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reasoning of the primary judge 28 The learned primary Judge formulated the question before him as follows: "The question is whether it is sufficient that the machines in dispute are utilised by numerous persons to do household laundry or to launder clothes and other linen of households. Alternatively does the preamble require, as the Commissioner contends, that there be some relevant nexus between the location of the use of the goods and the goods themselves, namely, that the goods are of a kind ordinarily used in the immediate confines or curtilage of a household dwelling." (at [33]) 29 His Honour referred to dictionary definitions of "household" and was of the opinion that the word could mean an establishment, as distinct from the people who made up a household. He said (at [37]): "Household purposes, therefore, might be purposes pertaining to a household or to a domestic establishment." 30 His Honour thought that while not decisive, the approach taken by Davies J in O R Cormack Pty Ltd v Federal Commissioner of Taxation (1992) 23 ATR 151 indicated an acceptance of "household" in a "physical sense" rather than as referring to the persons who might make up a household. He stated (at [46]): "I consider that the notion of goods used for household purposes signifies use pertaining to a household. Whether "household" means the persons who make up the household or the physical establishment, it must be possible to demonstrate that the particular kind of goods are goods ordinarily used for the purposes of a household. It is not sufficient to show that members of many household happen to be permitted, by paying a fee, to place washing in a particular machine, even if that washing could be characterised as household washing." (my emphasis) The learned primary Judge found support in a passage from the Second Reading Speech in respect of the Bill that first introduced the concession, in which the then Treasurer, The Hon Sir Arthur Fadden, stated (Parl Debs, HR, 18 August 1954, p418): "There is a wide demand for exemption of furniture and household goods. These goods cover a very wide range, indeed, and the cost of a complete exemption would be so heavy as to render this impracticable at present. It is proposed, however, to reduce from the general rate of 12 1/3 per cent. to a special rate of 10 per cent. a wide range of furniture and household goods as specified in the Bill. It is believed that this will appreciably reduce the costs of home establishment." (my emphasis) The learned primary Judge gleaned from this passage two propositions: that the concession was to be for "household goods"; and that the concession was intended to reduce "the costs of home establishment". 31 His Honour further stated (at [49], [50]): "The expression, "used for household purposes," directs attention to the persons whose use is important. In my view, it also directs attention to the concept of a household in a physical sense. I do not consider that non-exclusive use by many householders in shared laundry facilities, or in a commercial facility such as a laundromat, is relevantly use for household purposes. The question is whether the purpose of persons who have [sic - no] exclusive proprietary or possessory right or interest in relation to the machines can be a relevant purpose. The Tribunal's findings indicate that the purpose of the persons who have proprietary or possessory rights in relation to the machines will be to generate income from customers, or perhaps to provide a service to guests of hotels, or caravan parks, or occupants of shared accommodation. The purpose of those persons who have an exclusive proprietary or possessory interest in the machines, is not a household purpose. It is not a purpose pertaining to a domestic establishment." 32 His Honour noted that there was no finding by the Tribunal that commercial machines (or industrial machines) were goods of a kind ordinarily used for the purposes of a household, by the members of the household, to the exclusion of others. He said that in practical terms, machines in the disputed categories would be of a kind ordinarily used for household purposes in the relevant sense if they were of a kind ordinarily to be found "within" domestic establishments, but that it would be curious for a domestic establishment to keep its washing machine and dryer "away from the physical premises or curtilage of the premises which constitute the household" (at [51]). 33 His Honour concluded (at [52]) as follows: "I consider that the Tribunal has misdirected itself in concluding that goods might be said to be of a kind ordinarily used for household purposes in circumstances where there is no connection physically between such goods and a household. Putting it another way, where the members of a particular household have no exclusive possessory or proprietary interest or right in relation to a kind of goods, I do not consider that it can be said that the goods are of a kind ordinarily used for household purposes." (my emphasis)

reasoning on the appeal

Issues on the appeal 34 The Taxpayer submits that the questions which arise on the appeal are whether the expression goods "of a kind ordinarily used for household purposes" are capable of applying to washing machines and dryers which (a) are used by numerous persons to do their household laundry; and (b) which may not be located within the curtilage of a dwelling; and (c) in respect of which members of a household may not have any exclusive possessory or proprietary interest or right.

The authorities 35 The expression "of a kind ordinarily used for household purposes" or a predecessor expression has been considered in several cases to which I will refer in chronological order. 36 (i) In Deputy Commissioner of Taxation (NSW) v Newbound & Co Pty Ltd (1952) 26 ALJ 386 ("Newbound"), the goods in question were "washfountains". They were designed to fulfil the function of an ordinary wash-bowl or basin, but were adapted for use by up to ten persons at the one time. The washfountains consisted of a circular bowl or basin about 4' 6'' in diameter. From the centre rose a pillar, from the top of which, when a tap was turned on, a spray of water was directed outwards and downwards into the bowl, from which it escaped through a pipe. The bowl was supported by a pedestal with which it was integral. The washfountain was intended to be installed in such a position that there was access to it at any point on its circumference. 37 Because up to ten persons could wash their hands at the same time, the washfountain was well adapted for use in a factory, for example, where it would take the place of ten individual wash-bowls or basins, and was not intended or adapted for use in an ordinary dwelling house or domestic establishment. 38 The ordinary wash-bowl or basin could be attached to a wall or stand on a pedestal, but the washfountain would not achieve its maximum usefulness unless there was access to it all round. 39 The question for decision was whether the washfountain enjoyed exemption from sales tax by reason of its falling within Item 90D in the First Schedule to the Sales Tax (Exemptions and Classifications) Act 1935 (Cth), which, so far as relevant, was as follows: "Household fittings and sanitary ware (and parts therefor, including chains, plugs and washers) of a kind installed in houses or other buildings so as to become fixtures therein, viz: (1) Baths, bath and shower screens, pedestal lavatory basins, wall and bowl basins, sinks, sink tops, draining boards, combination sinks and drainers, wash troughs or stands and pedestals therefor." (my emphasis) The High Court held by a three to two majority that the washfountain fell within the words that I have emphasised above. The majority comprised Williams, Webb and Fullagar JJ; the minority, Dixon CJ and McTiernan J. 40 Fullagar J, with whom Williams J agreed, thought that the washfountain was clearly a "pedestal lavatory basin". His Honour then noted the Commissioner's argument that it must also fall within the expression "household fitting"; that this expression signified "fittings intended or adapted for use in an ordinary dwelling house or domestic establishment"; and that the washfountain was not a household fitting. His Honour rejected the argument. He said that prima facie the word "namely" signified that it was wrong to regard the generic description as limiting the specific descriptions. As will be seen later, this construction is not applied to Item 1 with which we are concerned. Therefore, it is more relevant for our purposes that his Honour also thought that the Commissioner gave the expression "household fittings" "an unnecessarily narrow meaning", and that the expression meant "fittings which serve a household or domestic purpose (such as the washing of hands or clothes)". His Honour continued (at 389): "If we give them such a meaning, all difficulty disappears. It does not follow that they are otiose or superfluous. They would, of course, serve to exclude articles in an industrial establishment which had a purely industrial function - for example, a wash trough in a tannery in which hides were soaked in the course of an industrial process. The manufacture of leather is not a household or domestic purpose, but the washing of hands is." His Honour clearly rejected the Commissioner's contention that "household fittings" meant "fittings fitted in a dwelling house" or "[fittings] intended or adapted for use in an ordinary dwelling house", because it did "not represent a legitimate construction of the language used." In so far as he rejected a requirement that the goods be within a house or its curtilage ("physical connection") and favoured a test of domestic function ("domestic function"), his Honour's approach favours the Taxpayer in the present case. 41 Unlike Fullagar and Williams JJ, the third member of the majority, Webb J, thought that the generic description did qualify the specific classes. Like them, his Honour thought that the washfountain fell within the specific description, but he continued (at 388): "But is it a household fitting? The circular shape of the washfountain and the necessity to install it some distance from a wall if it is to be fully utilized do not prevent it from being a household fitting. Any difficulty in so regarding it arises from the fact that the circumference of the basin is so large and the spray of water on such a scale and released in such a manner that ten persons can use it at the same time. This might appear to suggest that the washfountain is really designed and suitable for exclusive use in shops, factories and other business and industrial operations as a measure of economy, and not for use in dwellings. No doubt the purpose for which it is manufactured is a material consideration, and in the case stated it is agreed that this washfountain is designed for use in factories, hospitals, and the like, and not for an ordinary household, that is, for a family. But a household may be comprised of persons who are not related. A number of friends might occupy the same dwelling, and with or without their children, but more particularly with their children, they might be so numerous and living under such circumstances, say in a holiday house at the seaside, that a washfountain would be found very desirable and installed. It is difficult to deny that the washfountain would be a household fitting in such circumstances. Other examples could be given of cases in which a washfountain would properly be regarded as a household fitting. An article may be at the same time a household fitting and a factory fitting, e.g., a window frame, a lock and key and an electrical fitting are both. Item 90D is not confined to articles which are household fittings and nothing else: where the restricted meaning is intended that is expressed, as in Items 90B and 90C. Further, the fact that an article is rarely used as a household fitting does not prevent it from being one. I do not find it necessary to deal in detail with the arguments and alternative arguments of counsel. But one argument of Mr Bowen for the defendant company seems to me to be sound, namely, that this washfountain wherever installed is, because of its exclusive purpose, i.e., the washing of hands, of an essentially domestic nature, and so can be said to be suitable for use in at least a limited number of households, and therefore comes within the category 'household fittings' within Item 90D, which, as already stated, is not restricted to articles which are household fittings and nothing else. After all a washfountain is only a substitute for a number of washbasins, i.e., for a number of household fittings in the truest sense of the term." (my emphasis) In the present case, the relevant machines were designed to accommodate household laundry loads, and can be viewed as substitutes for a number of domestic machines. 42 Like Webb J, Dixon CJ (dissenting) considered that goods must satisfy the general description as well as come within one of the specific classes. However, the Chief Justice thought that the washfountain did not satisfy the former because it was not a "household fitting". His Honour added (at 387): "It may be true that the washfountains compete in trade with pedestal lavatory basins and wall and bowl basins, in the sense that the washfountains may take their place in factories and like places. If so, it may be unfortunate that the washfountain should not be exempt. But that is not enough to bring it within the exemption as it is framed." 43 McTiernan J (also dissenting) said (at 387): "It appears from the case stated that a 'washfountain' is designed for use in factories, hospitals and the like 'to enable ablutions to be performed by several persons at the one time': and that it is not designed for use in an 'ordinary household'". Like Dixon CJ, McTiernan J thought that the washfountain was not a household fitting because it was "designed for other than household use". 44 In sum, Dixon CJ, McTiernan J and Webb J thought it necessary that goods meet the general description as well as come within one of the specific classes, whereas Fullagar and Williams JJ did not; Webb, Fullagar and Williams JJ thought the general description satisfied if goods satisfied a "domestic function" test, while Dixon CJ and McTiernan J thought this insufficient and that the goods did not qualify if they did not satisfy a "physical connection" test; and Webb J also thought, in any event, that the washfountain might be found, even if in unusual circumstances, located within a household, that is, satisfy a physical connection test. 45 To my mind, the expression "household fittings" more clearly points to a physical connection between goods and a household than does the expression "goods of a kind ordinarily used for household purposes". Accordingly, if, as Webb, Fullagar and Williams JJ thought, the expression "household fittings" is satisfied where goods are used exclusively for a domestic function, even though not located within a house or its curtilage, one might be pardoned for thinking that the position would be a fortiori where the expression to be applied is "goods of a kind ordinarily used for household purposes". 46 (ii) Deputy Commissioner of Taxation v Stewart (1984) 154 CLR 385 ("Stewart") concerned the expression "[goods] for useĽbyĽa public benevolent institution" in Item 81(1)(c) in the first column of the First Schedule to the 1935 Act. The taxpayers sold lottery tickets in bulk. They also manufactured coin-activated machines designed to dispense the tickets upon the insertion of a 20 cent coin. They bailed the machines to certain benevolent institutions free of charge on condition that only tickets supplied by the taxpayers be dispensed from the machines. The institutions used the machines to sell the lottery tickets to raise funds for their purposes. The machines remained the property of the taxpayers who serviced them. 47 By a four to one majority the High Court held that the machines were exempt from sales tax under Item 81(1)(c). The significance of the case for present purposes is threefold. First, it was held that the machines could satisfy the terms of the item even though they could also be seen to be used by the taxpayers to promote their sales of lottery tickets to the institutions. Similarly, it is not fatal in the present case that the relevant machines can also be seen to be of a kind ordinarily used for the commercial purposes of, for example, a laundromat operator, renter or router. 48 Secondly, the expression "for use … by" did not require that the goods be exclusively or primarily or principally for use by a public benevolent institution. 49 Thirdly, Deane J said (at 401): "While the subjective intentions of manufacturer or purchaser are relevant and may well be conclusive, what is required is an objective characterisation of the goods themselves in the light of all the relevant circumstances. That characterisation must be made as at the time when liability to sales tax would otherwise attach. It will, in an appropriate case, be made with the benefit and in the context of knowledge of the actual use which was subsequently made of the goods." Ordinarily, the taxing point is the occasion of importation or the first wholesale sale in Australia. 50 (iii) In Commissioner of Taxation v Sherwood Overseas Pty Ltd (1985) 75 FLR 474 ("Sherwood Overseas"), Olney J held that machines called "Kreepy Krauly Automatic Pool Vacuum Cleaners" fell within par 1(g) of the Third Schedule to the 1935 Act as being "goodsĽof a kind ordinarily used for household purposes, namelyĽvacuum cleanersĽand other appliances used for cleaning purposes". His Honour thought that goods were required to satisfy both the general introductory description ("of a kind ordinarily used for household purposes") and the words of the specific classification ("vacuum cleaners,Ľand other appliances used for cleaning purposes"). His Honour thought that the purpose of the former was to distinguish between goods described in the listed classifications which were intended to attract the exemption and "similar goods that have uses outside a domestic establishment". He observed that many, if not most, of the groups of goods described in the numbered subparagraphs have an application in industrial or commercial contexts "as well as within the household", and referred to "office furniture, commercial refrigerators, industrial vacuum cleaners [and] air conditioners designed for use in a public hall" (at 477). 51 Olney J appears to have been content to treat the word "household" as referring to a physical thing. He concluded (at 479): "In my opinion a robust approach ought to be taken to the construction of the Third Sched. particularly in view of the fact that it is part of a statute imposing taxation and I take the view that any goods which fall within the particulars described in pars (a) to (p) of the first item which are ordinarily used in or about a dwellinghouse can fairly be said to be ordinarily used for household purposes. It is conceded that Kreepy Kraulys are goods of a kind ordinarily used for domestic swimming pools and in my opinion that concession is sufficient to bring them within the ambit of the Third Sched.". 52 His Honour's decision would not, however, dictate a result in the present case, which turns on an issue that was not before him. The case before his Honour raised the distinction between a house and its curtilage. The fact that it may suffice to attract the concessional rate that goods are of a kind ordinarily used within a dwelling house or its curtilage, does not indicate that they must be found there. It is consistent with his Honour's holding that goods which are not of a kind ordinarily used within a dwelling house or its curtilage can nonetheless be goods of a kind ordinarily used for household purposes within the terms of Item 1 in the Third Schedule. 53 (iv) Sherwood Overseas was followed in Kentucky Fried Chicken Pty Ltd v Federal Commissioner of Taxation (1986) 17 ATR 1039 ("Kentucky Fried Chicken") (affirmed by the Court of Appeal of New South Wales at (1988) 12 NSWLR 643). In that case the goods in issue were paper serviettes and refresher towels which the taxpayer, a seller of takeaway products through retail outlets, supplied with, or for use with, its food products as elements of "serviette packs". Each serviette pack comprised a paper serviette, a refresher towel and a plastic spoon, which were packed by the taxpayer in a cardboard or polystyrene foam carton. In relation to the paper serviettes and refresher towels, the question was whether they fell within Items 8(1)(p) or (r) of the Third Schedule to the 1935 Act. That Item was, relevantly: "Goods,Ľof a kind ordinarily used for household purposes, namelyĽ (1) household drapery and soft furnishings, namelyĽ (p) Ľtable napkinsĽ (r) towels, face cloths and face washers." 54 Yeldham J referred with approval to the statements by Olney J in Sherwood Overseas to the effect that the adjective "household" was intended to distinguish between qualifying goods and similar goods that have uses outside a domestic establishment; that a "robust approach" should be taken to the construction of the Third Schedule, particularly in view of the fact that it was part of a statute imposing taxation; and that any goods falling within the particulars described in pars (a) to (p) of Item 1 which are ordinarily used in or about a dwelling house, can fairly be said to be ordinarily used for household purposes. Like the passage from Sherwood Overseas set out above, this statement is not a statement that in order to qualify goods must be ordinarily used in or about a dwelling house. Observing that he was also adopting a robust approach to construction, Yeldham J held that the paper serviettes could properly be described as "table napkins" which, by definition, came within the description "household drapery and soft furnishings". Also he considered that the refresher towels, which were made, not of cloth but of paper, were to be described as "towels, face cloths and face washers", which again, by definition, were included within the extended definition of "household drapery and soft furnishings". His Honour held that it followed that the taxpayer was entitled to a declaration that the paper serviettes and refresher towels were within subitems 8(1)(p) and (r) respectively. 55 (v) The learned primary Judge was not referred to Hygienic Lily Ltd v Deputy Commissioner of Taxation (1987) 13 FCR 396 ("Hygienic Lily"). In that case the taxpayer manufactured and sold by wholesale cups of various capacities and sizes, together with lids for them. The cups were made of paper coated with wax. After manufacturing the cups, the taxpayer printed various designs on them, some of which were particular to the requirements of individual customers, being trademarks or designs employed by those customers in their respective businesses. 56 The evidence before his Honour related to the course of trade in the cups and lids by reference to the activities of one customer of the taxpayer, McDonald's System Pty Ltd, which owned 185 McDonald's restaurants throughout Australia. The overwhelming use to which the cups were put at the restaurants was to contain beverages sold there to customers. Approximately 55 per cent of the "total business" of the restaurants was in the sale of food and drink to customers who did not consume their purchases on the premises. Some of the restaurants had, as well as a counter-service, a drive-in facility which enabled customers to order and take away food and drink without leaving their cars. At these restaurants, approximately 40 per cent of the business was conducted at the takeaway counters. Gummow J noted (at 397): "It is not disputed that of these 'take-away' customers a number take the food and drink home and consume them there." 57 At issue was Item 1, par (c) of the Third Schedule to the 1935 Act. It was not disputed that if the cups fell within that Item, the lids were accessories within Item 2 and therefore also attracted the lower rate of sales tax (10 per cent rather than 20 per cent). 58 Gummow J considered that goods could be "ordinarily used for household purposes" within Item 1, even though they were not "exclusively or principally" so used. His Honour continued (at 399): "Further, the setting in which the phrase 'goods of a kind' appears suggests it is directed not to the use for which the particular goods in question were designed or manufactured, nor to the purpose to which it is intended those particular goods shall be put, but rather to the nature, quality and adaptation offo goods in the class or genus in question. Thus, goods are 'of a kind ordinarily used for household purposes' if they are to be recognised as members of a class or genus which commonly or regularly (albeit not necessarily exclusively or principally) is used for household purposes; cf Customs and Excise Commissioners v Mechanical Services (Trailer Engineers) Ltd [1979] 1 WLR305 at 312-313, 315, 316-317." His Honour's approach in this passage has been followed subsequently, as we shall see. Gummow J contrasted in the present respect the terms of Item 81(1)(c) that were in issue in Stewart, discussed earlier: "goods for useĽand not for sale, byĽa public benevolent institution." Yet, as his Honour observed, the High Court was able to hold that the coin-operated lottery ticket dispensing machines in question in that case met the description, even though they were not designed for use by a public benevolent institution or in fact exclusively used by the particular public benevolent institutions to which they were supplied. His Honour stated (at 400): "In my view, the cups involved in this case, are of a kind ordinarily used for household purposes because they are members of a class or genus (paper cups) which commonly or regularly (albeit not necessarily exclusively or principally) is used for household purposes (viz the carrying of beverages and the consumption thereof). In my view, a purpose may be a household purpose even if not exclusively or principally pursued in situ a dwelling." Gummow J continued immediately after this passage as follows (at 400): "In any event, even if one looks to the provenance of the particular goods and to the purpose for which they were manufactured, that does not, in my view, take them outside the genus of goods ordinarily used for household purposes. The cups have printed upon them 'McDonald's' and many stylised representations of the letter 'M'; it readily may be conceded that these goods are manufactured to fill orders placed upon the applicant to supply McDonald's Restaurants for use in filling with beverages sold to customers. However, in my view, that does not deprive them of the character of goods of a kind ordinarily used for household purposes. Item 1 does not predicate the criteria for classification upon so single-faceted a method of characterisation." 59 His Honour observed that previous cases were not of decisive importance in the dispute before him. Nonetheless, he referred to Newbound, Sherwood Overseas and Kentucky Fried Chicken. Of Newbound, his Honour stated as follows (at 402): "The judgments certainly illustrate the subtleties in meaning and in combinations of meaning that can be found in collocations of ordinary terms. Whilst there is no authoritative guidance for the resolution of the present question of construction of Item 1, it is to be observed, as the applicant submitted, that the term 'household' was at least by the majority, not read as limited to activities solely pursued in a domestic setting." 60 Gummow J referred to Olney J's holding in Sherwood Overseas that he had not understood the Commissioner to have contended that an article was to be regarded as ordinarily used for household purposes only if its ordinary use was "within the four walls of a dwelling house". His Honour found Olney J's approach supportive of his own approach to the construction of Item 1. 61 Gummow J noted that in Kentucky Fried Chicken Yeldham J had held that the paper serviettes in question were within the classification in Item 8(1)(b) of the Third Schedule, "Household drapery and soft furnishings, namelyĽtable napkins". His Honour continued (at 402-403): "In my view in the same way that these goods did not cease to be of that character [ordinarily used in or about a dwelling house for household purposes] by their use in connection with supply of goods and services to customers at Kentucky Fried Chicken 'outlets', the cups in the present case are goods of a kind ordinarily used for household purposes." 62 It is difficult to know what the learned primary Judge in the present case would have made of Hygienic Lily if it had been drawn to his attention. The Commissioner submits that it is distinguishable from the present case on the ground that it was not disputed that a number of "take-away" customers took the McDonald's food and drink (the latter in the paper cups) home for consumption. I do not accept the submission. It seems to me that Gummow J was prepared to accept that particular goods might be of a kind ordinarily used for household purposes, although they were of a kind not used within a house or its curtilage at all. His Honour's noting of the fact that it was not disputed that some of the "take-away" customers took the drink home and consumed it there occurred in his setting out of the factual background, not in the "reasoning" section of the judgment. Moreover, as appears from the second passage set out above, his Honour treated the word "ordinarily" as meaning "commonly or regularly", yet he did not find that the cups were commonly or regularly taken home, and a finding to that effect is not implied by the mere reference to the fact that a "number" of customers took them home. Finally, his Honour stated that he accepted a submission of the taxpayer that "household purposes" in Item 1 may identify "an activity not necessarily or exclusively performed in or about a house" (at 401 - my emphasis). 63 The essence of Gummow J's reasoning is that he: (1) defined the relevant "class or genus" of which the particular cups were members as "paper cups"; (2) thought that "paper cups" were commonly or regularly used for "household purposes" because they were commonly or regularly used for "the carrying of beverages and the consumption thereof"; and (3) considered himself therefore compelled to conclude that the particular McDonald's paper cups were goods of a kind ordinarily used for household purposes. 64 By step (1), his Honour identified the relevant class or genus as "paper cups" rather than, for example, the narrower class or genus, "paper cups bearing the McDonald's name, trademark or logo". His Honour rejected such a form of classification as unacceptable because "single-faceted". In the present case, however, the coin-operated 6 kg or 7 kg machines are different from the domestic 6 kg or 7kg machines in more respects than just the presence of the coin mechanism: there are also the features mentioned earlier dictated by the intended repeated and continuous use by successive operators. 65 Step (2) in Gummow J's reasoning was the identification of the purpose for which the class or genus of goods (paper cups) was commonly or regularly used: "the carrying of beverages and the consumption thereof", rather than, for example, the narrower one of being filled at a restaurant in response to orders placed by customers and providing a means of delivering the contents at the restaurant to the customers. The choice made by his Honour in this respect makes clear that it is not determinative in the present case that the purpose of laundromat operators is non-domestic: consistently with his Honour's approach, it would be sufficient if goods of the class or genus in question are commonly or regularly used by the end-users for household purposes. The washing of clothes, bed linen, towels and other household fabrics is a household purpose. Consistently with the approach of Gummow J, the disputed relevant machines would fall within Item 1 subject to an appropriate initial identification of the class or genus to which they belong - a matter to which I shall return later. 66 (vi) In O R Cormack Pty Ltd v Federal Commissioner of Taxation (1992) 23 ATR 151 ("O R Cormack"), the taxpayer manufactured painters' equipment and sought a declaration that various paint brushes, paint rollers and associated painting equipment fell within Items 1 and 2 of the Third Schedule to the 1935 Act. Davies J found it helpful to ask whether the goods were "brushes of a kind ordinarily used for household purposes", rather that to ask separately whether they were "brushes", and, if so, whether they were "goods of a kind ordinarily used for household purposes". His Honour thought that the answer to this question depended, not upon the use to which the particular goods were put, but upon an assessment of their "general character", objectively determined by reference, at least principally, to the nature of the goods. 67 (vii) Diethelm Manufacturing Pty Ltd v Commissioner of Taxation (1993) 44 FCR 450 ("Diethelm") is the first of two Full Court cases on the Exemptions and Classifications provisions. The taxpayer was a manufacturer of office furniture. It sold chairs by wholesale to a related company which, in turn, sold them by retail, largely to commercial customers. Less than 10 per cent of purchasers from the retailer bought the chairs for domestic use. The evidence showed that almost all of the chairs were designed or adapted for "extended use at a work station or in an office environment". The primary Judge characterised the chairs as "primarily office furniture". But the function of a chair used at a computer terminal in an office was said to be the same as that of a chair used at a computer screen at home. Various features of the chairs relevant to their use at a work station were identified, including height adjustment, swivel, tension adjustable recliner facilities, and the provision of castors. The primary Judge found that the chairs were high quality office furniture which were occasionally bought for use in a home. 68 In order to attract the lower rate of sales tax, the chairs had to meet the following description which appeared in par (a) of Item 1 of the Third Schedule to the 1935 Act: "GoodsĽof a kind ordinarily used for household purposes, namely:- a) furniture". The trial Judge held that evidence that less than 10 per cent of the chairs were used in homes put the goods outside this category. 69 A Full Court unanimously dismissed the taxpayer's appeal. Two substantive judgments were delivered. After an extensive review of the authorities, French J concluded that the introductory general words ("of a kind ordinarily used for household purposes") qualified the listed specific classes, and continued (at 465): "It cannot be enough to say that because some goods fall into a genus wide enough to encompass goods ordinarily used for household purposes they are therefore 'goods of a kind ordinarily used for household purposes'. The mere fact that office chairs and domestic chairs both provide 'seating', which in some applications is a household purpose, is not sufficient to establish that office chairs are of a kind ordinarily used for household purposes. It may be that some of what was said by Olney J and Davies J in Sherwood Overseas Pty Ltd and OR Cormack Pty Ltd respectively conflicts with some of the reasoning in Hygienic Lily Pty Ltd. It is not, however, necessary for the purposes of this appeal to pass upon that decision." 70 Seeking to implement the purpose of reducing the costs of home establishment, and applying an "essential character" test (his Honour referred to support for this test to be found in judgments of Davies J in Thomson Australian Holdings Pty Ltd v Commissioner of Taxation (1988) 20 FCR 85 (affirmed, sub nom Commissioner of Taxation v Thomson Australian Holdings Pty Ltd (1989) 25 FCR 481) and in O R Cormack.), his Honour concluded that the chairs in question were "correctly identified as office furniture". He said (at 465): "That characterisation reflects the market in which the chairs were manufactured and sold having regard, inter alia, to their quality, cost, design, and intended and actual purchasers. While they were chairs sometimes used for household purposes, and performing physical functions similar to such chairs, they were not of a kind ordinarily so used." 71 Hill J, with whom, as noted earlier, Whitlam J agreed, stated that in order to qualify, particular goods must satisfy, first, the opening general words of Item 1, and, secondly, the terms of one of the categories of goods described in the lettered paragraphs. 72 His Honour thought that the "essential character" test might be found useful in some cases but that in other cases it might be "lacking in precision". 73 Hill J considered, apparently contrary to the approach of French J, that little assistance was to be gained by a consideration of the particular "realities of [goods'] manufacture and sale" (at 470). (Similarly, in Commissioner of Taxation v Chubb Australia Ltd (1995) 56 FCR 557, discussed below, his Honour stated (at 571): "the fact that there was no direct evidence that particular safes manufactured or imported by Chubb were used in households is irrelevant".) 74 His Honour emphasised that the question was not whether the particular goods in question were ordinarily used for household purposes but whether they were "goods of a kind" ordinarily used for such purposes. He observed as follows (at 471): "The use of the words 'goods of a kind' entail[s] the determination of a relevant genus. Therein lies an initial difficulty. The wider the genus is stated, the more likely it will be that it will be found that that class of goods is commonly used for a particular household function. That point is well illustrated by the decision of Gummow J in Hygienic Lily Ltd v Deputy Commissioner of Taxation (1987) 13 FCR 396. That case concerned the question whether three sizes of wax coated paper cups bearing designs including the trademark 'McDonalds', fell within the same Item. His Honour held that the goods did, being of the genus 'cups', that class of goods being of a kind ordinarily used for household purposes. Those purposes being, in his Honour's view (at 400): 'The carrying of beverages and the consumption thereof'. Had the cups in question been categorised in a more narrow way, for example, as cups delineated with the trademark of the manufacturer of the goods to be contained therein, then it might more readily have been held that the cups in question were of a kind ordinarily used in take-away restaurants, rather than for household purposes." 75 Hill J said (at 472) that it was not desirable to separate out the two questions, how the particular goods in question were to be categorised and whether the category decided upon was of a kind ordinarily used for household purposes. (In this respect, his Honour's approach differs from that of Gummow J in Hygienic Lily and is akin to that approved by Davies J in O R Cormack noted earlier). His Honour noted that the taxpayer's submission would first categorise the goods as "chairs" and their function as being "to be sat upon" - a function ordinarily performed in a household. Rather, Hill J thought it proper to ask simply the composite question whether the goods in question were goods of a kind ordinarily used for household purposes. His Honour continued (at 472): "This approach requires consideration of each of the particular chairs in question. Of some of them the question may readily be answered in the negative. A high back executive office chair is clearly not a chair of a kind ordinarily used for household purposes. Rather, it is of a kind ordinarily used for office purposes. The question, however, becomes more complicated with smaller chairs of a kind which may, on the one hand, be used in an office and on the other hand, are, in accordance with the evidence, sold by retail outletsĽfor what are clearly household purposes." 76 His Honour referred to the evidence before the primary Judge and concluded that that evidence did not permit a conclusion on the balance of probabilities that any of the types of chairs sold by the taxpayer was of a kind ordinarily used for household purposes. His Honour observed that the case had apparently been run on the basis that either all the chairs were within the Item or none were, but that if the taxpayer, which bore the burden of proof, had led further evidence, it may have established that some were of a kind ordinarily used for household purposes. 77 (viii) In Commissioner of Taxation v Chubb Australia Ltd (1995) 56 FCR 557 ("Chubb"), the taxpayer manufactured or imported, and subsequently sold or applied to its own use, relevantly, variousfreestanding safes or security cabinets. The Commissioner took the view that sales tax was payable at the rate of 20 per cent, whereas the taxpayer contended that the lower rate of 10 per cent applied because the safes and cabinets fell within Item 1(a) in the Third Schedule to the 1935 Act. Item 1(a) was as follows: "GoodsĽof a kind ordinarily used for household purpose, namely:- (a) furniture". 78 The primary Judge decided favourably to the taxpayer in respect of certain models of the freestanding safes. The Commissioner appealed and the taxpayer cross-appealed. 79 Burchett J referred to the difficulty of making "reality" fit a legislative system of classification, and continued as follows (at 559): "Ľa Court should not exacerbate the problem by giving to the Items in a statute setting out exemptions and classifications any narrow or rigid meaning. They must be understood in a flexible and elastic sense capable of accommodating the individual variations, unforeseen by the draftsman, which reality is certain to produce. It must be remembered, too, that a system of classification of articles used by the members of any society will be tested by constant changes in fashions and requirements. To read such a statute in the way I have endeavoured to state is simply to have regard to its nature as the essential context in which its words are used. At the same time, other rules of construction, familiar in relation to revenue legislation, may also have to be applied." 80 His Honour cast some doubt on the "essential character test" in the following passage (at 559): "Ľwith respect, I think the composite nature of the Item must be observed. It refers to furniture, and in that respect the essential character of something said to be furniture will often be determinative. However, the Item does not apply to a piece of furniture unless it also meets the description 'goodsĽof a kind ordinarily used for household purposes'. That is a question of fact into which degree and impression must enter largely, but I do not think its resolution is assisted much by turning back to the essential character of the article. Rather, attention must be focused on the statutory question whether goods of that kind are ordinarily used for household purposes." 81 Burchett J noted that the word "ordinarily" in the present context does not require that the goods be most commonly used for household purposes and that it sufficed that they be commonly used for such purposes. He said that the word "household", when employed as an adjective, signifies primarily "of or belonging to a household, domestic", citing the Shorter Oxford English Dictionary (3rd ed, 1985). Applying the understanding of "ordinarily" and "household" just mentioned, his Honour saw no error in the primary Judge's conclusions. 82 Hill J examined in some detail the evidence led at the hearing before the primary Judge. He noted the parties' agreement that the decision of the Full Court in Diethelm governed the appeal. He stated (at 569-570): "Where a question arises under Item 1(a) two issues will arise. The first, which is one of classification, requires the determination of the kind of goods to which the particular goods belong. This is sometimes spoken of as defining the genus to which the goods belong. The determination will be made in a commonsense way. In many cases mere observation of the Item will enable the classification to be made. In some borderline cases the task of classification may involve a consideration of evidence. The second issue involves giving an answer to the question whether the classification arrived at satisfies the language of the Item, that is to say, whether the relevant kind of goods is ordinarily used for household purposes. Again, in many cases, common experience will answer that question. In borderline cases, at least, it will be necessary to consider evidence to reach a conclusion." 83 Like Burchett J (and Davies J in O R Cormack), his Honour thought that the word "ordinarily" in the present context probably meant no more than "commonly". 84 Importantly, Hill J stated (at 570): "Finally, it may be noted that the Item does not require consideration of whether the relevant kind of goods is ordinarily used in households. The Item requires consideration of 'household purposes'. It draws attention to the purposes for which the kind of goods are used, not the location of that use. Storage of household valuables will clearly be a household purpose; storage of addictive drugs will not. Just as in the Diethelm case where the evidence made it clear that there were categories of chairs which included office chairs and domestic chairs (although, at least at the fringes, the categories overlapped), so too in the present case it is clear that there are domestic safes, on the one hand, and industrial and commercial safes, on the other. One difference between the two safes is to be found in the type of goods ordinarily kept in each kind of safe. At the extremes the categories of domestic and commercial or industrial safes are so divergent that, as her Honour recognised, there was a category of safe, namely, commercial and industrial safes, that could not be said to be ordinarily used for domestic purposes. At the other extreme there were clearly safes of which on the evidence it could be said that they were used for domestic purposes, indeed, were ordinarily so used, albeit that they were capable of use and, in fact, were used by non-domestic users, eg hotels, shops and small businesses. The safe keeping of money, jewellery and valuables and important family papers is clearly a domestic purpose. Perhaps the keeping of large amounts of cash in high security safes might be a different matter." 85 His Honour thought the evidence permitted the conclusions drawn by the primary Judge in respect of the various models of safes that were, and those that were not, of a kind ordinarily used for household purposes. 86 The third member of the Court, Tamberlin J, agreed with the conclusions and reasoning of Hill J. His Honour referred to the importance of appreciating that the Court does not come to consider questions of classification in a vacuum, and that the determination of borderline cases, in the final analysis, "must necessarily be based to a large extent on experience and common sense, after … close regard [is paid] to the factual material placed before the Court". His Honour thought that the primary Judge's conclusions had support in the substantial amount of evidence before her Honour.

Conclusions on the appeal Certain general propositions 87 I think it useful and convenient to set out certain general propositions which apply to the resolution of the issues raised. 88 (1) Item 1 requires that goods both be of a kind ordinarily used for household purposes and fall within one of the listed specific categories of goods (Newbound per Dixon CJ, McTiernan J, Webb J; Sherwood Overseas; OR Cormack; Diethelm). 89 (2) The goods to which Item 1 must be applied are the particular goods of the taxpayer, that is, in the present case, the relevant machines, being the coin-operated 6 kg, 7 kg and 10 kg machines and the push-bar operated 10 kg machines identified in the Schedule (Diethelm per Hill J (with whom Whitlam J agreed) at 470 and 472). 90 (3) The statutory question is not whether those goods of the taxpayer will in fact be used for household purposes but whether they are goods "of a kind ordinarily used for household purposes" (Chubb per Hill J (with whom Tamberlin J agreed) at 571; Diethelm per Hill J at 470). 91 (4) I respectfully agree with Hill J in Diethelm (at 472) and, I suggest, with Burchett J in Chubb (at 559), that it is preferable to pose the statutory question as a single composite question. 92 In some cases it may be misleading to address separately the question of identification of the "genus" to which the particular goods in question belong, and the question whether that genus meets the description "ordinarily used for household purposes". The problem can be indicated by the question "What kind of kind of goods is the Item speaking of?" Answering the genus question separately as a threshold one will assume, without making explicit, an answer to this question. 93 Goods and purposes can be equally correctly described in different ways, in particular, broadly or narrowly, yet the description selected may dictate the answer to the statutory question. For example, an architect's stool, an office chair and a kitchen stool or chair may be described as "stools" or "chairs" and their purpose as being "to provide seating". Yet it would be wrong to conclude that the architect's stool or the office chair is of a kind ordinarily used for household purposes for no other reason than that, like the kitchen chair, it is ordinarily used for the purpose of providing seating. 94 If, in the present case, one were to define the genus of which the relevant machines are members as "machines designed to wash fabrics", apparently even industrial washing machines would qualify as goods ordinarily used for household purposes. 95 In the present case, there seems to be no dispute that the relevant genus to which the disputed relevant machines belong is coin-operated 6 kg, 7 kg and 10 kg washing machines and push-bar operated 10 kg washing machines, all designed to wash and dry successively the clothes and other fabrics of the members of households. 96 (5) The "essential character" test lacks sufficient precision to assist, at least in the present case (cf Diethelm per Hill J at 470; Chubb per Burchett J at 559). In my view, there is a danger that that test may serve simply to give an undeserved legitimacy to first impressions. 97 (6) I accept that "ordinarily" means "commonly" or "regularly", not "principally", "exclusively" or "predominantly" (Hygienic Lily at 399, 400; Chubb per Burchett J at 560, Hill J at 570). Physical connection; "a household" or "several households"; exclusive possessory or proprietary interest 98 The Taxpayer cannot rely on physical connection, at least in the sense of containment of the machine within the boundaries of the dwelling of a conventional nuclear household and its curtilage. It is noteworthy, however, that in the case of all the instances of shared accommodation listed earlier, there would be varying degrees of physical propinquity between the shared facility and the places where its users live. For the reasons below, I do not find it necessary to explore the nature and extent of that physical proximity further. 99 The statutory question to be asked is whether the relevant machines are of a kind ordinarily (commonly or regularly) used for household purposes. The question is not, in terms, whether they are of a kind ordinarily found within a house or its curtilage and used there, that is, whether they are of a "domestic" kind in that physical sense. Physical connection or absence of it may, however, be relevant to the statutory question. If we knew a priori that all goods, or even only that all washing machines, of a kind ordinarily used for household purposes necessarily had a physical connection with a household, the absence of that connection would dictate a negative answer to the statutory question. But we do not know this, even though the fact that particular goods were of a kind ordinarily found within a house or its curtilage and used there would strongly, perhaps conclusively, indicate that they were of a kind ordinarily used for household purposes. 100 Where the question of physical connection has been referred to expressly, authority has rejected any such requirement in favour of a domestic activity or purpose test: cf Newbound per Fullagar, Williams and Webb JJ (on the expression "household fittings"); Hygienic Lily esp at 401; Chubb per Hill J at 570. 101 I accept that when the then Treasurer, the Hon Sir Arthur Fadden, introduced the concession in question in 1954, he probably had thought only of furniture and other goods that one would expect to find in a house. I have set out earlier an extract from his Second Reading Speech on the Sales Tax (Exemptions and Classifications) Bill 1954. But times change and so do the forms of home establishment able to be aided by the concession. Let it be assumed, for the sake of example, that the only use made of coin-operated machines was to provide a laundering facility to be shared by "nuclear households", and that the purpose of the payment was not to generate a commercial profit for anyone but to enable an equitable sharing of the facility as between its users. I suggest that the legislative purpose underlying the concession would be served in such a case, even though: · the machine was not located within the boundaries of any of the flats, home units or town houses served by it or their immediate curtilages; · the machine was used, not by one household, but by multiple households; and · none of the members of any of the households had a possessory or proprietary interest in the machine. Yet it was these considerations which, the learned primary Judge thought, took the relevant machines outside Item 1. 102 The three considerations mentioned are interrelated (if physical connection to one household is not an a priori requirement, it is difficult to see why confinement to use by a single household or the existence of a possessory or proprietary interest in the members of a household would be) and may be seen to be based on the concept of "household purposes" as the purposes of one household and no more. No doubt, this view of matters is an arguable one with some attraction, but ultimately I think it unnecessarily reads into the language "of a kind ordinarily used for household purposes" a limitation which unduly confines the concept underlying the concession. 103 It is difficult to accept that the presence of the coin device alone disqualifies a machine which would otherwise qualify as goods of a kind ordinarily used for household purposes. Let it be assumed that coins were "collected at the door" for the use of machines rather than by use of a coin device. It is difficult to accept that those machines would necessarily attract the concessional rate while others, with a coin device affixed but otherwise identical, would necessarily not do so. Certain evidence before the Tribunal 102104 Of the relevant machines of the Taxpayer listed in the Schedule (set out earlier), the models listed in column 1 below appear in the Distribution Schedule (also set out earlier). Column 2 below gives the total number of those models sold during the period in question. Column 3 gives the percentage installed as a shared laundry facility of residential accommodation, excluding route business; column 4 gives the percentage installed as a shared facility as a result of someone's route business; column 5 gives the percentage installed in laundromats; and column 6 gives the total percentage.