Dick Smith Electronics Pty Ltd v Commissioner of Taxation
[1997] FCA 1221
•14 NOVEMBER 1997
FEDERAL COURT OF AUSTRALIA
SALES TAX - exemptions - “adaptors” - devices which enabled certain electrical goods requiring DC 9 volt power to be plugged into normal AC 240 volt power - whether such devices are “adaptors” within item 43(3)(a) of Schedule 1 of the Sales Tax (Exemptions and Classifications) Act (Cth) - whether “adaptors” used in other than its ordinary English sense - ordinary English meaning of “adaptors” the same as common usage of the term in the electrical industry - devices make AC 240 volt power suitable for use in certain domestic appliances and are thus “adaptors”.
Sales Tax (Exemptions and Classifications) Act 1992, Schedule 1, item 43
Telstra Corporation Ltd v Federal Commissioner of Taxation (1995) 95 ATC 4,400 and (1996) 68 FCR 566 considered.
Zeroz v Federal Commissioner of Taxation (1997) 97 ATC 4277 considered.
Feltex Commercial Interiors Pty Ltd v Federal Commissioner of Taxation (1990) 90 ATC 4925 considered.
Magna Stic Magnetic Signs Pty Ltd v Commissioner of Taxation (1991) 28 FCR 39 considered.
DICK SMITH ELECTRONICS PTY LIMITED v COMMISSIONER OF TAXATION
NG 359 of 1997
FOSTER, CARR & TAMBERLIN JJ
SYDNEY
14 NOVEMBER 1997
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NG 359 of 1997
GENERAL DIVISION
ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA
BETWEEN:
DICK SMITH ELECTRONICS PTY LIMITED
AppellantAND:
COMMISSIONER OF TAXATION
RespondentJUDGES:
FOSTER, CARR & TAMBERLIN JJ
DATE OF ORDER:
14 NOVEMBER 1997
WHERE MADE:
SYDNEY
MINUTE OF ORDERS
THE COURT ORDERS THAT:
The appeal be allowed.
The orders appealed from be set aside.
There be declarations as follows:
(a)that the AC adaptors sold by the appellant with the Shimasu Kiddicall Baby Monitor Kit for one inclusive price are within sub-item 43(3)(a) of the First Schedule to the Sales Tax (Exemptions and Classifications) Act 1992;
(b)that so much of the taxable value of the sale of the Shimasu Kiddicall Baby Monitor Kit by the appellant to distributors as is attributable to the AC adaptors, namely the price for which the AC adaptors could reasonably be expected to have been sold if they had been sold separately, is not subject to sales tax;
(c)that the AC adaptor sold by the appellant with the Digitor Personal CD Player Kit for one inclusive price is within sub-item 43(3)(a) of the First Schedule to the Sales Tax (Exemptions and Classifications) Act 1992;
(d)that so much of the taxable value of the sale of the Digitor Personal CD Player Kit by the appellant to distributors as is attributable to the AC adaptor, namely the price for which the AC adaptor could reasonably be expected to have been sold if it had been sold separately, is not subject to sales tax;
(e)that the Sanyo AC Adaptor model no. KR0522 is within sub-item 43(3)(a) of the First Schedule to the Sales Tax (Exemptions and Classifications) Act 1992;
(f)that, having regard to s 24 of the Sales Tax Assessment Act 1992, an assessable dealing with the Sanyo AC Adaptor model no. KR0522 is not taxable.
The respondent pay the appellant’s costs of the application and of the appeal.
NOTE:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NG 359 of 1997
GENERAL DIVISION
ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA
BETWEEN:
DICK SMITH ELECTRONICS PTY LIMITED
AppellantAND:
COMMISSIONER OF TAXATION
Respondent
JUDGES:
FOSTER, CARR & TAMBERLIN JJ
DATE:
14 NOVEMBER 1997
PLACE:
SYDNEY
REASONS FOR JUDGMENT
FOSTER J:
I have had the advantage of reading in draft form the reasons for judgment of their Honours Carr and Tamberlin JJ. I agree with the orders which their Honours propose and with their reasons for making those orders.
I certify that this page is a true copy of the Reasons for Judgment herein of the Honourable Justice Foster.
Associate:
Dated: 14 November 1997
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NG 359 of 1997
GENERAL DIVISION
ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA
BETWEEN:
DICK SMITH ELECTRONICS PTY LIMITED
AppellantAND:
COMMISSIONER OF TAXATION
Respondent
JUDGE(S):
FOSTER, CARR & TAMBERLIN JJ
DATE:
14 NOVEMBER 1997
PLACE:
SYDNEY
REASONS FOR JUDGMENT
CARR J:
INTRODUCTION
Most Australian domestic electrical power is alternating current (“AC”) at 240 volts. Some electrical appliances will only operate on direct current (“DC”) at a very much lower voltage. The question raised in this appeal is whether a device, which is plugged into a power socket and converts AC 240 volt power to DC 9 volt power, is an “adaptor” within the meaning of item 43(3)(a) of Schedule 1 to the Sales Tax (Exemptions and Classifications) Act 1992 (“the Act”)? If so, it is exempt from sales tax. This appeal is from a judgment of a Judge of the Court who, on 18 April 1997, decided that question in the negative.
FACTUAL BACKGROUND AND THE PROCEEDINGS TO DATE
This factual background is taken largely from the reasons for judgment of the learned primary judge. The appellant sells electrical goods by wholesale to distributors and by retail to members of the public. Between 1 January 1993 and 28 February 1996, the appellant sold by wholesale to distributors, among other things, the following goods:
(a)a Shimasu Kiddicall Baby Monitor Kit; and
(b)a Digitor Personal CD player.
During the same period, the appellant also sold by wholesale to distributors a device labelled as “Sanyo AC Adaptor Model No. KR0522”.
The appellant sold with the baby monitor kit, and included in the price for it, two devices which were labelled and were described in the accompanying owner’s manual as “AC adaptor”. It also sold with the CD kit, and included in the price for it, a device described as “AC adaptor”. That device was also labelled and described in the owner’s manual as “AC adaptor”. There being no relevant differences between them, I shall refer to them generally as “the devices”.
On 29 February 1996 the appellant sued the respondent Commissioner of Taxation in the High Court of Australia. On 18 March 1996, McHugh J, by consent, ordered that further proceedings in that action be remitted to this Court and that the action proceed in this Court as if the steps already taken in the action in the High Court had been taken in this Court. In the proceedings the appellant seeks the following declarations:
That the AC adaptors sold with the Shimasu Kiddicall Baby Monitor Kit for one inclusive price are within sub-item 43(3)(a) of the First Schedule to the Act;
That so much of the taxable value of the sale of the Shimasu Kiddicall Baby Monitor Kit [sold] by the appellant to distributors as is attributable to the AC adaptors, namely the price for which the AC adaptors could reasonably be expected to have been sold if they had been sold separately, is not subject to sales tax;
That the AC adaptor sold with the Digitor Personal CD Player Kit for one inclusive price is within sub-item 43(3)(a);
That so much of the taxable value of the sale of the Digitor Personal CD Player Kit by the plaintiff to distributors as is attributable to the AC adaptor, namely the price for which the AC adaptor could reasonably be expected to have been sold if it had been sold separately, is not subject to sales tax;
That the Sanyo AC Adaptor model no. KR0522 is within sub-item 43(3)(a);
That, having regard to s 24 of the Sales Tax Assessment Act 1992 (Cth) (“the Assessment Act”), an assessable dealing with the Sanyo AC Adaptor model no. KR0522 is not taxable.
Section 24 of the Assessment Act, when read with s 4 of the Act provides, in effect, that sales tax shall not be payable in respect of goods covered by any item or sub-item in the First Schedule to the Act.
Item 43 in the First Schedule to the Act relevantly reads as follows:
“(1) The following goods, if they are of a kind ordinarily used as part of fixed electrical installations in consumers’ premises:
(a)electrical fittings (including electronically operated electrical fittings);
(b)electrical accessories (including electronically operated electrical accessories);
(c)electrical materials (including electrical conduit).
(2)Subitem (1) does not cover:
......
(i) condensers, converters, starters and transformers;
.......
(3)The following goods, if they are of a kind ordinarily used in connection with fixed electrical installations in consumers’ premises;
(a)adaptors;
(b)plugs;
(c)electrical safety devices for the protection of persons.”
(emphasis added)
THE DECISION AT FIRST INSTANCE
It was common ground at first instance (and on appeal) that the devices were goods “of a kind ordinarily used in connection with fixed electrical installations in consumers’ premises”. The sole question was and is whether the devices are adaptors within sub-item 43(3)(a).
The learned primary judge, in summary, held that:
.the devices performed the function of an adaptor as that term is defined in the dictionaries and as it is generally used both in common parlance and in the electrical engineering field;
.the adapting function is quite incidental to the essential function of the devices;
.the essential function and the essential character of the devices is to convert the electricity supply from one which cannot be utilised by the appliance into an electricity supply which can be utilised by the appliance for its operation;
.the essential character of the devices is that of a converter or transformer.
.because the essential character of the devices is to transform and convert electricity supply, not to adapt the input on the appliance to the output on the wall, the devices were not exempt from sales tax.
GROUNDS OF APPEAL
There were ten grounds of appeal in the appellant’s notice of appeal. The following adequately summarises those grounds:
That the primary judge should have held that the word “adaptors” in sub-item 43(3)(a) was used in its ordinary English meaning and that the devices were within that meaning;
Alternatively, that the word “adaptors” in that item was used in a different and special trade sense and that the devices were within that meaning:
That his Honour, having found that the devices were generally referred to in common parlance and in the trade as “adaptors” should have held that it was not necessary to apply a test of essential character. In those circumstances, so the appellant contends, his Honour erred in applying the test of essential character in classifying the devices;
Alternatively, if essential character was an appropriate test in classifying the devices, then his Honour should have found that the essential character of each of the devices was that of an adaptor.
THE RESPECTIVE SUBMISSIONS
The appellant’s first submission was that Parliament intended the word “adaptors” in sub-item 43(3)(a) to have its ordinary meaning as found in standard dictionaries. In the present matter, so it was submitted, not only did the devices fall within the dictionary definitions of the word “adaptor” but there was expert evidence that the devices were understood by those engaged in the relevant trade to be “adaptors”. As the learned primary judge had found that in common usage the devices were generally referred to as “adaptors” he should, so it was contended, have held that the devices fell within the ordinary meaning of the word “adaptors” or (in the alternative) within that meaning as extended by the evidence of the trade. The appellant submitted that the relevant time to decide what Parliament meant by the expression “adaptors” was when the Act was enacted in 1992. As part of that submission, Mr D.H. Bloom QC, for the appellant pointed out that the Act constituted a substantial re-write of the previous exemptions and classifications legislation. By way of answer to that contention, the respondent submitted that it was open to the learned primary judge to conclude (and his Honour had concluded) that the devices were not “adaptors” within the ordinary meaning of that word by reference to the dictionary definitions. The respondent submitted that the devices do much more than envisaged by such definitions. In oral argument, Mr R Edmonds QC (who with Mr S McMillan appeared for the respondent) developed this submission by contending that the devices fell within a separate genus. The genus was that of a multi-function device which incorporates a transformer, a rectifier, a filter and two terminals.
REASONING
The first question to be determined, as a question of law, is whether the expression “adaptors” in sub-item 43(3)(a) is used in a sense other than that which it has in ordinary speech: Telstra Corporation Ltd v Federal Commissioner of Taxation (1995) 95 ATC 4,400 at p 4,405. It appears to me that his Honour did not decide that question, but rather, after considering the evidence given by experts in the electrical engineering field and referring to a number of dictionary definitions, held that while the devices performed the function of an adaptor as defined in the dictionary and as generally used both in common parlance and in the electrical engineering field, the adaption function was quite incidental to what his Honour held to be their essential function.
His Honour heard the evidence from experts in the field which indicated that the trade meaning of “adaptors” was no different from the ordinary English meaning of that expression. As a Full Court of this Court explained in Zeroz v Federal Commissioner of Taxation (1997) 97 ATC 4277 at p 4284.
“Often an examination of this evidence [evidence from witnesses about the trade meaning] will lead to the conclusion that any trade meaning adopted is no different from the ordinary English meaning. This means no more really than that the ordinary English meaning of the expression to be construed should be adopted.”
In finding that there was no difference between the ordinary meaning of “adaptors” and the trade meaning of that term his Honour focussed on what I will call the physical function of the devices, i.e. connection to the wall power socket. However, in my view, neither common usage nor the trade evidence required such a focus.
The authorities show that when construing revenue statutes which use trade or technical terms the law “generally favours” interpretation of those terms as they are understood in the trade or industry to which the statute applies and that revenue laws “frequently” classify goods in terms of those known in a relevant trade or that terms in such laws will “more readily” be treated as being used in accordance with trade usage: Herbert Adams Pty Ltd v Commissioner of Taxation (1932) 47 CLR 222 at p 227, 228-9; Collector of Customs v Agfa-Gevaert Ltd (1996) 186 CLR 389 at pp 398-399; Pepsi Seven-Up Bottlers Perth Pty Ltd v Commissioner of Taxation (1995) 95 ATC 4746 at p 4752.
The legislative history of item 43 and its predecessor item 90C(1) can be found in Telstra at pp 4403-4404. I do not think that it is possible to identify an underlying philosophy as being reflected in item 43 and sub-item 43(3)(a) in particular, which would require the term “adaptors” to be given a trade meaning. As Lindgren J observed in Telstra on appeal (1996) 68 FCR 566 at p 582:
“In sum, it is not possible from the legislative history to identify an aim, purpose or objective of Item 90C(1) and (2) except, perhaps, one so broad as not to assist in the making of fine distinctions of the kind called for in the present case.”
I can find nothing in the Act to suggest an intent to use the word “adaptors” in other than its ordinary English sense. There are many classes of goods described in Item 43. Very few are described in terms which suggest that any tehnical meaning is intended. Almost all of them are described in ordinary non-technical English. Sub-items 43(3) acquired its present form in 1992. However, it in particular uses non-technical ordinary English to describe the items which form the immediate context of the word “adaptors” viz:-
(b) plugs;
(c) electrical safety devices for the protection of persons.
Accordingly, I have reached the conclusion that Parliament intended the term “adaptors” in sub-item 43(3)(a) to have its ordinary meaning.
In my view an adaptor is something which adapts. The New Shorter Oxford English Dictionary defines the verb “adapt” as to
“Fit, adjust, (to); make suitable (to or for) ... Alter or modify to fit for a new use, new conditions, etc ...”.
It also defines “adaptor” as being synonymous with “adapter” which, in turn, it defines as:
“A device allowing connection of pieces of equipment ... unable to be connected directly ... an electrical fitting of this nature, usu. one enabling more than one plug to be connected to the same socket.”
The Macquarie Dictionary 2nd ed (1991) relevantly defines “adaptor” as:
“an accessory plug for connecting a piece of apparatus fitted with one type of terminals to a supply point with a different type.”
Although the Macquarie Dictionary definition of “adaptor” provides an example of an electrical adaptor, I consider that for present purposes the New Shorter Oxford English Dictionary definition is more useful, particularly when read with the definition of the word “to adapt”. The devices with which we are concerned in this matter make 240 volt AC power suitable for use in the domestic appliances described earlier in these reasons. They do this by a composite process of transforming the 240 volt power down to 9 volts and converting AC power to DC power. The evidence shows that they also contain a “filter” which provides a uniform level of DC voltage. It would seem that this makes the power even more suitable for the appliances concerned. Having reached that stage in my reasoning, my reading of the authorities is that it is permissible to derive assistance from the evidence of those engaged in the relevant trade. In Feltex Commercial Interiors Pty Ltd v Federal Commissioner of Taxation (1990) 90 ATC 4925 at p 4936 Lockhart J said:
“I regard the expression ‘builders’ hardware’ where appearing in item 84(2) as one which is to be defined according to its natural and ordinary meaning and not by the evidence of people in the building industry. But I regard that evidence as relevant not to determine the meaning of the expression which seems to me to be a simple expression; but to identify whether certain objects fit within it as understood in the building trade.”
In Magna Stic Magnetic Signs Pty Ltd v Commissioner of Taxation (1991) 28 FCR 39 at p 42 Davies J cited the above passage with approval and added:
“A judge would be hesitant to hold that goods were not builders’ hardware if they were so regarded in the building and hardware trades. And a judge would be reluctant to hold that goods were builders’ hardware if they were not understood to be so in those trades.”
In this matter his Honour, after referring to the evidence of two expert trade witnesses said:
“The evidence has established quite convincingly that devices of the same nature and function as those in question are regularly referred to as “adaptors”, “AC adaptors” or “AC/DC adaptors” in the electrical industry in which they are used.”
In the last paragraph of his reasons his Honour referred to:
“... the fact that, in common usage, the devices are generally referred to as adaptors or AC adaptors or AC/DC adaptors ...”.
It can thus be seen that what I consider to be the relevant dictionary definition of the term “adaptors” and trade usage in the electrical industry are one and the same. I would refer in particular to the evidence of Mr Alex Baitch, who was described by the learned primary judge as an experienced consultant in the field of electrical engineering. After referring to the fact that he had examined the devices which either bore the description “AC adaptor” or were so labelled, Mr Baitch deposed as follows:
“9. The term “AC adaptor” is a generic description for devices of the type examined by me and referred to in paragraph 8 above, which are inserted into standard mains outlets in buildings which supply AC power (alternating current), and into an appliance for the purpose of connecting that appliance to the power supply to enable it to operate. Those devices perform the following functions:
(a)They provide a means of physical adaptation of the connection from one form to another, i.e. from the fixed electrical installation (socket outlet) to the different plug connector on the appliance.
(b)They provide an electrical adaptation of the supply from the fixed electrical installation (240 volt alternating current) to an electricity supply suitable for powering the appliance (low voltage direct current).
(c)They provide an enclosure for housing the various components that are required to provide both the physical adaptation of the connection and for the electrical adaptation of the electricity supply.
Where a device fulfils the functions referred to in (a), (b) and (c) above, the common usage term for the combination is an “adaptor”.”
Despite Mr Baitch’s reference to “common usage” I think it is clear that he was referring to common usage in the field of electrical engineering. His evidence (at p 27 of the transcript) confirms this. His Honour so regarded it (see p 150).
It is well established that a somewhat robust approach to the problem is appropriate in sales tax cases - see Olney J in Federal Commissioner of Taxation v Sherwood Overseas Pty Ltd (1985) 85 ATC 4267 at p 4271 which was cited with approval by Hope JA in Federal Commissioner of Taxation v Kentucky Fried Chicken Pty Ltd (1988) 12 NSWLR 643 at p 654, where the following observation can be found:
“Sales tax legislation is not intended to stultify trade and commerce but is intended to produce revenue for the government from trade and commerce. A construction which aids these general purposes is to be preferred to one which operates, as it were, in a vacuum, detached from the reality of trade and commerce.”
The technical, practical and commercial reality is that these devices make 240 volt AC power suitable for use in the domestic appliances described above. In my opinion, they adapt that power for that purpose and fall within the ordinary English meaning of “adaptors”.
The appellant relied fairly heavily on the fact that the devices have the purpose and perform the task of enabling portable apparatus, such as a CD player to have access to the power point (the fixed electrical supply). This meant, so it was submited, that the devices were adaptors “irrespective of whether they do more”. As I have indicated above, my opinion has a broader basis. But I do not think it is incompatible with the argument advanced on behalf of the appellant. In my view, the fact that the devices include the metallic prongs which fit into the power socket simply provides an additional factor which justifies characterising them as adaptors. However, the legislature has, within sub-item 43(3) itself, separately described “plugs”. I would not regard the “plugging” function of the devices on its own as forming a proper basis for characterising the devices as “adaptors”. Mr Bloom relied on the analogy drawn by Gummow J (in dissent) in Commissioner of Taxation v Thomson Australian Holdings Pty Ltd (1989) 25 FCR 481 at p 492-493 between construing legislation which may be supported by one or more of an enumerated set of legislative powers [citing Murphyores Inc Pty Ltd v The Commonwealth (1976) 136 CLR 1 at pp 19-23 and Alexandra Private Geriatric Hospital Pty Ltd v The Commonwealth (1987) 162 CLR 271 at p 279] and the need to be “... wary of hermetic characterisation ...” when construing a term such as “catalogue” in sales tax legislation. With all due respect, I agree that the analogy may well be useful. However, in the present context while I accept that an adaptor may include a plug, I think that to describe the devices as being adaptors simply because they have plugs on them would not be true to the ordinary English meaning of the term “adaptor”.
In view of the above conclusions it is strictly unnecessary for me to consider whether it was appropriate to apply a test of “essential character” when deciding whether the devices were adaptors. However, even if this test were applied, the decision in that case, in my opinion, would be the same. Counsel for the appellant submitted that the concept of essential character is relevant primarily in the area of customs legislation - see Rule 3.(b) of the “Rules for the Interpretation of Schedule 3” to the Customs Tariff Act 1995 (Cth). Counsel acknowledged that the test was applied in relation to sales tax by Davies J in Thomson Australian Holdings Pty Ltd v Commissioner of Taxation (1988) 20 FCR 85 at 86. However Mr Bloom suggested that that case was distinguishable because, it having been conceded that the relevant publications were books or periodicals, the question for determination was whether those books or periodicals were excluded as being “catalogues or price lists”. It was thus necessary to determine what kind of books or periodicals they were. On appeal to the Full Court, the appropriateness of essential character to the determination of that question was not disputed: Commissioner of Taxation v Thomson Australian Holdings Pty Ltd (1989) 25 FCR 481 at 482. Counsel acknowledged that Hill J had said in Diethelm Manufacturing Pty Ltd v Commissioner of Taxation (1993) 44 FCR 450 at 470:
“ ... there may be cases where the search for the essential character of an item may be useful in determining whether particular goods constitute advertising matter or a catalogue ... In other cases the phrase “essential character” may be thought itself to suffer some lack of precision.”
I agree, respectfully, with Hill J that there might be cases where an identification of the essential character of an item will be useful in determining whether particular goods fall within a given description. I think that this is such a case. I accept that “essential character” need not mean dominant character - see Times Consultants Pty Ltd v Collector of Customs(Qld) (1987) 16 FCR 449 in the context of the Customs Tariff Act, and that the use to which an item is put may not always determine its essential character. However, in the context of sales tax legislation, Davies J in Thomson at first instance [(1988) 20 FCR 85 at p 87] thought that evidence of the manner in which the publication the subject of that matter was used by persons in the trade might help to clarify the nature of the publication itself. In the present matter I consider that what these devices do is most helpful in assessing their essential character. The essential character of the devices is to make 240 volt AC power suitable for appliances which require 9 volt DC power. In my opinion the essential character of the devices is thus to adapt that power for those particular appliances. In practical terms they are adaptors. The respondent submitted that the legislature by adopting the terms “convertors” and “transformers” in sub-item 43(2)(i) and “adaptors” on the other in sub-item 43(3)(a) regarded them as different items. It was common ground that a convertor is a device which changes alternating current to direct current and that a transformer is a device which transforms currents from one voltage to another. The devices in this matter can thus be seen to contain both convertors and transformers (and filters). I think that there are two answers to this submission. First, items 43(1) and (2) relate to goods of a kind ordinarily used as part of fixed electrical installations. Item 43(3) is concerned with goods of a kind ordinarily used in connection with fixed electrical installations. Secondly, it is one thing to exclude on an individual basis [as sub-item 43(2)(i) does] condensors, convertors, starters and transformers. It is another thing to refuse exemption to a device which by combining a convertor, a transformer and a filter squarely falls within the definition of “adaptors”. Counsel for the respondent suggested that item 43(3) was concerned solely with items which had only a physical function. That is certainly true of sub-items 43(3)(a) and (b). However it can be seen that that is not the case in relation to sub-item 43(3)(c) (“electrical safety devices for the protection of persons”). That sub-item would, in my opinion, clearly extend to such electronically operated devices as heat or smoke detectors.
It might be thought odd that Parliament should exclude convertors and transformers from sales tax exemption when they form part of a fixed electrical installation, but extend exemption from sales tax when they are contained in devices which satisfy the description of “adaptors” when ordinarily used in connection with fixed electrical installations. What policy might justify such a distinction? The answer to that question is, in my view, reflected in the following passage from the reasons for judgment of Lindgren J in Telstra at pp 580-581:
“It is not obvious what, if any, unifying concept underlay the list of exclusions. A broad notion of things not “reasonably necessary for the installation of an electrical system in a building”, or of things not “reasonably necessary before it can be said that electricity is available to be consumed throughout a building”, may have been influential. But the more likely explanation is to be found in particular responses to exigencies of political pressure.”
I agree that to search for logical consistency in Schedule 1 to the Act is likely to prove fruitless and unhelpful.
At the hearing of the appeal the following further issues were raised:
.whether there was any evidence before his Honour about the trade meaning of the word “adaptors” either in 1953 when the predecessor to item 43(3) [Item 90C(2)] was inserted into the predecessor to the Act or in 1992 when the Act was enacted;
.whether the history of the sales tax legislation manifests an intention that the Act is to restate the law in simplified terms rather than to change it; and
.whether, on the evidence, it was open to the learned primary judge to conclude whether the devices fell within any trade meaning.
In view of my conclusion that the expression “adaptors” in sub-item 43(3)(a) is used in its ordinary English sense, it is not necessary to consider those issues.
CONCLUSION
For the above reasons, I would allow the appeal, set aside the orders made on 18 April 1997 and make the declarations sought by the appellant in the writ of summons. The respondent should pay the costs of the proceedings at first instance and of the appeal.
I certify that this and the preceding twelve (12) pages are a true copy of the Reasons for Judgment of Justice Carr.
A/g Associate:
Dated: 14 November 1997
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NG 359 of 1997
ON APPEAL FROM A SINGLE JUDGE
OF THE FEDERAL COURT OF AUSTRALIA
BETWEEN:
DICK SMITH ELECTRONICS PTY LIMITED
APPELLANTAND:
COMMISSIONER OF TAXATION
RESPONDENT
JUDGES:
FOSTER, CARR & TAMBERLIN JJ
DATE:
14 NOVEMBER 1997
PLACE:
SYDNEY
REASONS FOR JUDGMENT
TAMBERLIN J:
I agree with the reasons for judgment and orders proposed by Carr J. I wish to make several comments.
The first is that in construing statutory language there is a presumption that it should be given “the most natural and ordinary meaning which is appropriate in the circumstances”: see Maunsell v Olins [1975] AC 373 at 391; Collector of Customs v Agfa-GevaertLtd (1996) 186 CLR 389 at 398.
The second is that the appropriate approach to the question as to the meaning of “adaptors” in the present case is that formulated and applied by Gibbs CJ in Downland Publications Ltd v Deputy Commissioner of Taxation (1983) 57 ALJR 286. His Honour, with whom the other four members of the Court agreed, said at 288:
“Is it then a newspaper within Item 54? In answering this question it is right to look at its form, its contents and its use, as Hood J pointed out in In re Bradshaw’s Guide; Ex parte Stillwell (1903) 29 VLR 415 at 418. In Rotary Offset Press Pty Ltd v Deputy of Commissioner of Taxation of the Commonwealth (1972) 46 ALJR 609 Stephen J said, ‘It seems to me that the test properly is one of popular usage and .... that the matter is entirely a question of fact to be decided upon an inspection of the document guided by common knowledge’.”
His Honour then proceeded to apply the popular usage test and concluded that on such a test the publication would not be called a “newspaper”. In so doing he emphasised the form and contents of the document and decided that it was properly characterised as a “betting guide”.
The third matter is that, in the present case, the initial question whether the section is intended to refer to the meaning of the expression according to popular usage must be answered in the affirmative. Guidance in answering this question can be derived from the way in which the other goods in Item 43(3) are described. They are described in common language. In addition to “adaptors”, Item 43(3) refers to “plugs” and “electrical safety devices for the protection of persons”. The expression “plugs” is readily comprehensible to a lay person, as is the plain English description of “safety devices for the protection of persons” (“protection devices”). There may be an overlap in meaning between “plugs” and “adaptors” or “protection devices” in some circumstances. For example, adaptors and protection devices may or may not include plugs or be connected to plugs. There is no indication in the section itself of any technical or special trade meaning of any of the items. This is an indication that the provision is not meant to be read otherwise than in its popular usage: cf Commissioner of Taxation v Thomson Australian Holdings Pty Ltd (1989) 25 FCR 481 where the Court held that the word “catalogue” when read in context was not used in its popular sense. In the present case the context does not indicate a technical or trade meaning.
When the popular usage test is applied, in the present circumstances, it is common ground that the term “adaptors” includes the articles in question.
The fourth matter is that the difference drawn in Item 43 between “goods used as part of ...” and “goods used in connection with ....”, is a significant distinction for present purposes. The specific reference to the expressions “converters” and “transformers’’ in sub-item (2) does not require the conclusion that such goods cannot come within sub-item (3) which is concerned with the broader category of goods “used in connection with”. These different prefatory phases in each of the paragraphs may provide a rationale for excluding “converters” and “transformers” from exemption under sub-item (1), but conferring exemption where they are included in sub-item (3) because they come within the expression “adaptors” and are used in connection with fixed electrical installations. The popular usage of “adaptors” to include adaptors which convert and transform current has the consequence of indicating a sub-class of “adaptors”, but this does not necessarily take the types of adaptor in the present case outside the ambit of the term “adaptor”.
The final matter concerns an argument advanced to the effect that there was no evidence either at 1953, when the Act was amended, or in 1992, when further extensive amendments were made, that the goods fell within the trade or technical description of “adaptors”. I do not accept the argument in relation to 1992 because the evidence was sufficiently general in its chronological framework to reach back to this period although that specific date was not mentioned. It is common ground, that the goods in question could not be said to have been within the expression “adaptors” as that expression was understood in the electrical trade in 1953. However, this does not matter for two reasons. The first is because the relevant date is 1992 when the relevant provisions were substantially re-enacted. The date at which the legislation “speaks” is on and from the commencement of the 1992 amendments. The second, of course, is that the expression is used in the provision in its popular and not its trade meaning.
In summary, it seems to me, that an error of law resides in the application of the “essential character” test, to override the conclusion which would otherwise be reached as a result of what might be described as the “popular usage” approach. Although analysis of essential character or function might in some cases, provide guidance, it is not controlling in this case where the Court is satisfied that the goods come within the expression “adaptor” both in popular usage and in the trade sense. There is simply no need to resort to the “essential character” approach in the present circumstances. In any event, even on the “essential character” approach, in my view, the goods are within the description of “adaptors” because it is clear that their function is to “adapt” current by converting and transforming it when used in connection with fixed electrical installations.
I certify that this and the preceding three (3) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Tamberlin
Associate:
Dated: 14 November 1997
Counsel for the Appellant: Mr D M Bloom QC Ms P A Sharp
Solicitor for the Appellant: Firmstone & Feil Counsel for the Respondent: Mr R Edmonds SC Mr S McMillan Solicitor for the Respondent: Australian Government Solicitor Date of Hearing: 22 September 1997 Date of Judgment: 14 November 1997
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