Quarries Ltd v Commissioner of Taxation

The expression "plant", even when used by itself in relation to any particular trade or business, is capable of embracing so many kinds of appliances and equipment according to the use made of it that it is obvious that some reference must be made to the nature of the taxpayer's business and the purpose which the so-called sleeping units served. Again, it should be mentioned in passing, that the expression, as has been pointed out on many occasions - and latterly by Lord Reid in Hinton (H.M. Inspector of Taxes) v. Maden & Ireland Ltd. [1] - may be somewhat extended or restricted by the context in which it is found. In that case the relevant expressions were "plant or machinery" or "machinery and plant" whereas in the present case the expression is "plant, or articles owned by a taxpayer and used by him for the purpose of producing assessable income". "Article", of course, is an extremely wide word and it is undefined. But this may be of no more consequence than it was thought to be in M'Intyre v. M'Intee [2] where Lord Strathclyde observed: "The statute gives us no definition of "article". That is not surprising, for everyone understands the meaning of "article". A more comprehensive word could not by any possibility have been used" [3] . The latter proposition is, no doubt, beyond question but I find myself in some difficulty in subscribing fully to the former after having given some attention to Sir Carleton Allen's contribution to the Law Quarterly Review (1961) vol. 77, p. 237 - What is an Article? However, in the present case counsel for the Commissioner found in the association of "article" with "plant" ground for asserting that the former expression should be given a somewhat more limited meaning than it would otherwise, by itself, normally bear. To what extent it should be taken to be limited by its context did not precisely appear but the suggestion was made that it was intended to describe articles which, though not plant in the strict sense, possess some of the general characteristics of plant. This proposition has difficulties of its own and I shall return to it after discussing the nature of the appellant's business and the purpose which, in relation thereto, the sleeping units served.

1. (1959) 38 Tax Cas. 391, at p. 417. 2. [1915] S.C. (J.) 27. 3. [1915] S.C. (J.), at p. 28.

As its name implies the taxpayer was carrying on the business of quarrying and crushing stone. But the major part of its business, and that which constituted the main source of its income, consisted at all material times in carrying out contracts which it had entered into with the South Australian State Highways Department and which required the taxpayer to win and crush stone for the Department's purposes. Frequently, the taxpayer's contractual obligations oblige it to carry out these operations at remote places. Stone is won in various places round the country-side and the taxpayer's equipment, to use a neutral term, is taken from site to site. The duration of the operations of quarrying and crushing at each site seems to vary from three months to twelve months and the average is about six months. The sleeping units are, of course, provided for the accommodation of the taxpayer's employees whilst they are engaged on operations of this character. Several illuminating photographs were tendered in evidence to show the nature of the units and to illustrate the way in which the taxpayer's equipment is moved from place to place and installed at each selected site. The units of the crushing plant, itself, were described as semi-portable. There are several sections, the first containing a primary crusher and scalping unit, and the second, the secondary crushers. These units are transported from site to site by semi-trailer. The sleeping units appear as small enclosed sheds or cubicles about eight feet wide and seven feet deep. They are constructed of galvanized iron and timber and in such a manner as to be readily and conveniently moved by a crane. Four or five of the units may conveniently be placed upon a trailer attached to a prime-mover. A mobile kitchen and "diner", together with a mobile crane, completes the taxpayer's "train" of equipment. Upon arrival at any selected site the crushing plant is set up and assembled and a camp is established. The sleeping units are placed on the ground either on the roadside or, with the permission of the owner of the land where the taxpayer's operations are to take place, upon his land.

Consideration of the evidence including the photographs leaves me with the distinct impression that it is by no means unreasonable to regard the entirety of the "train", together with the equipment which it transports from place to place, as a comprehensive unit designed especially to enable the taxpayer to carry on the major part of its business. But the taxpayer failed before the Board of Review since, primarily, a majority of its members considered that the sleeping units were not plant or articles "because they have no place in the productive process itself". They did no more, it was thought, than provide sleeping accommodation for the taxpayer's employees. It was conceded that "they were used in connexion with the taxpayer's income earning operations", but that, it was said, was also true of other things which the taxpayer owned and which were not plant, "e.g. the place in which the taxpayer company carries on its business". Further, the majority saw in the definition of plant, in so far as it is contained in sub-s. (2) (b) of s. 54, a reason for denying to any buildings or structures for residential purposes the character of plant unless they should answer the description of structural improvements on land which is used for the purposes of agricultural or pastoral pursuits and which are provided for the accommodation of employees, tenants, or share farmers engaged in or in connexion with those pursuits.

It is convenient to deal with the latter suggestion at once. By sub-s. (2) (a) plant includes "animals used as beasts of burden or working beasts in a business other than a business of primary production, and machinery, implements, utensils and rolling stock". But the provisions of sub-s. (2) (b), to which reference has already been made, is not a provision which can operate to restrict the ordinary meaning of plant; it is a provision which operates by way of extension of that term in relation to agricultural and pastoral pursuits. However, the suggestion is that, except pursuant to sub-s. (2) (b) buildings, or to be more precise, structural improvements which provide accommodation for employees cannot be regarded as "plant" and, therefore, that that term cannot comprehend the sleeping units in question. But even if the sleeping units can be said in ordinary parlance to be buildings it is abundantly clear that they do not, in any sense, constitute structural improvements on land. Accordingly there is nothing in that sub-section to deny to the units in question the character of "plant or articles", if, upon any proper view they should be thought, in the circumstances of the case, to be comprehended by that general expression.

The question of what is comprehended by the expression "plant" has been the subject of discussion on many occasions and I was referred to a number of well-known authorities such as Yarmouth v. France [1] ; Margrett (H.M. Inspector of Taxes) v. The Lowestoft Water & Gas Co. [2] ; J. Lyons & Co. Ltd. v. Attorney-General [3] ; Commissioners of Inland Revenue v. Reid [4] ; and Hinton (H. M. Inspector of Taxes) v. Maden & Ireland Ltd. [5] . But valuable as such cases may be as a general guide when considering the question of what may and what may not be regarded as plant in any particular case they demonstrate the impossibility of formulating any precise rule by the application of which the problem may always be readily solved. One of the best known statements concerning the meaning of the expression is that of Lindley L.J. in Yarmouth v. France [1] : "in its ordinary sense, it includes whatever apparatus is used by a businessman for carrying on his business, - not his stock-in-trade which he buys or makes for sale; but all goods and chattels, fixed or movable, live or dead, which he keeps for permanent employment in his business" [6] . This test led Lindley L.J., in common with the other members of the Court, to hold that a cart-horse belonging to the defendant was "plant" within the meaning of s. 1 of the Employers' Liability Act, 1880. But in London and Eastern Counties Loan and Discount Co. v. Creasey [7] cab-horses were held not to be "plant" within the meaning of s. 6 of the Bills of Sale Act, 1882. The reason was, of course, that in the latter statute the word "plant" was found in a context which required the conclusion that it should be read in a restricted sense. The statement of Lindley L.J. has been adopted on many occasions and comparatively recently by Uthwatt J. in J. Lyons & Co. Ltd. v. Attorney-General [3] and by Lord Reid in Hinton's Case [5] . But the statement is, understandably, in general terms and is not of a great deal of assistance in solving the present case. Here we are concerned with the expression, "plant or articles" and the section requires that they must have been used for the purpose of producing assessable income. The composite expression must, I think, be taken to have a somewhat wider connotation than "plant" when used by itself and there can be no reason for supposing that such a result was not intended. The section is designed, with reason, to provide for depreciation allowances with respect to equipment, if I may use a neutral word, used for the specified purpose and it would be anomalous if such allowances should be available in the case of equipment which is thought to be strictly comprehended by the expression "plant" but not in the case of other equipment notwithstanding the fact that it is used for precisely the same purpose. I see no reason for denying to the word "article" the comprehensive meaning which it normally bears or for thinking that it was not used in the section by way of extension and to avoid any such anomaly. Of course, "article" cannot ordinarily be taken to comprehend a structure erected or built in situ (cf. In the Matter of Application for the Registration of Designs by R. H. Collier & Co., Ltd. [1] ) though in some circumstances a structure in the nature of a building may be "plant" (The Australian Gas Light Co. v. The Valuer-General [2] ). However the sleeping units, are not structures in the nature of buildings in any ordinary sense of that expression; they were, as appears, designed and constructed as portable or movable equipment for use in connexion with the nomadic type of business which the taxpayer carries on. As such they were just as much "articles" as were the tents which, earlier during the year of income in question, were provided by the taxpayer.

1. (1887) 19 Q.B.D. 647. 2. (1935) 19 Tax Cas. 481. 3. [1944] Ch. 281. 4. (1950) 31 Tax Cas. 402. 5. (1959) 38 Tax Cas. 391. 6. (1887) 19 Q.B.D. 647. 7. (1887) 19 Q.B.D., at p. 658. 8. [1897] 1 Q.B. 442. 9. [1944] Ch. 281. 10. (1959) 38 Tax Cas. 391. 11. (1937) 54 R.P.C. 253. 12. (1940) 40 S.R. (N.S.W.) 126, at p. 141; 57 W.N. 53, at p. 57.

The contention, previously mentioned, that the word "articles" should be given a restricted meaning because of its association with the word "plant" was, of course, advanced in opposition to this view. But as I have already said the suggestion that "articles" should be understood as meaning articles possessing some of the general characteristics of plant has difficulties of its own. As I understand the proposition the operation of the section should be confined to "articles" which share some undefined common quality with "plant". The answer to this proposition is, I think, to be found in the section itself; the common quality is to be sought not inherently but in the use which may, and is, in fact, made of the "articles". That is to say that all "plant" and all "articles" are within the section if they may fairly be said to be used for the purpose of producing assessable income.

The ultimate question, therefore, is whether the units were used for this purpose. I have already indicated that it would not be unreasonable to regard the entirety of the taxpayer's equipment comprised in the "train" as a comprehensive unit designed to enable the taxpayer to conduct the major part of its somewhat unusual business. Indeed, I do not see any reason why it should not be regarded as the "heart and core" of the major part of its enterprise (Commissioner of Inland Revenue v. Reid [1] ) and, therefore, "plant or articles" used for the specified purpose. But the majority of the Board of Review considered the units separately and came to the conclusion that they were outside the section because "they merely provide sleeping accommodation for the company's employees". From one point of view this may be a strictly accurate statement but it fails to do justice to the taxpayer's case. Its business was of a special character, it could be carried on only if the taxpayer transported its crushing plant and its employees to each selected site and, obviously, it could be carried on only if some accommodation for its employees was provided at each site. The sleeping units were, of course, used by the employees for the purpose which their description implies. But this is beside the point. The critical question is concerned with the purpose for which they were used by the taxpayer. Obviously, without the units, or without tents, it would have been impossible for the taxpayer to carry on its business in the manner which its contractual obligations required. For my part I have no doubt that the correct view is that the units constituted "plant or articles" within the meaning of the section and that they were used for the purpose specified in the section. That being so I am of the opinion the appeal should be upheld and that the amended assessment should be set aside.