I turn to the first question. The craft the subject of the claim was described on the front cover of the builder's specification as an ``18 metre catamaran tourist vessel''. More particularly, in the specification proper, it was provided that ``the vessel is to be capable of operating as a ferry or as a tourist vessel'' and that it was to be ``a twin-hulled (catamaran) high speed ferry constructed with welded steel hulls. A welded aluminium superstructure will be fitted containing passenger cabin, toilets, wheel-house etc. Passenger capacity will be about 100 dependent on final measurement by the survey authority. The vessel will be propelled by two high speed diesels. The vessel will be able to achieve a speed of about 25 knots fully loaded.''
The craft, the ``James Kelly'', was unquestionably sought and acquired by the partnership for the purpose of being used in the course of the partnership business, which was described in its relevant income tax returns as ``charter boat operators''. The partnership, the name of which is ``Scenic Gordon and Hells Gates Charters'', carries on business at Strahan in western Tasmania. The business involves as its principal activity taking parties of people by boat from Strahan into Macquarie Harbour and thence along the Gordon River to a place called Marble Cliffs, which is reached shortly before the Gordon River joins the Franklin River. The journey then proceeds back along the Gordon into Macquarie Harbour to Hells Gates, the narrow promontories guarding the harbour from the Southern Ocean, and back to Strahan. The area is noted for its rugged scenic beauty and it may be assumed that therein lies much of its attraction to those who undertake a cruise of the kind the partnership offers.
The taxpayer, who is now aged in his early forties, has operated vessels in and around Macquarie Harbour for the greater part of his working life and is a qualified mariner. He and his wife, rather younger than he, began their business in 1977, with himself as skipper, while she looked after bookings, clerical work, catering and the like as one of the crew of three. At first they used a steel mono-hulled ferry called the ``Matthew Brady'' which they leased from a company called Sullivan's Cove Ferry Company Pty. Ltd., of Hobart. That company's business merits a short excursus. It was, before 1975, operating a ferry service on the Derwent River, from Hobart on one side to Bellerive on the other, and in adjacent waters. Following the accidental destruction of the Derwent River bridge in January 1975 a greater call for ferry services arose and the company operated the ``Matthew Brady'' and three or four other passenger ferries 24 hours a day to supply the demand. Two of these the company hurriedly built for the purpose, so it acquired a measure of expertise in the design and construction, as well as the operation, of vessels of that kind. According to the evidence, the company carried some nine or ten million people in these craft during the period it operated over six or seven years until about 1978. Anticipating a drop in demand for ferry services after the reconstruction of the bridge, the company set about building a further vessel of a more comfortable and sophisticated kind than those previously in use. The object was to entice some, at least, of the commuters who had become used to water travel while the bridge had been down to remain loyal to the ferry service after the bridge's restoration. Shortly before the bridge's was re-opened in 1977 the new ferry was completed. The vessel, called the ``Jeremiah Ryan'', was described in evidence by Mr. R.F. Clifford, the managing director of the company, as ``a catamaran, steel hulled, built with the purpose of carrying passengers across the Derwent, in a higher standard than had previously been done, higher speed, better seating and generally an upgraded ferry service''. He said, ``... We did hope that we would be able to retain as many passengers as possible on the ferry service, and not lose them to the roads. However, in the long term, that was unsuccessful, but the boat itself proved to be very successful''. Like the earlier ferries it was designed to replace, the ``Jeremiah Ryan'' was essentially a passenger-carrying craft and, like them, it contained facilities for providing light refreshments, including a small bar.
The ``Jeremiah Ryan'' was operated as a commuter ferry on the Derwent for some little time before the bridge was re-opened and after that for some six months. It then went into service as a ferry operating from Townsville to Magnetic Island, then in the Port of Brisbane and later between Stoney Point and Cowes, in Westernport Bay. Mr. Clifford said in his evidence that when it was built he considered it as a prototype for the future development of a class of vessels. His expectation or hope has been borne out, for there are now over thirty of the class in operation in various parts of the world as passenger or light cargo carriers.
The taxpayer actually worked on the construction of the ``Jeremiah Ryan'' and knew it well by the time it was completed in mid-1977. Not long after the ``Jeremiah Ryan'' went into service, the bridge having been re-opened, the ``Matthew Brady'' became redundant to the Sullivan's Cove company and the taxpayer leased it for use in his business operating out of Strahan. It cruised at about 10 knots and the trip he offered, as I have briefly described it, took the best part of a day at that speed. While the taxpayer's venture, using the ``Matthew Brady'', was not unsuccessful in the first year of operation, he became keen by about the end of 1977 to acquire a better and faster vessel. He discussed with Mr. Clifford the prospect of having built for him by Sullivan's Cove Ferry Company Pty. Ltd. a vessel of which the ``Jeremiah Ryan'' was the prototype.
The taxpayer himself did not give evidence either before the Board of Review (the evidence before which was treated as evidence before me) or on these appeals. His wife and Mr. Clifford, however, did give evidence before the Board and Mr. Clifford gave further evidence in this Court. Between them they described the nature of the discussions which the taxpayer had had with Mr. Clifford. There were two aspects to the discussions, which continued over a period of six months or more. One concerned the nature of the vessel to be built and the other concerned the payment of its cost. I can concentrate for the moment on the former. It was a cardinal requirement of the taxpayer's that he should have a craft capable of accomplishing two cruises outward from Strahan and back within a day. That consideration made a vessel like the ``Jeremiah Ryan'' attractive to him. He also wanted a reasonably sophisticated and comfortable vessel affording good opportunities for the taking of photographs. A twin-hulled vessel was something of a novelty for the kind of operation he conducted but his hope was that it would be appealing to people minded to take the Macquarie Harbour cruise. A vessel capable of sustaining 25 knots could accomplish the journey in about three and three-quarter hours and was expected to appeal to many who might not care to spend the whole day at it. Furthermore, two cruises a day would increase the turnover.
The ``James Kelly'' was completed in June 1979 by a company in which Mr. Clifford is a guiding influence and to which the building contract with the partnership was assigned by Sullivan's Cove Ferry Company Pty. Ltd. The construction was done under the personal supervision of Mr. Clifford. According to his evidence the craft was designed as a passenger-carrying vessel modelled on and essentially the same in every respect as the ``Jeremiah Ryan''. The hulls were unchanged from those of the prototype but the after beam of the ``James Kelly'' was altered to lengthen the deck and improve appearance. The taxpayer wanted the vessel specifically for use in his business and, since it was built to his order, it was in that sense ``specially designed and built for cruising on the Macquarie Harbour and Gordon River'', as his advertising brochure asserts. According to Mr. Clifford's evidence, however, while he well knew that the vessel was to be used on Macquarie Harbour and the Gordon River, it was not specifically designed for that purpose. Like the ``Jeremiah Ryan'' on which it was modelled, the ``James Kelly'' was designed to ply as a passenger-carrying vessel within harbour limits and similar sheltered waters. It can be used in any harbour or sheltered waterway in Australia — for example Port Phillip Bay — subject to compliance with the relevant State survey requirements.
Mr. Clifford said that the design of the ``James Kelly'' is essentially indistinguishable from that of the ``Jeremiah Ryan'' and that the former had been in no way adapted to carrying sightseers any more than the prototype had been. The ``James Kelly'' has an open top deck (which would accommodate sightseers) whereas the ``Jeremiah Ryan'' did not, but most of the other ferries built by Mr. Clifford's organisation did have the same kind of open deck. The ``James Kelly'' also had specially strengthened bollards so that it could tow barges if necessary. This feature was provided at the taxpayer's request because he had hoped to pick up some work of that kind as a result of the hydro-electric development on the Gordon River. The seats in the ``James Kelly'' are of the same kind as those that were used in the ``Jeremiah Ryan'' and the ``Matthew Brady''. There is a small bar on the ``James Kelly'' of the same general size and kind as that on the ``Jeremiah Ryan'' although, whereas the bar on the ``Jeremiah Ryan'' was astern, the bar on the ``James Kelly'' is forward, as it had been on the ``Matthew Brady''. There were other minor differences in the superstructure of the ``James Kelly'' when compared with that of the ``Jeremiah Ryan''. The engines installed in the ``James Kelly'' were as specified by the taxpayer because he preferred one make over another, and the exhausts were placed with a view to minimising noise. All these features, however, seem to have involved little if anything more than matters of taste or other individual preference. According to the evidence they did not distinguish the two vessels in their essential characteristics.
The evidence shows, I think, that the ``James Kelly'' is properly and appropriately described as a passenger-carrying vessel and that it is equally well adapted to the carriage of the general public on rivers and harbours for any purpose for which passengers might want to travel aboard it, whether for amusement or recreation or otherwise. I may say that Mr. Clifford observed in his evidence that, when he built the ``Jeremiah Ryan'' as a prototype, he had particularly in mind the prospect that the design might be suited for ferries in general use on Sydney Harbour. Indeed, it seems right to conclude that the vessel is suitable for general use of that kind. There was no evidence called for the Commissioner to suggest that the design was not appropriate for general purpose passenger ferries and there was, of course, evidence that ``Ryan class'' vessels are in use in that capacity.
The question, then, is whether the ``James Kelly'', having the characteristics I have described, and having been built and bought by the taxpayer for, and used in, his business of a charter boat operator, was a vessel ``for use in, or primarily and principally in connexion with... amusement or recreation''. In deciding this question against the taxpayer, the Board of Review appears to have been much influenced by the considerations that his partnership business is directed to catering for what is called the tourist trade or industry and that the vessel was purchased with a view to carrying tourists as passengers. These facts are indubitable. They are reinforced by the further fact that, following the taxpayer's application, the Tasmanian Department of Tourism provided a guarantee of a bank loan of almost half the cost of the vessel. The partnership needed the loan to pay for the vessel; and the bank would only provide it if the Tasmanian Government guaranteed repayment; and the guarantee was given on the footing that the vessel would be Tasmanian-made. According to the evidence of the taxpayer's wife the ``James Kelly'':
``... was solely built for passengers. That was the only reason we got the tourism loan, that it was for the Gordon River; that was stipulated. We could not use it anywhere else. It had to be used on the Gordon River.''
The Board of Review in its reasons referred to that piece of evidence and relied on it for its conclusion. It seems, however, not to be entirely accurate. At another stage of her evidence Mrs. Kearney said, ``... the vessel was built to be used in Hobart'' and in fact it was used on the Derwent River before being taken to Strahan. Moreover, the documents in evidence relating to the basis on which the Department of Tourism's guarantee was given do not suggest that the vessel could not be used elsewhere than on the Gordon River. Even so, it is perfectly clear that the taxpayer and his wife wanted to attract tourists to take their cruise and it may be safely assumed that, after the boat had been taken to Strahan, they did so.
There is an underlying but unexpressed assumption in the reasoning of the Board of Review that a tourist is to be equated with a person who is bent on amusement or recreation. No doubt the assumption is substantially, if not universally, justified. But not all tourists are on pleasure bent, as the dictionary definitions of ``tourist'', ``tourism'' and ``tour'' and one's general experience confirm.
In W. Smith v. F.C. of T. 82 ATC 4240 the Full Court of the Federal Court decided that para. (f) of subsec. (2) of sec. 82AF of the Act does not by its terms introduce any notion of use by a particular person. It is concerned with the nature of the articles it seeks to describe and not with the identity of their users. It follows that, if the ``James Kelly'' is not of its nature a vessel for use in or primarily and principally in connection with amusement or recreation, the use to which it was put or intended to be put, whether by the taxpayer or its passengers, will not alter its classification for the purpose of the subsection. The Federal Court applied and explained Smith's case in Hamilton Island Enterprises Pty. Ltd. v. F.C. of T. 82 ATC 4302 at p. 4305, saying that the former decision:
``... should not be read as indicating that the use to which the relevant item of personal property is put will necessarily be irrelevant for the purpose of determining whether, for the purposes of sec. 82AF(2)(f)(i), the item answers the description `plant or articles for use in, or primarily and principally in connection with, amusement or recreation'. It may, in a particular case, be common ground that the use to which the relevant item is put corresponds with the use which it is of its character to serve. In such a case, the examination of the actual use of the item could well be decisive of the question whether it was or was not of a designated character. Quite apart from such cases, the use to which an item is actually put will ordinarily be illustrative of at least some aspects of its character.''
In this case it was argued for the Commissioner that the ``James Kelly'' was built to order for the taxpayer for his own special purpose; and that he and Mr. Clifford were more concerned with the operational use of the craft than with its functional character or purpose. The argument went on to say that to characterise it as a passenger-carrying vessel is to adopt a terminology that is too wide or imprecise; that it is more appropriately described as a passenger vessel adapted to tourism or excursions; and that it is on that account brought within the exception. I do not agree because, when I look for an essential or important feature of the character of the ``James Kelly'' which distinguishes it from a general purpose passenger vessel, I can find none which designates it as a vessel for use in or primarily and principally in connection with amusement or recreation.