Commissioner of Taxation v Totalisator Administration Board of Queensland

[1989] HCATrans 284

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IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Brisbane No B39 of 1989

B e t w e e n -

COMMISSIONER OF TAXATION OF

THE COMMONWEALTH OF AUSTRALIA

Applicant

and

TOTALISATOR ADMINISTRATION

BOARD OF QUEENSLAND

Respondent

Application for special
leave to appeal

BRENNAN J GAUDRON J McHUGH J

Totalisator

TRANSCRIPT OF PROCEEDINGS

FROM BRISBANE BY VIDEO LINK TO CANBERRA

ON FRIDAY, 17 NOVEMBER 1989, AT 10.40 AM

Copyright in the High Court of Australia

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MR D.M.J. BENNETT, QC: In this matter, if Your Honours please,

I appea~ with my learned friend, MR J.A. LOGAN, for the applicant.(instructed by the Australian

Government Solicitor)

MR C. E. K. P.:.A1"1PSON, QC: In this matter, if Your Itonours please,

I appear with my learned friend, MR S.L. DOYLE for

the respondent (instructed by O'Shea Corser & Wadley)

MR BENNETT:  Your Honours, this application involves a short

question of construction. There are four provisions
of the SALES TAX ASSESSMENT ACT<No. 1i which are

primarily relevant.

BRENNAN J:  Mr Bennett, I think we would probably be advantaged

if we called upon the respondent first.

MR BENNETT: If Your Honours please.

BRENNAN J: Yes, Mr Hampson.

MR HAMPSON:  If it please the Court, we would submit that there

is really no question of construction here, but only

a question of characterization. The situation is

that the judges who considered this below, the trial

judge Mr Justice 11cPherson, and two of the judges

who constituted the Full Court, Justices Ambrose

and Thomas, quite clearly approacP~d the question of

whether the respondent was a manufacturer by the
process of characterizing its activities. That

appears in the appeal book at page 6, for the trial

judge, the passage commencing:

The question remains whether by the production of goods in the form of printed matter the T.A.B. becomes a manufacturer.

And the following page and the Court will notice

that His Honour there was relying on two decisions

of this Court, which have stood for a long time,

ADAMS V RAU and the FEDERAL COMMISSIONER OF TAXATION

V RILEY, cases in which that approach of characterization

was - - -

GAUDRON J: Well,he was not relying on them, was he,Mr Hampson?

He was contrasting them.

MR HAMPSON:  No, he was not looking for facts. He was not

trying to say 'Uell the facts of this case fit

underneath the facts of that case". What His Honour

was saying was what the High Court has done in

relation to these provisions, is to say they mean

this and that, and then they go to proceed to

characterize them. Now in one case, in ADAMS V RAU,

he sets out what was said to be the definition,how

it should be treated,and he mentioned the facts and

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he contrasted the facts in RILEY's case which,

of course,led to a different decision, but again

it was a case of characterization only. That is

the point that we make: that it really is a

question of saying "What are the activities of the

TAB in this particular case? What are the

activities of the shorthand writers in RAU's case?

What are the activities of the photographers in

RILEY's case?" and that is really what, in our

submission, that is - again the other references

are page 20 of the appeal book.The Court will see

at the top of the page there:

I do not think that the present situation

is governed by specific authority.

Well, with respect, it is not. You did not have

a TAB before. You were not having to characterize

the activities of that. So you could not find an

authority which would, within its four corners, allow

the TAB in this case to be fitted. But His Honour

went on:

It seems plain that in determining whether

the process is one of "manufacture" at all, the

Courts seek to categorise the activity engaged in. This is demonstrated by perusal of each

of the above cases, in particular RAU's case at

pp. 578, and 579; RILEY's case at pp. 78 and 79;

the HORNIBROOK case at pp. 281 and 284 and in

the NIMROD THEATRE case at pp. 274, 282 and 283.

BRENNAN J: There is no doubt though, is there, of the relevant

activities of the TAB in fact in this case.

MR HAMPSON:  No, there was no dispute as to what they were

in fact. It conducts an approved gaming business

and in the course of that approved gaming business

it, in fact, uses for its own purposes certain

materials which it makes itself. (Continued on page 4)

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BRENNAN J: Well, is that not a question of law whether or

not having regard to those activities as found and

as not open to dispute, the TAB answers in law the

description "manufacturer"?

MR HAMPSON: Well, the question of whether it is a manufacturer -

really, the proposition that is being advanced was

really advanced on behalf of the Commission - was

really to say that it is a manufacturer of those

things that it uses in its business. That is the

type of argument that was made there. But we say

the proper characterization is to look at the

totality of the activities of the business,

whatever the business is, and that is an approved

gaming facility.

BRENNAN J: Well, if that be the contest of approach,

that is, one looks either at the discrete activity

of printing on the one hand, or the totality of

activities on the other, is that not an important

question of law?

MR HAMPSON:  No, with respect, it is not. It is really a

question of characterization and that is made

clear, indeed, by the applicant's affidavit. If

one goes and looks at the affidavit on which the
applicant here relies - see, paragraph 16 says

what its case is:

on its proper construction, a person who

engages in the manufacture of goods for

his own use in the course of carrying on

a business which, if he did not, he would
have to purchase from another person, is

a manufacturer of those goods within

section 17.

Then he says, paragraph 17:

Until that decision -

(b) is the one, I think, to look at. He saya

taxpayers -

Until that decision -

used to pay tax in fact, including:

building societies and finance companies

who printed their own prospectuses,

application forms ..... truck courier firms

which manufactured their own truck bodies;

retailers who manufactured their own display

stands, shelving and furniture;

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engineering consultants who manufactured

their own machinery; advertising agents
who produced slides, photographs and
videos for demonstration purposes; hire
firms who manufactured their own caravans,

house boats, trailers and coaches;

building construction companies who

manufactured their own scaffolding;

cleaning companies who manufactured their

own chemicals.

And so on. And he goes on:

The decision of the Full Court will have the

consequence that taxpayers in each of these

categories will no longer pay tax -

now, we submit, that is not the case at all. All

these factual situations are quite different and
the question will simply be, as it has been in the

past, to characterize whether these particular

persons are manufacturers within the definition.

That is the simple matter. You characterize what

is the business they are carrying on; are they,

in fact, a manufacturer as defined. That is what,
in fact, one is concerned with and that is, in fact,

exactly what the majority did. And we submit that
the majority did that exactly in conformity with
the approach of this Court which has stood for a

considerable period of time.

The other judge - I promised.that - the other

one was at page 33. I did not give that other

reference: it really starts, I suppose, on page 32

at the bottom; refers to the analysis of:

the scheme of Sales Tax legislation

considered by Dixon J. in CLARKE AND ELLIS

and Windeyer J. in TAUBMAN PAINTS indicates

to my mind that a "manufacturer" referred

to ins. 17(2) ands. 19 of the Act is a

person who carries on business as

manufacturer and does not refer to any person

who in the course of carrying on a different

kind of business makes or manufactures
something for his own use to enable that
non-manufacturing business to be carried on.

GAUDRON J: But, Mr Hampson, does that not raise precisely

the question of the interpreation of the definition

of "manufacturer" in section 3 of the Act?

MR HAMPSON: Well, if one looks at what was put up, the

actual submission that was, in fact, made, if

one looks at what the learned judge said - take

the trial judge, if we go back to his statement of what was submitted before him, one will find

at page 4 of the appeal book, about half-way down,

having quoted section 17(2):

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MR HAMPSON (continuing):

pointed out there are six elements in this	In his helpful submission Mr Bennett Q.C.
provision: (a) goods; (b) manufactured; (c) in Australia; (d) by a manufacturer;
(e) in the course of carrying on a business; and (f) applied to his own use.

and then goes on to what the other matters are.

So the question is, we would subriiit - it is a

simple matter - that the manutacturer, the person who is

in the"manufacturer'is the person, in fact, who

manufactures the goods, that they are goods, they

are manufactured in Australia, and in the course - not
of some other business, but in the course of the

business of being of a manufacture, that is exactly

what the definition is about. That is the whole

background of this particular legislation. I mean,

if a barrister makes notebooks for himself for use

in court our of scrap pieces of paper - he recycles

them and clips them together, or something - he does

not become a manufacturer; one still characterizes

his activities as a barrister. You have a look and
you say, "Is he a manufacturer?" He is carrying on
a profession - but anyway - is he a manufacturer?

You can say, "He is the creator - he is the maker -

of those notebooks out of the recycled paper", but

he is not a manufacturer, within the statutory

definition, and, we would submit that it is quite

clear that the intention has to be - the

characterization must be of what the manufacturer,

in fact, does, and it has got to be in the course

of a manufacturing business; not in the course, as

it were, of a completely different business.

We submit that there is no new question, at all,

involved in here. There is nothing important

involved in the matter. To put forward an affidavit

which says, "There is all sorts of disputes and you

might lose sales tax", that is not the question.

The question is, "What does the definition mean?"

This Court has considered it on quite a number of

occasions. For example, that last occasion that

was mentioned there by Mr Justice Thomas, I think it was, also showed the approach - the characterization approach - in ADAMS V RAU, (1931) 46 CLR, at page 578

and 579, and in RILEY's case at pages 78 and 79 -

that is where the important passages are, but that

approach was also adopted in the COMMISSIONER OF

TAXATION V NIMROD THEATRE, and that was a case - it

was the same situation, really - exactly the same

situation of somebody carrying on the business, if one

likes, of exhibiting plays - putting together plays

and exhibiting them, who manufactured - if one

likes to use that word, one might prefer to stay

away from it seeing it is in a statutory definition

and said "created" or "made" - stage machinery and the

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like. The characterization test employed by the

Full Federal Court, and the important passages

at 271, 272, 273, 282 and 283 of the reports, went

precisely on that particular basis. For example,

referred, at page 282 and 283, the"reference to	if I could just take the last two to which I had
the context in which sales tax is imposed·.
satisfied me"- this is the decision of
Mr Justice McGregor which whom Mr Justice Wilcox
agreed. He agreed with both of the justices.
There is: · · · ·

This reference to the context in which

sales tax is imposed satisfied me that

s 17 is to be read as requiring sales tax

to be levied on and paid so far as a

manufacturer is concerned by persons

engaged in the business of manufacturing,

and not entities who are engaged in a

different business, for example such as

Nimrod - accepted for present purposes

that Nimrod is engaged in a business - but

as part of such occupation produces goods

for its own use in that occupation. The

concept of Nimrod, a producer of plays, as

engaged in manufacturing so as to be liable

to sales tax on its sets is incongruous to

the point of being bizarre; and it is not

surprising that, upon analysis, the ASSESSMENT

ACT does not support such a proposition.	One
may note what was said in ADAMS.	That

authority was concerned with professional

shorthand writers who were charged that,

carrying on business as manufacturers within

the meaning of the SALES TAX ASSESSMENT ACT

1930 (a predecessor of the present ASSESSMENT

ACT) they did, inter alia, fail to become registered.

The court said (at 57a).

(Continued on page 8)

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MR HAMPSON (continuing):

"The service which they perform cannot

first be disintegrated and then part of

it examined while the rest is excluded

entirely from consideration. Doubtless

_ the transcript 'produced' by the typist

from the shorthand writer's dictation is

a new entity, and is not the same

thing as the pieces of paper on which it

was made. Doubtless it is capable of

sale. But it is brought into existence,

not for sale as a cormnodity, but for the

purpose of enabling the employers to have

the benefit of services given in the

course of a skilled vocation."

I suggest the activities of NIMROD, in the

same way, should not be "disintegrated".

In my opinion the decision of the

Supreme Court was correct.

Now, of course, in that particular case an application was made to this Court for special leave to appeal

and that was refused and, we would submit, the

present case is on par with that; it is just the same

type of situation, factual situation, arising again.

GAUDRON J:  Well, it is not precisely, Mr Hampson, because,

I think, at the beginning of the judgment of
Mr Justice McGregor there is reference to the

continuity imported by the notion of engaging or engagers in the definition whereas in the case of

NIMROD there was not necessarily any continuity in the production of the stage props.

MR HAMPSON:  No, but they would probably be different ones

but the TAB does not, you see, produce for this week

certain sorts of betting slips and use them for the

other 51 weeks of the year. It does have a

continuity in the production of betting slips but

they are appropriate for their use for the next

meetings. Now, in the same case, NIMROD, I think

it is said at page 275, that:

The set -

that they were talking about there -

was used for forty-five performances over

a period of seven weeks. At the end of

the performances, the set was returned to

the "workshop" and ultimately only the

rostrum modules were retained for future use,

the canvas and waves shapes being taken

"to the tip" -

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and so forth and what happened to other parts of

sets. But, I do not know that the evidence

actually went on to this but quite surely if we

assume that NIMROD was carrying on a continuous

business in that this was not the only stage play
that it presented but it would be presenting other
stage plays in the future, it would make for those

future stage plays, sets. So, the sets that it

made again were things which were fashioned for its

particular use. They would stay as they were for

the present play for some weeks and then they would

be taken to pieces, some parts kept, some parts

apparently lent to other people, but when you came

to a new stage play part of the old sets might be

resurrected and incorporated in the new set or the

• •	new set might be completely rebuilt. So, with
respect, from the point of view of the proper analysis
of the facts, Your Honour, it would be our submission
that there is really no difference. There is a
continuity in each case; a continuation of the business in each case,which properly characterized in the case of NIMROD, was the production, the business of producing for reward, stage plays. In the case of the TAB it was this licensed betting business, gambling business, that it was undertaking,
making money from that and in both cases the persons
concerned in conducting those businesses were making
things which assisted them in carrying out the business.

Now, the question falls, when they are a

manufacture~,. carrying on business in each case,

you say, "Well, what is their business?". Well,

their business is not that of a manufacturer ..

The fact that they do make some goods does not make them a manufacturer and we submit that it is a very

strong consideration, in fact, that just as the long-standing decisions of this particular court,

treated the matter not as any difficulty in the way

of construing but as a matter of characterizing

the activities of the business and the alleged

manufacturer so,too, the Full Court in this present

case has followed. exactly the same path and, we would

submit, that there is no important or new principle

of law to be discovered here. What we are concerned

with purely is the application of a definition

which has been made clear by the courts. The court

has said, "You don't split up the individual

ingredients of each particular business but you characterize what the business is to see if the

person concerned is a manufacturer and to do that

doesn't involve any important question of law; it

means only the application of that definition to

multitudinous sets of facts". We submit that that

is the situation here and that undoubtedly

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commended itself to this Court in the

NIMROD case because special leave to appeal was

not granted. So we would submit, there is no

greater reason today to find there is something special or important about this particular case than there was on the day when this Court refused

special leave in the NIMROD case. I do not know

T21	if there is anything I can usefully add.
BRENNAN J:	Yes, thank you, Mr Hampson. Although we have

been advantaged by an argument which draws our

attention to all the sali~1t features against the granting of special leave, none the less, we are of the view that special leave should be granted in this case. Special leave will be granted

accordingly.

AT 11.00 AM THE MATTER WAS ADJOURNED SINE DIE

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