BP South West Pacific Ltd v Collector of Inland Revenue [1981] CKHC 4 (24 February 1981)

IN THE HIGH COURT OF THE COOK ISLANDS
HELD AT RAROTONGA

BETWEEN

B.P. SOUTH WEST PACIFIC LIMITED
a duly incorporated company having its registered office in Fiji
OBJECTOR

AND

THE COLLECTOR OF INLAND REVENUE
RESPONDENT

Date of Hearing: 3.12.80
Date of Decision: 24.2.1981

Clarke for objector
Solicitor-General for Respondent

JUDGMENT OF SIR GAVEN DONNE C.J.

This is a case stated pursuant to Section 48 of the Turnover Tax Act 1980. The Objector is an overseas company carrying on business as an oil merchant. It sells jet fuel and water methanol for use by aircraft departing from the Cook Islands, in this particular case the aircraft being those of Air New Zealand, Polynesian Airlines and the Royal New Zealand Air Force. On furnishings the returns for turnover tax assessment for sales amounting to $166,484.11, the objector paid $1,664.84 being tax at the rate of one per centum. The Respondent assessed the tax at $6,659.36 being tax at the rate of 4 per centum and made demand for the balance then due, $4,994.52. The Objector filed the requisite objection within the time specified in the Act.

The short point for decision is whether the turnover tax should be assessed at 4 per centum under Section 18(b) of the Act or at 1 per centum under Section 27 thereof.

Section 18(b) reads as follows:-

"18. Tax upon sale of property - Every person engaging or continuing within the Cook Islands in the business of selling any tangible personal property shall pay a tax levied and assessed at a rate equivalent to -

(a) 1% of the gross proceeds of the sales of the business to any person who is registered as a wholesale purchaser pursuant to section 12 of this Act in respect of the property sold to him;

(b) 4% of the gross proceeds of the sales of the business in all other cases."

Section 27 reads as follows:-

"27. Tax on export sales - Every person who sells for export outside the Cook Islands any tangible personal property shall pay a tax levied and assessed at a rate equal to 1% of the gross proceeds thereof provided that the gross proceeds from the sale of fresh primary produce for exports will not attract turnover tax."

The objector contends that the fuel sold was for the purpose of export out of the Cook Islands and is thus "sold for export" within the meaning of section 27 and taxable at the rate of 1 per centum. The respondent contends the sale of fuel is a retail sale covered by section 18(b) because the fuel is supplied to the aircraft to be used instanter and that much of it no longer exists when the aircraft reaches its destination. He submits that the fuel is not being taken to another country to be dealt with there in some other way. Much of it is being used before and no longer exists when it reaches its destination.

The term "sells for export" is not defined in either section 27 or elsewhere in the Act nor is the term "any tangible personal property." This latter expression may well require some definition, but, it is not challenged here and I accept that there is no dispute that the fuel sold comes within such a category. For the purpose of this decision that term shall be referred to by the simpler word "goods."

The contention of the respondent that for the goods sold to constitute an "export" they must be destined for another country to be used there in my view, is untenable. The meaning of the word "export," must be in the absence of statutory definition be used in its ordinary meaning. I was referred to Muller v Baldwin (1874) 9 Q.B. 457 which is relied on by counsel for the objector. In that case, the Tyne River Harbour Commissions were empowered to levy dues, inter alia, one penny per ton on "coals exported from the port." A levy was demanded from the plaintiff on coal carried on his ship from the port. The vessel cleared the port for overseas destinations and it was admitted that 345 tons of the 530 tons it was carrying would be used for the purpose of navigation and thus was solely for the ship's use. The Judge in the first instance held that the plaintiff was entitled to an exemption from the export levy in respect of coals reasonably required for the purpose of the ship's use. On appeal, it was argued for the plaintiff that the terms "exported" must be taken in a restricted sense as being exported for the purpose of sale in the countries of destination. The Court in its judgment at p. 461 lines 3 to 9 said:

"We agree as to the reasonableness of making a distinction between coals taken away for sale and coals taken for the necessary use of the vessel; but we are constrained to differ from the learned judge in his construction of the Act. There is nothing in the language of the Act to shew that the word "exported" was used in any other than its ordinary sense, namely, carried out of the port."

and lines 14 to end of judgment:

"We cannot, however, speculate upon the intentions of the legislature which are neither expressed in terms nor conveyed by implication; our duty is to interpret the words of a statue according to their plain and grammatical meaning, when, as in this case, they are not controlled by anything to be found in the context. Construing the words of the Act upon this principle, we feel bound to hold that coals carried away from the port, not on a temporary excursion, as in a tug or pleasure-boat, which intends to return with more or less of the coals on board, and which may be regarded as always constructively within the port, but taken away for the purpose of being wholly consumed beyond the limits of the port, are coals "exported" within the meaning of the Act. We therefore give judgment for the defendant."

A similar interpretation of the term was given by the Court of Appeal in New Zealand in Commissioner of Inland Revenue v International Importing Limited (1972) N.Z.L.R. 1095. In this case, duty free goods which were sold to purchaser on the condition that they did not take delivery of them until immediately prior to boarding the aircraft on which they were departing from New Zealand and did not "retain consume or otherwise dispose of "the goods in New Zealand, were held to be "export goods........exported from New Zealand." There was no definition of the word "export" in the section of the enactment being considered and it was argued that the exporter was the purchaser of the goods. Richmond and McArthur J.J. at pp. 1103 (line 51) to 1104 (line 20):

"It was common ground between counsel that the ordinary meaning of the word 'export' is 'to send or take out of New Zealand.'

Mr Mathieson contended that when the circumstances show a clear case of taking out of New Zealand by the buyer, no room is left for the concept of a simultaneous sending of the goods out of New Zealand by the vendor.................................................................................

The Legislature has not attempted for the purposes of s. 129b to define the meaning of the word 'export' and the Court can do no more than give to that word its ordinary meaning (as just described) and to decided as a matter of fact and degree in individual cases whether the part played by the taxpayer in bringing about the removal of the goods from New Zealand was a sufficiently immediate and effective cause of that removal to justify the description of the vendor as a sender (or taker as the case may be) of those goods out of New Zealand. Whether or not a person 'exports' goods seems to us to depend more on the actual part which he in fact played in bringing about their removal than upon the terms of the contract between himself and the buyer."

In the present case, there is no dispute that the objector is sending the fuel out of the Cook Islands. That is the test which, in my view, must be applied. In the circumstances, I hold it has sold the goods for export and I allow the objection and order that the assessments be amended to provide for the turnover tax to be levied under the provisions of section 27 of the Turnover Tax Act 1980.

There will be cost $100 to the objector.

Sir Gaven Donne, K.B.E.
Chief Justice

Solicitors for the Objector: Clarke Ingram & Co. Rarotonga.
Solicitors for the Respondent: Solicitor-General. Rarotonga.