this:

( I ) Some persons purchase chairs from Diethelm for use in their own homes.

(2)	Freedom Funtihve, Ikea and Harvey N o m n to customers who, it can be
Chairs sLnilar in appearance to those sold by Diethelm are sold by
. infermi, oniinarily purchase them foruse in the home.
(3)	fuminve are mainiy sold to purchasers for use in ofFces.
Chairs manufachued by Diethelm and other manufacturers of office
(4)	studeni childrm have chairs of a kind sLnilar to some of the modelr sold
Nine out of ten homes where there is a computer or where there are
by Diethelm. M is not evidence of the number of homes using such chairs or the ratio of chairs used in such sinrations to chairs used in an office enhnment"

% Nidmcc does not, it seem to me, permit a concIuswn on the balance of pmbabilities that any of the types of chairs sold by Dietheh is of a kind ordinarily used for household purposes. lhat may not be supking, as the case was apparent& run on the basis that either all of the chairs were within the Item or none were. It is quire 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 jimher evidence the appelIant might have established that some of the chairs at

issue in the present proceedings were of a kind odharily used for household

pposes. However, Diethelm had the burden of p m f To the extent that it has not established on the evidence that a particular chair was of a kind oniinarily

used for household purposes, it w t 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 470 that the

fa&, the subject goods should be described as goods of a kind-ordinarily used for	appropriate genus was determined by ascertaining: "[w]hether, having regard to all the
dom& pwposes". I will return to this question shortly.
French J's conclusion focused upon the essential character of the goods. His Honour stated at 465:

"In the present case the essential character of the chairs in issue was coma& idcnrifiad as office f u m k Z%at characterisation rejlects the market in which

the chairs were manufactured and sold having regani, inter alia, to their quality,

. sost, and intended and actual purchasers. .While they were chairs

somcrimcs used for household puqwses, and performing physical functions sLnilar

to such chak, they were not of a kind ordinarily so used Having regard to the ppose of Item I and applying the canons of popular usage and objective chamctcriration with due ngard to the market puposes to which I have refen&

the chairs in quwtiOn fell outside Item I."

W r e turning to the c l d c a t i o n issue in this case, it is convenient to refer to certain of the other relevant authorities.

In J M X v (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(l)(c) of the First Schedule as "&@txb for use...& not for sale, by ... a public benevolent institution". His Honour

stated at 401 that:

"[wjhile the subjective intenriom of manufacturer or purchaser are relevant and

may well be conclusive, what is required is an objective chamcthation of the goads themselves in the light of all the relevant circumstances. lhat chanactcrisotion must be made as at the time when liability to sales tar would othmvke attach. It will, in an appropriate case, be made with the ben@ and in

the context of knowledge of the actual use which was subsequent& made of the

goads."

Although MS case was concerned with the classification of goods by reference to

we, 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 l(a) classification, as Hill J said,

little assistance is to be gained by having regard to factors such as "the commercial

nalYtics of... manufacture", of which the subjective intention of a manufacturer could

be seen to be part. Gummow J in - v Ltd v DCI: (1987) 13 FCR 3% also

considered the intention of the manufacturer to be irrelevant for an Item l(a)

clessification. Further, care is to be taken in using the construction of one exemption

proviaion to assist in the construction of another. In

Ltd v F a (1988) 20 FCR 85 Daviea J accepted that composition and function

are relevant to a determination of the essential character of goods, when his Honour

stated at 86 that the "e.weW character of g&" is "...what the goods are, not some dwwte&k that the goods might have. Essenrial character derives from the bask

nature of the goods, f i m what they are, though composition, function, and other facioers

nacGnwuily play a part'!

. .

In v Sherwood Overse (1985) 75 F%R 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,

ccvpcl sweep, jbor polishers and other appliance for use for cleaning puposes.." His

Honour stated at 477 that:

"...in so far as the Item refers to fumihcre, it is to furniture of a kind ordinarily used for household putposes and likewise with r&erators, washing machines,

vacuum cleaners and indeed all of the other goodr mentioned	Many, if not most,
of the goods that are described have an application in industrial or commercial

contdxrs as well as within the household The Item clearly does not refer to office

f t m h e , commercial rejiigemtoers, indrcrtrial vacuum cleaners or air conditioners

designed for use in a public hall"

His Honour further stated at 478-9:

"[t]he use of the adjective "household" suggests that the intention has been to dirtinguish the parriurlw goodr in question from similar goods that have uses ourside a domestic establishment. I have shady made reference to commercial

and trduminl uses to which g o d of a similar description can be put and I think

that in bmad terms this is the intention of using the wonis "ordina* used for
household pwposes".

. . (1986) 17 ATR

Ltd v

1039 was concerned with the question whether the paper napkins distributed for use

by customers purchasing products from Kentucky Fried Chicken qualified as

"hourrhoId drapery and soft fwnirhings". At first instance, Yeldham J held that the
napkin8 fell within Item 8(l)(p) of the Third Schedule which exempted "househokf

dmpcrV and soft jhkhing. ..namely table napkins." Yeldham J adopted Olney J's

approach in O v - m namely that the adjective "household",

de~n'bcd articles ordinarily used in or about a dwelling house for household purposes.

Thia approach was not disturbed on appeal: see (1988) 12 NSWLR 643.

The question whether goods were "of a kind ordinarily ured for household putposes"

. . .

wan considered in m Ltd v Da. 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 "cup" and that class of goods was of a kind

ordinarily used for household purposes. As Gummow J said at 399:

l'. .. goods are "omhrily used for household puposes" within Item 1 even though

they m not tzclusively or pincipa& so used: cf Nomad Indus& of Aust Ply

M v Commissioner of Taxation (Cth) (1986) 81 FLR 450; 86 ATC 4036 at 456- 4584042 ~ , t h e ~ i n i n t h e ~ n g v o d T q f a h i d a p p m r s

q @ p l s i t i r ~ n o r t o t h e u s c f w i n t h e p a n w a r g o o d r i n ~ ~
~ a ~ n o r t o t h e ~ t o w h k h i t ~ ~ r l h r c

~ g v o d T s h a I l b e p q b u t m a h a t o t h e n a a u c , ~ a n d ~ o f

g m d r i n t h e d a a a g r n u r i n ~ Ihus,gwrLFare"ofakindonl~used

fov ho~(~ehoId puposes" if they are to be recognised as members of a class or

g m which common& or regularly (albeit not necmariEy exclusively or

pim&ally) is used for household p u r ~ ~ ~ e s : cf Customs and W e Commissioners v Mechanical Services (lhiler Engineem) Ltd [l9791 I WLR 305 at 312-313, 315.316-317' (emphasis added).

- 17-

It will be recalled that Hil 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 m 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 l(a), there is little utility in so doing. Rather, the matter is best approached by responding to the question posed by

Hill J in at 470 which I have set out earlier, namely: "Whether, having regard

& aU the facts, the subject go&	should be described as goods of a kind ordinarily used
for dome& pqnam'!	In answering that question, it is relevant to consider evidence

of the usc 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 adaptarion" 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.

Courwl for the respondent submitted that in this case there was no evidence as to

the ordinary use of safe& 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 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 l(a), but that the other safcs 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 asnessment 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

safu 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) gum; (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

alro 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 m
Ljbr and cases make clear however, that factor does not necessarily exclude

aafca, or some categories of safes, from falling within the phrase "goodr of a W

ordfnarily used fw householdpupxes". For example, assuming for the purposes of the

argument that heaters are furniture, the fact that no or few homes in the tropical

"onlLwi3, d for household pupxes". On the other hand, the fact that safes are regions of Australia had heaters would not deprive heaters of the quality of being

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 Givena is that they were usual or common purposes for which safes are used. It is dear, both on the evidence and as a matter of common sense, that all of the

applicant's safcs for which exemption is sought under Item l(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

-CS". 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 caah (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 ordinalily used for household pwposes". To the extent that safes are not ordinarily

so used, I am of the 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 arc of a type normally used for the household purpose which I have identified arc: 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 Servis.de 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 "natwe, qual* and

ockrplarion which ti relevant to their chssfication":	per Gummow J at 399.
I conaider that the other models do not fall within Item 1 (a).	It is appropriate that I

set out brie5y 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.

@)	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.
(C)	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 l(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 arc ordinarily used for household purposes.

v

The next question is whether the wall and floor safes fall within Item 84(1) of the

Fint Schedule to the Exemptions and Classifications Act.

which was described as "a sheet metal box", which is either let into the floor or the	The floor and wall safes have two main components. There is the body of the safe
wall. The other main component is the door. Ln 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 banier to the 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 l o c h g 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
baIlistic 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. COUIWCI 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. Altcmtivcly, 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, counrel for the applicant relied upon the statement by Lockhart J in &

of T m

(1990) 90 ATC 4925 at 4933 that:

'!..the a p m s panels. ..are gooak of a kind used principally in the consauction of the CoIcr-Myer building they are also wrought into or attached so as to fomr pan of that buika'ing. Ihe panels and accessories are with the intention that

they shout? remain h pasirion either permanently or for an indejinite or certainly

a substantralperiod"

Alternatively, it was submitted that if the wall and floor safe units did not fall within

Item Wl), the d o o ~ fell within Item 84(3), being inverted "metal doors of a k i d used

in conmudon or repair of and wrought into or attached to so as to form part of;

buWngs or other firnves".

The word 'Ifknue"	in Item & has its usual common law meaning: see m	where
. .

Lockhart J applied Sir Frederick Jordan's classic formulation in

Asaurancc(=nI td v (1938) 38 SR (NSW) 700 at 712 as follows:

"a quabn whether a chattel has become a @we depencLF upon whether it has

been fired to r(m4 and if so for what pwphf.e. g a chattel k acwliy W to

land to any exfeM by any means other than its own weight, then prima facie it iF

a fixave;...the tat of whether a chattel which has been to some extent to land as a firhue iF whether it has been jked with the intention that it shall remain in paririon permanently or for an indefinite or substantial period..or whether it has been jked with the intent that it shall remain in pasirion on& for some tempomry

purpose..."

. .

ScealroprcclslnnLtdvFCI:  (1992) 92 ATC 4099.

In this case, there was no real dispute that the wall and floor safes, once installed,

becams 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

tvidcnce 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, 1 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 glde7s, m&, bars,

wh, sheets, mh, lathing and fabricated unils composed of any of those goods ...) for use

in the comfmction ... of, and to be wrought into ... so as to form part of; buildings or

other fixnvcs.. 'l.

In Ltd v FCI: (1989) 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 Items 82.4 or Items @(l) or (2) of Schedule 1.

Einfeld J noted at 4469 that a common feature of these Items was a requirement that the goods be ''wmught into or attached so as to form parts of buildings or otherfimcres". It waa argued by the Commissioner that the goods did not fall within Item @(l) as they had a clear identity as fireplaces and were so described in the applicant's &erthing. 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. T h y

am and are intended to be an irremovable part of a house...".

In (1992) 92 ATC 250, Bany 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 Bamer 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 'lfor use in the consbuction" of buildings
and fixhues7 (3) were they, in the construction process, wrought into or attached to,

single point mooring system or the whole hotel complex, including. its mooring system	so as to form part of the building or other fixture? (4) can the structure, either the
be considered a building or fixture?
His Honour accepted that building materials were '1.. anything which becomes an
in&@ part of the shuctwe 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 M(1) is concerned with "metal building materials". Next, his Honour conridered that the words 'ybr use in the commcrion" 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 m
Law of V-(1(1%, 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 rrecure the hotel to the ocean floor.
Counsel for the applicant submitted that this case is indistinguishable from Jetmaster

Ltd v F a (1989) 89 ATC 4464. He further submitted that each of the

three cases referred to above demonstrated that it did not matter that raw material

har 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 "meral 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 &(l), 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 case, it was held that there was a ". .cont~ct o supply and install a large number of specijic items of equ@nent" 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 that case was relied upon by counsel for the applicant in relation to the meaning of	fixtwc. As I have stated, I do not consider that to be an issue here. There is nothing
eke 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
di9tinguishable. 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
c . 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 @(l) 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 buildinp or other 6xtures. 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 ia 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
draw a distinction between buildings and fixtures which the provision does not construction of the building. In my opinion, it does not. To so require would be to
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 doom 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
cu, 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
brie5y express my views on that issue.
&me1 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 doon
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 asseaunent had doors manufactured of mild steel and which had doors manufactured with carborundurn 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 respondent relied upon the

. .

statement of Kitto J in W u t v of T-V Ptv U (unreported, High Court, 22 March 1956), dealing with the phrase "goods of kind used in the consaucrion or repair of and wrought into or attached to so as to form pan of

b - or other firtures":

'Wicre wonis cannot properly be applied to every article which is intended to be

aftErcd to the fabric of the building so as to be held in a position which is suitable
for itr convenient me."

The evidence in thin cwe is that the wall and floor safes are manufactured as discrete unita. 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 constmcrion or repair by

. .

SO ao PI Accordingly, I reject the applicant's

submission that the doors of the wall and floor safes fall within Item 84(3).

I certi@ that this and the preceding 30 pages are a true copy of the Reasons for

Judgment herein of her Hono

Associate'.

Date:	26 August 1994
Counsel for the Applicant:	Mr N Forsyth QC and Mr A Robertson
Solicitors for the Applicant:	Terns & Salier
Counsel for the Respondent:	Mr A M Slater QC and Dr H Sorenson
Solicitors for the Respondent:	Australian Government Solicitors
Date of hearing:	27 October 1993