Mercedes-Benz Australia/Pacific Pty Limited v Commissioner of State Revenue
[2016] VSCA 194
•11 August 2016
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S APCI 2015 0096
| MERCEDES-BENZ AUSTRALIA/PACIFIC PTY LIMITED | Applicant |
| v | |
| COMMISSIONER OF STATE REVENUE | Respondent |
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| JUDGES: | TATE, BEACH and FERGUSON JJA |
| WHERE HELD: | MELBOURNE |
| DATE OF HEARING: | 20 June 2016 |
| DATE OF JUDGMENT: | 11 August 2016 |
| MEDIUM NEUTRAL CITATION: | [2016] VSCA 194 |
| JUDGMENT APPEALED FROM: | [2015] VCAT 1288 (Judge Jenkins) |
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TAXES AND DUTIES – Imposition of duty on registration of vehicles – Applicant unsuccessfully claimed vehicles exempt because sole or primary purpose of registration was for sale of vehicles and/or use as demonstrator vehicles – Commissioner’s determination confirmed by Victorian Civil and Administrative Tribunal – Appeal on question of law – Vehicles part of fleet of courtesy vehicles provided to customers while their own vehicle was serviced – Courtesy vehicles were part of applicant’s sales strategy – Vehicles ultimately sold – Applicant’s primary purpose in registering vehicles was for provision of alternative transport for service customers not for their sale or use as demonstrator vehicles – Purpose to be determined by reference to objective facts and subjective intention – Leave to appeal granted – Appeal dismissed – Duties Act 2000 s 231(2)
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| APPEARANCES: | Counsel | Solicitors |
| For the Applicant | Mr M T Flynn with Ms L E Davis | Johnson Winter & Slattery |
For the Respondent | Mr C J Horan QC with Mr C P Young | Solicitor for the Commissioner of State Revenue |
TATE JA
BEACH JA
FERGUSON JA:
The Commissioner of State Revenue disallowed an objection by Mercedes-Benz Australia/Pacific Pty Ltd to the imposition of duty under the Duties Act 2000 (‘the Act’) on two cars. The cars were provided by Mercedes-Benz to customers whose own vehicles were being serviced. The cars were later sold. This was part of a program that Mercedes-Benz had in place to up-sell clients into new cars. If the vehicles were registered solely or primarily for the purpose of their sale and/or their use as demonstrator vehicles, then an exemption from duty would have applied.[1] The Commissioner determined that they were not primarily used for either of those purposes.
[1]Duties Act 2000 s 231(2)(a).
The Victorian Civil and Administrative Tribunal (constituted by a Vice President) confirmed the Commissioner’s determination. Mercedes-Benz seeks leave to appeal under s 148(1)(a) of the Victorian Civil and Administrative Tribunal Act 1998.[2] An appeal may only be brought on a question of law.[3] Leave may be granted if the proposed appeal has a real prospect of success[4] in the sense that it is not fanciful.[5]
[2]A Vice President having constituted the Tribunal.
[3]Victorian Civil and Administrative Tribunal Act 1998 s 148(1).
[4]Supreme Court Act 1958 s 14C; Metricon Homes Pty Ltd v Softley [2016] VSCA 60 [68].
[5]Kennedy v Shire of Campaspe [2015] VSCA 47 [13].
For the reasons which follow, we would grant leave to appeal. We would dismiss the appeal. No error of law has been identified by Mercedes-Benz. The Vice President did not fail to take into account any relevant matter. The Vice President did not misconstrue the legislative provisions. The Vice President correctly identified that Mercedes-Benz primary purpose in registering the two vehicles was for use as alternative transport for customers who were having their own cars serviced. In making that determination, the Vice President took into account both subjective and objective facts. Her Honour was right to do so. She made no error in taking into account matters relating to Mercedes-Benz strategy for selling vehicles to service customers. That strategy was part of the relevant context in which Mercedes-Benz primary purpose in registering the vehicles in question was to be assessed.
Facts
As well as being an importer and distributor of vehicles, Mercedes-Benz operates two retail dealerships, one in South Melbourne and the other in Toorak. Mercedes-Benz has what is known as a fleet of service demonstrator vehicles. They are courtesy cars provided to customers who are having their own vehicle serviced. There are about 34 service demonstrator vehicles in the South Melbourne dealership fleet. Service demonstrator vehicles are also used as part of a Mercedes-Benz strategy to up-sell clients into new cars. Customers can ask for a vehicle to use while their own vehicle is being serviced. The request is usually made when the customer’s vehicle is booked in for servicing. Mercedes-Benz sales staff receive a list each day that tells them which of their clients is having their vehicle serviced the next day. The salesperson and the service department advisor then consider what vehicle the client should be given from the service demonstrator fleet (taking into account the client’s circumstances and vehicle history). As the aim is to sell the client a new vehicle, typically they will be given a newer or more expensive model than the one the client currently owns.
The process followed by Mercedes-Benz staff is that when the client brings their vehicle in for service, the salesperson meets them to show them the service demonstrator vehicle and all of its features and offers to arrange for a valuation of the customer’s current vehicle. The valuation helps with calculating an appropriate trade-in price. When the service demonstrator vehicle is returned, the salesperson meets the client with the aim of selling them a new vehicle or the service demonstrator vehicle.
Mercedes-Benz has a target of selling service demonstrator vehicles within 3 months with mileage of less than 6,000 km. If a vehicle is not sold within four months, it is removed from the program.
On 4 October 2013, Mercedes-Benz registered the two cars upon which duty was imposed. The two cars were allocated to the South Melbourne dealership fleet of service demonstrator vehicles. One of them was used by a customer when his car was being serviced. He told a Mercedes-Benz salesperson that he had a client who may be interested in purchasing the car. The car was subsequently sold to that person on 24 December 2013. The car had travelled 500 kilometres at the time it was sold.
The second car was not sold while it was part of the service demonstrator fleet. Rather, it was sold on 22 October 2014 after it had been removed from the fleet and placed on the showroom floor.
Exemption under the Duties Act for payment of motor vehicle duty
Subject to some exemptions, duty is payable by a person who applies for registration of a motor vehicle at the time that the application for registration is lodged.[6] The issue in this case is whether the two vehicles are exempt from duty under s 231(2) of the Act which provides:
[6]Duties Act ss 216(1), 217(1).
(2)No duty is chargeable under this Chapter on an application by a licensed motor car trader who carries on a business of dealing, for the purpose of sale by retail, in motor vehicles for registration or transfer of registration of a motor vehicle—
(a)in the course of, and for the purpose of carrying on that business and solely or primarily for the purpose of either or both of the following—
(i)the sale of the motor vehicle;
(ii)the use of the motor vehicle as a demonstrator vehicle.
The only dispute between the parties is whether the vehicles were registered solely or primarily for the purpose of their sale or use as demonstrator vehicles. ‘Demonstrator vehicle’ is defined in the Act to mean a motor vehicle that is used exclusively for the purpose of sale of another vehicle of the same class.[7]
Vice President’s reasons[8]
[7]Ibid s 3(1).
[8]Mercedes-Benz Australia/Pacific Pty Ltd v Commissioner of State Revenue [2015] VCAT 1288 (‘Reasons’).
The Vice President set out in her Reasons the procedural history of the matter and the relevant statutory provisions.[9] The Vice President then summarised the case for Mercedes-Benz, including the evidence upon which it relied.[10] Included in this section of her Honour’s reasons was a description of how each of the subject vehicles had been used and sold and the more general evidence about the service demonstrator vehicle program, including summaries of the evidence given by Mercedes-Benz senior tax manager and its new car sales manager. The Vice President then summarised the Commissioner’s case.[11]
[9]Reasons [1]–[5], [7]–[26].
[10]Ibid [29]–[47].
[11]Ibid [48]–[53].
The Vice President observed that the submission by Mercedes-Benz that it would not invest in a service demonstrator fleet to be turned over every four months, if its sole or primary purpose was not to offer such cars for sale was a convenient circular rationalisation for its strategy.[12] However, the Vice President stated that it was not an appropriate starting point to analyse the application of the relevant statutory test. Rather, the Vice President stated that it was necessary to take into account both subjective intention and objective facts in order to assess ‘purpose’ under s 231(2)(a) with a greater focus to be placed on the objective facts.[13]
[12]Ibid [57].
[13]Ibid.
The Vice President reasoned that to identify purpose it is necessary to consider what is achieved by use of the car. She analysed this by reference to both Mercedes-Benz and the customer as follows:
(a)Objectively the purpose of providing the SDVs [service delivery vehicles] is to provide alternative transport for a customer whilst their own vehicle is being serviced. Indeed, it is a condition precedent to access a SDV that a customer’s vehicle is booked in for service;
(b)Objectively, the on-line booking system offers a loan car as an alternative transport option. If the booking is made on-line, then one of the options which may be selected is ‘Service Loan Car Preferred? (If available)’. It does not say ‘if eligible’ or ‘if deemed a suitable option’ or the like; and does not describe the vehicle as a ‘service demonstrator’;
(c)Objectively, there is no indication either when seeking an appointment booking on-line, by telephone or in person, that the provision of a SDV is conditional upon the customer expressing interest in purchasing another vehicle and that the customer must also satisfy certain key criteria;
(d)Objectively, the provision of a SDV can only be made available to a proportion of customers whose own car is in service, based upon the average number of customers who usually seek an alternative transport option. Accordingly, for those customers who do not indicate a preference for a service loan car or for whom a SDV is not convenient, even if they might be interested in purchasing a second car, they will never be considered for this option; and
(e)Objectively, from the customer’s perspective, the availability of a SDV, for the purpose of appraising a new vehicle for purchase, does not present as an option unless and until the customer’s own vehicle is booked in for service. If the customer were otherwise interested in a new vehicle then they would have the option to attend the showroom and presumably test drive a demonstrator model. There was no suggestion, in evidence, that such a customer might be offered the additional option of test driving a SDV during the next service of their existing motor vehicle.[14]
[14]Ibid [66].
On this basis, the Vice President concluded that the preponderance of evidence clearly confirmed that the primary (if not sole) purpose of registering the sales demonstrator vehicle is to provide alternative transport to service customers.[15]
[15]Ibid [67].
The Vice President drew a distinction between primary purpose and ulterior motive and held that s 231(2)(a) is concerned with the former.[16] She found that the primary purpose here was to provide alternative transport while a customer’s car was being serviced.[17]
[16]Ibid [68]–[69].
[17]Ibid [71].
The Vice President then considered the meaning of ‘demonstrator vehicle’ in s 3(1). It will be recalled that the definition imports the concept of ‘exclusive’ use for the purpose of sale. By reference to authority,[18] the Vice President held that as the use of the sales demonstrator vehicles as alternative transport could not be described as minor or incidental use, they were not used exclusively for the purpose of sale.[19]
[18]Ryde Municipal Council v Macquarie University (1978) 139 CLR 633, 644, 649-650; Randwick Corporation v Rutledge (1959) 102 CLR 54, 94.
[19]Reasons [78]–[88].
The Vice President then stated her overall conclusion as follows:
In my view, the sole or primary purpose of the Applicant in registering the subject vehicles is not for the purpose of sale or use as a demonstrator vehicle, within the terms of the relevant provisions of the Duties Act 2000. In summary, I have reached this conclusion having particular regard to the following.
First, a SDV is utilised on a daily basis on loan to a service customer as a replacement vehicle while their own motor vehicle is being serviced. This is consistent with the Dealer Guidelines which mandates that alternative means of transport must be supplied. In this context, the Applicant also takes the opportunity to market new vehicles to service customers, which strategy may be employed at the time when the customer requests a SDV, as alternative transport, or at any time during the service period, and indeed at any time thereafter, as communication with the customer is maintained to maximise selling opportunities.
Secondly, a clear distinction may be drawn between the use of the demonstrator models made available to customers for a test drive and the use made by a service customer of a SDV:
(a)In the case of a demonstrator model, the customer has chosen to attend the Applicant’s dealership with the intention of examining and possibly considering a new car, knowing that the option of a test drive will likely be offered, subject to availability. There is no illusion as to the basis upon which the customer is attending the Applicant’s dealership or the intention of the sales representative to secure a sale;
(b)By contrast, in the case of a SDV, the only intention and purpose of a customer in making an appointment with the Applicant’s service department, is to have their current vehicle serviced. As an ancillary convenience, a SDV may be available for same day business use.
Thirdly, the definition of ‘demonstrator vehicle’ has two limbs: ‘used exclusively for the purpose’, and ‘sale of another vehicle of the same class’. At most, the SDV might be described as fulfilling an ancillary purpose of the Applicant, but its prime purpose is clearly to provide the vehicle for alternative transport while a customer’s own vehicle is being serviced.
Fourthly, sole or primary purpose must mean the immediate purpose. Although the SDV is described as being available for sale, in fact there were two circumstances, confirmed by Mr Vaseehar, where this may not occur in practice: First, turnover of any individual SDV may need to be delayed in order to ensure a replacement in a timely manner, where there may be a 6-12 month lead time; and Secondly, the Applicant may not wish to sell a SDV which is a newly released model, within a short time frame where to do so might create a secondary market which competes with their policy to sell new model vehicles without discount.
Fifthly, although the evidence of the purpose of the dealer subsidy was somewhat unclear, as between the tendered material and oral evidence, it is consistent with providing compensation to the dealer for the diminution in value of the new car during the period for which a loan vehicle is provided.
Sixthly, the evidence of conversions to sale, as a direct consequence of the SDV program, was vague at best. In particular: .
(a) No statistical data was provided;
(b)No evidence was given as to the timing of any such sales following the service of the customer’s vehicle;
(c)No evidence was given as to whether sales to service customers, who did not have the facility of a SDV, were equally as likely to purchase a new car within a comparable period; and
(d) No evidence was given as to any relevant customer surveys.
Finally, the treatment of the SDVs as trading stock in the Applicant’s books is not determinative of the purpose for which such cars are used.[20]
[20]Ibid [89]–[96].
The Vice President concluded that the subject vehicles did not qualify for an exemption from duty pursuant to either limb under s 231(2)(a). She dismissed the objections that were the subject of the review and confirmed the Commissioner’s assessments.[21]
[21]Ibid [97]–[99].
Proposed grounds of appeal
There are six proposed grounds of appeal. They are:
(1)The Tribunal erred in law by stating that the evidence of conversions to sale as a direct consequence of the service demonstrator vehicles program was vague at best and that, in particular, Mercedes-Benz adduced no evidence as to the timing of any sale following the service of a customer’s vehicle.
(2)The Tribunal erred in law by failing to take into account relevant evidence.
(3)The Tribunal misconstrued s 231(2) of the Act by treating the sole or primary purpose of its customers as relevant to determining the purpose for which Mercedes-Benz registered each motor vehicle.
(4)The Tribunal misconstrued s 231(2) of the Act by interpreting ‘purpose’ to mean ‘immediate purpose.’
(5)The Tribunal erred in finding that Mercedes-Benz’ purpose of selling cars was a motive for registering the vehicles, but not a purpose within the meaning of s 231(2) of the Act.
(6)The Tribunal erred in law in finding that Mercedes-Benz’ service demonstrator vehicles generally failed to satisfy the exemption, because the Vice President addressed the wrong question. The question the Vice President should have answered was whether the two vehicles the subject of the applications satisfied the exemption.
(7)The Tribunal misconstrued the definition of ‘demonstrator’ by treating any purpose of using a vehicle other than a minor purpose, as falling outside an incidental purpose.
Did the Vice President err in describing the evidence about vehicle sales as being vague at best and stating that there was no evidence as to the timing of any sale? (Ground 1)
Mercedes-Benz submitted that there were only two vehicles in issue. In respect of both vehicles, there was evidence about when they were sold and in what circumstances. In respect of the first vehicle, Mercedes-Benz contended that it was sold as a result of its use by a service customer.[22] Mercedes-Benz submitted that the Vice President had ignored this evidence.
[22]See [7] above.
Mercedes-Benz also referred to a document said to be an extract of sales by one member of its sales team at the South Melbourne dealership resulting from referrals from the service department for the period from August 2012 to August 2013. That document listed in tabular form 36 de-identified customers and against each a car model number, commission and information about the trade-in vehicle for the customer.
It is an error of law for the Tribunal to ignore relevant material if it affects the exercise or purported exercise of its powers.[23] Here, it is difficult to see how Mercedes-Benz complaints, particularly as they are framed, give rise to such a question of law. Mercedes-Benz criticises that part of the Reasons dealing with the evidence at [17] above. That passage referred to Mercedes-Benz evidence about its service demonstrator vehicle program in general. Mercedes-Benz conducted its case on the basis that that evidence was relevant.[24] It was part of the context in which the Vice President addressed the question of what was Mercedes-Benz primary purpose in registering the two vehicles in question. That is made clear by the introductory paragraph to that part of her Reasons. The Vice President said:
In my view, the sole or primary purpose of Mercedes-Benz in registering the subject vehicles is not for the purpose of sale or use as a demonstrator vehicle, within the terms of the relevant provisions of the Duties Act 2000. In summary, I have reached this conclusion having particular regard to the following.[25]
[23]Craig v South Australia (1995) 184 CLR 163, 179 (Brennan, Deane, Toohey, Gaudron and McHugh JJ); Minister for Immigration and Multicultural Affairs v Yusuf (2001) 206 CLR 323, 351–2 [83] (McHugh, Gummow and Hayne JJ).
[24]See [61]–[63] below.
[25]Reasons [89].
The Vice President then set out her reasons including her sixth reason describing the evidence of conversions to sale as a direct consequence of the service demonstrator vehicle program as vague.[26] The Vice President did not ignore this evidence (which included the sales extract for August 2012 to August 2013). Rather, the Vice President attached to the evidence the weight that she believed appropriate. This does not constitute an error of law.[27]
[26]Ibid [95].
[27]Macedon Ranges Shire Council v Romsey Hotel Pty Ltd (2008) 19 VR 422, 436 [49].
In any event, for our part, we can see nothing wrong with the Vice President’s description of the evidence as vague. Of itself, it did not establish that customers had bought vehicles as a result of the service demonstrator vehicle program. To give but one example, it did not include information about the time between use of the service demonstrator vehicle and the purchase of a new vehicle.
Leaving to one side that general evidence about the program and turning to the two vehicles in question, the Vice President did not ignore that evidence. Indeed, she specifically set out the uncontroversial evidence about the two vehicles.[28] When regard is had to the whole of the Reasons, there is no sustainable basis for criticism. The Reasons do not support Mercedes-Benz proposition that the Vice President ignored the facts about the two vehicles and decided the case on some alternative basis;[29] that is, on the basis of generalities applicable to its service demonstrator vehicle program. Rather, she determined the issue of purpose in relation to the two vehicles in the broader context of that program.
[28]Reasons [12] and [32] in respect of vehicle registration no. 1AA4JP N and Reasons [13], [32] and [37] in respect of vehicle registration no. 1AA4JO G.
[29]Mercedes-Benz relied on Pattas v Stonnington City Council [2010] VSC 487. In that case, when the Tribunal determined the site value of a property it failed to consider the effect of the heritage overlay that affected the property. The heritage overlay was an important matter to be taken into account. The Tribunal approached the question of site value essentially as a comparative sales exercise. Other than reciting a limited submission of the Council about the heritage overlay, the Tribunal did not mention the heritage overlay in its reasons. Importantly, the Tribunal did not mention the heritage overlay as a factor that might cause the estimated site value to be revised downwards. The Court determined that there was an error of law and remitted the matter to the Tribunal for rehearing.
Ground 1 must fail.
Did the Vice President fail to take into account relevant evidence? (Ground 2)
Mercedes-Benz submitted that the Vice President failed to take into account the following evidence:
(a) a bulletin dated 23 January 2009;
(b) part of the dealer standard dealing with service demonstrator vehicles;
(c) the history of the two cars which were the subject of the objection;
(d) evidence about its target of selling service demonstrator vehicles within three months of registration;
(e) the size and nature of its investment in the service demonstrator fleet; and
(f) its sales strategy supporting the use of the service demonstrator vehicles.
Mercedes-Benz elaborated its argument in respect of the first three matters.
The bulletin
Mercedes-Benz submitted that the Vice President ignored a bulletin which is dated 23 January 2009 and is headed ‘Service Demonstrator Program 2009.’ Under a sub-heading ‘Objective,’ the bulletin states:
Provide dealers with subsidized vehicles for demonstration to service customers and assist dealership staff to up-sell service customers into new cars.
There then follow what are described as ‘Terms and Conditions.’ They include:
·SDVs must be available for sale at all times and must be promoted as being available for sale.
·Maximum Service Demonstrator Program period is four months (three turns per year) with no kilometre restrictions.
·If the 4 months as an SDV expires then the vehicle will be removed from the program, de-commissioned and automatically Sales Card Captured by MBC to the dealership. This will count toward the dealerships new car sales target. The vehicle must then be transferred and sold via the Pre-Owned Sales Department where the retail sale to an actual customer will count toward the POV Sales Target. Dealers have the option to replace their de-commissioned SDVs to fulfil their allocated SDV quota.
·Current promotional material (ie brochure) must be displayed for customer viewing in order to help generate an up-sell or upgrade.
There is another sub-heading ‘Recommended Best Practice Dealership Policies.’ Included under this heading are the following:
·All SDVs must be available for sale at all times and must be promoted as being available for sale during the normal trading hours at the business premises.
·Customers should not be charged for use of SDV vehicles.
·All service staff that have contact with customers to be trained in accordance MBC designed up-selling methodology at least six-monthly.
Dealer standards
The second piece of evidence which Mercedes-Benz submitted the Vice President had failed to take into account is standard number 12.4 of its dealer standards document. That read:
No. Title Standard Measurement Criteria 12.4 Alternative Customer Transport & Service Demonstrator Vehicles The Dealership must supply alternative transport for customers 1. Cars Service Demonstrator Vehicles (SDV) – As per Mercedes-Benz program, the initiative will provide Dealers with vehicles for demonstration to service customers and assist sales staff to up-sell customers into new cars. The Dealership must have an adequate supply of Mercedes-Benz Service Demonstrator vehicles:
- Service Demonstrator vehicle stock equals 30% of average daily Service Repair Order throughput, excluding internal.
Refer to latest (Mercedes-Benz) Mercedes-Benz Cars communication for Terms and Conditions.
Cars - Where possible, the SDV range Metro should consist of a mix of vehicle models, to match up existing customer requirements, and where possible, on sell the vehicle to the customer.
2. Cars Customer Mobility – additional
methods of mobility must be offered on behalf of the Dealer to the customer, including but not limited to courtesy transport, pick-up & drop-off service, taxi and public transport options.3. Any vehicle decals on service demonstrator vehicles must comply with the current guidelines. For approval please send an email to [email address]
In particular, Mercedes-Benz pointed to the section of the dealer standard that referred to the first sentence in the ‘Measurement Criteria’ column where reference is made to up-selling customers into new cars. Mercedes-Benz submitted that this part of the standard provided direct evidence of its purpose in registering service demonstrator vehicles. It contended that the Tribunal failed to take this evidence into account yet seized upon the title of the standard as evidence that the sole or main purpose of providing service demonstrator vehicles was to provide alternative customer transport.
History of the vehicles
Mercedes-Benz submitted that the Tribunal failed to have regard to the evidence about the history of the two cars that were the subject of the objection apart from the following reference to them:
The Applicant first registered Vehicle 1AA4JP N on 4 October 2013 and allocated it to the Melbourne dealership’s SDV fleet. The vehicle was used as a SDV after that date until it was sold by Kurt Vollenhoven in December 2013. A client of Mr Vollenhoven requested to drive a Class C250 CDI Coupe while his vehicle was being serviced. He informed Mr Vollenhoven that one of his clients, Adriana Maimone, would be interested in purchasing the vehicle. Mr Vollenhoven subsequently gave Adriana Maimone a test drive of the vehicle and she purchased it from him. It had travelled 500 kilometres at the time of sale.[30]
[30]Reasons [32].
Apart from the reference to Mr Vollenhoven’s evidence in this paragraph and stating that Mercedes-Benz relied on his affidavit, Mercedes-Benz submitted that there was no reference to his evidence, particularly in that section of her Honour’s reasons where she gave her analysis and made her findings.[31]
[31]Ibid [55]–[96].
Mercedes-Benz submitted that the failure to take all of this evidence into account amounted to an error of law. Moreover, it submitted that ignoring subjective elements when ascertaining a person’s purpose was wrong.[32] It contended that this is what the Vice President had done in the passage of her reasons set out at [13] above. Mercedes-Benz contended that the Vice President had also ignored most of the objective evidence adduced by it.
[32]Mercedes-Benz relied upon Parker Pen (Australia) Pty Ltd v Export Market Development Grants Board (1983) 67 FLR 234, 242 (Lockhart J).
We are not satisfied that the Vice President ignored any of the evidence to which Mercedes-Benz referred. Whilst the Vice President made no express reference to the bulletin, it was exhibited to Mr Vollenhoven’s short witness statement. The Vice President clearly had regard to that statement as can be seen from the passage set out at [34] above and as Mercedes-Benz acknowledged, she noted that Mercedes-Benz relied upon that statement.[33] The matters canvassed in the bulletin, and upon which Mercedes-Benz sought to rely, were matters that were in substance the subject of other evidence which was taken into account by the Vice President and her findings were consistent with what was contained in the bulletin. For example, her Honour referred to using the service demonstrator vehicles as part of a strategy of up-selling clients into new cars.[34] She also made reference to service demonstrator vehicles being available for sale at all times.[35] The Vice President also mentioned what happens to a service demonstrator vehicle after four months in the program.[36] The Vice President noted that there is no charge for use of the service demonstrator vehicle.[37] It was not necessary for the Vice President to refer to each piece of evidence that contributed to her factual findings.
[33]Reasons [27(c)].
[34]Ibid [29].
[35]Ibid [33(a)].
[36]Ibid [33(e)], [42].
[37]Ibid [33(g)], [56], [70].
There is no substance in Mercedes-Benz submission that the Vice President did not take into account the dealer standard. The Vice President referred to that document and said ‘Dealer Standard 12.4 requires a dealer to maintain a fleet of SDVs to assist sales staff to up-sell clients into new cars.’[38] The fact that the Vice President also referred to other parts of the document[39] and placed weight on them does not mean that she ignored the parts which Mercedes-Benz seeks to emphasise.
[38]Ibid [29]. See also [40] in which the Vice President refers to the standard stipulating that provision of a vehicle is for up-selling.
[39]Ibid [90].
It is clear that the Vice President took into account the other matters about which Mercedes-Benz complains. The paragraph set out at [34] above summarises the evidence about one of the cars. In respect of the other car, the Vice President noted that Mercedes-Benz relied on the same evidence in relation to both vehicles, the only difference being that it took longer to sell than the other.[40] It is difficult to see what more the Vice President should have done.
[40]Ibid [37].
The Vice President noted Mercedes-Benz submission that its intention was to sell one of the vehicles within three months of its registration and that it was sold within that period.[41] She also referred to the size and nature of the service demonstrator vehicle fleet.[42] The Vice President described in detail the sales strategy associated with the service demonstrator vehicle fleet, including the process for selecting vehicles for customers.[43]
[41]Ibid [33(c), (d)].
[42]Ibid [29], [56].
[43]Ibid [29]–[31], [40]–[47].
As can be seen from what we have said above, the Vice President did not overlook or ignore relevant material such as would give rise to an error of law. Rather, Mercedes-Benz real complaint is that the Vice President did not accept that the evidence supported findings in its favour that the exemptions in s 231(2)(a)(i) or (ii) applied to the vehicles in question. It was not necessary for the Vice President to refer to all of the evidence in the section of her Reasons where she stated her conclusion about Mercedes-Benz primary purpose in registering the relevant vehicles and then set out in summary why she had reached that conclusion having regard to particular matters.[44] The Reasons must be read as a whole and as we have noted above, elsewhere the Vice President set out the facts and made findings relevant to the task that she faced.
[44]Ibid [89]–[96]. See [17] above.
Ground 2 must fail.
Did the Vice President misconstrue s 231(2) of the Act? (Grounds 3, 4 and 5)
Mercedes-Benz submitted that the Vice President erred because she accepted the Commissioner’s submission that in determining ‘purpose’ in s 231(2) of the Act it is necessary to have regard to the intention of the customer in using the vehicle. In particular, Mercedes-Benz referred to the following passage from the Vice President’s reasons:
Respondent’s Counsel submits to the effect that the word ‘purpose’ cannot be looked at unilaterally and it must be a mutual intention on the part of both parties as to the purpose for which the SDV is being used.[45]
[45]Ibid [61].
Mercedes-Benz contended that while objective facts are relevant, ultimately it is its purpose at the time of registration that is relevant for s 231(2). According to Mercedes-Benz, given the evidence adduced by it (including the objective evidence), the Tribunal should have concluded that its purpose satisfied the requirements of s 231(2).
Under the heading ‘Immediate v Ultimate Purpose’ the Vice President stated:
Respondent’s Counsel submits that having regard to ss 218(1)(ab) and 238, s 231 is concerned with immediate purposes after registration, rather than long-term or ‘ultimate’ purposes. If it were assumed that the ultimate or long-term objective of a licensed dealer in respect of any car it buys is its sale, then s 231(2)(a)(ii) would be otiose. Accordingly, the existence of the sub-paragraph suggests that a more immediate focus on purpose is required by the section. Similarly, the provision of a 60-day time period in s 218(1)(ab) is also more consistent with an immediate focus on purpose being required by s 231(2)(a). Furthermore, s 238 requires any change in predominant use to be notified within 14 days. Accordingly, that section also confirms that the motor vehicle duty provisions are concerned with immediate uses and not ultimate uses.
I generally accept the analysis proffered by Respondent’s Counsel, although the more appropriate distinction to be drawn is between primary purpose and ulterior motive rather than immediate and long-term objectives.[46]
[46]Ibid [68]–[69].
Section 218(1)(ab) of the Act provides the rate of duty on passenger cars that within the previous 60 days have been registered for the first time in the name of a licensed motor car trader who has not paid duty because of the use of the car.[47] Section 238 provides:
[47]The section provides:
(ab)on an application for registration or transfer of registration of a motor vehicle—
(i)that is a passenger car; and
(ii)that was, within the previous 60 days, registered for the first time in Victoria in the name of a licensed motor car trader; and
(iii)that has not previously been registered elsewhere; and
(iv)in respect of which no duty was chargeable under this Act in relation to the registration referred to in subparagraph (ii) because of the use of the motor vehicle; and
(v)in respect of which no duty was paid (or, if paid, the duty is refundable) under this Act in relation to an application for registration or transfer of registration or change of use of the motor vehicle after the registration referred to in subparagraph (ii)—
$10.40 per $200, or part, of the dutiable value of the motor vehicle if the dutiable value exceeds the luxury car tax threshold or $6.40 per $200, or part, of the dutiable value of the motor vehicle if the dutiable value does not exceed the luxury car tax threshold;
(1)This section imposes duty if—
(a)there is a change in the predominant use of a motor vehicle the last application for registration or transfer of registration of which was not chargeable with duty under this Act because of the use of the vehicle; and
(b)an application for registration or transfer of registration of the vehicle in Victoria is not lodged in connection with the change of use; and
(c)duty would have been chargeable on an application referred to in paragraph (b) had that application been lodged.
(2)Within 14 days after there is a change in the predominant use of a motor vehicle of the kind referred to in subsection (1), the registered operator of the vehicle must—
(a)lodge with the Commissioner a statement of the change in the use; and
(b)pay duty at the rate of $8 per $200, or part, of the dutiable value of the vehicle at the time the change occurred.
Mercedes-Benz submitted that the Tribunal was wrong to conclude that in s 231(2) of the Act ‘purpose’ means ‘immediate purpose.’ It contended that distinguishing between its ultimate and immediate purpose was unnecessary and was apt to confuse the application of the exemption. It submitted that such a construction requires the reading in of the word ‘immediate’ yet there was no warrant for that. It pointed to the text of the section and submitted that contextual matters did not support the distinction between immediate and ultimate purpose. It distinguished itself from other car dealers because of its strategy of using its service demonstrator vehicles for up-selling. It says that other dealers do not do this; instead they use base model vehicles as loan cars to service department customers with a charge being made for use of the loan car. In any event, Mercedes-Benz submitted that its immediate purpose was to sell the cars or to use them to sell other vehicles.
Secondly, Mercedes-Benz submitted that the 60 day period in s 218(1)(ab) of the Act is irrelevant. It submitted that s 218(1)(ab) provides for the higher rate of duty to apply to vehicles first registered by a dealer within 60 days of registration or the transfer of registration to the taxpayer and has nothing to do with ascertaining purpose in s 231(2).
Thirdly Mercedes-Benz submitted that s 238 of the Act is irrelevant. In its submission, s 238(2) requires the change of use from an exempt use to a dutiable use to be notified within 14 days of the change. It argued that that period is irrelevant to ascertaining whether there has been a change of use and would apply regardless of whether ‘purpose’ in s 231(2) means immediate or ultimate purpose.
Mercedes-Benz also submitted that it was not open to the Vice President to conclude that its purpose of selling vehicles was irrelevant on the basis of being a motive rather than a purpose. It submitted that the end that it sought to achieve was to sell the vehicle and to use it to assist in the sale of other vehicles. It argued that although there may have been some other underlying motive for it to see that end (for example, to increase its profits) the purpose of selling vehicles was a relevant purpose within the meaning of s 231(2).
Mercedes-Benz argued that the Tribunal should have weighed up its purpose of selling vehicles with the purpose of providing alternative transport for its service customers to determine what its primary purpose was. It contended that the Tribunal had failed to do this because the Vice President treated its purpose of selling cars as irrelevant.
There are a number of authorities that have considered ‘purpose’ in various statutory contexts.[48] Both parties relied on Parker Pen (Aust) Pty Ltd v Export Development Grants Board.[49] In that case, Lockhart J considered the meaning of the word ‘purpose’ which was used in the definition of ‘eligible expenditure’ in s 4(1) of the Export Market Development Grants Act 1974 (Cth). To fall within the definition, the expenditure had to be (in the opinion of the Export Development Grants Board) incurred by a person primarily and principally for the purpose of specified matters. Lockhart J stated:
The word ‘purpose’ is, of course, susceptible of a variety of meanings depending on its context. In the context of sub-s 4(1) the enquiry must be to ascertain whether the expenditure was incurred by the person primarily and principally for the purpose of creating or seeking opportunities or creating or increasing demand for the stipulated objects, including the sale by that person for export of eligible goods manufactured in Australia. This involves a subjective element. The purpose must be someone’s purpose. It is the purpose of the person mentioned in the sub-section. To ignore subjective elements is wrong. There is, of course, a difference between the essential elements in the notion of purpose and the means whereby purpose is ascertained. Purpose may be gleaned either from subjective or objective elements or, more usually, both. A person may say what his purpose is, but the objective facts may cast doubt upon the credibility or reliability of his statement. It is for the tribunal of fact to consider all the circumstances and conclude whether the requisite purpose has been established. Objective facts are usually more reliable than mere protestations of purpose, intent or state of mind, which, although susceptible of testing in cross-examination, are intrinsically impenetrable and inscrutable.[50]
[48]See, for example, R&R Fazzolari Pty Ltd v Parramatta City Council (2009) 237 CLR 603 where the High Court considered the meaning of ‘purpose’ in s 188(1) of the Local Government Act 1993 (NSW) which provided: ‘A council may not acquire land under this Part by compulsory process without the approval of the owner of the land if it is being acquired for the purpose of re-sale;’ News Ltd v South Sydney Football Club (2003) 215 CLR 563 where the High Court considered the definition of ‘exclusionary provision’ in s 4D of the Trade Practices Act 1974 (Cth) which entailed considering whether the provision of a contract had a specified purpose; Federal Commissioner of Taxation v Spotless Services Ltd (1996) 186 CLR 404 where the High Court considered s 177A(5) of the Income Tax Assessment Act 1936 (Cth) which provided that a reference ‘to a scheme or part of a scheme being entered into or carried out by a person for a particular purpose shall be read as including a reference to the scheme or part of a scheme being entered into or carried out by the person for 2 or more purposes of which that particular purpose is the dominant purpose;’ Mills v Commissioner of Taxation (Cth) (2012) 250 CLR 171 in which the High Court considered s 177EA(3)(e) of the Income Tax Assessment Act 1936 (Cth) which referred to a person carrying out a scheme ‘for a purpose (whether or not the dominant purpose but not including an incidental purpose).’
[49](1983) 46 ALR 612 (‘Parker Pen’).
[50]Ibid 621.
Care must be taken in considering the meaning of a word used in different legislative contexts. It is always necessary to construe the relevant legislative provision by reference to its text, context and purpose.[51] Nevertheless, the general observations by Lockhart J in Parker Pen are apposite in relation to interpretation of the word ‘purpose’ in s 231(2)(a) of the Act.
[51]Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (NT) (2009) 239 CLR 27, 46–7 [47] (Hayne, Heydon, Crennan and Kiefel JJ).
Evidence of the subjective intention of Mercedes-Benz is relevant to determining its purpose. This is because it is the purpose of the licensed motor car trader at the time of registration that must be determined. But the subjective intention of the licensed motor car trader is not the end of the enquiry. The objective evidence, including evidence about use of the vehicles in the service demonstrator vehicle program, is also relevant to test what is claimed to be the primary purpose of registration. That use is relevant is made clear by the language of the section itself. Section 231(2)(a)(ii) refers to ‘use’ of the vehicle as a demonstrator vehicle. How a vehicle is used is also important and referred to in other provisions of the Act dealing with the imposition of duty, including s 238 which is concerned with duty payable when there is a change of use.
In expressing her conclusion, the Vice President accepted that it was the purpose of Mercedes-Benz that was relevant. In this regard, she concluded that ‘the sole or primary purpose of the Applicant in registering the subject vehicles is not for the purpose of sale or use as a demonstrator vehicle’ (emphasis added).[52] The passage set out at [43] above merely recorded the Commissioner’s submission. It does not support Mercedes-Benz argument that the Vice President erred by identifying the customer’s purpose and giving it greater significance than was warranted. The Vice President was not wrong to have regard to the objective evidence about use of the vehicles by customers. Nor was she wrong to place emphasis upon it. The service demonstrator vehicle program provides the context for considering the primary purpose for the registration of the two vehicles in question. The vehicles in the program are used by customers on a daily basis on loan while they have their cars serviced. Their use may or may not lead to the sale of other vehicles. Those matters were objective facts relevant to the determination of the primary purpose of Mercedes-Benz in registering the vehicles in question.
[52]Reasons [89].
The Vice President focussed on other objective facts, including what was provided for in the dealer standard. Under the title ‘Alternative Customer Transport & Service Demonstrator Vehicles’ item 12.4 sets the standard to be met as follows:
The Dealership must supply alternative transport for customers.[53]
[53]See [32] above.
That is an objective indication of what Mercedes-Benz primary purpose is in registering the service demonstrator vehicles (including those which were the subject of the proceeding before the Tribunal). A side benefit is that those vehicles provide an opportunity for sales staff to show off new models to the service customers, hopefully enticing them to purchase a new car. This is recognised in the standard as one of the measurement criteria. It is not surprising that Mercedes-Benz would seek to maximise the benefits that might flow from using the service demonstrator vehicles for their primary purpose of providing alternative transport. But that does not mean that such additional benefits take precedence and become the primary purpose. Accepting that Mercedes-Benz invests quite heavily in its service demonstrator vehicle fleet, no doubt in making that investment it has weighed up the additional cost of providing those vehicles rather than base models against the monetary gain it forecasts it will make in sales. That does not alter its primary purpose of providing alternative transport for its service customers.
The discussion above proceeds on the basis that Mercedes-Benz had at least two[54] purposes in registering the vehicles — provision of transport for its service customers and seeking to sell new vehicles to them as a result of them having driven a service demonstrator vehicle. We do not take the Vice President to have found otherwise. The real focus was not so much on what constituted the purposes of Mercedes-Benz but rather on which of them was the primary purpose. Read as a whole, when the Vice President referred to motive, immediate and ultimate purpose in her Reasons, she was doing no more than identifying Mercedes-Benz different purposes in registering the two vehicles in question and using those terms to assist her in reaching a conclusion as to which purpose was the primary or sole purpose. She determined that the primary or sole purpose was not one which attracted exemption from the payment of duty.
[54]On one view it has three purposes: providing alternative transport to service customers; selling the demonstrator vehicles themselves; selling other Mercedes-Benz vehicles.
Grounds 3, 4 and 5 must fail.
Did the Vice President address the wrong question? (Ground 6)
Mercedes-Benz submitted that the Tribunal disregarded the facts about the two vehicles that were in question and considered only the facts that were common to all service demonstrator vehicles. Consequently, it argued that the Vice President had addressed the wrong question.
This ground of appeal has no merit. The first point to note is that it was Mercedes-Benz which led and relied heavily on evidence about its service demonstrator vehicle program. Indeed, its application for leave makes it clear that in essence it is treating the decision about the two vehicles in question as of general applicability. Put another way, in essence it wishes to use the subject vehicles as test cases. In its leave application it included as a reason for granting leave the following:
Although there are only two vehicles in issue and a small amount of duty, the decisions in relation to these two vehicles will affect [Mercedes-Benz] liability for duty for all of its service demonstrator vehicles (SDV). [Mercedes-Benz] has a large service demonstrator fleet that is regularly turned over, therefore, a significant duty liability turns on the outcome of these two matters.
Mercedes-Benz senior tax manager gave evidence in line with this:
Since my appointment as senior tax manager I have tried unsuccessfully to reach an agreement with the State Revenue Office about the treatment of service demonstrator vehicles. Therefore, for the purpose of resolving this issue, Mercedes-Benz has paid duty, and objected, in relation to two vehicles, chosen at random, which were allocated to Mercedes-Benz Melbourne’s service demonstrator fleet: a C-Class C250 CDI Coupe registration number 1AA4JP and a B-Cass B200 CDI sedan registration number 1AA4JO.
The opening sentence of the written submissions of Mercedes-Benz before the Tribunal read ‘This application concerns the liability of Mercedes-Benz … for duty on the registration of ‘service demonstrator’ vehicles that it uses in its dealership businesses.’ It then went on to deal with the two subject vehicles in particular. Much the same approach was taken by the Vice President and she should not be criticised for that.
Secondly, as noted above, the service demonstrator vehicle program provides the context in which the primary purpose of the registration of the vehicles is to be assessed.
Thirdly, what the Vice President stated in the concluding paragraphs of her Reasons (set out at [17] above) was prefaced by and followed by the conclusion she had reached that the sole or primary purpose of Mercedes-Benz in registering the subject vehicles was not an exempt purpose.[55] Towards the beginning of her Reasons, she also referred to the issue to be determined as whether the subject motor vehicles were exempt from duty.[56]
[55]Reasons [89], [97].
[56]Ibid [6].
It is clear that the Vice President had in mind that her task was to decide whether the two specific vehicles were exempt from duty. She made that assessment taking into account their use in the context of the service demonstrator vehicle program. There is no error in that.
Ground 6 must fail.
Did the Tribunal misconstrue the definition of ‘demonstrator vehicle’? (Ground 7)
As noted above, s 3(1) of the Act defines ‘demonstrator vehicle’ as a motor vehicle that is used exclusively for the purpose of sale of another vehicle of the same class. Mercedes-Benz described it as ‘awkward’ integrating that definition into s 231(2) which adopts a test of ‘sole or primary purpose.’ It submitted that while the use of word ‘exclusive’ excludes vehicles used for purposes that are collateral or independent, it does not exclude vehicles that have uses that are incidental to the stipulated use.[57] It submitted that its use of service demonstrator vehicles as alternative transport could be described as minor or incidental use but the Tribunal failed to consider this. Moreover, it submitted, in equating ‘incidental’ with ‘minor’ the Tribunal erred because a use may be incidental, even though it is not minor, if it occurs fortuitously or in subordinate conjunction with another purpose or merely follows another purpose as its natural incident.[58]
[57]Randwick Corporation v Rutledge (1959) 102 CLR 54, 93; Ryde Municipal Council v Macquarie University (1978) 139 CLR 633, 644.
[58]Mercedes-Benz relied upon Mills v Federal Commissioner of Taxation (2012) 250 CLR 181, 202 [64] (Gageler J, French CJ, Hayne, Kiefel and Bell JJ agreeing).
This ground of appeal relies upon Mercedes-Benz succeeding in its submission that the primary purpose of registering the vehicles was for the purpose of sale of another vehicle or its use as a demonstrator vehicle. If that were accepted, then the question may have arisen as to whether the use of the vehicles as alternative transport for service customers meant that each of the vehicles did not come within the term ‘demonstrator vehicle’ in s 231(2)(a)(ii) of the Act. On the hearing of the appeal, senior counsel for Mercedes-Benz accepted that, although he contended that ground 7 was a distinctive ground in its own right, it was difficult to see how, if the ground was upheld, Mercedes-Benz would succeed without also establishing that the Tribunal was incorrect in reaching the conclusion it did about purpose. It is clear that the Tribunal understood that the exclusivity required by the definition of ‘demonstrator vehicle’ did not preclude uses that are incidental to the stipulated use. Her Honour’s finding, however, that, in the circumstances, the primary purpose of Mercedes-Benz in registering the two vehicles was for use as alternative transport for customers who were having their own cars serviced, in effect precluded a finding that the vehicles were used exclusively for the purpose of sale. If the use of a vehicle as an alternative transport for customers is its primary use, that use can hardly be sensibly characterised as no more than incidental to the use of the vehicle for the purpose of sale of another vehicle of the same class.
For the reasons given above, we do not accept that the Vice President made any error in determining that the primary purpose was not for the sale of another vehicle or its use as a demonstrator vehicle. Hence, the issues raised by ground 7 do not arise.
Conclusion
Whilst we would grant leave to appeal, the appeal must be dismissed. We would answer the questions of law as stated in the amended application for leave as follows:
1Did the Tribunal ignore altogether the evidence of the conversion to sale of vehicle 1AAA4JP as a direct result of the SDV program? (Ground 1) – No.
2Did the Tribunal err in law by failing to take into account the evidence listed in any or all of grounds 2(a) to 2(e)? – No.
3Did the Tribunal misconstrue s 231(2) of the Act? (Grounds 3 and 4) – No.
4Was the Tribunal bound to find that Mercedes-Benz purpose of selling cars was a purpose of registering vehicles 1AA4JO and 1AA4JP, rather than a motive? (Ground 5) – No.
5Did the Tribunal turn its mind to the correct question? (Ground 6) – Yes.
6Did the Tribunal misconstrue the definition of ‘demonstrator’ in s 3(1) of the Act? (Ground 7) — Does not arise.
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