National Dairies WA Ltd v Commissioner of State Revenue [2001] WASCA 112

National Dairies WA Ltd v Commissioner of State Revenue [2001] WASCA 112 - WASCA 2001 case summary — Zoe

[64]

"By and large the items of property in question here are items of plant and equipment used in the processing of the milk. They are as I understand it all connected to a power supply and they are connected in the processing line by pipes fixed to ceilings of rooms in the processing plant or under floors and running through walls. By that means then, the items of equipment may be described as being fixed to the factory and thereby to the land. But, again speaking generally, they are not otherwise so fixed except by their own weight. Very few pieces of equipment, notably compressors and centrifuges, are bolted to the floor of the factory. Those that are are so fixed because that is required by law for safety reasons or otherwise to keep the machine steady and fixed in position during its operation. There are various ladders and raised platforms bolted to the floor and some of these are fixed to the machines, but that form of fixation is to provide a firm ladder or platform which will not move so as to endanger the user.

The plant and equipment in question was acquired and introduced into the relevant factory on many different dates between October 1984 and February 1994. That reflects the fact that for such milk processing plants to be operated successfully it is necessary that the processing equipment may be changed to be disposed of or transferred to another factory location and to be replaced by different or more modern pieces of equipment. By that means the factory owner and operator is enabled to respond in an efficient manner to market forces such as demand generated for a different milk product, or changes in regional consumer demand which may necessitate the upgrading of the capacity of a particular factory, perhaps at the expense of another. There may be, and have been, changes made to accommodate the different packaging of milk products. New technology may appear which will cause a modification of the processing plant to provide for processes of greater efficiency and capacity. All of this obviously has to do with the cost effectiveness of the processing plant to produce the milk product, whatever it may be, in such a manner that it may be marketed competitively."

[68]

"As at the time the above items of equipment were respectively placed upon the land and incorporated into the dairy processing factory they were undoubtedly readily removable and might have been removed and transferred to another place, or sold, or otherwise disposed of as required, but in my opinion, they were items which were placed on the land for the purpose of their integration into the factory system into which they were firmly incorporated. They were not placed there for a temporary purpose, but for an indefinite period of time. They were interconnected and incorporated into the factory, although the degree of annexation was variable and generally not otherwise than by the weight of the units. Nonetheless, as photographs reveal, their operative use was in various quite complex ways a part of the way in which the factory was structured. I have no doubt that the items of equipment described above were annexed to the land for the purpose of its better enjoyment or use as a dairy processing plant. When they were sold with the land the sale was of a factory as a going concern. The items of property described above were in my opinion fixtures and not able to attract the exemption provided in the Third Schedule to the Act.

The appeal is not pursued with respect to a number of originally contested items, particularly airconditioners and a stainless steel steam line. A furnace is in contest, but the evidence tells me nothing about its use in the factory process. Similarly, that is the situation with respect to a PABX digital switchboard and a Simpson dishwasher. Although in the N H Dunn case a similarly described switchboard was held to be a chattel because it was concerned with office communication, the evidence in this case tells me nothing about the use to which the switchboard was put. For all I know it may be an essential part of communication between those responsible for various parts of the factory process. In my view the proper conclusion with respect to those items of equipment not covered by the evidence is that I am simply unable to find that the appeal is made out with respect to them.

In the final analysis therefore, the appeal is dismissed in its entirety."

[87]

The question then arises as to the intention which I should impute or presume so far as the parties in the present case are concerned. In my opinion the degree of annexation of each house to the land, the purpose for which each house was placed upon the land, the limited, (although not insubstantial), time that the houses were to be upon the land, the fact that at the time the houses were purchased Growth Industries had other projects in mind, the fact that the houses could be moved in the way in which I have described to other sites and, in so far as it is relevant, the stated intention of the parties, all lead me to the conclusion that on the facts of this case it was not intended that the houses should become fixtures.

All counsel relied in their written submissions on statements from the various judgments in Reid v Smith [1905] HCA 54; (1905) 3 CLR 656. I have not been able to discern in those judgments that the ultimate matter for consideration is not the intention. That certainly was the view to which Walsh J came in Anthony.

Mr Wales, for the plaintiff, relied upon certain passages from Reid, but I do not consider they are inconsistent with the conclusions to which I have come. Nor do I consider that the decision in Hewett v Court [1983] HCA 7; (1983) 149 CLR 639; 46 ALR 87, upon which Mr Wales relies, is.

Mr Wales also relied upon the fact that the houses rested on concrete piers sunk into the site. That may mean that the piers become fixtures, but it does not mean, in my view, that the houses resting upon them do. I consider Webb v Frank Bevis Ltd [1940] 1 All ER 247 is authority for this. Similarly, I do not consider that the concession that the verandah may constitute a fixture affects the houses. Indeed, the ease with which the verandah posts could, on the evidence, be removed from the 'U' bolts, strengthens me in this view and makes me wonder whether the concession should have been made. However, it was and I have decided the matter on that basis. I do not accept Mr Wales' submission that 'the building is not, it is submitted, an accumulation of parts, as to some of which the defendant can "waive" its claim'. In my opinion the authorities make it clear that one must look at each thing under consideration to determine whether or not it is a fixture or a chattel. A number of things may fall into one category or the other. That supports the view I consider to be correct. A simple and perhaps homely example arises from a consideration of a domestic stove and refrigerator. Usually the former is treated as a fixture - a purchaser would be surprised, in the absence of an express term in the contract, to take possession and find it removed. A purchaser would, I think, be equally, but pleasantly, surprised to find a refrigerator still in the house."

[111]

"(1) Pasteurising and homogenising equipment. Two of the milk processing machines in this group were very valuable indeed being valued at over $750,000 and $870,000 respectively. They are machines which rest on the factory floor secured by their own weight, connected to the power system and bolted to the piping by which milk is brought to them and taken from them. They are also connected to the refrigeration piping system. Essentially these machines operate within the process by separating the cream from the milk, by heating and cooling the milk using a heat exchanger, and by homogenising the milk.

(2) There are various tanks or vats, some of which are as large as a 20,000 litre capacity. They are storage tanks. They rest on the factory floor or on a steel mezzanine, held in place by their own weight, but again, obviously connected to the pipe system. They are easily removable and on occasions are moved between factories.

(3) Blow moulders. These also are merely secured on the factory floor by their own weight. They are machines used to manufacture plastic bottles. They are connected to the power source of the factory and merely by chutes to the factory's conveyor system. Again they may be moved from factory to factory as demand fluctuates. Associated with them at the relevant time was a blow moulder recycling baling machine, a piece of equipment not bolted to the factory floor, but connected to the power source and used to recover and recycle imperfect plastic bottles or scrap plastic resulting from the operation of the blow moulders. As I understand it, the conveyor takes these plastic bottles to that part of the factory where they may be filled by a milk product which has concluded its processing through the hygienically separate processing room which accommodates the pasteurising and homogenising equipment. Associated with the blow moulders are annealing machines in which the plastic bottles produced by the blow moulders are heated to stabilise them to the appropriate size. These are relatively small units bolted to the conveyor system.

(4) There are various filling machines, including a glass bottle filler which has now been removed, sold and shipped overseas, and machines for filling plastic bottles and bulk milk containers, particularly for the sale of milk to various institutions. Again, these machines rest on the factory floor and are secured by their own weight, being connected to the factory's power source, its pipe system and conveyor system. The plastic bottle filler, acquired in May 1993, was valued at over $220,000. Associated with these machines at the end of the conveyor system is a bottle packer with the obvious task of packing plastic bottles into crates. This machine is bolted to the conveyor system and connected to the power source of the factory.

(5) Boilers. There are various items of this kind of varying size and positioned in different ways into the processing system. The main boiler, acquired in 1990, was valued in the contract of sale at over $209,000. Again, the boilers are annexed to the floor only by their own weight and are connected to the pipe system. They produce steam for various purposes including the pasteurisation process.

(6) There are two butter printers, as they are called, for printing codes on wrappers into which butter is packed. These machines stand alone on the factory floor connected to the factory's power source.

(7) An evaporator. Valued at the time of contract at nearly $100,000. Again, this is a free standing unit which may be moved within the factory or to another factory. The equipment is used to reduce the water content in a milk product to produce a concentrated milk product. As one would expect, it is connected to the power source of the factory and is bolted to the transmission pipe system.

(8) A separator. Valued at over $100,000 in the contract. Used to separate cream from unhomogenised milk to produce cream, sour cream and cheese products. The separator is bolted to the pipe system and connected to the power source. Because of its mode of operation it is bolted to the floor for stability. A separator has a centrifugal operation.

(9) An evaporative condenser. This piece of equipment is again bolted to the factory floor for stability. Its purpose is to cool compressed ammonia gas into liquid ammonia for purposes of refrigeration. It is therefore bolted to the refrigeration pipe system as well as being connected to the factory's power source.

(10) There is a hot water softener and water filtering machine. They are designed to soften and purify water before it is converted by the boiler into steam. Their effect is to reduce damage to the boilers and they are bolted into the water pipe system.

(11) Water cooling towers. As their name suggests these machines are used to cool milk in the pasteurisation process. They sit on frames outside the factory building. They are bolted to water pipes and pumps.

(12) Refrigeration compressor. This is the main refrigeration unit for the factory. It was valued in the contract at over $170,000. It had been acquired in November 1988. It is used to refrigerate water to cool the milk. Being a compressor the unit is required to be fixed in position for safety reasons. It is connected to pipes and any fracture of pipes might allow liquid ammonia to escape. It is therefore the case that the solid fixing of this unit is required by law, but the unit may be disconnected and removed.

(13) A gram wrap machine. This is an icecream packing machine for icecream products which are sold on sticks. Again, although this machine, valued in the contract at over $40,000, is merely secured to the floor by its own weight, it is connected to the power source for the factory and is bolted to the liquid ammonia refrigeration system. The purpose of the machine is to mould and freeze the icecream product."

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (119 paragraphs)

National Dairies WA Ltd v Commissioner of State Revenue [2001] WASCA 112 (11 April 2001)

Parties

Legislation Cited (1)

Cases Cited (10)