Commissioner of Taxation v Silverton Tramway Co Ltd

The defendant company was incorporated under the law of Victoria as a trading company on 22nd December 1894. It appears to have been the successor in title to the undertaking of another company bearing the same name but then in liquidation. The undertaking is that called the Silverton Tramway. The defendant company took all the rights, powers, privileges and concessions conferred by the Silverton Tramway Act 1886-1888 N.S.W.. As might be expected, the objects contained in the memorandum of association of the defendant company were wide, but doubtless the leading provision was one authorizing it to carry on the business formerly carried on by the old company. Another important object was to carry on the business of carriers of passengers goods and things of every kind, and cattle and livestock of every kind.

The Silverton Tramway Act of 1886 recited that the Government of South Australia was then constructing a railway to a point on the western boundary of New South Wales and that five persons, described respectively as a grazier, a broker, a gentleman, a financial agent and a merchant, were desirous of constructing a tramway from that point to Broken Hill via Silverton and, in effect, that in order to do so they required statutory powers. The recital stated that it was expedient to confer upon them legislative authority to construct maintain and use the tramway and further that it was expedient to enable them to transfer their rights, powers, authorities and liabilities under the Act to a company duly incorporated for that purpose. The Act proceeded to authorize the construction of the tramway, as it is called, the gauges being three feet six inches. Powers were given to carry it along any road or street. The Act directed that plans of the project should be prepared showing what lands were required. So far as they were Crown lands they were to be made available; so far as they were private lands they might be acquired by agreement or compulsorily, subject, of course, to the assessment of compensation. It was provided that the tramway should be open to public use upon a payment of tolls or charges, the maximum amounts of which were prescribed. The undertakers were empowered to make by-laws subject to the approval of the Governor-in-Council for certain purposes. The by-laws might regulate the conduct of officers and servants employed in connection with the tramway. They might provide for the proper management of the affairs of the tramway and for the protection of the tramway and other property of the undertakers from trespass or injury. Other purposes for which by-laws might be made were regulating the speed at which the carriages using the tramway might be moved or propelled, preserving the free course of the tramway, preventing obstructions, regulating the loading and unloading of carriages and the weights to be carried, regulating the receipt and delivery of minerals, goods, livestock and other things to be conveyed upon it, regulating the number of passengers to be carried and the occupation of the seats therein and preventing or restricting smoking or the commission of any other nuisance in or upon the carriages, and generally regulating travelling upon or the use of the tramway. The statute dealt specifically with the liability of the undertakers as carriers and provided that they should not be liable to any greater extent than, according to the laws of New South Wales, stage-coach proprietors and common carriers would be liable. An express authority to use locomotive engines was given. A provision was included requiring the tramway to carry public mails on terms to be fixed by arbitration. The Act provided for the recovery of penalties and for the mode of prosecution. In accordance with the recital full power was expressly given of assigning the rights, powers, authorities, privileges and liabilities conferred and imposed by the Act.

The contention of the defendant company is that the effect of the foregoing provisions is to give to it the character of an "authority", a public transport authority. The locomotives and tenders in respect of which sales tax is demanded were imported for use by the defendant company exclusively in or exclusively in connection with the establishment, conduct or maintenance of the transport service which it owns and operates as the Silverton Tramway. If therefore the defendant company fills the description of a "public transport authority" the goods are exempt. For the other conditions of the exemption are satisfied. Can it correctly be said, having regard to its powers, that the defendant company is a public transport authority?

For the plaintiff Commissioner of Taxation the expression "public transport authorities" in Item 77 of Div. XI, was treated as meaning public authorities for transport or public authorities for public transport. For the defendant company, however, it was said that the natural meaning of the expression was "authorities for public transport". The word "public" described the character of the transport, not the character of the authority, which might or might not be public. It may be conceded that according to ordinary English usage the position of the word "public" would make it qualify "transport" rather than "authorities". But it does not follow that the plaintiff commissioner is wrong in denying that the defendant company is a public transport authority within the exemption. His case does not depend on attaching the adjective "public" to the word "authorities" so that it adds to the connotation of the word "authorities". The word "authority" has long been used to describe a body or person exercising power or command. No doubt this has come about by a transfer of meaning from the abstract conception of power or command to the body or person possessing it. But in relation to such a public affair as public transport the use of the word "authority" as a description of a person or body implies he or it is an agency or instrument set up to exercise control or execute a function in the public interest whether as an emanation of the general government or as an adjunct of local government or as a specially constituted officer or body. The word "authority" would not readily be applied in ordinary speech to a company carrying on an undertaking for private profit, even if the undertaking were a public utility and the company had secured a grant of statutory powers to enable it to do so. The natural reading of the expression would be against such an application of it.

The draftsman of the First Schedule has lent some confirmatory support to this conclusion by the collocation he has given to the exemption. Item 77, which contains the words "public transport authorities" occurs as one of a long list of exemptions grouped in Div. XI. This particular group is headed "Goods for use by Governments, Representatives of Governments, and Public Bodies". The curious provision in s. 3 (2) forbids the use of this heading to affect the interpretation of the items in the division but the heading in any case gives very little light. The list itself gives more. A scrutiny of the list shows, it is true, that many bodies having no governmental authority are included, but they are all bodies carried on exclusively for the advantage of the public or some section of the public and not for private profit. Institutions and bodies mentioned include public hospitals, benevolent institutions, welfare centres, societies for conducting infant clinics and the like, societies or institutions established for various public purposes, religious, philosophical, educational, scientific or literary. In the list are placed diplomatic representatives of foreign countries. Throughout the whole division there appears a policy of exempting persons or bodies either because of their connection with or service of governments or for their service of the public independently of profit gained or their contribution to the public welfare or for their governmental or quasi-governmental character. The association of ideas is unfavourable to the supposition that the word "authority" was employed to cover every person or company conducting public transport for private advantage simply because it had sought and obtained statutory powers. It is true that the statutory powers conferred by the Silverton Tramway Act include power to expropriate private property, to adopt by-laws if sanctioned by the executive government and to do other things in the exercise of an authority conferred by law and affecting the public at large. The company, however, is armed with these powers for the purpose of enabling it to carry on adequately a transport undertaking and so at one and the same time fulfil duties to the public and conduct a profit-making business. The general character of the company remains that of a body constituted for profit. Statutory powers have often been sought and have often been granted in the case of commercial undertakings because the public is expected to gain an advantage from the establishment and conduct of the enterprise and because the enterprise cannot be established and conducted without special statutory privileges and powers. But because a public end is served and statutory powers are enjoyed, the commercial enterprise does not become an agency exercising control power or command for the public advantage in such a sense that it would be designated an "authority". All that can be said is that it has been granted powers, privileges and authorities for its own purposes because its own purposes enure for the public benefit.

In my opinion the defendant company does not qualify as an authority for public transport under the exemption and the question in the case stated should be answered: the defendant was not a public transport authority within the meaning of Item 77 of the First Schedule of the Sales Tax (Exemptions and Classifications) Act 1935-1951. In accordance with the agreement of the parties expressed in the special case the consequence of this answer is that judgment must be entered for the plaintiff for the sum of £17,214 14s. 2d. and costs of action to be taxed.

I think the term "public transport authorities" in Item 77 under Div. XI of the First Schedule to the Sales Tax (Exemptions and Classifications) Act 1935-1951 should be given the meaning it bears according to the rules of syntax, and that it means, what counsel for the defendant company submitted, i.e., an authority to provide public transport; so that cases on the meaning of "public authority" are of little, if any, assistance. Division XI is headed "Goods for use by Governments, Representatives of Governments, and Public Bodies"; but s. 3 (2) of the Act provides inter alia that the heading of a division shall not be read as affecting the interpretation of any item in the schedule.

However, although the defendant provides public transport, it does not follow, in my opinion, that it is an "authority". Throughout Australia there are many limited liability companies, such as gas and electricity supply companies, operating as does the defendant solely for the profit of their shareholders. But, like the defendant, they have authority to place their installations on or under streets and other public places, and to make by-laws, with penalties for breach, for the protection of such installations against unauthorized interference, and in return are required to meet the public demands for their commodities or services and to do so at fixed or maximum prices. But as far as I am aware these companies are never referred to or regarded as authorities, whether local or otherwise, no matter what might be the nature or the scale of their operations. They are, however, often called public utilities. As it cannot properly be claimed that government or command is vested in them, or that any public trust is discharged by them, the mere fact that they are authorized by legislation to the extent indicated does not entitle them to be termed authorities, any more than does their creation or constitution by statute. To warrant that designation they must, I think, have authority to act for and on behalf of the public, and not merely have authority to use or encroach upon public property, subject to providing compensation to the public in some form or other, and to take measures, even subordinate legislative measures, in support of such use or encroachment, but always for private profit.

I would answer the question in the negative and enter judgment for the plaintiff commissioner for £17,214 14s. 2d. and costs.

The question which is raised by the case stated is whether the defendant company was, on 5th October 1951, a "public transport authority" within the meaning of Item 77 of the First Schedule to the Sales Tax (Exemptions and Classifications) Act 1935-1951. If this question should be answered in the negative then, it is agreed, judgment should be entered for the plaintiff for the sum of £17,214 14s. 2d., whilst if the question should be answered in the affirmative then judgment is to be entered for the company.

The First Schedule to the Act contains a series of lists of goods which, by s. 5 of the Act, are exempted from the operation of various specified Sales Tax Acts. Division I of the schedule deals with specified items of agricultural machinery, implements, equipment and materials. Exemption under this division depends upon goods conforming to a specified character and this is true of a number of the divisions in the schedule. A perusal of the schedule indicates that specified exemptions apply in respect of such things as mining machinery and equipment, drugs medicines and surgical goods, book printed matter and paper, and scientific and religious goods and works of art. Division XI, however, in which Item 77 is to be found purports to relate to "Goods for use by Governments, Representatives of Governments, and Public Bodies" and the exemptions which are effected by the joint operation of s. 5 and the items specified in this division are not, in general, exemptions of any specified class or classes of goods but, in the main, of goods acquired for use by persons, bodies or authorities of specified character or characters. Item 77, which is the twenty-fifth item in the division, is in the following terms: "Goods for use (whether as goods or in some other form) by public transport authorities exclusively in, or exclusively in connexion with, the establishment, conduct or maintenance of transport services".

It is common ground that the company is not a public authority in the sense that it is publicly managed and controlled but this circumstance, according to the contentions of the defendant company, is of no consequence. For the company it is maintained that the strictly grammatical meaning of the relevant words do not require the existence of that characteristic in an "authority" in order that it should answer the description "public transport authority", and, further, that it is sufficient if the company may properly be described as an "authority" and if, in fact, it provides a service which may be characterized as "public transport". The company is a company limited by shares and incorporated under the provisions of the Companies Act 1890 Vict. and it was formed to take over the undertaking of an earlier company of the same name. That company operated and the present company operates and conducts what is referred to in the case stated as the Silverton railway. This railway provides a service from the western boundary of the State of New South Wales to Broken Hill via Silverton in that State and the defendant company has owned and operated it since the year 1894. The earlier company enjoyed certain rights, powers, authorities and privileges which had been accorded to certain specified persons by the Silverton Tramway Act of 1886, a private Act of the Parliament of New South Wales. Likewise the earlier company was subjected to certain liabilities and obligations imposed upon those persons by that Act. By virtue of s. 54 of the Act these rights, powers and privileges, liabilities and obligations were assignable by such specified persons and at all material times the defendant company has been the assignee and transferee thereof.

There is no doubt that the service for passengers and goods which the company provides by means of its railway is a service to the public, and, equally, there is no doubt that members of the public have a statutory right to use it. Section 5 of the Act provides that the said "tramway" shall be open to the public use upon payment of certain specified tolls or charges and further provides that no differential charges shall be made but that the charges shall be equal to all persons using the said "tramway". The Act made extensive provision to enable the railway to be constructed and for this purpose conferred a power to purchase land by agreement and also to acquire it by a form of compulsory acquisition. Perhaps it may be said the Act conferred such powers upon specified persons and their assigns as were necessary to enable the railway to be constructed and operated. Particular reference was, however, made to s. 27 by which authority was given to make by-laws for regulating the conduct of the officers and servants employed on or in connection with the railway, for the protection of the railway, for regulating the mode by and the speed at which carriages using the railway should be moved or propelled and for preserving the free course of the railway and preventing any obstruction thereto and generally for regulating travelling upon or use of the railway. It is the circumstance that the company is authorized by statute to exercise this and other functions that has led the defendant company to claim that it is an "authority" but I must confess that I am not at all sure what this expression, standing by itself, connotes. If it merely means that the company has derived authority from the Parliament of New South Wales to do certain things, including the making of by-laws, I thoroughly agree. But to designate it, for this reason, by the bare term "authority" seems to me to be completely artificial for the statutory powers with which it is invested have been conferred, merely to enable it, effectively, to conduct its business and are not determinative of its real character or composition; it is essentially a company formed for the purpose of conducting and in fact conducting a business enterprise for its own profit. Moreover, in my opinion, the expression "public transport authority" is a composite expression and does not intend to refer to a company, such as this, constituted with share capital and operated for profit under the management and control of directors appointed by its shareholders. I think the observations of Rich J. in Renmark Hotel Inc. v. Federal Commissioner of Taxation [1] are peculiarly apposite to a consideration of this case. Speaking of the expression "public authority" in s. 23 (d) of the Income Tax Assessment Act 1936-1947 he said: "The characteristics of a public authority seem to be that it should carry on some undertaking of a public nature for the benefit of the community or of some section or geographical division of the community and that it should have some governmental authority to do so. In s. 23 (d) it is made clear that it must be constituted under a State Act. Coercive powers over the individual are given to many governmental authorities which could be called public authorities, but it is not an essential part of a conception of a public authority that it should have coercive powers, whether of an administrative or a legislative character. It may, however, be an essential characteristic of the conception that it should have exceptional powers or authority, for instance a tramway board or trust has the exceptional authority of taking its trams down a public street. A water authority may lay its water mains, a lighting authority may do the like. Some exceptional powers of doing what an ordinary private individual may not do are generally found in any body which we would describe as a public authority. The words "public utility" have a wider significance, embracing public utilities carried on for profit by private enterprise. No-one would describe as a public authority an electric lighting company which had obtained statutory powers but possessed a share capital issued to shareholders and which carried on for profit, but we might call it a public utility " [1] .

1. (1949) 79 C.L.R. 10. 2. (1949) 79 C.L.R., at p. 18.

Notwithstanding the fact that his Honour was considering the meaning of the expression "public authority" and not the expression "public transport authority" the italicized passage is, I think, apposite to the circumstances of this case.

But even if the proper view should be to regard the word "public" as merely qualifying the word "transport" the result would, in my opinion, be the same for, as I have already said, it would be quite erroneous to designate as an "authority" a company which, though invested with some statutory powers and providing a public utility, is operated under the general control of and for the benefit of its shareholders.

In the circumstances I am of the opinion that the question should be answered in the negative and judgment entered accordingly.