Ausnathealth.com Pty Ltd and Australian Trade and Investment Commission (Austrade)

[2022] AATA 2860

Ausnathealth.com Pty Ltd and Australian Trade and Investment Commission (Austrade) [2022] AATA 2860 (1 September 2022)

Division:GENERAL DIVISION

File Number(s):      2020/8458 & 2020/8459

Re:Ausnathealth.com Pty Ltd

APPLICANT

AndAustralian Trade and Investment Commission (Austrade)

RESPONDENT

Decision

Tribunal:Deputy President B W Rayment OAM QC

Date:1 September 2022

Place:Sydney

Both reviewable decisions are set aside and substituted with decisions consistent with paragraphs [22], [30] and [33] of these reasons for decision.

................................[SGD]........................................

Deputy President B W Rayment OAM QC

Catchwords

AUSTRADE – export market development grants – eligibility for grants under the Export Market Development Grants Act 1997 (Cth) – relevant law and material considered – decisions under review set aside and substituted.

Legislation

Export Market Development Grants Act 1997 (Cth)

REASONS FOR DECISION

Deputy President B W Rayment OAM QC

1 September 2022

1. The applicant applied for grants under the Export Market Development Grants Act 1997 (Cth) (the Act) for the years ended 30 June 2014, and 30 June 2018. The reviewable decisions made by the respondent in relation to the grants approved by the Australian Trade and Investment Commission (Austrade) for the two grant years are the subject matter of this review.

2. The Act provides for the giving of financial assistance in the form of grants to exporters to encourage them to develop export markets. The export business conducted by the applicant related to Australian made herbal medicine products. In the case of the 2014 year, the overseas market involved was in Vietnam.  In the 2018 year the export markets were in Vietnam and in the United States of America.

3. The form of the legislation has changed since the two grant years and references to the legislation in these reasons are references to the Act as it stood at the times relevant to the two grant years. The statute was in similar terms for both grant years.

4. Reviewable decisions were defined in s.97 of the Act. They included in s.97(c) any decision relating to an application for a grant. Internal review of such a decision went to the CEO under s.98(4) who had to reconsider the decision and could confirm or vary it in such manner as the CEO thought fit. Section 99 gave a right to seek review of the CEO’s decision under s.98(4) to the Tribunal. That review is on the merits in the usual way.

5. A grant application had to be made by an eligible person, who was a small or medium Australian business developing export markets for eligible products, with a prospect of success in their export enterprise: s.5. Part 3 of the Act dealt with the eligibility requirements and it is common ground that the applicant met those requirements.

6. Eligible products were specified in Part 4 of the Act and it is common ground that the products exported by the applicant met those specifications.

7. Contrary to a suggestion made by the applicant, the factual questions arising in the reviews are to be determined in the same way as such questions are determined in the majority of reviews determined in the Tribunal, that is, the Tribunal must be satisfied of facts about which it makes a finding on the basis of relevant and rationally probative evidence. The Act says nothing about onus of proof.

8. I take the grant years in turn, starting with the year, which ended on 30 June 2014.

9. The applicant suggests that the grant made to it by Austrade for the 2013-2014 year is incorrect in the following respects:

   (a)The applicant incurred expense for its overseas representative in Vietnam in the sum of $36,204 and the applicant claimed 40% of that amount and suggests that the $10,000 cap imposed by the respondent on that entitlement (on the basis of a contested application of s.56A of the Act) was incorrect;

   (b)The applicant claimed $24,501 for marketing visits to Vietnam during the relevant period and was not fully compensated for that expenditure by the respondent, which the applicant says should have been allowed in full and consistently with ss 33 and 37 of the Act; and

   (c)The applicant asserts that $38,362 was spent in providing free samples of its products and says that claim should have been allowed in full, consistently with ss 33 and 37 of the Act.

10. The evidence was at first taken audio-visually, and since there were language, transcript and technological difficulties with the first two days of hearing, I directed that a third day of hearing take place, which Mr Luong attended in person.

11. As to issue (a), s.56A provides as follows:

    Expenses of an applicant in respect of a grant year are excluded to the extent (if any) that:

    (a) the applicant pays off the expenses by physically transferring currency to the persons to whom the expenses are payable; and

    (b) the amount of the expenses is greater than $10,000.

12. Remuneration was paid to the representative by transferring it to an intermediary (otherwise than in cash) and the intermediary paid cash to the representative in Vietnam. The physical transfer of currency to its representative in Vietnam was not effected by the applicant personally, but rather by its agent (an intermediary). As I understand s.56A, it does not matter whether the payment made by the applicant in cash is made directly or through an agent. If cash reaches the representative by either means, the cap of $10,000 will apply.

13. Three other matters arise. First, Mr Luong rather said that if the intermediary paid the representative in cash, he was not aware of it. I do not regard that evidence as in accordance with the probabilities, and am not satisfied that Mr Luong did not know that payments were made in cash by the intermediary. In any event, I doubt that s.56A requires such knowledge to be had by both principal and agent in circumstances such as the present, where an agent made the payment rather than the principal. The second matter is that the applicant decided not to call as a witness the representative on this matter, and I was told by his solicitor Mr Gordon that the applicant did not call the representative on legal advice. The absence of the representative from the witness list does not cause me to alter the findings I have made. The third matter is that the respondent queried why payments of remuneration by the applicant were soon followed by payments by the representative to the applicant. The respondent asked why that was and Mr Luong said that it did not matter whether payments made by the representative to the applicant came from remuneration which he was paid. I do not reject that answer.

14. The issue mentioned in paragraph 9(a) above is to be resolved in favour of the respondent.

15. As to issue (b), sections 33 and 37 of the Act deals with eligible promotional activities and approved promotional purposes. Each of those sections listed categories of eligible activities and purposes for grant purposes.

16. Section 96 of the Act enables the CEO of Austrade to adjust expenses incurred in respect of an eligible promotional activity which may not have been “properly substantiated” or may not be reasonable, commercial or bona fide, and in certain other circumstances. If the CEO makes an adjustment, then the applicant’s provisional grant amount under s.64 of the Act becomes the adjusted figure.

17. Those powers of the CEO become, on review, powers of the Tribunal, which stands in the shoes of the CEO. Therefore, the question for the Tribunal is whether adjustments made by the CEO (through a delegate) or any other adjustments, accorded with s.96 of the Act.

18. The approach of the respondent in the reviewable decision was that although the respondent accepted that Mr Luong visited Vietnam, it had a number of doubts about aspects of the substantiation. I have sworn evidence from Mr Luong about the matter and nothing put to him in cross-examination satisfies me that any adjustment should be made to this claim. The oral evidence of Mr Luong sufficiently substantiates the claim. It should be allowed in full.

19. As to issue (c), the evidence is that free samples were given out to Vietnamese nationals at markets or promotional meetings organised by the Vietnamese representative of the applicant. The fact that some persons to whom samples were given away were poor does not appear to me to make the claim excessive.  Some of the products exported by the applicant were cheaper than others. In one case the wholesale price of 60 capsules was $16. And of course, some people who are poor later become more wealthy and therefore able to afford more expensive products. The purpose of the applicant and no doubt also the representative was not to do charitable work but to attract persons hoped to become purchasers of the exported product.  Mr Luong gave evidence as to his purpose of sending free samples, and I am satisfied that no charitable purpose was involved, but rather the commercial purpose which is to be expected. The same must have been true of the Vietnamese representative, who may be taken to have had a commercial rather than a charitable intention when sample product was given away. 

20. There was a remark apparently made by the Vietnamese representative suggesting that bribes may have been paid by visitors to Vietnam who carried the free samples. Mr Luong gave evidence that the free samples were imported into Vietnam in the usual way through the shipping company, and all were the subject of customs duty paid in Vietnam. I see no reason to reject Mr Luong’s evidence. Mr Luong also said that he himself carried free samples in his personal luggage. The respondent asked the Australian Federal Police (AFP) to check whether any bribes were paid in Vietnam and the AFP, having investigated the matter, reported that no person could be identified involved in any (Vietnamese) bribery offence in relation to the samples. There is no evidence before the Tribunal which satisfies me to the contrary of the AFP report. I therefore see no basis to reduce the claim of the applicant by half, as was done in the reviewable decision.

21. Issue (c) is to be resolved in favour of the applicant.

22. The result in relation to the earlier year, in my opinion is that the correct or preferable decision is to set aside the reviewable decision, and substitute a decision that save for item (a) with respect to the payment to the overseas representative (correctly allowed by the respondent at $10,000), the applicant should have a grant of the whole amounts claimed for items (b) and (c), subject to the deduction in each case of 50% as the Act provides, that will result in a further payment of grant to the applicant, less amounts already paid.

23. I now turn to the later grant year, which ended on 30 June 2018. The revised monetary claim for that year was a claim for payments to the overseas representative in Vietnam of $42,000 plus 50% of $76,566 for either promotional expenditure, including payments for promotional visits by Mr Luong, accompanied for this by his Vietnamese-born wife.

24. Instead of paying the Vietnamese representative through an intermediary, the applicant paid the representative by making contras against the invoices sent to the Vietnamese representative for goods shipped to him.

25. The sum of $42,000 (being half of the total amount paid of $84,000) was wholly disallowed by the CEO’s delegate for that year.

26. Auditing the claim, Austrade suggested that the aum of $84,000 was not set off against the running balance of the Vietnamese representative, and suggested that there were confusing debits and credits with the bank account of Mr and Mrs Luong, and also suggested that round robins occurred between the applicant and the Vietnamese representative

27. Mr Gordon tendered at the resumed hearing Exhibit A, which showed that $84,000 was credited to the account of the representative, by equal monthly payments of $7,000.

28. It follows that there was no round robin, and that no involvement of Mr Luong’s Australian bank and the mortgage on his home affected the claim. Mr Luong explained, and I accept, that he and his wife gave security to the bank by means of their own home for an overdraft with the bank.  Mr Luong said that the reason for the change of procedure as to payment of the overseas representative was that in the earlier year, his claim of such payments was reduced to $10,000 as discussed above. The contra method meant that for the later year, the representative was not paid in cash.

29. Because Mr Maloney did not have notice of Exhibit A until the resumed hearing, I gave the respondent an opportunity to comment on it in writing after the resumed hearing. That opportunity was not taken up.

30. In my opinion the correct or preferable decision is that the claim of $42,000 should be allowed in full. The American market did not involve a representative. The applicant established a business in the name of his Australian manufacturer with its permission.

31. As to the role of Mrs Luong in the overseas marketing, her evidence and Mr Leong’s evidence satisfied me that she played a role in the marketing, such that expenses related to her travel and other expenses should also be allowed.

32. One difficulty which appears to have affected the reviewable decision is a language or communication difficulty.  Although Mr Luong has fair English, the Tribunal had the benefit of a Vietnamese interpreter.

33. I am not satisfied that any adjustment under s.96 is required to the claim for the later year, which should be allowed in full, subject to the reduction of 50% as the Act stipulates.

34. In the result both reviewable decisions will be set aside, and decisions consistent with paragraphs [22], [30] and [33] of the reasons will be substituted.

I certify that the preceding 34 (thirty-four) paragraphs are a true copy of the reasons for the decision herein of Deputy President B W Rayment OAM QC

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Associate

Dated: 1 September 2022

Date(s) of hearing:	6 - 7 October 2021 & 3 June 2022
Solicitor for the Applicant:	Mr D Gordon, Adam Ahmed & Co
Solicitor for the Respondent:	Mr S Moloney, Mills Oakley