Isaac Jewellery Pty Ltd and Australian Trade Commission
[2008] AATA 758
•28 August 2008
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2008] AATA 758
ADMINISTRATIVE APPEALS TRIBUNAL )
) No: 2007/5644
GENERAL ADMINISTRATIVE DIVISION )
ReISAAC JEWELLERY PTY LTD
Applicant
And AUSTRALIAN TRADE
COMMISSION
Respondent
DECISION
TribunalMs N Isenberg, Senior Member
Date28 August 2008
PlaceSydney
DecisionThe decision under review is set aside and the matter is remitted to the Respondent to complete an assessment of the expenses and consider the application of section 96.
.................[sgd].............................
Ms N Isenberg
Senior Member
CATCHWORDS
EXPORT MARKET DEVELOPMENT GRANTS – determination that applicant not eligible to receive grant – whether applicant business should be treated as a continuation of a business which previously received the full grant entitlement – decision under review set aside
Export Markets Development Grants Act 1997 – ss 3, 94, 98
Re Amlink Technologies Pty Ltd and Australian Trade Commission (2005) 86 ALD 370
REASONS FOR DECISION
28 August 2008
Ms N Isenberg, Senior Member
DECISION UNDER REVIEW
1. The decision under review is the decision of the Australian Trade Commission (“Austrade”), on reconsideration, to disallow an application by Isaac Jewellery Pty Ltd (“Isaac Jewellery”) under the Export Market Development Grants Act 1997 (“EMDG Act”), for a grant in respect of claimed expenditure of $120,114 in the 2006/07 grant year.
BACKGROUND
2. The sole director and shareholder of Isaac Jewellery is Isa Atakliyan (also known as Issac Atakliyan) and the business is operated by Mr Atakliyan and his wife Annet.
3. By application received by Austrade on 6 July 2007 (T3) Isaac Jewellery applied for a grant under the EMDG Act.
4. In the Application the business was described as follows:
We are manufacturer of hand crafted gold chains, bracelets, earrings pendants, anything to do with jewellery. We manufacture all the goods in Sydney Market St premises, buying gold from Australian gold suppliers.
All of the product described above are exported to UK only at this stage.
Further information will be supplied via our international catalogue, web site print etc.
5. Mr Atakliyan had previously been, with his brother, Aram, a director and shareholder of ABJ Australia Pty Limited (“ABJ”), a business which operated as a designer, manufacturer and wholesaler of jewellery for approximately 25 years. ABJ had an export business and applied for and received seven grants under the Export Market Development Grant scheme in consecutive years from 1997/98 to 2003/04. The company ceased operation, but it was not liquidated. Raw materials, stock and equipment were shared between the brothers and utilised by Isaac Jewellery and the new company set up by Aram, ADJ Australia Pty Ltd (“ADJ”).
6. On 27 July 2007 the Respondent issued a Notice of Determination of Grant which advised that Austrade had determined that Isaac Jewellery was not entitled to a grant on the basis that “… Section 94 of the EMDG Act applies to treat the Applicant company as a continuation of the business previously carried on by ABJ Australia Pty Ltd … which previously received the full grants entitlement of 7 grants”.
7. On 24 September 2007 Isaac Jewellery notified Austrade that it wished to lodge an appeal against the Notice of Determination. The notification was accepted as a notice of appeal pursuant to section 98 of the EMDG Act. Isaac Jewellery was requested to provide any additional information in support of its case within 14 days of Austrade’s acknowledgement of the appeal dated 3 October 2008.
8. A letter dated 17 October 2007 addressing section 94 of the EMDG Act was lodged by Isaac Jewellery. The Respondent’s Statement of Facts and Contentions drew attention to the following excerpt:
Isaac Jewellery Pty Ltd does not dispute that its wholesale jewellery design, manufacturing and marketing business is “similar to” the old business previously carried on by ABJ Australia Pty Ltd (ABJ) and which had received 7 EMDG grants. It is not disputed that any new jewellery business will have similarities to both existing and old businesses because of the very nature of their activities. What is disputed, however, is that, because of these similarities (with the differences apparently not taken into account) the CEO of Austrade should apply his discretion in this area to unjustly deprive our company of EMDG assistance.
9. By letter dated 16 November 2007, Austrade advised Isaac Jewellery that, having reviewed the additional information provided in support of their claim with regard to the application of section 94 of the EMDG Act, Austrade had “concluded that there were too many similarities NOT to warrant the application of Section 94 and that Isaac Jewellery P/L therefore be treated, for EMDG purposes, as continuing the old business thus inheriting the grant history of ABJ Australia P/L”. As ABJ had been the recipient of seven prior grants it was determined that Isaac Jewellery was “no longer eligible for a grant”.
10. Isaac Jewellery then lodged the present application for review.
LEGISLATION
11. The Respondent’s Statement of Facts and Contentions stated the following, by way of an overview of the EMDG Act:
2. The EMDG Act provides 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 their products (see section 3 of the EMDG Act).
3. Expenses incurred by an applicant are eligible expenses in terms of section 29 of the EMDG Act if, inter alia, the expenses are, under section 33 of the EMDG Act, claimable expenses in respect of an eligible promotional activity. The table to section 33 sets out what activities are an eligible promotional activity and what expenses are claimable expenses in respect of that activity. Section 37 of the EMDG Act specifies when an eligible promotional activity in relation to an applicant is for an approved promotional purpose.
4. The scheme is capped, which means that there is a finite amount of money allocated by the Australian Government to fund the administration of the scheme and the payment of grants.
5. To ensure that the available funding of the scheme under the EMDG Act is distributed in accordance with the intent of the Act and to prevent abuse of the scheme there are various interpretation and anti-avoidance provisions. These include section 94 and section 96.
SECTION 94 OF THE EMDG ACT
12. Section 94 of the EMDG Act provides as follows:
94 Change in ownership of business etc.
(1) Subsection (2) applies if:
(a) at any time, a person (the previous owner) carried on a particular business (the old business) in Australia; and
(b) at a later time, another person (the new owner) carries on:
(i) the business or a part of the business (the relevant part); or
(ii) a business (the new business) that, at that time, is similar to the old business, or a part of the old business (the relevant part), carried on by the previous owner before that time, to such an extent that the CEO of Austrade is satisfied that the new business should be treated as a continuation of the old business; and
(c) the new owner applies for a grant in respect of a grant year.
Note: Decisions whether 2 businesses are similar are subject to guidelines determined by the Minister under section 101.
(2) For the purposes of this Act, the CEO of Austrade must treat particulars of the previous owner as being those of the applicant in the following ways:
(a) any eligible expenses incurred by the previous owner in the capacity of owner of the business (or of the relevant part) are to be treated as having been incurred by the new owner;
(b) if the CEO had decided that the previous owner met the grants entry requirements—the new owner is to be treated as if the CEO had decided that it had met the grants entry requirements;
(c) any grant, or advance on account of grant, paid or payable (whether under this Act or under the repealed Act) to the previous owner in the capacity of owner of the business (or of the relevant part) is to be treated as having been paid, or as being payable, to the new owner;
(d) any other aspect of the business (or of the relevant part) is to be treated as if it had been carried on by the new owner.
Note: For eligible expenses, repealed Act and grants entry requirements see section 107.
13. The EMDG Administrative Guidelines which explain Austrade’s interpretation of the EMDG Act and how it is applied by Austrade in administering the scheme state in relation to section 94:
Underlying principles of section 94
As provided for in section 93 (Object of Division) of the EMDG Act, the philosophy of section 94 is that grants attach to a particular business regardless of any changes of ownership of the business. Section 94 makes businesses receiving grants subject to both the beneficial and the restrictive provisions of the Act.
Accordingly, when a change of ownership of a business occurs, section 94 enables Austrade to regard the new owner, for grant calculation purposes, as having carried on the relevant business at the earlier time.
ISSUE BEFORE THIS TRIBUNAL
14. The issue for determination by the Tribunal is whether subsection 94(2) of the EMDG Act applies to this application with the effect that Isaac Jewellery is not entitled to a grant in the 2006/2007 grant year.
15. The Tribunal must therefore determine whether Isaac Jewellery carries on:
(a)the business, or part of the business, carried on by ABJ: section 94(1)(b)(i); or
(b)a business similar to the business, or part of the business, carried on by ABJ, to such an extent that the new business should be treated as a continuation of the old business: section 94(1)(b)(ii).
16. If so, Isaac Jewellery will be ineligible to receive an Export Market Development Grant.
THE EVIDENCE
17. Mr and Mrs Atakliyan gave evidence. Mr Felsman, the Austrade NSW and ACT State Manager - Export Grants also gave evidence. Mr Felsman’s evidence related to the decision-making process.
18. By way of background Mr Atakliyan told me that he had trained as a jeweller before coming to Australia. His brother Aram learnt some features of the family’s jewellery business as a child, but by the age of 12 Aram had been sent overseas for his schooling.
19. Mr Atakliyan’s first job in Australia was doing silver plating and silver repairs. His employer then gave him a very small space in which he started working for himself, firstly, making gold chains. He knew nothing of the Australian or international jewellery market and he was a craftsman only. Because Aram had been better educated his English was better and Mr Atakliyan brought him into the business as the front man. Aram incorporated the company ABJ Australia Pty Limited standing for Atakiliyan Brothers Jewellery. Aram would obtain orders and Mr Atakliyan would tell him how much gold was needed to make the item. Then Aram would purchase the necessary amount of gold. Aram went to all the overseas and interstate exhibitions. As a result Aram might make a sketch of an order or if he had ideas for something that he thought would sell. A couple of times Mr Atakliyan went to an exhibition at Darling Harbour or looked in shop windows to get inspiration for designs.
20. Mr Atakliyan and Aram bought premises in Clarence Street, Sydney and ABJ paid them rent. They worked together as ABJ for 18 years, but in 2004 they had “a major falling out” when Aram wanted ABJ to purchase a 1200 sq m property at Artarmon. Mr Atakliyan said he was overseas when Aram used Mr Atakliyan’s power of attorney to borrow $800,000 to purchase the Artarmon property. It came as a “complete surprise” when Aram told him in about June 2005 that they were “separating” from the end of the year. Aram told him he could “come too” if he paid rent. They sold the Clarence Street property and physically divided ABJ’s gold and equipment. Mr Atakliyan took only about 25% of the soldering, polishing, plating and other machinery.
21. Of the approximately 20 staff, Mr Atakliyan retained only three and only did so, because he “was forced to”. Of those Aram took with him, 8 to 10 were jewellers and Mr Atakliyan assumed they would be making the jewellery for Aram. Mr Atakliyan has only been to Artarmon twice.
22. Isaac Jewellery was incorporated in July 2005. ABJ was not liquidated for the reason, as stated in its letter dated 17 October 2007, “that the brothers could maintain their credibility in the industry”. Using half the proceeds of sale from the Clarence St property, Mr Atakliyan bought a 91 sq m property in Market Street, Sydney in September or October 2005 and rents this to Isaac Jewellery. He purchased other equipment. Mr Atakliyan had to phone suppliers and open accounts with them. There are, it was explained, a limited number of gold suppliers. For 24 carat gold Isaac Jewellery used the same supplier as ABJ, as did ADJ, because it was the only company that sold on a COD basis. Isaac Jewellery purchased other gold from the cheapest supplier on the day, but Mr Atakliyan did not know if ABJ did that or had a regular supplier.
23. Although the break up had made the whole family “miserable”, the brothers now see each other monthly at family functions, but business is never discussed. Occasionally Aram will ask Mr Atakliyan for advice.
24. Mrs Atakliyan told me that she had her own business before Isaac Jewellery was started and has business degrees including an MBA. Initially, in January 2006, she was helping out with the new business. She had suggested to Aram that they divide the ABJ client list alphabetically, but he had rejected that out of hand. Mr Atakliyan said he had asked Aram to introduce him to the clients, but when he had refused he took the client list off the computer. It proved to be useless because nobody knew Mr Atakliyan, even though it was he who had produced ABJ’s items. Mrs Atakliyan identified a strategy to generate income: she decided to target retailers on a suburb by suburb basis and go cold calling. She did not set out to get ABJ’s customers, but was untroubled if they had previously been ABJ customers; she would go to whoever would see her. ABJ had a customer list of about 5,000 so there would have been almost no shops that had not previously been a customer or potential customer. She knew she was a good salesperson because of the success of her own business. In the course of making her sales pitch she was frequently asked if she was related to Aram, who those in the jewellery business knew. If pressed, she would say that her husband had been in partnership with Aram, but had been “pushed back”. She agreed that it was part of her sales pitch to say that “they” had been “doing jewellery” for 30 years.
25. From the outset Mr Atakliyan decided to do new designs, different to those he had done for ABJ. He thought that if customers wanted an ABJ product they would go to ADJ, because Aram had been their contact. Having said that, if someone produced an ABJ catalogue and asked for something from it, he would make it. He stressed though, that the same applied if someone produced a Tiffany or Cartier catalogue – he would produce that design also, provided it was not patented. He designed a couple of hundred new products which were introduced to the range of about 1,500 pieces. Within three months he had his own castings, whereas at ABJ he had never used castings. Whereas ABJ’s “bread and butter” was chains, he was looking, as an artist, to create “different looks”. Altogether, Isaac Jewellery’s products were superior to those of ABJ, and as a result, were more expensive. ABJ also produced few earrings. Those in its catalogue were purchased by it as a service to customers. Isaac Jewellery, on the other hand, makes a range of earrings.
26. One unique product was the “surreal” line: a handmade bracelet with a unique type of locking system and charms. Another major difference was some new know-how: he could create hollow and silver-filled products, which would make their products more affordable to the younger market they were seeking. As far as they knew there was only one competitor making silver-filled products and they are in Melbourne. Isaac Jewellery has a 15 to 20 item silver-filled product line and these are a big seller. Another new product was a “donut” clasp, a product that ABJ had previously imported. There was also a greater use of precious stones. The clients wanted to see “new things” and new design work accounts for about 80% of the business.
27. While some of the designs may look the same to the untrained eye they are made differently with a different finish or using different machinery and have a different weight, gauge, or colour. Anything that is handmade is unique.
28. ABJ had produced new designs for the two to three annual trade shows it attended. For example, a month beforehand Mr Atakliyan would design in anticipation of showcasing their products there for future sales. At Isaac Jewellery he designs “all the time”, and not just for the trade shows and this is a major aspect of his business. It was impossible to identify in the catalogue how many of his designs are post the establishment of Isaac Jewellery.
29. From the beginning of March 2006 Isaac Jewellery offered a 24 hour service on standard items. ABJ had never offered that service.
30. Through her research Mrs Atakliyan recognised that England was the biggest market for 9 carat gold jewellery. They sought advice from Austrade. Mrs Atakliyan booked into the London International Jewellery Fair in September 2006. Her goal was to demonstrate they could make anything. ABJ had exported to Hong Kong, Japan, the UK, the US and Singapore, mostly through the Birmingham jewellery fair. Aram, for ABJ, did not go the London jewellery fair, but to the London gift fair.
31. Mrs Atakliyan borrowed money from her parents to fund the production of a catalogue which would be necessary to expand overseas. With the help of the jewellery trade magazine, she identified and engaged a specialist jewellery photographer, who also recommended layout. Time was short, so she asked Aram to supply some photographs because she knew it would be very expensive to create all new photographs when many items are standard across the industry. She agreed that many of the products were identical. It was also agreed that to have on the cover of the Isaac Jewellery catalogue “[p]roudly hand crafted in Australia for over thirty years” was something of an exaggeration, but she said that Mr Atakliyan himself had actually been in business for 40 years.
32. Mr Atakliyan had designed the Isaac Jewellery logo with the assistance of a designer. The selection of an oval design was inevitable because everybody in the industry, not just ABJ used an oval logo. A bundle of documents was tendered containing the logos of Catene d’Italia, AGR Matthey, Salvatore Bersani, Il Gioiello Creazioni, Karisma, Torrini, Ondaoro, Millennium Chain, Peter W Beck, Divine Diamonds, Sherman Opals and Joris Gemstone Traders which all incorporated an oval.
33. I was referred to catalogues from ABJ and Isaac Jewellery and from other manufacturers as follows:
· ABJ “International Catalogue” comprising; front cover, pages 2-35 and back cover. (T24)
· Isaac Jewellery “International Catalogue” comprising; front cover, inside front cover, pages 1- 84 and back cover. (T25)
· Morris and Watson Ltd “Chain Catalogue 2007” comprising; front cover, inside front cover, pages 1- 21 and back cover. (T26)
· AGR Matthey “Chains & Bracelets” comprising; front cover, pages 1- 118 and back cover. (T27)
34. A large folder was also produced showing more samples of jewellery produced by Isaac Jewellery.
CONSIDERATION OF THE EVIDENCE
35. I have identified the two questions that I must consider as whether Isaac Jewellery carries on:
(a)the business, or part of the business, carried on by ABJ: section 94(1)(b)(i); or
(b)a business similar to the business, or part of the business, carried on by ABJ, to such an extent that the new business should be treated as a continuation of the old business: section 94(1)(b)(ii).
36. The questions are most conveniently addressed together.
37. In applying section 94, I, as the decision–maker standing in Austrade’s shoes, am required to take into account the Export Market Development Grants (Change in Ownership of Business) Guidelines 2006 (the “Guidelines”): s 101(1)(d).
38. Pursuant to clause 4(2) of the Guidelines, I “must have regard to the similarities (if any) and the differences (if any) between” the 11 matters listed in that paragraph. Those matters are:
(a) the product of the new business and that of the old business; and
(b) the activities that are carried out in the course of the business of the new business and the activities that were carried out in the course of the old business; and
(c) the customers, including the export market customers, of the new business and those of the old business; and
(d) the directors, shareholders, and management personnel of the new business and those of the old business; and
(e) the suppliers to the new business and those to the old business; and
(f) the overseas representatives of the new business and those of the old business; and
(g) the employees of the new business and those of the old business; and
(h) the markets, including the export markets, of the new business and those of the old business; and
(i) the premises from which the new business is conducted and the premises from which the old business was conducted; and
(j) the logo of the new business and that of the old business; and
(k) the property and assets, including the intellectual property, of the new business and those of the old business.
39. In this paragraph I outline the evidence and the parties’ submissions in respect to each of the matters I am required to have regard pursuant to the Guidelines.
(a)Product of the new business and that of the old business
(i)The Respondent submitted that ABJ and Isaac Jewellery both made handmade jewellery from precious metals, mostly gold of varying carats and provided a Schedule annexed to its Statement of Facts and Contentions for comparison of product from the ABJ “International Catalogue” (T24) and Isaac Jewellery’s “International Catalogue” (T25). Numerous items bear an identical product code, with the addition only of an “I” in the Isaac Jewellery catalogue. The Respondent conceded in its submissions that the catalogues are of limited assistance because there are standard designs across the industry, and which need to be included to demonstrate manufacturing proficiency. The Respondent submitted, and I agree, that there was some difficulty in identifying which of the catalogue products were unique to Isaac Jewellery. I accept that anything that is handmade is unique. I also accept the Applicant‘s evidence that while some of the designs may appear the same to the untrained eye they are made differently with a different finish or using different machinery and have a different weight, gauge or colour.
(ii)There was no dispute that the staple line of ABJ was chains (T10 p 55). I accept Mr Atakliyan’s evidence that ABJ’s “bread and butter” was chains, and that he did some design work for ABJ, largely for the purposes of developing product lines which would be showcased at trade fairs.
(iii)I also accept that at Isaac Jewellery, however, he was doing mostly original design work, which is more expensive, and which accounts for about 80% of the business. Mr Atakliyan designed a couple of hundred new products as part of a standard product range of about 1,500 pieces, which I accept as a more accurate description than, as Mrs Atakliyan had written in the company’s submission to Austrade, that Isaac Jewellery had “developed over 1500 new lines since its birth” (T10 p55). Isaac Jewellery’s innovative products included the “surreal” line, hollow and silver-filled products, and a “donut” clasp. There was also a greater use of precious stones. As he had done at ABJ Mr Atakliyan would make products of other companies, including ABJ, if requested, provided they were not patented.
(iv)Unlike ABJ, Mr Atakliyan’s practice at Isaac Jewellery was to use castings. ABJ also manufactured few earrings, but Mr Atakliyan created a range for Isaac Jewellery. The Respondent pointed out that no earrings had apparently been exported (T3 p35).
(v)In its submission to Austrade Isaac Jewellery said the products ADJ was offering for sale on its internet site had not evolved significantly from those appearing in the “old” ABJ catalogue. Isaac Jewellery submitted that “[i]f any business should be considered a continuation of the ‘old’ ABJ business perhaps Austrade should refocus on ADJ” (T10 p55). The Respondent did not dispute that the products offered by ADJ are the same as those offered by ABJ, but noted that Isaac Jewellery also offers products which were offered by ABJ.
(b)The activities that are carried out in the course of the business of the new business and the activities that were carried out in the course of the old business
(i)At a basic level the activities of both businesses were jewellery design and manufacturing for the wholesale market.
(ii)From the evidence, ABJ’s main activity was selling chains, whereas Isaac Jewellery’s main activity is designing original pieces.
(iii)Isaac Jewellery has, since early in its inception, provided a 24 hour service on standard design items. This activity was not undertaken by ABJ.
(c)The customers, including the export market customers, of the new business and those of the old business
(i)On the evidence, there are about 5,000 retail jewellery outlets in Australia. These were ABJ’s local market. Mrs Atakliyan’s evidence was that Isaac Jewellery too was targeting that market, but was approaching it on an ad hoc basis. Given that both companies were in the business of wholesale jewellery design and manufacturing, it is hardly surprising that their customer base was similar in respect of the standard products. It was unclear as to the source of the clients which account for 80% of Isaac Jewellery’s business, that is, original design work.
(ii)In its submission to Austrade Isaac Jewellery contended that ADJ largely succeeded in retaining the clientele of the old ABJ business. Further, it was said that ADJ had offered all of the old clients of ABJ credit terms that Isaac Jewellery was not able to match (T10 p53).
(iii)As to major export customers, most of ABJ’s overseas customers were attracted through sales in Birmingham and the London Gift Fair. Isaac Jewellery sought entry into the UK market through the London International Jewellery Fair, where ABJ was unknown. Mrs Atakliyan stated they also had chosen a different look and market space to what ABJ had done in the past.
(d)The directors, shareholders, and management personnel of the new business and those of the old business
(i)The directors and shareholders of ABJ were Mr Atakliyan and his brother Aram. The evidence was that while Aram managed the business with little consultation with his brother, Mr Atakliyan was responsible for design.
(ii)In its submission to Austrade Isaac Jewellery noted that Aram incorporated ADJ with a name clearly intended to give the impression that it was the old ABJ business. Also, it referred to a flyer sent out by Aram to former ABJ clients which was said to reinforce the theme that ADJ is the old ABJ business.
(iii)Mr Atakliyan is the sole director and shareholder of Isaac Jewellery with his wife, a capable and independent business woman, responsible for management and sales, describing herself in submissions as the accountant, the business consultant, Secretary, marketing manager, HR manager and business development management. Mr Atakliyan is responsible for creative input and manufacture. Mrs Atakliyan said her husband was an artist and needed a business person because he lacked the confidence to turn a design into a saleable item.
(e)The suppliers to the new business and those to the old business
(i)The evidence was that there is only one company that sold 24 carat gold on a COD basis so it is unsurprising that both ABJ and Isaac Jewellery use the same supplier. Isaac Jewellery purchased other gold from the cheapest supplier on the day, but Mr Atakliyan did not know if ABJ did that or had a regular supplier.
(ii)In its submission to Austrade Isaac Jewellery wrote that because there are a limited number of gold suppliers the same “core of suppliers” was used by the majority of jewellers in Sydney (T10 p57). Eighty per cent of other raw materials were said to be sourced from different the suppliers from those used by ABJ.
(f)The overseas representatives of the new business and those of the old business
(i)Not applicable.
(g)The employees of the new business and those of the old business
(i)Only three apprentice jewellers from ABJ’s 23 staff at time of the demise of ABJ went to Isaac Jewellery. Mr Atakliyan’s evidence was that he was reluctant to take them.
(h)The markets, including the export markets, of the new business and those of the old business
(i)ABJ’s overseas market was predominantly in the UK, although it was said to previously have exported to the USA, Japan and Switzerland.
(ii)The evidence was that while Isaac Jewellery uses the UK fairs to attract customers, those customers are from various countries. The evidence that the UK is the principal market for 9 carat gold jewellery was not challenged.
(i)The premises from which the new business is conducted and the premises from which the old business was conducted
(i)ABJ conducted its business from premises in Clarence Street, Sydney, whereas Isaac Jewellery conducts its business from premises in Market Street, Sydney.
(j)The logo of the new business and that of the old business
(i)ABJ’s logo was oval shaped with “ABJ” inside and “ATAKLIYAN BROTHERS JEWELLERY” on the border. Isaac Jewellery’s logo, although a different colour, is also oval shaped with “IAJ” inside and “ISAAC JEWELLERY” on border.
(ii)There was evidence that the oval shape is used widely in the jewellery industry, but the Respondent submitted that that was irrelevant.
(k)The property and assets, including the intellectual property, of the new business and those of the old business
(i)Neither ABJ nor Isaac Jewellery owned the premises from which they operated. Both had a similar arrangement: the principal(s) own the property and lease it to the company.
(ii)ABJ had jewellery manufacturing machinery, stock and materials, which, on its demise, were divided between Isaac Jewellery and ADJ. Because Isaac Jewellery’s premises were a lot smaller Mr Atakliyan only took about 25% of the equipment. He quickly acquired the new equipment he needed.
(iii)There was evidence that ABJ was known in the industry. Indeed, Mrs Atakliyan was often asked on her connection to Aram Atakliyan. It was suggested that Isaac Jewellery traded on ABJ’s goodwill, especially by describing itself on the cover of its catalogue as: “Proudly hand crafted in Australia for over thirty years.” In fairness though it was true that Mr Atakliyan personally could lay claim to that statement.
(iv)It was submitted that there was effectively some sharing of ABJ’s intellectual property. The client list was accessed by Mrs Atakliyan, but proved useless. Some of ABJ’s photos were provided for the catalogue.
(v)As to product designs I have discussed above the need for standard products and Isaac Jewellery’s main business of unique designs, and its innovation.
40. The Respondent contended that Isaac Jewellery’s business is the same as the business of ABJ or is similar to such an extent that Isaac Jewellery’s business should be treated as a continuation of the old business. I do not agree.
41. The directors and shareholders of ABJ were Mr Atakliyan and his brother Aram, whereas Mr Atakliyan is the sole director and shareholder of Isaac Jewellery. They are unconnected companies. He has very few of the staff of ABJ, and Isaac Jewellery’s business is at different premises to that of ABJ. I draw no inference from the companies having a similar arrangement with respect to leasing their premises.
42. I find a major point of differentiation is in the products of Isaac Jewellery compared to those of ABJ. It was apparent from its catalogue that Isaac Jewellery produced numerous items identical to those produced by ABJ but, as the Respondent acknowledged, there are standard designs across the industry. It is also the case that the untrained eye may be unable to differentiate between some items.
43. ABJ’s staple product was chains, but Isaac Jewellery’s business was mostly original, expensive design work. Mr Atakliyan’s previous design work for ABJ was mainly for the purposes of developing products in anticipation of trade fairs.
44. Isaac Jewellery has added additional innovative products of Mr Atakliyan’s design and there was also a greater use of precious stones. New methods were used and it offered a new 24 hour service.
45. As to the development of new products the Respondent submitted that this is to be expected of a business, but is not a change of business activity, or a change of product but an evolution (see Re Amlink Technologies Pty Ltd and Australian Trade Commission (2005) 86 ALD 370). I do not think this is accurate in this matter. Creating uniquely designed hand crafted jewellery is vastly different from technological advances which might be expected over time.
46. I do not place much weight on the fact that Isaac Jewellery was targeting the same local market as ABJ. Both companies were in the business of wholesale jewellery design and manufacturing and the market was necessarily limited. While both companies sought overseas customers through the predominant 9 carat gold jewellery market in the UK, Isaac Jewellery targeted a different trade fair where ABJ was unknown and presented itself in a different manner.
47. I accept that there are a limited number of gold suppliers so little weight can be attached to the fact that Isaac Jewellery uses the same suppliers as ABJ did.
48. I find that the point of commonality between the logos is primarily that each is oval in shape and that each bears the name of the company in its border. I do no think the similarity goes beyond that. Further, it was interesting to observe the frequency with which the oval shape is used in the jewellery industry.
49. As to intellectual property, I have discussed above industry-wide products and Isaac Jewellery’s main business of unique designs, and its innovation. There was some re-use of ABJ photos that had been retained by Aram for ADJ, but I accept this was a matter of practicality in quickly assembling a catalogue when the standard products were the same. ABJ’s client list was not ultimately used. I do not accept that the supplier details were part of ABJ’s intellectual property because of the limited number of suppliers. There was no evidence as to pricing parity, as the Respondent’s Statement of Facts and Contentions would suggest.
50. I have therefore come to the view, having regard to the factors identified in the Guidelines, that Isaac Jewellery is neither carries on the same business, or part of the same business, carried on by ABJ, nor does it carry on a business similar to the business, or part of the business, carried on by ABJ to such an extent that the new business should be treated as a continuation of the old business.
DECISION
51. The decision under review is set aside.
52. I was informed that no assessment of Isaac Jewellery’s expenses has been carried out because of the section 94 decision. Having set aside the decision under review in relation to the application of section 94 the matter is remitted to Austrade to complete an assessment of the expenses. Further, the matter is remitted to Austrade to consider the application of section 96.
I certify that the 52 preceding paragraphs are a true copy of the reasons for the decision herein of Ms N Isenberg, Senior Member
Signed: ........[sgd]....................................................................
AssociateDates of Hearing: 23 and 24 June 2008
Date of Decision: 28 August 2008
Solicitor for the Applicant: Self-represented
Solicitor for the Respondent: Mr C Tucker, Collins House Legal
Counsel for the Respondent: Miss R Henderson
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