Australian Trade Commission v Hellay Laboratories Pty Ltd

[2001] FCA 1436

FEDERAL COURT OF AUSTRALIA

Australian Trade Commission v Hellay Laboratories Pty Ltd [2001] FCA 1436

ADMINISTRATIVE LAW – Export market development grants – Application for grant in respect of the activity of engaging a consultant on a short term basis – Meaning and application in this context of the words “short term basis”.

Export Market Development Grants Act 1997, s 33

AUSTRALIAN TRADE COMMISSION v HELLAY LABORATORIES PTY LTD

V 172 of 2001

WILCOX, von DOUSSA and FINKELSTEIN JJ
18 OCTOBER 2001
MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIAN DISTRICT REGISTRY	V 172 of 2001

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:	AUSTRALIAN TRADE COMMISSION APPELLANT
AND:	HELLAY LABORATORIES PTY LTD RESPONDENT
JUDGES:	WILCOX, von DOUSSA and FINKELSTEIN JJ
DATE OF ORDER:	18 OCTOBER 2001
WHERE MADE:	MELBOURNE

THE COURT ORDERS THAT:

1.The appeal be dismissed.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIAN DISTRICT REGISTRY	V 172 of 2001

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:	AUSTRALIAN TRADE COMMISSION APPELLANT
AND:	HELLAY LABORATORIES PTY LTD RESPONDENT

JUDGES:	WILCOX, von DOUSSA and FINKELSTEIN JJ
DATE:	18 OCTOBER 2001
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

WILCOX and VON DOUSSA JJ:

1. This is an appeal against a decision of a Judge of the Court (North J) in respect of an application for review of a decision of the Administrative Appeal Tribunal (“the Tribunal”).  His Honour’s judgment is Australian Trade Commission v Hellay Laboratories Pty Ltd [2001] FCA 79.

2. The Tribunal reviewed a decision of Australian Trade Commission (“Austrade”), the present appellant, in respect of an application by Hellay Laboratories Pty Ltd (“Hellay”), the present respondent, for a grant under the Export Market Development Grants Act 1997 (“the Act”). The question at issue is the proper interpretation of the words, then found in s 33 of the Act, “engaging as a consultant on a short term basis”.

   The statutory scheme

3. Section 3 sets out the object of the Act in these terms:

   “The object of this Act is to bring benefits to Australia by encouraging the creation, development and expansion of foreign markets for Australian goods, services, intellectual property and know-how.  It does so by providing for an assistance scheme under which small and medium Australian exporters committed to and capable of seeking out and developing export business are repaid part of their expenses incurred in promoting those products.”

4. Section 4 of the Act entitles a person to a grant if that person has, inter alia, incurred “eligible expenses” in a grant year. The amount of the grant is to be worked out under Part 6 of the Act.

5. Part 5 of the Act (ss 28-59) deals with eligible expenses.

6. Section 29 provides that “expenses incurred by an applicant for a grant in respect of a grant year are eligible expenses” if certain conditions are satisfied.  Those conditions include that:

   “(a)the expenses are, under section 33, claimable expenses in respect of an eligible promotional activity.”

7. At the relevant time, s 33 was in the following form:

   “(1)The activity specified in column 2 of an item in the following table is an eligible promotional activity in relation to an applicant.

   (2)The expenses specified in column 3 of an item in the following table, to the extent to which they are not excluded expenses under Subdivision 4, are claimable expenses of the applicant in respect of the activity specified in column 2 of that item.

   Claimable expenses in respect of eligible promotional activities  

Column 1 Item ___________	Column 2 Activity ___________________________	Column 3 _______________________
1	maintaining an overseas representative on a long term basis in a foreign country to the extent to which the representative is maintained for an approved promotional purpose	so much of the expenses incurred by the applicant in a grant year in: (a)    maintaining the representative;      and (b)    meeting the expenses incurred by the representative in soliciting business for the applicant; that, together with similar expenses (if any) incurred in respect of other representatives during the grant year, does not exceed $200,000
2	any visit (marketing visit) made by the applicant or its agent to any place in or outside Australia to the extent to which the visit is made for an approved promotional purpose	all expenses: (a)   incurred by the applicant in payments to persons that, in Austrade’s opinion, were not closely related to the applicant; and (b)   that are allowable expenses under section 34
3	any communication by the applicant or its agent with a potential buyer or a distributor, representative or consultant to the extent to which the communication is made for an approved promotional purpose	all reasonable expenses incurred by the applicant in payments to persons that, in Austrade’s opinion, were not closely related to the applicant
4	the provision, primarily for an approved promotional purpose, of free samples to a person that is not a resident of Australia, as follows: (a)    provision outside Australia of samples relating to any eligible product of the applicant; (b)    provision in Australia of samples relating to eligible tourism services supplied by the applicant	all reasonable expenses incurred by the applicant that are attributable to the actual cost of providing the samples
5	participation by the applicant or its agent in a trade fair, or the provision by the applicant or its agent of promotional literature or other advertising material, to the extent to which this is done for an approved promotional purpose	all reasonable expenses incurred by the applicant in payments to persons that, in Austrade’s opinion, were not closely related to the applicant
6	engaging as a consultant on a short term basis (either in or outside Australia) a person that, in Austrade’s opinion, is not closely related to the applicant, to the extent to which the person undertakes market research, or marketing activities, related to an approved promotional purpose	all reasonable expenses incurred by the applicant

1. The word “Austrade” means the Australian Trade Commission, the present appellant: see the definition in s 107 of the Act.

2. Hellay relies on item 6 of the table in s 33. In that connection it is relevant to note that s 37 sets out seven circumstances under which an eligible promotional activity in relation to an applicant is for an approved promotional purpose. They include if the activity “is carried out for the purpose of creating, seeking or increasing demand or opportunity in a foreign country” for “eligible goods owned by the applicant and that the applicant intends to sell for export or to export and sell”.

   The claim

3. Hellay lodged a claim for a grant under the Act in respect of the 1996-97 grant year. Although the Act did not commence until 1 July 1997, this is a “grant year” for the purposes of the Act: see the definition in s 107.

4. The claim was for a grant in respect of consultancy fees of $79,452 paid to a marketing consultant, Austprom International Pty Ltd (“Austprom”).

5. This claim was rejected by Austrade on the ground that Austprom was not engaged “as a consultant on a short term basis”, within the meaning of item 6 of s 33 of the Act. Hellay sought review of that decision by the Tribunal. The Tribunal upheld Hellay’s contention that the expenditure fell within item 6, set aside Austrade’s decision and substituted a decision that the fees “are eligible expenses for the purpose of a grant for the 1996-97 grant year”.

   The facts found by the Tribunal

6. The findings of fact set out in the Tribunal’s reasons for decision included the following (at paras 10-14):

   “Hellay is a privately owned Australian company which was established in 1990.  It has a modern manufacturing facility in Dandenong, a Melbourne south-eastern suburb.  Chemical additives, pharmaceutical, health-food, food and cosmetic products are manufactured.  Hellay operates as a licensed manufacturer and toll manufacturer for large and small companies, including several well known brands.  Hellay also wholesales products in Australia on its own behalf.  Manufacturing, either under licence or for wholesaling is Hellay’s core activity.

   The Managing Director of Hellay, Dr Douglas Hawley, who has a PhD in biochemistry, decided in 1995 to investigate business opportunities in Asia and approached Mr Ross Harvey, the principal director of Austprom, for assistance in undertaking a preliminary assessment of the export potential into Asia in two broad categories, one for cereal based products and the other for chocolate based drinks.

   Austprom is a consulting company which provides business development and marketing advice and services to Australian food and beverage companies seeking to market their products in South East Asia.

   The first substantive discussions between Dr Hawley and Mr Harvey took place in September 1995.  Austprom presented Hellay with a business development and marketing proposal

   …

   Austprom hoped to develop a long term relationship with Hellay which if established would be of mutual benefit to Austprom and Hellay.  Indeed the report suggested that at a future time it was possible that consideration could be given to Mr Harvey joining Hellay.  In evidence Dr Hawley said that that particular matter had at no time been taken further.”

7. The Tribunal recorded that, on 29 January 1996, Dr Hawley wrote to Mr Harvey confirming a decision “for Hellay to engage Austprom International … along the guidelines outlined in your proposal”.  However, Dr Hawley indicated Hellay would initially limit its expenditure to a net figure of $60,000.

8. The Tribunal’s statement of findings went on (at paras 16-21):

   “The offer was accepted and during the period January-June 1996, Austprom conducted extensive field and consumer research into the export potential to Asia of various nutritious cereal mix and drink products and produced a number of reports, including a project status report dated 4 March 1996 which revealed that there was significant potential for Hellay’s products in Asia.  This report indicated that further technical research and development needed to be carried out by Hellay before several identified export projects could be advanced.  According to Dr Hawley, Austprom’s role was to provide specific input into testing the market viability of the products while Hellay was responsible for direct liaison with the potential customer on technical research and development, commercial negotiations and logistics.

   Hellay obtained a grant under the Act for the grant year 1995-96 for consultancy fees paid to Austprom during the period January-June 1996.

   On 1 July 1996 Austprom provided a Trip Report to Hellay … which essentially summarised the identified opportunities.  This report identified eleven distinct major projects with seven different companies in five different countries.  Following further discussions, Austprom was engaged to proceed with further work on three projects considered to be viable, a cereal beverage in Singapore, a multigrain cereal porridge in the Philippines and a chocolate beverage product in Singapore.  Austprom recommended that the commercialisation phase for these products should commence immediately.  Hellay decided that the other projects were to be put on hold or progressed slowly as they were regarded as secondary.

   The report also proposed additional consultancy work to be performed by Austprom for Hellay.  It was Dr Hawley’s evidence that he did not then nor subsequently commit to the extra work as a total package.  He believed that the export opportunities that Austprom had uncovered were worth pursuing, but as Hellay’s resources were limited, it would be better for Hellay to play a bigger role implementing its export plan than that proposed by Austprom.  Accordingly, Hellay decided to engage Austprom for specific assignments where assistance was required, which was the basis of the work undertaken by Austprom in the 1996-97 grant year.

   During the 1996-97 grant year six overseas assignments were undertaken by Austprom on behalf of Hellay each one separately agreed to by Dr Hawley. … Each assignment had one or two prime objectives related to the key projects referred to above.  Other secondary objectives usually related to secondary projects were generally included in the overseas visits because it made financial sense that they be advanced when Mr Harvey was in the region.

   The role of Austprom in advancing the projects was confined to particular aspects of the marketing plan as a cost control mechanism relative to Hellay’s responsibilities in carrying out the plan.  …  It is unnecessary to recite the detail here.  At the end of the 1996-97 grant year Hellay had no commitment to Austprom and there was no understanding of further work that Austprom might undertake for Hellay.”

9. The Tribunal indicated that details of the assignments undertaken by Austprom on behalf of Hellay were listed in a document provided by Hellay to the Tribunal.  Details of the work undertaken by Austprom were set out in Mr Harvey’s statement.

10. The Tribunal commented on the quality of the evidence at para 22:

    “Mr Harvey’s evidence corroborated Dr Hawley as to the business arrangement between Hellay and Austprom.  Dr Hawley approved the expenditure at each step and did not approve all the proposals/recommendations made by Austprom.  Mr Harvey understood that Austprom did not have an ongoing retainer and that the approval and agreement of Dr Hawley was required before any proposed assignment could be commenced.  The arrangements ranged from advanced marketing support for hot cereal products for the Philippines to exploratory development work on instant pre-packed meals for Indonesia and China.  As well several variations and formulations of chocolate beverage products were being developed with differing product characteristics for particular countries.  In evidence both Dr Hawley and Mr Harvey impressed as credible witnesses.”

    The Tribunal’s reasoning

11. After setting out these facts, the Tribunal referred to two earlier decisions of the Tribunal, Re Dinnet Holdings Pty Ltd and Australian Trade Commission (1998) 28 AAR 185, and Re Robert Andrew Gordon Pottery Pty Ltd and Australian Trade Commission (1999) 55 ALD 551. The Tribunal noted that the Act does not define “short term”; although, Austrade has formulated Public Policy Ruling 1997-2 in an attempt to provide guidance to officers about that concept. However, the Tribunal commented at para 30:

    “While the Policy Ruling provides guidance to which regard will obviously be had it does not have legislative force.  The Tribunal in Robert Andrew Gordon Pottery cautioned against slavish adherence to the terms of the Policy Ruling and pointed to the need to consider all relevant factors including (but not limited to) the nature of the relationship between the applicant and the consultant, the particular needs of a business the applicant is developing and the purpose for which the consultant was engaged.  We agree with this approach.”

12. At para 31 the Tribunal noted two Macquarie Dictionary definitions of “short term”:

    “1.  Covering a comparatively short period of time.  2. Having a maturity within a comparatively short time: a short term loan.”

13. The Tribunal noted these definitions indicated a “short term” period is comparative; “it is not an absolute in time but relative”.  The Tribunal added at para 32:

    “In a temporal sense, the meaning of ‘short term’ depends upon the context in which it is used.  For example in the money market, ‘short term’ refers to within a day or overnight, whereas in the mining industry where horizons are long ‘short term’ may mean years.”

14. The Tribunal said at paras 33-34:

    “… In our opinion the answer to the meaning of the term ‘short term’ is to be found in the ordinary meaning of the language in the context in which the expression is used. There was no evidence to suggest that the expression ‘short term’ was intended in the Act to have a commercial or special meaning distinct from its ordinary meaning. In accordance with its dictionary meaning, it refers to a comparatively short time.

    Consultancy on a short term basis is not, in the present circumstances, capable of a precise definition because there is no benchmark for time in the marketing activities of the products being developed by Hellay. Its meaning has to be considered in the context of the activities undertaken. The object and purpose of the Act is to encourage export markets for Australian goods, by providing an assistance scheme to small and medium enterprises. Establishing a product presence in Asia requires a commitment over time. This is recognised in Austrade advice and publications. It was clearly in Mr Harvey’s mind in making his initial proposals to Hellay and was certainly understood by Dr Hawley. Viewed in this way, Austprom’s work for Hellay covered a comparatively short period of time given the product development and marketing required for the particular markets. That is not to say that it is necessary to look to the purpose of the Act in determining the meaning of the term which is to be found in its ordinary meaning.”

15. The Tribunal went on to find the consultancy was not for a fixed period or an exclusive arrangement; Austprom was free to engage in other consultancy work.  At first it was a “broad ranging brief to investigate export marketing opportunities”.  Then it was “followed by specific identified projects”.  The Tribunal said at paras 36-38:

    “… The 1 July 1996 proposals … were broad in scope to the extent that almost any subsequent activity could be said to be included.  It does not follow however nor do we accept that as a consequence of initial broad proposals, that all subsequent engagements necessarily were part of a continuing engagement.  While it is true that Austprom undertook consultancy work for Hellay from January 1996 to February 1999, we are satisfied that during the grant year 1996-97, the relevant period under consideration, that Austprom was engaged as a consultant on a short term basis.  The fact that consultancy work was done in other periods before and after the grant year while instructive is not necessarily conclusive of the issue.  By that we do not mean to say that we are quarantining the work done in the grant year in determining whether the engagement was on a short term basis.  The nature of the consultancy was a series of engagements for particular projects with monitoring reappraisal and renewal from time to time.  There was no overall obligation for either party to continue the association beyond the grant year notwithstanding that further work was done after the grant year.

    In oral evidence and by production of his diary entries Dr Hawley was able to demonstrate that the relationship with Austprom was one based on a series of separate limited objectives.  Some projects fell within the umbrella of the original Asian market strategy.  Others were opportunistic or emergency for instance, where action was required regarding a troubled market launch in the Philippines and on another occasion with financial problems arising from the Asian economic crisis.  Dr Hawley, being a prudent man, was anxious to ensure that any commitment was limited and not open ended.

    Although the projects were closely related, this does not negate the fact that Austprom was separately engaged on various projects.  A relationship between projects does not in itself create a long term engagement nor in our opinion is it correct to say that the projects ‘were aspects of the applicant’s core business’ as submitted by the respondent.  Hellay’s core business is concentrated in Australia and is directed largely towards manufacturing and wholesaling in Australia.  The entry into Asia was a new venture requiring an adaptation of skills and knowledge of the Asian markets which Hellay lacked and Austprom was able to provide.  The services provided by Austprom were on an ‘as required’ basis and as a series of short term assignments.”

    North J’s reasoning

1. In his reasons for judgment, North J set out the relevant legislation, the Tribunal’s findings of fact and reasoning and a summary of counsel’s submissions to him.  He referred to the two earlier Tribunal decisions, Dinnet Holdings and Robert Andrew Gordon Pottery, and considered the notion of short term engagement.  At paras 26-30, North J said:

   “The object of the Act is to bring benefits to Australia by encouraging the creation, development and expansion of foreign markets for Australian products. It does this by reimbursing specific expenses of small and medium Australian exporters who seek out and develop export markets. The expenses reimbursed under Item 6 are for market research and marketing activities “related to an approved promotional purpose”. One such purpose is described in section 37 as ‘creating, seeking or increasing demand or opportunity in a foreign country for …’ certain products.  [North J’s emphasis]

   Clearly enough the reference to short-term in Item 6 is a reference to a time period to be seen in relation to some other time period.  That is to say the concept expressed is a relative, not an absolute, concept.  The basis of the engagement is short-term in relation to some other thing. 

   In light of the object of the Act, and the scheme for the reimbursement of market research or marketing activity expenses, short-term is used to describe the relationship between the activities undertaken and the totality of the time and other factors required for the development of the market for the product in question.

   The table to section 33 itself provides in Item 1 for a contrasting situation to the situation provided for in Item 6.  Item 1 provides for reimbursement for a claimant who maintains an overseas representative on a long-term basis.  That is to say, reimbursement will be made for the cost of an overseas representative who is maintained for a long period when that period is measured against the period required to develop the particular market for the product in question.

   Thus, what constitutes a long-term basis or a short-term basis will depend on the features of the market for the product being developed.”

2. North J commented at para 33 that both Dinnet Holdings and Robert Andrew Gordon Pottery “rightly focussed on the nature and derivation of the process of development of the export market in question in seeking to establish whether the claimant was involved in the activity of engaging someone as a consultant on a short-term basis”.  On this basis, he saw no error in the Tribunal’s reasoning in the present case.  In analysing the Tribunal’s reasoning, at paras 41-43 of his judgment, North J said:

   “Thus, the Tribunal did not rely upon the individual assignments to hold that the relationship between Austprom and Hellay was on a short-term basis.  It correctly determined that all the work done by Austprom covered a comparatively short period in relation to the time necessary for the development of the relevant markets.  In support of this conclusion it examined the nature of the relationship between Hellay and Austprom to see whether there was a continuing obligation to complete all of the work originally proposed.  Having concluded that there was no such obligation, the original conclusion stood. 

   Mr Hanks was correct in submitting that is was necessary for the Tribunal to consider the totality of the relationship between Austprom and Hellay, and it would have been wrong for the Tribunal to have focused on the individual assignments and to conclude from those alone that the engagement was on a short-term basis.  However, that is not what the Tribunal did.  The basis for the Tribunal’s decision was that Austprom’s work for Hellay covered a comparatively short period of time given the product development and marketing requirements of the particular products.  As the initial proposal made by Austprom was broad, it was necessary for the Tribunal to explain why the breadth of the proposal did not contradict its expressed view that the work covered a comparatively short period of time relative to the time needed to develop the market for the products.  It did this by showing that the initial broad proposal had been cut back by Hellay, limiting Austprom to separate specific assignments. 

   The matter may be understood in another way.  Mr Hanks contended that the essence of the Tribunal’s reasoning was that a series of short-term engagements of a marketing consultant over a grant period constitutes the activity of engaging a consultant on a short-term basis.  That approach, he said, was wrong in law.  Such an approach would indeed have been wrong in law.  But it is not the approach which was taken by the Tribunal.  The Tribunal did not hold that the engagement of Austprom was on a short-term basis because Hellay engaged Austprom on a series of short-term, specific enterprises.  Rather, it started by looking at the whole relationship between Austprom and Hellay.  It then compared the work done as a result of that relationship with the time needed, and other requirements, of developing the export markets in question.  In relation to that exercise, the engagement of Austprom was on a short-term basis.  The Tribunal discussed the particular nature of the specific engagements simply to answer the argument that the broadness of the initial proposal made by Austprom could only have been executed by a long-term engagement.”

3. Mr Peter Hanks QC was counsel for Austrade before North J; as he was before us, with Mr Mark Moshinsky.

   Conclusions

   (i)The correct approach to item 6

4. The words “short term basis” are not defined in the Act. They must be given their ordinary English meaning. However, “short term” is a comparative concept. As the Tribunal pointed out (see para 20 above), the application of the words varies from one context to another. Section 33 of the Act contains no specific benchmark for determining what, in that context, is “short term”. The only assistance it provides is a contrast with “long term”, used in item 1 in connection with the maintenance of an overseas representative in a foreign country.

5. In this situation, as it seems to us, Austrade (or, on review, the Tribunal) must make a qualitative judgment as to whether the engagement of the relevant consultant is “on a short term basis”. 

6. That judgment must be made with reference to the whole of the circumstances, including the nature of the relationship between the grant applicant and the consultant.  However, contrary to a submission put to us by Mr Hanks, we do not think it is fatal to a finding that a particular engagement is “on a short term basis” that the grant applicant has previously engaged the same consultant.  We illustrate the point by taking a hypothetical case raised during argument.  Assume a solicitor has, over many years, acted in that capacity for a particular client, providing services from time to time as the need arose, but without any continuous retainer.  The client asks the solicitor to act in respect of a particular matter, such as a minor criminal case that is likely to be concluded within weeks.  In that situation, it would seem to us apt to describe the solicitor’s most recent engagement as being on a “short term” basis, notwithstanding the earlier connection between the solicitor and the client.  The nature of the subject engagement is no different to what it would be if the client had retained a different solicitor, with whom the client had had no previous association, to provide the same services.

7. In the hypothetical case, there is a difference in the nature of the relationship between the client and each of the two solicitors.  However, item 6 makes a clear distinction between the question whether a particular engagement is short term and the nature of the relationship between the grant applicant and the consultant.  For an applicant to qualify for a grant, the consultant engaged on a short term basis by the applicant must be “not closely related to the applicant”.

8. Whether a person is “closely related to the applicant” is something to be determined by Austrade (or the Tribunal) by reference to binding guidelines made by the Minister under s 101 of the Act. It would seem that, if he or she thought it desirable to do so, the Minister could provide that a person who had previously acted, to a specified extent, as consultant to an applicant was “closely related” to that applicant.

9. Another matter made clear by the wording of item 6 is that Austrade (or the Tribunal) is concerned with the overall commitment made, to each other, by the consultant and the applicant.  The item speaks of “engaging” a consultant, not “contracting with” a consultant.  The extent of the engagement is not necessarily to be determined by reference to the terms of any contract that may have been made.  Take, for example, a case where a grant applicant and consultant agreed that the latter would provide particular services over a two year period, but the parties decided their relationship should be governed by a series of six-month contracts.  In such a case, it seems to us, it would be open to Austrade (or the Tribunal) to say the applicant “engaged” the consultant over a two year period, notwithstanding that damages for any breach of contract would be confined to a six-month period.  This would be because the consultant and applicant had committed themselves to a relationship, even though in a non-enforceable way, over two years.

10. It will be recalled (see para 23 above) that North J thought the words “short term” were used in item 6 “to describe the relationship between the activities undertaken and the totality of the time and other factors required for the development of the market for the product in question”.  While we agree all relevant circumstances must be considered in making the qualitative judgment as to what is “short term”, we see a problem about treating the words as describing a direct relationship between the duration of the consultancy and the time required for development of the relevant market.  At the time when a consultant is engaged, it may be impossible to know whether it is feasible to develop any market for the relevant goods; nonetheless item 6 contemplates that an engagement may qualify for a grant under item 6 on the basis that the consultant “undertakes market research, or marketing activities”.  Even if it is clearly possible to develop a market, it may be impossible to say, either at the time of the engagement or at the time of assessment of the grant application, how long it will take to do this.  Indeed, at what stage is a market “developed”?  It is now some 30 years since the commencement of significant promotion of Australian wines in the United Kingdom market, with resounding success; yet promotional activities continue, with expectations of further increases in sales volumes.

11. There is no ready benchmark of what is “short term” within the meaning of item 6.  Austrade (or the Tribunal) has to look at the whole of the facts, including the nature of the relevant market, the applicant’s export development plans and the nature of the task for which the consultant is engaged, and make a value judgment as to whether this should be regarded as a “short term” engagement.  Relevant to that question will be the usual practice concerning consultancies, in the relevant industry or in relation to a particular type of consultancy.  It will also be relevant to bear in mind that grants are made on an annual basis, so it is unlikely that an engagement extending beyond one year would qualify as “short term”.

12. We think this approach reflects the policy underlying the Act. It would have been easy, in a drafting sense, for Parliament to define “short term” by reference to a maximum number of weeks or months. But that would have made a general rule for all cases; whatever period was chosen would almost certainly have been inappropriate in some situations. Parliament seems to have preferred to leave what is “short term” to be determined, on a case by case basis, by an expert body, Austrade, or, on review, by a suitably qualified panel of the Tribunal.

    (ii)The Tribunal’s present decision

13. Against the background of these general observations, we turn to the question whether the Tribunal erred in law in this case.

14. Counsel for Austrade submitted North J erred in holding that the Tribunal “did not base its conclusion that Hellay’s engagement of Austprom was on a short-term basis on the [Tribunal’s] finding that Hellay had engaged Austprom as a consultant for a series of engagements, each of a short-term nature”.  Counsel said the Tribunal’s reasons demonstrate that it thought it to be decisive of the critical question “that Hellay had engaged Austprom on a series of projects and under a series of separate engagements, rather than a single or standing engagement”.

15. We agree that the Tribunal put considerable weight on the circumstance that the relationship between Hellay and Austprom was constituted by a series of engagements, each of a short-term nature.  But we cannot agree that the Tribunal regarded that circumstance, without more, as determinative of the issue it had to consider.  The Tribunal went to some trouble to trace the whole of the relationship between Hellay and Austprom.  It addressed the question whether there was really a long-term engagement, given practical effect by a series of contracts for specific projects, or whether the relationship was one in which there was no commitment beyond any particular contract.  The Tribunal specifically found, for example, that Dr Hawley make clear to Austprom his wish to limit Hellay’s cost exposure to $60,000 net.  The Tribunal also found (see para 15 above) that, at the end of the grant year, “there was no understanding of future work that Austprom might undertake for Hellay”.  The Tribunal said (see para 22 above) that, although consultancy work in periods before and after the grant year is not necessarily conclusive, that did not mean “we are quarantining the work done in the grant year in determining whether the engagement was on a short term basis”.

16. Like North J we do not think the Tribunal fell into error of law in relation to its determination.

    Disposition

17. The appeal should be dismissed.  We will so order.

I certify that the preceding thirty-nine (39) numbered paragraphs are a true copy of the Reasons for Judgment herein of Justices Wilcox and von Doussa.

Associate:

Dated:             18 October 2001

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	V 172 of 2001

On appeal from a single judge of the Federal Court of Australia

BETWEEN:	AUSTRALIAN TRADE COMMISSION Appellant
AND:	HELLAY LABORATORIES PTY LTD Respondent

JUDGES:	WILCOX, von DOUSSA & FINKELSTEIN JJ
DATE:	18 OCTOBER 2001
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

FINKELSTEIN J

1. I agree that the appeal should be dismissed.

2. The Export Market Development Grants Act 1997 (Cth) enables the payment of grants to encourage the development and expansion of Australian exports. Speaking generally, a grant is payable to a resident of Australia who incurs eligible expenditure in the development of markets for Australian goods and services.

3. The class of eligible expenditure with which this appeal is concerned is that incurred in relation to “eligible promotional activities”. These activities are described in column 2 of the table in s 33. The expenditure that may be claimed in respect of eligible promotional activities is that described in column 3.

4. The respondent applied for a grant for what it said was expenditure incurred in respect of the activity specified in what was item 6 of column 2:  see now item 1B which was introduced by the Export Market Development Grants Amendment Act 2001 (Cth). That activity was “engaging as a consultant on a short term basis (either in or outside Australia) a person that, in Austrade’s opinion, is not closely related to the applicant [for a grant], to the extent to which the person undertakes market research, or marketing activities, related to an approved promotional purpose.” Column 3 provided that the eligible expenditure for that activity is “all reasonable expenses incurred by the applicant.” Section 4 limits the entitlement to a grant to expenditure incurred in a grant year. There is a definition of grant year in s 107, and it is only necessary to observe that a grant year is a twelve month period. Section 70(2) provides that an application for a grant must be made within five months after the end of the grant year.

5. The outcome of this appeal depends upon the proper construction of item 6 of the table in s 33. Its precise meaning is not clear. The important thing to notice about this provision is that the claimable expense is that incurred in respect of “engaging” a person as a consultant to undertake a particular function. Two conditions must be satisfied. The first is that the “engaging” of a person as a consultant must be on a “short term basis”. The second condition is that the consultant must not be closely related to the applicant.

6. Leaving aside the two conditions, item 6 directs primary attention to particular conduct of the grant applicant, namely the act of “engaging”; a nonfinite verb used in its participle form that has a progressive or durative aspect.  Because it is progressive the “engaging” is not confined to a single event (one engagement), but may be concerned with an aggregation of events (a series of engagements).

7. I will explain what I mean by reference to an hypothetical case.  Let it be assumed that a grant applicant has entered into a number of independently negotiated engagements with an arms-length consultant to undertake work described in item 6.  Let it also be assumed that each engagement is “short term”, whatever meaning is to be given to that phrase.  Because the act of “engaging” is progressive, to determine whether the amounts paid to the consultant are claimable expenses, it is necessary to decide whether or not the repetitive conduct amounts to “engaging [a person] as a consultant on a short term basis”.  It will not be enough merely to ask whether each single engagement was for a “short term”.  What must be determined is whether the series of engagements can be regarded as on a “short term basis”.  So, if there have been two seven-day engagements per month, in each month of a grant year, it will be difficult to conclude that the applicant has been “engaging [a person] as a consultant on a short term basis” when the progressive or continuous nature of the activity is taken into account.  Any other conclusion would permit abuse of the statute. 

8. The next question is what is meant by “short term basis”?  The adjective “short” is used as a measure.  Usually these types of adjectives come in pairs, one for each opposite end of a range or scale.  Examples abound – old:young; thick:thin; wide:narrow – to mention but a few.  The scale that is to be measured by the use of these adjectives will often be imprecise.  Thus the opposites in the range may not be identified easily.

9. In this case, what is to be measured is a “term” which, in the phrase “short term basis” is a period of time.  Presumably the term that is to be measured must be either short or long:  though some might say that the term may be short, medium or long.  Here we must identify what is a short period.  Because there is no definitive measurement available, whether a term is short or not will often be a question of degree.  How does one determine on what side of the line a particular term will fall?

10. Quite obviously, whether or not a particular term is a short term, cannot be determined as an abstract question.  It is necessary to have regard to the thing that is being measured.  For example if the thing is a lease, one might say that a three months’ lease is a short term lease, but a three year lease is not.  If the thing is marriage, a three year marriage might be regarded as of short term, but not if it lasts for fifteen years.  If the thing is the life of a human being, fifteen years may be short, while one hundred years would be long. 

1. How have I been able to make these observations?  They are certainly not a priori propositions.  The examples chosen are of matters that fall within the ordinary experience of most people.  Having regard to that experience, one is able to observe the usual duration of the thing in question, whether it be a lease, a marriage or a life.  Then there exists a yardstick against which it is possible to measure whether the duration of the thing under consideration is short or long.  This is not to suggest that the answer will always be obvious.  Take for example an eighteen month lease, an eight year marriage or a life span of forty-five years?  For those cases there may not be a “correct answer”.  The choice is an exercise of judgment about which reasonable minds may differ.

2. The activity with which we are concerned is the work of a consultant who is undertaking market research or marketing activities to promote overseas sales.  Often it will be easy to decide whether or not the grant applicant is engaging such a consultant on a short term basis.  For the moment I will assume a single engagement, to keep matters simple.  If the engagement is for a week or two, or even a month or so, it will be short term; if the engagement is for a year or more, most likely it will be long term.  I say again that these conclusions have not been arrived at without reference to experience.  They are conclusions based upon some knowledge of the designated activities.  What is that knowledge?  It is of the duration of contracts with consultants performing the two categories of work, though not necessarily work in relation to the establishment of overseas markets.  I freely admit that my knowledge is limited.  That may lead me into error, but not, I suspect, at the extremities of the scale.

3. It follows from what I have said that to decide whether a grant applicant has been “engaging [a person] as a consultant on a short term basis”, it is preferable to contrast the relevant engagement with other engagements to perform like work in like circumstances.  Those engagements may be by third parties (the best point of reference) or by the grant applicant in previous years.  If no evidence of such engagements is available, the task will be more difficult.  A judgment will have to be made whether the engagement or engagements result in the grant applicant “engaging” a consultant on a short term basis having regard to factors such as:  (a) if there be one engagement, the duration of the engagement; (b) if there be more than one engagement, the number, frequency and duration of the engagements; (c) the duration of similar engagements, though not entered into for the export market; (d) how a consultant might research or promote the grant applicant’s goods or services (as the case requires) in the particular market in which the grant applicant operates; (e) the precise work to be undertaken by the consultant.  It may be assumed that in some cases an examination of these factors will not produce a clear answer.  That is why I say the resolution of the issue will be a matter of judgment.

4. The trial judge thought that, having regard to the objects of the Export Market Development Grants Act, “short-term is used to describe the relationship between the activities undertaken and the totality of the time and other factors required for the development of the market for the product in question”. Thus, he said that “what constitutes a long-term basis or a short-term basis will depend on the features of the market for the product being developed.”

5. It will be apparent that I do not agree with this view.  The error in the reasoning of the trial judge is that it resolves the measure of one activity without regard to the different possible periods within which that activity may be performed.  In any event, it adopts as a yardstick something which will often not be capable of determination.

6. Did the tribunal fall into error?  It did not adopt the approach suggested by the trial judge.  The tribunal said that it reached its conclusion after examination of “all relevant factors including (but not limited to) the nature of the relationship between the applicant and the consultant, the particular needs of a business the applicant is developing and the purpose for which the consultant was engaged.”

7. My reading of the tribunal’s reasons leads me to suspect that it arrived at its conclusion for the substantial reason that the consultant was engaged for a series of projects under a series of separate engagements, and not pursuant to one overarching agreement.  If that is the case, its decision would have been in error.  But suspicion is not proof.  I am not permitted to go behind the tribunal’s statement that it took other factors into account.  Precisely what those other factors were is not clear.  But no complaint is made that the tribunal failed to give proper reasons. 

8. It is for these reasons that I join in the order that the appeal be dismissed.

I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finkelstein.

Associate:

Dated:             18 October 2001

Counsel for the Appellant:	Mr P Hanks QC and Mr M K Moshinsky
Solicitor for the Appellant:	Tuckers Lawyers
Counsel for the Respondent:	Mrs J Batrouney SC and Mr G Raitt
Solicitor for the Respondent:	Anderson Rice
Date of Hearing:	10 August 2001
Date of Judgment:	18 October 2001