Active Sports Management Pty Ltd v Industry Innovation and Science Australia [2024] FCA 1346
Appeal from:
Active Sports Management Pty Ltd and Industry Innovation and Science Australia [2023] AATA 4078
File number(s):
NSD 6 of 2024
Judgment of:
GOODMAN J
Date of judgment:
25 November 2024
Catchwords:
ADMINISTRATIVE LAW – appeal from the Administrative Appeals Tribunal decision to affirm a decision of the respondent that claimed activities were not “core R&D activities” within the meaning of s 355-25(1) of the Income Tax Assessment Act 1997 (Cth) (ITAA 1997) – whether the Tribunal erred by not considering or by failing to engage “meaningfully” with the applicant’s submissions – error not established
ADMINISTRATIVE LAW – whether the Tribunal erred by failing to undertake a genuine independent consideration of the issues arising on the review and instead adopted the respondent’s submissions – error not established
ADMINISTRATIVE LAW – whether the Tribunal misconstrued s 355-25(1) of the ITAA 1997 – no misconstruction established – in any event the contended error could not be material when the Tribunal found that the applicant had not established other required elements of the definition of “core R&D activities”
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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AGLC
Active Sports Management Pty Ltd v Industry Innovation and Science Australia [2024] FCA 1346
Case
[2024] FCA 1346
Decision Date
CaseChat Overview and Summary
Active Sports Management Pty Ltd (the applicant) appealed against the Administrative Appeals Tribunal's (the Tribunal) decision to affirm the respondent's determination that the applicant's activities were not "core R&D activities" within the meaning of s 355-25(1) of the Income Tax Assessment Act 1997 (Cth) (ITAA 1997). The applicant lodged applications for the registration of several activities relating to the development of a customised basketball shoe as "core R&D activities". The respondent determined that none of the activities satisfied the definition of "core R&D activities" and confirmed the determination on internal review. The Tribunal affirmed the internal review decision, and the applicant sought judicial review of the Tribunal's decision.
The court was required to decide whether the Tribunal erred by not considering or by failing to engage "meaningfully" with the applicant's submissions, whether the Tribunal failed to undertake a genuine independent consideration of the issues arising on the review and instead adopted the respondent's submissions, and whether the Tribunal misconstrued s 355-25(1) of the ITAA 1997. The court found that the Tribunal did not err in failing to consider the applicant's submissions in detail, as it was not required to set out a detailed refutation of the case put by the unsuccessful party. The Tribunal's reasons were coherent, logical and contained sufficient detail in terms of its references to the evidence on which its findings were based. The court also found that the Tribunal undertook a genuine independent consideration of the issues arising on the review and did not adopt the respondent's submissions. Finally, the court found that the Tribunal did not misconstrue s 355-25(1) of the ITAA 1997, as the contended error could not be material when the Tribunal found that the applicant had not established other required elements of the definition of "core R&D activities".
The court dismissed the appeal and ordered that the applicant pay the respondent's costs of the appeal, as agreed or taxed.
Orders
Orders of the court
1. The appeal be dismissed.
2. The applicant pay the respondent’s costs of the appeal, as agreed or taxed.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
For the reasons developed below, the appeal should be dismissed.B. BACKGROUND The applicant lodged with the respondent applications for the registration of several activities – referred to by the Tribunal as the Claimed Activities – relating to the development of a customised basketball shoe (Delly1) as “core R&D activities” within the meaning of s 355-25 of the Income Tax Assessment Act 1997 (Cth) (ITAA 1997). That section provided in so far as is presently relevant:355‑25Core R&D activities(1) Core R&D activities are experimental activities:(a) whose outcome cannot be known or determined in advance on the basis of current knowledge, information or experience, but can only be determined by applying a systematic progression of work that:(i) is based on principles of established science; and(ii) proceeds from hypothesis to experiment, observation and evaluation, and leads to logical conclusions; and(b) that are conducted for the purpose of generating new knowledge (including new knowledge in the form of new or improved materials, products, devices, processes or services).(2) However, none of the following activities are core R&D activities:...(emphasis in original) As is apparent from the text of s 355-25(1), for activities to be considered “core R&D activities”, those activities must have at least the following characteristics. The first characteristic – which is found in the first limb of s 355-25(1)(a) – is that the outcome of the activities cannot be known or determined in advance on the basis of current knowledge, information or experience. The second characteristic – which is found in the second limb of s 355-25(1)(a) – is that the outcome of the activities can only be determined by applying a systematic progression of work, where that systematic progression of work has both of the following features:(1)it is based on principles of established science; (2)it proceeds from hypothesis to experiment, observation and evaluation, and leads to logical conclusions. The third characteristic – which is found in s 355-25(1)(b) – is that the activities are conducted for the purpose of generating new knowledge (including new knowledge in the form of new or improved materials, products, devices, processes or services). I use the expression “at least” because those three characteristics are central to the present case. There is an additional requirement that the activities do not fall within s 355-25(2). On 6 May 2019, the respondent made a determination under s 27J of the IR&D Act that none of the Claimed Activities satisfied the definition of “core R&D activities”. That determination was subsequently confirmed on an internal review under s 30D(2) of the IR&D Act. The applicant then sought review of the internal review decision by the Tribunal. Following a hearing occupying four days, a senior member of the Tribunal affirmed the internal review decision and published her reasons for doing so: Active Sports Management Pty Ltd and Industry Innovation and Science Australia [2023] AATA 4078 (T, or Reasons).
Evidence
Evidence Before The Court
The Tribunal is not required to set out a detailed refutation of the case put by the unsuccessful party. In WAEE, the Full Court explained at 604 [46]: It is plainly not necessary for the Tribunal to refer to every piece of evidence and every contention made by an applicant in its written reasons. It may be that some evidence is irrelevant to the criteria and some contentions misconceived. Moreover, there is a distinction between the Tribunal failing to advert to evidence which, if accepted, might have led it to make a different finding of fact (cf Minister for Immigration and Multicultural Affairs v Yusuf (2001) 206 CLR 323 at [87]-[97]) and a failure by the Tribunal to address a contention which, if accepted, might establish that the applicant had a well-founded fear of persecution for a Convention reason. The Tribunal is not a court. It is an administrative body operating in an environment which requires the expeditious determination of a high volume of applications. Each of the applications it decides is, of course, of great importance. Some of its decisions may literally be life and death decisions for the applicant. Nevertheless, it is an administrative body and not a court and its reasons are not to be scrutinised “with an eye keenly attuned to error”. Nor is it necessarily required to provide reasons of the kind that might be expected of a court of law. (emphasis added) In National Disability Insurance Agency v KKTB [2022] FCAFC 181; (2022) 295 FCR 379, Mortimer and Abraham JJ explained at 410 to 411 ([112] to [113]):112On matters of fact and opinion, the Tribunal does not have to set out in its reasons a minute line by line refutation of the case put by one party in the Tribunal which it does not accept. It must of course carefully consider the submissions made by each party on a review before it. Having done so, it is entitled to form its impressions of witnesses before it, and the evidence they give, and so long as in its reasons it sets out those impressions in a rational and reasonable way, explains why it has preferred one witness over another (if indeed it has), and refers to the material on which its conclusions are based, its reasons comply with its obligation in s 43(2B) of the Administrative Appeals Tribunal Act 1975 (Cth). ...113The Tribunal’s reasons are compliant with its obligation in s 43(2B), and indeed on this appeal are not alleged by the Agency to be otherwise. It is important that, on an appeal under s 44 of the AAT Act, this Court does not impose unduly arduous or insuperable burdens on a busy merits Tribunal about the level of detail required in its reasons. The Tribunal’s reasons here are coherent, logical and contain sufficient detail in terms of its references to the evidence on which its findings are based. It need not have done more.(emphasis added) See also Linfox Australia Pty Ltd v Fair Work Commission [2013] FCAFC 157; (2013) 240 IR 178 at 191 [47] (Dowsett, Flick and Griffiths JJ); and KXXH at 28 to 29 [54] (at [50] above).E.1 Did the Tribunal not consider at all, or fail to engage in a meaningful way with, the applicant’s submissions?
Decision
Reasons for decision
Full text does not contain this section.
Ratio Decidendi
Legal Principle Established
Thus, the first ground of appeal fails.E.2 Did the Tribunal fail to undertake a genuine independent consideration of the issues arising on the review and instead adopt the respondent’s submissions?